NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Economic Reforms and Labor Markets: Policy Issues and Lessons from Chile

Sebastian Edwards, Alejandra Cox Edwards

NBER Working Paper No. 7646
Issued in April 2000
NBER Program(s):   LS   PE

This paper deals with the reform to labor market regulation implemented by Chile during the last twenty years. We concentrate on the reform to job security, on the decentralization of the wage bargaining process, and on the reduction in payroll taxes. Our interest is to understand to what extent these reforms helped reduce Chile's rate of unemployment from European' to U.S' levels. We argue that the reduction of payroll taxes (within the context of the social security reform), and the decentralization of bargaining increased labor market flexibility and contributed to the reduction of unemployment. Our analysis suggests that the reform on job security had no significant effect on the aggregate rate of unemployment.

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Published: Edwards, Sebastian and Alejandra Cox Edwards. "Economic Reforms And Labour Markets: Policy Issues And Lessons From Chile," Economic Policy, 2000, v15(30,Apr), 181-230.

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