Chilean paper analyses unemployment’s impact on wages
Analyses Chilean data from 1990–2012, proposes a dynamic earnings process
Unemployment spells are the most important source of earnings risk for workers, according to a working paper published this week by the Central Bank of Chile.
In Identification of earnings dynamics using rotating samples over short periods: the case of Chile, Carlos Madeira analyses Chilean data from 1990 to 2012 to propose a dynamic earnings process. Madeira considers two distinct shocks: unemployment spells and the wage of workers who stay employed.
"The idiosyncratic wage volatility of employed workers and the income variance due to flows into and out of unemployment are both high, but the share of volatility caused by unemployment increases much more during recessions," the author says.
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