Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/51657
Authors: 
Messina, Julián
Sanz-de-Galdeano, Anna
Year of Publication: 
2011
Series/Report no.: 
Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5778
Abstract: 
This paper examines the consequences of rapid disinflation for downward wage rigidities in two emerging countries, Brazil and Uruguay, relying on high quality matched employer-employee administrative data. Downward nominal wage rigidities are more important in Uruguay, while wage indexation is dominant in Brazil. Two regime changes are observed during the sample period, 1995-2004: (i) in Uruguay wage indexation declines, while workers' resistance to nominal wage cuts becomes more pronounced; and (ii) in Brazil, the introduction of inflation targeting by the Central Bank in 1999 shifts the focal point of wage negotiations from changes in the minimum wage to expected inflation. These regime changes cast doubts on the notion that wage rigidity is structural in the sense of Lucas (1976).
Subjects: 
downward wage rigidity
indexation
matched employer-employee data
emerging economies
JEL: 
J30
E24
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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