Microeconomic Evidence of Nominal Wage Rigidities in Chile

Abstract

This document presents new evidence on the adjustment frequency of wages in Chile and their fundamentals. The data come from a database built from information gathered by the Chilean safety association Asociación Chilena de Seguridad (AChS). The base consists of a panel of 429 thousand wage records for the period 2001.12–2007.12. The results indicate that, on average, wages take a little over nine quarters to adjust completely. As for the determinants of such adjustments, the degree of downward flexibility of wages depends positively on the participation of younger workers (under 30), positively on firm size, and negatively on the proportion of high income workers. Finally, the sectoral effects are statistical and economically significant.