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Labor market turnover and inequality in Latin America

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  • Menezes-Filho, Naercio
  • Narita, Renata
Abstract
This paper describes the patterns of worker turnover in selected Latin American countries and their implications for wage inequality. It documents a higher positive annual wage growth rate for jobto-job changers compared to stayers, due to turnover capturing the immediate gains from search behavior in the short run. Younger workers benefit relatively more from the positive effects of jobto-job changes, as expected. We also show that transitions are relatively higher within the informal sector for most countries, and particularly so for workers without college education. Moreover, total job separations and transitions from formal into informal employment occur more often among low-skill and young individuals. Next, the paper analyzes wage growth by percentiles for all workers and job-to-job movers for each country over a more extended period. We find that jobto-job changes are inequality-reducing in the short run, consistent with search gains associated with turnover exhausting more rapidly for high-paid workers. In contrast, we find that human capital effects dominate the search effects in the long run, as human capital accumulates over time. Thus, long-run wage growth is lower for job changers than for stayers, so that, while in the short run the search effects tend to dominate those of human capital, in the long run the opposite occurs. As unskilled workers change jobs more frequently, this suggests that job changes are inequalityincreasing in the long run. A potential explanation for limited wage growth in Latin American economies may include high informality rates. Policies to reduce wage inequality should focus on improving the conditions for positive turnover towards better investment and, thus, higher-quality jobs.

Suggested Citation

  • Menezes-Filho, Naercio & Narita, Renata, 2023. "Labor market turnover and inequality in Latin America," LSE Research Online Documents on Economics 120556, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:120556
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    File URL: http://eprints.lse.ac.uk/120556/
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    References listed on IDEAS

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    1. Carmen Pagés-Serra, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2000), pages 109-154, August.
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    Cited by:

    1. Maria Aristizabal-Ramirez & Cezar Santos & Alejandra Torres, 2024. "Arepas are not Tacos: On the Labor Markets of Latin America," International Finance Discussion Papers 1396, Board of Governors of the Federal Reserve System (U.S.).

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    JEL classification:

    • J00 - Labor and Demographic Economics - - General - - - General

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