Plant Level Evidence on Product Mix Changes in Chilean Manufacturing

This paper analyzes changes in the product mix by Chilean manufacturing plants in the period 1996-2003. Three-quarters of the surviving plants changed the set of products produced and more than three-quarters of the exporting plants changed the mix of products they exported during the sample period. Plants that changed their product mix contributed 85% of the aggregate growth in real sales of surviving plants between 1996 and 2003. Finally and in contrast to the US evidence, there is a negative correlation between revenue per product and the number of products. Apart from this, new evidence consistent with recent models of multi-product heterogeneous firms and trade is provided.heterogeneous plants, multiple products, entry and exit, trade, development.

Procyclical productivity : evidence from an emerging economy

Average productivity tends to rise during booms and fall during recessions. This fact is at odds with classical macroeconomic theories which suggest that labor productivity should be countercyclical due to the law of diminishing returns to factors. Theoretical explanations for this puzzle include exogenous changes in production technology, increasing returns to scale, measurement errors due to unobserved input variations, external economies and composition effects at the aggregate level. Surprisingly, aggregate data for the Chilean industry show that productivity is countercyclical. This paper has two objectives. First, we study the cyclical behavior of productivity in 84 sectors of the Chilean industry in the 1979-1997 period. We find that, contrary to the results obtained using aggregate indexes, disaggregated data confirm that on average productivity is unambiguously procyclical. The main reason for this difference is that aggregate data provides a distorted assessment of the cyclical component of productivity due to the marked heterogeneity of behavior between sectors. Second, we examine the determinants of productivity in the Chilean industry using an econometric model that allow us to quantify the relative contribution of the four different explanations of procyclical productivity. The results indicate that technology shocks account for 50% of productivity cycles in the 1979-1997 period, thus supporting the supply shocks hypothesis as the main source of business cycles in Chile. The other 50% of the productivity shocks is explained by important reallocation effects among sectors of different productivity and, more recently, by the presence of increasing returns. Variations in the utilization of capital and labor effort were insignificant.

The Effects of Labor Market Policies in an Economy with an Informal Sector

In many economies, there is substantial economic activity in the informal labor market, beyond the reach of government policy. Labor market policies, which by definition apply only to the formal-sector can have important spillover effects on the informal sector. The relative sizes of the informal and formal sectors adjust, the skill composition of the workforce in the two sectors changes, etc. In this paper, we build an equilibrium search and matching model to analyze the effects of labor market policies in an economy with an informal sector. Our model extends Mortensen and Pissarides (1994) by allowing for ex ante worker heterogeneity with respect to formal-sector productivity. We analyze the effects of labor market policy on informal- and formal-sector output, on the division of the workforce into unemployment, informal-sector employment and formal-sector employment, and on wages. Finally, our model allows us to examine the distributional implications of labor market policy; specifically, we analyze how labor market policy affects the distributions of wages and productivities across formal-sector matches.search, matching, informal sector

Efficiency in a Search and Matching Model with Endogenous Participation

We show that in a search/matching model with endogenous participation in which workers are heterogeneous with respect to market productivity, satisfying the Hosios rule leads to excessive vacancy creation. The reason is that the marginal worker does not internalize the effect of his or her participation on average productivity.search, matching, participation, Hosios rule, efficiency

The Effects of Labour Market Policies in an Economy with an Informal Sector

In this paper, we build an equilibrium search and matching model of an economy with an informal sector. Our model extends Mortensen and Pissarides (1994) by allowing for ex ante worker heterogeneity with respect to formal-sector productivity. We use the model to analyze the effects of labour market policy on informal-sector and formal sector output, on the division of the workforce into unemployment, informal-sector employment and formal-sector employment, and on wages. Finally, we examine the distributional implications of labour market policy; specifically, we analyse how labour market policy affects the distributions of wages and productivities across formal-sector matches. Keywords: Informality and Labour Market Policy

Efficiency in a Search and Matching Model with Endogenous Participation

We show that in a search/matching model with endogenous participation in which workers are heterogeneous with respect to market productivity, satisfying the Hosios rule leads to excessive vacancy creation. The reason is that the marginal worker does not internalize the effect of his or her participation on average productivity.participation, efficiency, matching, search, Hosios rule

Innovation, R&D Investment and Productivity in Chile

This paper uses two sources of information and different methodologies to analyze the causal effect of product and process innovation on productivity in the Chilean manufacturing industry during the past decade. In general, the evidence suggests there is not a contemporaneous effect of product innovation on productivity, but there is a positive effect of process innovation. This notsignificant effect of product innovation contrasts with evidence of studies for other countries. However, the results show the presence of lagged effects product innovation on productivity two years after innovation. Compared with the case of developed countries, this evidence might be consistent with a very slow process of “learning by doing” on the part of Chilean firms with regard to mastering new technologies. These slow and frequently uncertain gains in productivity could help to explain the low levels of investment in research and development (R&D) activities by Chilean firms.Productivity, Innovation, Investment, Research and development, Chile

Unemployment Insurance, Job Search, and Informal Employment

International audienceThis paper analyses the potential impacts of introducing unemployment insurance (UI) in middle income countries using the case of Malaysia, which today does not have such a system. The analysis is based on a job search model with unemployment and three employment sectors: formal and informal wage employment, and self employment. The parameters of the model are estimated to replicate the structure of the labor market in Malaysia in 2009 and the distribution of earnings for informal, formal and self employed workers. The results suggest that unemployment insurance would have only a modest negative effect on unemployment if benefits are not overly generous. The main effect would be a reallocation of labor from wage into self employment while increasing average wages in the formal and informal sectors

Mercado laboral chileno en tiempos de crisis: políticas macroeconómicas y reformas pendientes

Este artículo utiliza dos modelos macroeconómicos distintos, pero complementarios, para medir el efecto de algunos aspectos relevantes de la institucionalidad laboral de Chile respecto del ajuste y estructura de su mercado. Por un lado, se analiza cómo la rigidez de precios y salarios, junto con la presencia de costos de ajuste en el empleo, afectan la dinámica de las variables y políticas macroeconómicas ante un shock negativo de demanda como el que afecta a Chile actualmente. Se advierte que son principalmente las rigideces de precios y salarios las que retardan el ajuste del empleo, y que ello requiere de políticas macro más agresivas para retornar la economía a su senda de crecimiento. Por otro lado, a partir de una calibración de un modelo del mercado laboral chileno, se analiza el efecto de impuestos al despido y al salario sobre el bienestar agregado. Se concluye que una reforma laboral consistente en la eliminación del impuesto al despido acompañada por un aumento en el impuesto al salario para financiar un determinado gasto en protección social, arrojaría importantes ganancias de bienestar para Chile. Por su parte, la sola eliminación de los impuestos al despido no sería del todo deseable, ya que generaría un exceso de creación y destrucción de empleos.flexibility; labor market adjustment; severance payments, labor market reforms

The role of the brain in financial decisions : a viewpoint on neuroeconomics

In this article, we explain the important role neuroscience plays in economic and financial environments. Hence, we present neuroeconomics as a way to describe how decision-making processes affect brain activity, focusing especially on the importance of economic and financial decisions. We answer some questions regarding the role of emotions in finance, the psychological factors present in financial markets, and how neuropsychological stimuli affect our economic decisions. We conclude by citing the main research in the area of neuroscience in financial decision-making processes, and highlight further research projects in these areas