LABOR FLEXIBILITY

Chile has long been known in the region for relatively steady growth paired with high levels of income inequality. The country’s economic trajectory has been linked to its “labor flexibilization” policies implemented under Pinochet, which have not changed substantially since the transition to democracy in 1990.

In a 2018 chapter, PAUL W. POSNER calls into question the justification for these policies, arguing that the country’s highly flexible labor market has failed to increase formal sector employment.

From the chapter:

“Labor reforms adopted during the Augusto Pinochet dictatorship and largely maintained since the democratic transition are consistent with the flexible labor policies advocated by IFIs such as the IMF, World Bank, and Inter-American Development Bank. Labor flexibility in Chile has perpetuated, if not exacerbated, the very conditions its proponents have argued it would ameliorate. Chile’s continued adherence to a flexibilized labor market should be understood not in terms of its capacity to reduce inequality or generate employment. Rather, it should be understood as the product of several interrelated factors: (1) the business sector’s ability to protect its interests through the leverage it accrued with policymakers over the course of the dictatorship; (2) the center-left Concertación’s conscious limitation of threats to the business sector’s interests in order to maintain political and economic stability; and (3) the weakness of organized labor, resulting from the perpetuation of the Pinochet-era labor regime and its own failure to adapt to Chile’s profoundly altered labor conditions.”

+  “Our main conclusion is that Chile’s labor market reactions to structural shocks are among the most flexible economies.” By Elías Albagi, Pablo García, and Jorge E. Restrepo. Link. And a 2007 paper by Víctor O. Lima and Ricardo D. Paredes examine three labor market regimes in Chile from 1967 to 2002. Link.

+  “The code facilitated shifting workers from one position to another within a firm and, more importantly, allowed employers to fire workers at will, individually or en masse, for no reason other than ‘business necessities.'” By John Lear and Joseph Collins. Link. And a 1994 BLS paper defines the characteristics of  “labor market flexibility.” Link. 

+  Ángela Vergara on the rejected draft constitution’s proposals for labor reform. Link. And see her PW essay on the vote of Chilean mine workers. Link. 

NEW RESEARCHERS

EMILIE SARTRE is a Postdoctoral Research Associate at Brown University, affiliated with the Brown Center for Philosophy, Politics, and Economics. In a recent paper, she studies how public fiscal mismanagement leads to the rise of populism.

From the abstract: 

“This paper studies how populist candidacies were fueled by a case of public financial mismanagement that became salient during the Great Recession. Using an instrumental variable strategy, we exploit the leak of a list of French municipalities that contracted “toxic” loans before the crisis. During the subsequent municipal elections, we show that i) the right-wing populist party is the only political orientation experiencing an increase in vote share, while mainstream incumbents’ political orientations are electorally punished, ii) both right-wing and left-wing populist candidacies are more likely in municipalities affected by the scandal, leading to arise in electoral competition, iii) the entry of populist candidates remains persistent over time. Importantly, the findings are not driven by economic deprivation, austerity measures, or pure demand for a political turnover. They suggest that the disclosure of public financial mismanagement contributes by itself to the rise of populism during financial crises via the strategic entry of populist parties.”

+ + +

+   “Today, the European effort to assert economic sovereignty is in service of a sanctions alliance with the US.” New on PW, Esfandyar Batmanghelidj on how sanctions are reshaping EU-US relations. Link. 

+   “How would securitizing the World Bank’s portfolio work, and how does this tactic relate to the larger derisking turn in development finance?” New on the Polycrisis, Advait Arun analyzes securitization as a strategy for climate finance. Link.

+   “Russia’s war on Ukraine concretely reveals what it means for countries to lose their food sovereignty.” A new issue of Siyada magazine on the Ukraine invasion and food supply in North African countries. Link. 

+   Hugh Miller, Simon Dikau, Romain Svartzman, and Stéphane Dees on the shortage of three raw materials—copper, lithium, and nickel— needed for the low-carbon transition. Link.

+   “The IRS and Treasury effectively cannot be challenged in court for an action or decision that favors taxpayers, causing the government to lose money.” Brian D. Galle and Stephen E. Shay on administrative law and taxes. Link. 

+   Anne-Sophie Corbeau and Ann-Kathrin Merz on Germany’s gas price break. Link. 

+   A 2005 article from Betül Sengezer and Ercan Koç on land use planning and earthquake mitigation in Turkey, from Disaster‘s larger collection around earthquakes in the country. Link to the article, link to the collection. 

+    “A recent survey found that 63% of the population or around 130 million people are now ‘multi-dimensionally’ poor.” An interview with Alex Batubo on Nigeria’s upcoming presidential elections. Link. 

+   “It may be argued that the prohibition of usury impeded the development of capitalism in at least two ways: first, by keeping the interest rate high and, second, by undermining the enforcement of contracts. As far as the Medici are concerned, unsound financing was perhaps a major factor in their downfall. It seems plausible that they placed themselves in the same position as that of a modern corporation which is trading on the equity and relies mostly on the issuing of bonds as a means of financing expansion. When business conditions became unfavorable and profits fell, the Medici should have reduced the return which they offered to depositors. Perhaps it was impossible to do so without losing prestige or without causing withdrawals of much needed cash at a critical moment. In any case the Medici were reluctant to cut interest charges, except as a last resort. When they finally decided to take this fateful step, it gave wide publicity to the extent of their losses and undermined their prestige both at home and abroad.” By Raymond de Roover. Link. 

Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org