The Structure of Wages in Latin American Manufacturing Industries

By Jorge Salazar-Carrillo; Juan J. Buttari et al. | Go to book overview

Chapter 1. Introduction

Wage differentials reflecting diverse skills and productivity components, or resulting from such factors as disequilibria, market imperfections, and transfer costs, define the wage structure of a particular country or region. Accordingly, the wage structure constitutes a "formal way of describing the distribution of wages in any given situation."1

The measurement and study of wage differentials is essential for an understanding of labor market performance at local, national, or regional levels. The importance of wage differentials was formally recognized at least two centuries ago and has led contemporary writers to refer to them as among the more interesting problems for research in labor economics in developing countries.2 The significance attributed to this topic can hardly be exaggerated when account is taken of the important role that wage differentials play in determining labor mobility and migration: for it is through the wage structure that the labor market tends to allocate labor to situations where its productivity and wages are higher; changes in wage differentials may have important implications for poverty and for income distribution. Moreover, through their impact on production costs, wage differentials act as partial determinants of production and technological patterns. Consequently, they have important potential effects on production and trade possibilities.

In spite of its importance, systematic study of wage differentials in Latin America is of relatively recent origin and has been hampered by the lack of adequate data. Needless to say, the difficulties are compounded when measuring and examining the Inter-American structure of wages. In such circumstances, this study is a pioneering endeavor.3

____________________
1
International Labour Office, "Changing Wage Structure: An International Review," International Labour Review 73 ( January-June 1956), p. 275.
2
See Adam Smith's chapter 10, book I, of The Wealth of Nations ( Modern Library edition, 1937) and Lloyd C. Reynolds, Relative Earnings and Manpower Allocation in Developing Economies, Yale University Economic Growth Center Paper134 ( New Haven, Conn.: 1969).
3
For an earlier attempt with a different focus see John R. Eriksson, "Wage Structures and Economic Development in Selected Latin American Countries, A Comparative Analysis" (Ph.D. diss., University of California, Berkeley, 1966).

-1-

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