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More but not better Jobs in Chile? The Fundamental Importance of Open-ended Contracts

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In a context of a rapid economic growth during the last 20 years, the Chilean labour market has created a significant number of new jobs, unemployment has remained low, and wages have increased. Nevertheless, the quality of the jobs created by Chile’s growing economy oblige us to question the success of the labour market in generating greater aggregate economic wellbeing.
This paper studies the quality of employment in the Chilean labour market by focusing on the occupational status of workers, particularly on the relevance of open-ended contracts. We study labour markets conditions over the last two decades using both survey and administrative data and explore the statistical relevance of job characteristics in determining workers’ labour capabilities. Our results show how despite consistent economic growth and employment generation, employment conditions present a mixed performance: the proportion of open-ended contracts has not increased, which means the same proportion of workers remains excluded from full rights and benefits. Our results show that apart from individual characteristics associated to human capital, the job characteristics that most impact labour capabilities are conditions associated with the occupational status of workers, particularly their type of contact. We find that having an open-ended contract is the most important factor that contributes to a worker's employment capabilities. Our findings support the need to look at employment conditions as important indicators of labour market development. We conclude the paper by discussing the policy implications of our findings.

 

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