ABSTRACT
This chapter argues that rising wage inequality in Chile is the outcome of shifts in the country's position in international trade, macroeconomic conditions as well institutional factors such as labor relations. It considers the division of rents between Northern and Chilean capitalists. The chapter argues that free trade has reduced the amount of rents that Chilean capitalists earn, while increasing rents going to the North. Free trade has reduced rents in both import-competing and exporting Chilean firms. It concerns the division of rents between capitalists and workers in Chile. The chapter explores the division of rents between skilled and low-skilled workers. It provides the explanations advanced by neoclassical economists for the declining wages of Chilean low-skilled workers. The chapter shows how labor supply actually worked in favor of low-skilled workers, as did technological change, which was low-skill biased as opposed to skill-biased. In the cosmetics industry, the trend for domestic manufacturers has been to move "down" the value chain.
