consequently, in the earnings structure within different labor markets, a rather different analysis than the one presented in this paper would be needed to isolate the effects of each reform on the wage distribution. As noted above, the goal is to document wage inequality within labor markets before and after the reforms took place.

The paper is organized as follows. In section 2 we briefly outline the economic reforms introduced in each country and the macroeconomic performance during the selected years. In section 3 we discuss issues related to the data and summarize the evolution of human capital and other female worker characteristics between the sampled years. Section 4 outlines the general labor market conditions in each country and presents the changes in (unconditional) wage inequality within each labor market. In section _5_ we discuss some methodological issues and present the evolution of wage inequality after controlling for differences in worker characteristics (human capital and experience) and other characteristics (regional, occupational, industry, etc). In section 6 we conclude.

# **2. Economic Reforms and Macroeconomic Performance**<sup>**2**</sup>

The countries examined in this paper were selected as extreme cases during the period of liberalization. Costa Rica, a small and stable economy, had very subtle reforms during the late 1980s and early 1990s. Brazil and Argentina, on the other hand, are both big, rapidly changing economies that had massive restructuring during the period. Brazil, however, has a more flexible labor market that is adjusting to the changes in a very different manner than the more rigid Argentine economy.<sup>3</sup> This section outlines the structural reforms and the macroeconomic situation of each country during the selected sarnple periods.

# _2.1 Argentina_

The main structural reforms introduced in Argentina were trade and capital liberalization, deregulation of the financial markets and privatization of publicly-owned enterprises. In addition, Argentina introduced a new monetary exchange system that fixed the exchange rate between the national currency and the U.S. Dollar at a one-to-one rate. One of the goals of this convertibility plan was to avoid the monetization of the fiscal deficit and to stabilize prices. The economy soon started showing the effects of the reforms, especially from the convertibility plan. From 1991 to 1994, the Argentine economy witnessed a significant drop in inflation that reached annual levels close to 5.5% and sustained economic activity that put annual rates of GDP growth at 11.7% (35% during the period). Employment growth was also vigorous, especially during the first years after the implementation of the reforms. Annual employment grew 5.6% but urban unemployment had also grown considerably, from 6.0% in 1991 to 12.2% in 1994. Other changes include significant increases in capital flows and imports and real appreciation of the currency. The appreciation of the currency implied that during this time the economic activity depended exclusively on the internal demand which was also being positively stimulated by capital flows. However, this trend was reversed by the Mexican crisis in 1995. Capital flows decreased considerably and Argentina entered a recession (GDP

> **2** These outlines are based on Baer (1995), Edwards (1995) and the World Bank (1996). 3Initially, we had intended to include Colombia, a stable economy with restructuring and the Dominican Republic (to include a Caribbean economy), but due to data issues, those countries were omitted over the process of the study.

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