nep-lam New Economics Papers
on Central and South America
Issue of 2010‒10‒16
eight papers chosen by
Maximo Rossi
University of the Republic

  1. The Electric Revolution in Latin America By Xavier Tafunell
  2. LA AVERSIÓN AL RIESGO EN LA TOMA DE DECISIONES MÉDICAS: UNA REVISIÓN By Liliana Chicaíza B; Mario García Molina; Giancarlo Romano G
  3. Positive natural resource shocks and domestic adjustments in a semi-industrialized economy: Argentina in the 2004-2007 period By Serino, L.A.
  4. The Dynamic Effects of Commodity Prices on Fiscal Performance in Latin America By Leandro Medina
  5. How much do Latin American pension programs promise to pay back? By Forteza, Alvaro; Ourens, Guzman
  6. Work histories and pension entitlements in Argentina, Chile and Uruguay By Forteza, Alvaro; Apella, Ignacio; Fajnzylber, Eduardo; Grushka, Carlos; Rossi, Ianina; Sanroman, Graciela
  7. Skill Premium in Chile: Studying Skill Upgrading in the South By Francisco Gallego
  8. Sudden Stops, Financial Frictions, and Labor Market Flows: Evidence from Latin America By Francisco Gallego; José Tessada

  1. By: Xavier Tafunell
    Abstract: Latin America participated in the electric revolution which profoundly transformed the most developed Western economies between 1880 and 1930. The electrification of Latin America began relatively soon after these economies, but it was incapable of keeping up with them. Public electric lighting was introduced early in the big Latin American cities, where electric trams started running at almost the same time as in Europe, and electricity spread rapidly in the mining sector. In the most advanced countries or areas in the region, the manufacturing industry substituted the steam engine with the electric motor, following the example of industry in the United States and Europe. Nevertheless, towards 1930 electricity consumption per inhabitant for Latin America was far below that of the more advanced economies, and only the Latin American countries which lead the process of electrification had reached levels of electric consumption that were similar to those of the late industrialised European countries. One of the most striking features of the electric revolution in Latin America is rooted precisely in the enormous national differences. These differences are indicative of the great economic inequalities existing in the heart of the region and these nations’ highly diverse capacity for economic modernisation.
    Keywords: Latin American Growth, Comparative Development, Technological Progress, Energy Transition, Electricity.
    JEL: N76 N16 O33 L94
    Date: 2010–09
  2. By: Liliana Chicaíza B; Mario García Molina; Giancarlo Romano G
    Abstract: Se realiza una revisión de literatura sobre la aversión al riesgo en la toma de decisiones médicas. Se presenta la aversión al riesgo desde las teorías de la utilidad esperada subjetiva y desde la utilidad esperada basada en rangos. Se revisan las metodologías de medición de la aversión al riesgo en situaciones clínicas desde la economía y desde la psicología.
    Date: 2010–10–05
  3. By: Serino, L.A.
    Abstract: This paper evaluates the domestic adjustment to recent positive external shocks in Argentina's natural resource sectors. Although there is no single, exclusive determinant of ArgentinaÂ’s fast economic growth in the period 2003-2007, the paper illustrates the favourable contribution of certain economic policies to this outcome. According to counterfactual simulations performed with a dynamic Computable General Equilibrium (CGE) model especially designed to capture structural features of the Argentine economy, export taxes on natural resource products and ArgentinaÂ’s competitive exchange rate policy have counteracted Dutch disease adjustments associated the positive terms of trade shock (which may be contractionary in the medium-term if no economic policies are implemented) contributing to productive and export diversification and to bring about output growth. The analysis also shows that in a context of strong demand impulses spending the income collected with export taxes may not be beneficial for the overall competitiveness of the economy, hence counteracting one of the purposes of the tax policy. This implies, first, that subsidies to producers of wage-goods may be ineffective to control overall price increases, and second, that optimizing the contribution of public investment in infrastructure to improve the competitiveness of the economy requires special attention to the timing of public investment.
    Keywords: terms of trade;Dutch disease;Argentina;exchange rate policy;productive diversification
    Date: 2009–11–01
  4. By: Leandro Medina
    Abstract: The recent boom and bust in commodity prices has raised concerns about the impact of volatile commodity prices on Latin American countries’ fiscal positions. Using a novel quarterly data set-which includes unique country-specific commodity price indices and a comprehensive measure of public expenditures-this paper analyzes the dynamic effects of commodity price fluctuations on fiscal revenues and expenditures for eight commodity-exporting Latin American countries. The results indicate that Latin American countries’ fiscal positions react strongly to shocks to commodity prices, yet there are marked differences across countries. Fiscal variables in Venezuela display the highest sensitivity to commodity price shocks, with expenditures reacting significantly more than revenues. At the other end of the spectrum, in Chile expenditure reacts very little to commodity price fluctuations, and the dynamic responses of its fiscal indicators are very similar to those seen in high-income commodity-exporting countries. This distinct behavior across countries may relate to institutional arrangements, which in some cases include the efficient application of fiscal rules amid political commitment and high standards of transparency.
    Keywords: Business cycles , Chile , Commodities , Commodity price fluctuations , Commodity prices , Cross country analysis , Exports , External shocks , Fiscal policy , Fiscal sector , Latin America , Venezuela, República Bolivariana de ,
    Date: 2010–08–19
  5. By: Forteza, Alvaro; Ourens, Guzman
    Abstract: The authors present a new database of social security indicators for eleven Latin American countries designed to assess pension schemes in terms of the payments they promise in return to contributions. Based on this data, authors analyze inequality, insurance and incentives to work, using the replacement rates and the internal rates of return implicit in the flows of contributions and pensions. Results indicate that most programs analyzed are progressive in the sense that, other things equal, they yield higher returns to low than to high income workers. Poor workers, notwithstanding, often have flat age-earnings profiles and lower life expectancy, both of which reduce the rates of return received from social security. The Argentinean and (the pre-2008) Uruguayan programs severely punish short contribution careers, providing strong incentives for workers in the programs to continue contributing until they reach minimums that vary between 30 and 35 years of contributions. The counterpart is that these programs do not hedge workers against the risk of having short working careers; quite the opposite, they raise the uncertainty workers face. The very low rates of return that the Argentinean and Uruguayan main pension programs pay to workers with short working careers are likely to impact strongly on low income workers, as the probability they experience interruptions is higher. The Brazilian, Chilean and Mexican programs show a better balance between insurance against the risk of short working careers and incentives to work. The defined benefit programs of Argentina, Ecuador and Uruguay strongly discourage early retirement; the Chilean and Mexican programs are more neutral. Argentina, Chile and Uruguay passed reforms to their main pension programs in 2008. Unlike the Argentinean reform, the Chilean and Uruguayan 2008 reforms strengthened the social protection that programs provide, shifting the balance towards more insurance and less incentives to work.
    Keywords: Pensions&Retirement Systems,Emerging Markets,Debt Markets,Gender and Law,Labor Markets
    Date: 2009–12–01
  6. By: Forteza, Alvaro; Apella, Ignacio; Fajnzylber, Eduardo; Grushka, Carlos; Rossi, Ianina; Sanroman, Graciela
    Abstract: The authors propose alternative methods to project pension rights and implement them in Chile and Uruguay and partially in Argentina. The authors use incomplete work histories databases from the social security administrations to project entire lifetime work histories. The authors first fit linear probability and duration models of the contribution status and dynamic linear models of the income level. The authors then run Monte Carlo simulations to project work histories and compute pension rights. According to results, significant swathes of the population would not access to fundamental pension benefits at age 65, if the current eligibility rules were strictly enforced.
    Keywords: Pensions&Retirement Systems,Labor Markets,Emerging Markets,Gender and Law,Debt Markets
    Date: 2009–12–01
  7. By: Francisco Gallego (Instituto de Economía. Pontificia Universidad Católica de Chile.)
    Abstract: The evolution of the skill premium (i.e., the wage differential between skilled and unskilled workers) has interest from at least two perspectives: it is a rough measure of inequality among workers of different qualifications and provides information on the characteristics of the development process of the economy. In this paper, I investigate empirically the evolution of the skill premium in Chile over the last 40 years. After some fluctuations in the 1960s and 1970s, the skill premium increased in the 1980s and has remained roughly constant since then. The data suggest that this evolution is an outcome of a significant increase in relative demand for skilled workers in the 1980s and 1990s and a sizeable increase in the relative supply in the 1990s. Sectoral evidence shows that, after controlling for sector and time effects, (i) the relative demand increased faster in the same industries in Chile than in the US and (ii) the correlation is stronger for tradable industries and non-tradable industries that are intensive in imported capital, as expected. This result is consistent with a number of theories that link skill up- grading in developed and developing countries. To try to disentangle among these theories, I present time series evidence suggesting that, after controlling for other determinants of skill premium, not only there is a positive correlation between skill premium in Chile and in the US but also the size of the correlation is consistent with the Acemoglu (2003a) model of endogenous technological choice in which new technologies are produced in developed countries (like the US) and adopted in developing economies (like Chile).
    Date: 2010
  8. By: Francisco Gallego (Instituto de Economía. Pontificia Universidad Católica de Chile.); José Tessada
    Abstract: Sudden stops and international financial crises have been a main feature of developing countries in the last three decades. While their aggregate effects are well known, the disaggregated channels through which they work are not well explored yet. In this paper, we study the sectoral responses that take place over episodes of sudden stops. Using job flows from a sectoral panel dataset for four Latin American countries, we find that sudden stops are characterized as periods of lower job creation and increased job destruction. Moreover, these effects are heterogeneous across sectors: we find that when a sudden stop occurs, sectors with higher dependence on external financing experience lower job creation. In turn, sectors with higher liquidity needs experience significantly larger job destruction. This evidence is consistent with the idea that dependence on external financing affects mainly the creation margin and that exposure to liquidity conditions affects mainly the destruction margin. Overall, our results confirm the large labor market effects of sudden stops, and provide evidence of financial conditions being an important transmission channel of sudden stops within a country, highlighting the role of financial frictions in the restructuring process in general.
    Date: 2010

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