New Economics Papers
on Central and South America
Issue of 2011‒07‒13
two papers chosen by

  1. Effects of Argentina's Social Security Reform on Labor Markets and Poverty By Maria Laura Alzua; Hernan Ruffo
  2. The Latin American Development Problem By Diego Restuccia

  1. By: Maria Laura Alzua; Hernan Ruffo
    Abstract: In 1994, Argentina introduced Pension Reform and Unemployment Benefits as a major reform component to its social security system. This papers analyzes the effects of introducing new individual accounts in the pension system -which was under effect between 1994 and 2008- over wages, employment and poverty. While the macroeconomic effects of a change in the pension system is an issue that is relatively well addressed by the literature, its microeconomic effects are often neglected in the analysis. We use a CGE model to evaluate the effects of the reform on labor market and poverty. Our result indicate that if private pension funds are allocated to physical investment, labor demand and wages increase and poverty goes down. However, these effects fade out if funds of private accounts are used to buy government debt.
    Keywords: Social security, Poverty, Argentina
    JEL: H53 H55 D39
    Date: 2011
  2. By: Diego Restuccia
    Abstract: By international standards, gross domestic product (GDP) per capita in Latin America is low: around one fourth of that of the United States. Moreover, in the last five decades, Latin America has failed to catch-up in wealth to the level of the United States while other countries at similar or even lower stages of development have been successful. The failure to attain higher levels of relative income represents what I call the development problem in Latin America. Using a development accounting framework, I find that the bulk of the difference in GDP per capita between Latin America and the United States is accounted for by low GDP per hour and, in particular, low total factor productivity (TFP) in Latin America. I calculate that to explain the difference in GDP per hour, TFP in Latin America must be around 60 percent of that in the United States. I then consider a model with heterogeneous production units where institutions and policy distortions lead to a 60 percent productivity ratio between Latin America and the United States. Removing the barriers to productivity can increase long-run GDP per hour in Latin America by a factor of 4 relative to that of the United States. This increase is equivalent to 70-years worth of U.S. post WW-II development.
    Keywords: labor productivity, capital, schooling, establishment heterogeneity, policy distortions
    JEL: O1
    Date: 2011–06–12

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