New Economics Papers
on Central and South America
Issue of 2011‒11‒14
eight papers chosen by

  1. Fiscal policy and income redistribution in Latin America: Challenging the conventional wisdom By Nora Lustig
  2. How Sustainable are Latin American Fiscal Deficits: A Panel Data Approach By Jacobo Campo Robledo; Luis Fernando Melo Velandia
  3. Is there a motherhood penalty? Decomposing the family wage gap in Colombia By Luis Fernando Gamboa; Blanca Zuluaga
  4. Incentivos y patrones de retiro en Uruguay By Ignacio Alvarez; Natalia Da Silva; Alvaro Forteza; Ianina Rossi
  5. Should cash transfers be confined to the poor ? implications for poverty and inequality in Latin America By Acosta, Pablo; Leite, Phillipe; Rigolini, Jamele
  6. Redistributive effects of indirect taxes: comparing arithmetical and behavioral simulations in Uruguay By Verónica Amarante; Marisa Bucheli; Cecilia Olivieri; Ivone Perazzo
  7. Is there such thing as middle class values ? Class differences, values and political orientations in Latin America By Lopez-Calva, Luis F.; Rigolini, Jamele; Torche, Florencia
  8. The measurement of educational inequality : achievement and opportunity By Ferreira, Francisco H. G.; Gignoux, Jeremie

  1. By: Nora Lustig (Commitment to Equity Initiative (CEQ), Inter-American Dialogue and Tulane University)
    Abstract: Conventional wisdom states that fiscal policy redistributes little in Latin America. Lower tax revenues and – above all – lower and less progressive transfers have been identified as the main cause. Existing studies show that, while in Europe the distribution of all transfers combined (cash and in-kind) is egalitarian, the bulk of transfers in Latin America accrue to the upper quintile. Through an in-depth fiscal incidence analysis applied to Argentina, Bolivia, Brazil, Mexico and Peru we argue that conventional wisdom may be wrong. First, the extent and effectiveness of income redistribution and poverty reduction, revenue-collection, and spending patterns vary so significantly across countries that speaking of ?Latin America? as a unity is misleading. The (after direct taxes and transfers) Gini, for example, declines by over 10 percent in Argentina but by only 2.4 percent in Bolivia. In Argentina, Brazil and Bolivia government revenues are close to 40 percent of GDP, whereas in Mexico and Peru they are around 20 percent. Social spending (excluding contributory pensions) as a share of GDP ranges from 17 percent in Brazil to 5.2 percent in Peru. Second, social spending does not accrue to the richest quintile. On the contrary, concentration coefficients for social spending are highly negative (progressive in absolute terms) for Argentina and slightly so for Bolivia and Mexico. In Brazil and Peru social spending is progressive in relative terms only. Third, there is no obvious correlation between the size of government and the size of social spending, on the one hand, and the extent and effectiveness of redistribution, on the other: government size is similar for Argentina and Bolivia but they are on opposite sides in terms of the extent of redistribution. Fourth, due to indirect taxes households are net payers to the ?fisc? beginning in the third decile in Bolivia and Brazil; for Argentina, Mexico and Peru this happens in the fifth decile. Fifth, corrective measures differ too: in Argentina, Bolivia and Brazil they may involve the reduction in revenues and total spending, while revenues and social spending (especially direct transfers to the poor) should be increased in Mexico and Peru. Bolivia and Brazil need to introduce changes to their tax and transfer system so that net payers to the ?fisc? start at higher incomes. All five countries need to improve the progressivity of their spending, including non-social spending components.
    Keywords: fiscal incidence, fiscal policy, inequality, poverty, redistribution, social policy, taxes, transfers; Latin America, Argentina, Bolivia, Brazil, Mexico and Peru
    JEL: D63 H11 H22 H5 I3 O15
    Date: 2011
  2. By: Jacobo Campo Robledo; Luis Fernando Melo Velandia
    Abstract: This paper evaluates the fiscal sustainability hypothesis for eight Latin American countries, Argentina, Chile, Colombia, Ecuador, Panama, Peru, Paraguay and Uruguay, during the period 1960 - 2009. Using second generation cointegration panel data models, we test whether Government revenues and primary expenditures are sustainable in the long-run. This methodology allows for cross-sectional dependence among countries and is also appropriated under the existence of potential structural breaks. We found empirical evidence of sustainability of the primary deficit for these Latin American countries but only in a weak sense.
    Date: 2011–11–02
  3. By: Luis Fernando Gamboa (Universidad del Rosario, Bogotá, Colombia); Blanca Zuluaga (Universidad Icesi, Cali, Colombia)
    Abstract: The aim of this paper is to provide an estimation and decomposition of the motherhood wage penalty in Colombia. Our empirical strategy is based on the matching procedure designed by Ñopo (2008) for the case of gender wage gaps. This is an alternative procedure to the well-known Blinder-Oaxaca decomposition method. The cross-section data of the Colombian Living Standard Survey allows us to decompose the wage gap in four components, according to the characteristics of mothers and non-mothers. We found that mothers earn, in average, 1:73% less than their counterparts without children and that this gap slightly decreases as the group includes older women. Taking into account that this procedure is sensitive to the set of variables included in the matching, several specifications are tested. The main result of the paper is obtained when considering schooling as a matching variable. Once schooling is included, the unexplained part of the gap considerably decreases and turns non significant. Thus, we do not find evidence of wage discrimination against mothers in Colombia.
    Keywords: Family wage gap; childbearing costs; female wages.
    JEL: J31 J16
    Date: 2011
  4. By: Ignacio Alvarez; Natalia Da Silva; Alvaro Forteza (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Ianina Rossi (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: We estimate indicators of incentives to retire in a sample of individuals affiliated to the main Uruguayan social security program and we assess their impact on retirement and pension claims observed between 1996 and 2004. The implicit tax on work in this population is high compared to other countries for which similar studies have been conducted, particularly so when the indicator is computed for individuals covered by the institutional act 9. The reform law passed in 1995 increased the incentives to work. However, we do not find the expected effects of the incentive indicators on retirement.
    Keywords: Incentives to retirement, Social Security
    JEL: H55 J14 J2
    Date: 2011–09
  5. By: Acosta, Pablo; Leite, Phillipe; Rigolini, Jamele
    Abstract: This paper compares for 13 Latin American countries the poverty and inequality impacts of cash transfer programs that are given to all children and the elderly (that is,"categorical"transfers), to programs of equal budget that are confined to the poor within each population group (that is,"poverty targeted"transfers). The analysis finds that both the incidence of poverty and the depth of the poverty gap are important factors affecting the relative effectiveness of categorical versus poverty targeted transfers. The comparison of transfers to children and the elderly also supports the view that choosing carefully categories of beneficiaries is almost as important as targeting the poor for achieving a high poverty and inequality impact. Overall, the findings suggest that although in the Latin American context poverty targeting tends to deliver higher poverty impacts, there are circumstances under which categorical targeting confined to geographical regions (sometimes called"geographic targeting") may be a valid option to consider. This is particularly the case in low-income countries with widespread pockets of poverty.
    Keywords: Rural Poverty Reduction,Services&Transfers to Poor,Regional Economic Development,Poverty Monitoring&Analysis
    Date: 2011–11–01
  6. By: Verónica Amarante (Instituto de Economía, Facultad de Ciencias Económicas y de Administración, Universidad de la República); Marisa Bucheli (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Cecilia Olivieri (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Ivone Perazzo (Instituto de Economía, Facultad de Ciencias Económicas y de Administración, Universidad de la República)
    Abstract: In this brief paper we compare the redistributive effect of a VAT reform using an arithmetical and a behavioral microsimulation model. We analyze the effects of the elimination of the VAT for a basket of goods which is intensively consumed by the poorest population. Our microsimulations are based on data from the expenditure survey. The behavioral model uses the Quadratic Almost Ideal Demand System (QUAIDS) proposed by Banks et al (1997). Our results indicate that the change in the VAT implies a redistributive effect of small magnitude. The comparison of redistributive effects under the arithmetic and the behavioral simulation reveals that they are very similar.
    Keywords: fiscal redistribution, income inequality, taxes
    JEL: D31 H23 H20
    Date: 2011–09
  7. By: Lopez-Calva, Luis F.; Rigolini, Jamele; Torche, Florencia
    Abstract: Middle class values have long been perceived as drivers of social cohesion and growth. This paper investigates the relation between class (measured by position in the income distribution), values, and political orientations using comparable values surveys for six Latin American countries. The analysis finds that both a continuous measure of income and categorical measures of income-based class are robustly associated with values. Both income and class tend to display a similar association to values and political orientations as education, although differences persist in some important dimensions. Overall, there is no strong evidence of any"middle class particularism": values appear to gradually shift with income, and middle class values are between the ones of poorer and richer classes. If any, the only peculiarity of middle class values is moderation. The analysis also finds changes in values across countries to be of much larger magnitude than the ones dictated by income, education, and individual characteristics, suggesting that individual values vary primarily within bounds dictated by each society.
    Keywords: Inequality,Economic Theory&Research,Social Inclusion&Institutions,Labor Policies,Access&Equity in Basic Education
    Date: 2011–11–01
  8. By: Ferreira, Francisco H. G.; Gignoux, Jeremie
    Abstract: This paper proposes two related measures of educational inequality: one for educational achievement and another for educational opportunity. The former is the simple variance (or standard deviation) of test scores. Its selection is informed by consideration of two measurement issues that have typically been overlooked in the literature: the implications of the standardization of test scores for inequality indices, and the possible sample selection biases arising from the Program of International Student Assessment (PISA) sampling frame. The measure of inequality of educational opportunity is given by the share of the variance in test scores that is explained by pre-determined circumstances. Both measures are computed for the 57 countries in which PISA surveys were conducted in 2006. Inequality of opportunity accounts for up to 35 percent of all disparities in educational achievement. It is greater in (most of) continental Europe and Latin America than in Asia, Scandinavia, and North America. It is uncorrelated with average educational achievement and only weakly negatively correlated with per capita gross domestic product. It correlates negatively with the share of spending in primary schooling, and positively with tracking in secondary schools.
    Keywords: Teaching and Learning,Secondary Education,Education For All,Poverty Impact Evaluation,Tertiary Education
    Date: 2011–11–01

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.