New Economics Papers
on Central and South America
Issue of 2011‒12‒19
ten papers chosen by

  1. Housing Tenure and Housing Demand in Colombia By Maria Angelica Arbelaez; Roberto Steiner; Alejandro Becerra; Daniel Wills
  2. China’s Emergence in the World Economy and Business Cycles in Latin America By Ambrogio Cesa-Bianchi; M. Hashem Pesaran; Alessandro Rebucci; TengTeng Xu
  3. EDUCATION AND LABOUR MARKET OUTCOMES: EVIDENCE FROM BRAZIL By Geraint Johnes; R Freguglia; G Spricigo; A Aggarwal
  4. Protecting Workers against Unemployment in Uruguay By Veronica Amarante; Rodrigo Arim; Andres Dean
  5. Is there an Anti-labor Bias of Taxes? A Survey of the Evidence from Latin America and Around the World By Adriana Kugler
  6. Latin American Middle Classes: The Distance between Perception and Reality By Eduardo Lora; Deisy Johanna Fajardo
  7. Housing Demand in Brazil: Evidence from the Formal and Informal Sectors By Julie Litchfield; Fernando Balderrama; Caio Piza
  8. Can Emerging Market Central Banks Bail Out Banks? A Cautionary Tale from Latin America By Luis Ignacio Jácome; Tahsin Saadi Sedik; Simon Townsend
  9. Firm Size, Knowledge Intensity and Employment Generation: The Microeconometric Evidence for the Service Sector in Uruguay By Diego Aboal; Paula Garda; Bibiana Lanzilotta; Marcelo Perera
  10. External shocks and policy alternatives in small open economies: The case of El Salvador By Morley, Samuel; Piñeiro, Valeria; Robinson, Sherman

  1. By: Maria Angelica Arbelaez; Roberto Steiner; Alejandro Becerra; Daniel Wills
    Abstract: Using the 2003 and 2008 Quality of Life Surveys, this paper identifies the factors that affect housing tenure decisions in Colombia. Households with higher incomes are more likely to purchase than to rent, and the choice of formal housing is positively associated with wealth. Households eligible for social housing subsidies are more likely to purchase than to rent, and those working in the informal sector are more likely to purchase informal dwellings. Subsidies and access to mortgage credit have a large positive impact on demand. Finally, savings have a positive effect on demand in 2008, but not in 2003. The positive effect on demand of both subsidies and credit is explained by demand for low- income housing.
    JEL: G21 O54 R21 R28 R38 R58
    Date: 2011–10
  2. By: Ambrogio Cesa-Bianchi; M. Hashem Pesaran; Alessandro Rebucci; TengTeng Xu
    Abstract: This paper investigates how changes in trade linkages between China, Latin America, and the rest of the world have altered the transmission of international business cycles to Latin America. Evidence based on a GVAR model for five large Latin American economies shows that the long-term impact of a China GDP shock on the typical Latin American economy has increased by three times since the mid-1990s, while the long-term impact of a US GDP shock has halved, while the transmission of shocks to Latin America and the rest of emerging Asia GDP (excluding China and India) has not changed. These changes owe more changes in China’s impact on Latin America’s traditional and largest trading partners than to increased direct bilateral trade linkages boosted by the decade-long commodity price boom. These findings have important implications for both Latin America and the international business cycle.
    JEL: C32 E32 F44 O54
    Date: 2011–09
  3. By: Geraint Johnes; R Freguglia; G Spricigo; A Aggarwal
    Abstract: The effect of education on labour market outcomes is analysed using both survey and administrative data from The Brazilian PNAD and RAIS-MIGRA series, respectively. Occupational destination is examined using both multinomial logit analyses and structural dynamic discrete choice modelling. The latter approach is particularly useful as a means of evaluating policy impacts over time. We find that policy to expand educational provision leads initially to an increased take-up of education, and in the longer term leads to an increased propensity for workers to enter non-manual employment.
    Date: 2011
  4. By: Veronica Amarante; Rodrigo Arim; Andres Dean
    Abstract: This paper considers the main institutional features of the Uruguayan labor market and its recent evolution, with a focus on unemployment. The main policies aimed at protecting workers against unemployment are analyzed. Using administrative data from social security records, the paper studies the dynamics of the labor market. Particularly examined are inflows and outflows from the formal labor market, as well as the effect, in terms of earnings loss, of episodes out of the formal labor market. Finally, an impact evaluation of recent changes in the unemployment insurance program is presented.
    JEL: J01 J08
    Date: 2011–10
  5. By: Adriana Kugler
    Abstract: This paper surveys the macro and micro empirical evidence on the effects of different types of labor taxes (in particular, payroll and income taxes) on firm performance and worker behavior.
    Date: 2011–08
  6. By: Eduardo Lora; Deisy Johanna Fajardo
    Abstract: The main contribution of this paper with respect to previous work is the use of data on subjective perceptions to identify the Latin American middle classes. This paper provides a set of comparisons between objective and subjective definitions of middle-class using data from the 2007 World Gallup Poll. Seven objective income-based definitions of social class are contrasted with a self-perceived social status measure. Mismatches between the objective and the subjective classification of social class are the largest when the objective definition is based on median incomes. Mismatches result from the fact that self-perceived social status is associated not just with income, but also with personal capabilities, interpersonal relations, financial and material assets, and perceptions of economic insecurity. Objective definitions of the middle class based on absolute incomes provide the lowest mismatches and the most accurate differentiation of the middle class from other classes.
    JEL: D3 D6 I3
    Date: 2011–12
  7. By: Julie Litchfield; Fernando Balderrama; Caio Piza
    Abstract: This paper describes the determinants of housing demand in Brazil, with the intention of informing policy aimed at reducing the housing deficit and increasing home ownership. As price elasticity for renters is slightly higher, public policies that aim to influence the price of dwellings and/or the income of households are expected to affect renters more than owners. Given that rent is a pro-cyclical variable and that housing-price supply elasticity tends to be low, a social housing policy focused on the rental market might be an effective option, at least in the short run, to satisfy the increasing housing demand observed in Brazil.
    JEL: O54 R21 R23 R28 R31 R58
    Date: 2011–10
  8. By: Luis Ignacio Jácome; Tahsin Saadi Sedik; Simon Townsend
    Abstract: This paper investigates whether developing and emerging market countries can implement monetary policies similar to those used by advanced countries during the recent global crisis - injecting significant amounts of money into the financial system without facing major short-run adverse macroeconomic repercussions. Using panel data techniques, the paper analyzes episodes of financial turmoil in 16 Latin America during 1995-2007. The results show that developing and emerging market countries should be cautious because injecting money on a large scale into the financial system may fuel further macroeconomic instability, increasing the chances of simultaneous currency crises.
    Keywords: Banking sector , Cross country analysis , Developing countries , Emerging markets , Financial crisis , Financial systems , Latin America , Monetary policy ,
    Date: 2011–11–08
  9. By: Diego Aboal; Paula Garda; Bibiana Lanzilotta; Marcelo Perera
    Abstract: The employment impact of innovation in the heterogeneous universe of services was studied using data from the 2004-2009 Uruguayan service innovation surveys. The empirical evidence shows that the impact of product innovation on employment is positive, while process innovation appears to have no effect. The effect varies according to the skill level of the labor force, across sectors, and the type of innovation strategy pursued by firms. Process innovation activities tend to substitute low-skilled jobs with higher-skilled jobs, while product innovation allows for more gains in efficiency in the production of new products with unskilled labor and no gains with the skilled labor force. Producing technology in-house has in most cases no impact on employment, while the combined strategy of acquiring technology outside the firm and producing it in-house has strong positive effects. The results found for knowledge-intensive business services and small firms, with some exceptions, are similar to the ones found for whole sample.
    Keywords: Science & Technology :: Research & Development, Science & Technology :: New Technologies, Labor :: Workforce & Employment, Economics :: Economic Development & Growth, service sector, innovation, innovation strategies, firm size, knowledge intensity, employment quantity and quality, innovation surveys, Uruguay
    JEL: D2 J23 L8 O31 O33
    Date: 2011–12
  10. By: Morley, Samuel; Piñeiro, Valeria; Robinson, Sherman
    Abstract: In this paper we used a dynamic, regionalized computable general equilibrium (CGE) model to analyze the effect of various negative balance of payments shocks on output and employment and the effect of different alternative investment strategies on growth. The model shows clearly how sensitive El Salvador is to remittance or terms of trade shocks. Each 10 percent reduction in remittances lowers gross domestic product (GDP) by 0.2 percent and household consumption by 1.4 percent, with the cost rising as the shock intensifies. Any negative balance of payments shock forces a reduction in absorption, production, and employment and a real devaluation. Because El Salvador's economy is dollarized, that real devaluation can only come about through a fall in domestic prices brought about by recession. We show that the impact of the shock on output depends on how flexible wages are—the impact is smaller when real wages are flexible and greatest when they are fixed in dollars. We used the CGE model to analyze alternative investment strategies for increasing the growth rate. The investment share of GDP is low, and the model makes it clear that without some strategy for increasing investment, the economy's overall growth rate is likely to remain low. We hypothesized two alternative growth rates for investment, both associated with an increase in exogenous technical change. Both strategies require a marginal increase in the share of output devoted to investment. We also showed that if El Salvador can increase the investment share from 15.5 percent to just 16 percent over five years by producing a growth rate in investment of 8 percent per year, and if that increase produces a 1 percent increase in the rate of technical change in all sectors, then the growth rate of the economy will practically double, rising from 2.85 percent to 4.95 percent per year. There are equally favorable effects on employment for unskilled labor and on wages for skilled labor.
    Keywords: Development strategies, general equilibrium models, Regional development, Computable general equilibrium (CGE) modeling,
    Date: 2011

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.