New Economics Papers
on Central and South America
Issue of 2013‒12‒15
twelve papers chosen by

  1. Public sector efficiency: evidence for Latin America By António Afonso,; Alma Romero; Emma Monsalve
  2. Decomposing the recent inequality decline in Latin America By Azevedo, Joao Pedro; Inchauste, Gabriela; Sanfelice, Viviane
  3. Whither the push and pull for integration: Taking stock of Latin America’s declaratory regionalism By Nicole Jenne
  4. Regional Economic Links in Latin America: lessons from Asia and challenges from the regional links of other BRICS By Renato Baumann
  5. Electoral cycles in international reserves: Evidence from Latin America and the OECD By Jorge M. Streb; Daniel Lema; Pablo Garofalo
  6. Structural change, productivity growth and trade policy in Brazil By Firpo, Sergio; Pieri, Renan
  7. Self Employment in Developing Countries: a Search-Equilibrium Approach By Renata Narita
  8. Inequality, inequality of opportunity, and growth: what are we talking about? Theory and empirical investigation in Brazil By Geoffrey Teyssier
  9. Student mobility in low quality schools. Segmentation among the most vulnerable students By Marcela Perticara; Marcela Roman
  10. The Political Economy of Fuel Subsidies in Colombia By Helena Garcia Romero; Laura Calderon Etter
  11. Employment and innovation: Firm level evidence from Argentina By Ramiro De Elejalde; David Giuliodori; Rodolfo Stucchi
  12. Producing Higher Quality Jobs: Enforcement of Mandated Benefits across Brazilian Cities between 1996-2007 By Rita Almeida; Pedro Carneiro, Renata Narita

  1. By: António Afonso,; Alma Romero; Emma Monsalve
    Abstract: We compute Public Sector Performance (PSP) and Public Sector Efficiency (PSE) indicators and Data Envelopment Analysis (DEA) efficiency scores for a sample of twenty-three Latin American and Caribbean Countries (LAC) to measure efficiency of public spending for the period 2001-2010. Our results show that the PSE is inversely correlated with the size of the government, while the efficiency frontier is essentially defined by Chile, Guatemala, and Peru. Moreover, on average, output quantities could theoretically be proportionally increased by 19 percent with the same level of inputs. In addition, the performed Tobit analysis suggests that more transparency and regulatory quality improve the efficiency scores, while more transparency and control of corruption increase output-oriented efficiency.
    Keywords: public sector performance, technical efficiency, Tobit, DEA, Latin America, Caribbean.
    JEL: C14 C61 H50 N16 O54
    Date: 2013–12
  2. By: Azevedo, Joao Pedro; Inchauste, Gabriela; Sanfelice, Viviane
    Abstract: Over the past decade, 12 of 14 Latin American countries have experienced a reduction in inequality. Based on a series of counterfactual simulations, the observed changes in inequality are decomposed in order to identify the main determinants of inequality. In contrast to methods that focus on aggregate summary statistics, the method adopted in this paper generates counterfactual distributions, so that the analysis can account for changes related to demographics, occupation, labor earnings and transfers, pensions, and other nonlabor income sources. The results show that for the majority of countries in the sample, the most important contributor to the observed decline in inequality has been the relatively strong growth in labor earnings at the bottom of the income distribution. In particular, most of the reduction in inequality can be attributed to an increase in earnings per hour for the bottom of the income distribution. The paper also contributes to the literature on inequality in Latin America by providing the Shapley-Shorrocks value of this decomposition.
    Keywords: Poverty Impact Evaluation,Inequality,Services&Transfers to Poor,Labor Policies,Emerging Markets
    Date: 2013–12–01
  3. By: Nicole Jenne
    Abstract: Repeated setbacks to a regional project in Latin America have given rise to a narrative portraying the region’s integration endeavor as a succession of failed attempts. Analysts concordantly highlight that Latin America’s institutional development and actual policy output do not live up to the integrationist discourse sustained in the region, and point to a series of obstacles standing in the way of deep integration. Such a perspective misses out, however, on an intriguing persistence of Latin American regionalism both in discourse as well as in repeated attempts to induce new impetus into the regional project.In an attempt to map out the basis for a more rigorous, theoretically guided approach to the subject, this paper brings the debates on the different push and pull factors of Latin America’s regionalist project together. Based on the premise that forces pushing towards integration are present within the region, it is argued that the dominant hypotheses in the study of regional integration do not address Latin America’s declaratory regionalism in a conclusive manner. The key to the broader picture of the region’s integration gap lies with a lack of determination to let the word follow the deed, and needs to apprehend of the political function declaratory regionalism has come to fulfill in the Latin American international system.
    Keywords: Latin America, integration, regionalism, theory of integration
    Date: 2013–11
  4. By: Renato Baumann
    Abstract: Since the early 1950s Latin American countries have made systematic efforts to foster regional transactions. Nevertheless, the indicators of relative importance of regional trade remain well below the corresponding figures in other regions. This paper argues that a process of integration should take into account the differences between what can be achieved by negotiating with closer neighbours and with geographically distant partners. Also, at present there is an increasing competition from Asian goods, which have negatively affected Latin American producers. Among the lessons from the recent Asian experience are the economic links among countries that have helped to improve competitiveness as well as to foster the degree of convergence of the GDP growth rates of the participating countries.
    Keywords: regional integration, productive complementarity, competitiveness and trade barriers
    Date: 2013–06
  5. By: Jorge M. Streb; Daniel Lema; Pablo Garofalo
    Abstract: In Latin America there is ample evidence of exchange rate depreciations after elections. Hence, we turn to the behavior of international reserves over the 1980–2005 period to investigate if exchange rates are temporarily stabilized before elections. Using annual, quarterly, and monthly data to define the election year, we find that international reserves fall significantly before elections, which indeed suggests a policy of stabilizing exchange rates. The patterns observed in the region are not replicated in OECD countries. However, once we control for legislative checks and balances on executive discretion in countries with strong compliance with the law, the behavior of both regions becomes remarkably similar. We find that lower effective checks and balances can explain why reserves fall before elections in Latin America. The electoral cycles in reserves and exchange rates in Latin America can be interpreted in terms of the fiscal dominance of monetary policy.
    Keywords: monetary policy, checks and balances, fiscal dominance, political budget cycles, temporal aggregation
    JEL: D72 D78 H60
    Date: 2013–10
  6. By: Firpo, Sergio; Pieri, Renan
    Date: 2013–12–06
  7. By: Renata Narita
    Abstract: Self employment comprises around thirty percent of the workforce in Latin America. Most self employed evade payroll taxes, have low education, and run small businesses requiring low skills. I develop and estimate a life cycle search model where workers can be wage earners in the formal or informal sector, self employed or unemployed. Firms in the formal sector pay payroll and severance taxes, and in the informal sector, they can be fined. The estimated model (i) reproduces well the composition of workers over the life cycle as observed in Brazilian Labour Force data, and (ii) shows that the job value of the self employed is similar to that of informal wage earners. The model is used as a tool to evaluate the welfare impact of labour market policies, where self employment may be an option. When simulating an increase in the cost of informality by ten percent, results showed (i) small impact on employment composition and informality; (ii) significant cost pass-through to wages in the informal sector, meaning a reduction in the lowest wages in the economy, hence higher wage inequality. On the other hand, (iii) it led to substantial improvement in the welfare of formal firms and of all workers. These results prove that taking into account labour market frictions is important in welfare analyses of policies in multisectoral labour markets. As simulations which increase the cost of informality suggest, stricter enforcement of labour regulations (at least to a certain degree) can be a way towards efficient labor markets.
    Keywords: Self employment; Occupational choice; Informal Sector; Job Search; Labour market welfare
    JEL: J30 J24 O17 J42 J60
    Date: 2013–11–28
  8. By: Geoffrey Teyssier (UP1 UFR02 - Université Paris 1, Panthéon-Sorbonne - UFR d'Économie - Université Paris I - Panthéon-Sorbonne - PRES HESAM)
    Abstract: Building on the existing literature, a synthetic approach intended to ease the understanding of the notion of inequality of opportunity is developed. In turn, this paper tests a convincing hypothesis explaining the mixed evidence found by empirical studies regarding the instrumental effect of inequality on growth: income inequality would in fact be a composite measure of inequality of opportunity, which is expected to be detrimental to growth, and of inequality effort, which is expected to be beneficial; the effect of total income inequality would then depend on which sort of inequality dominates. This hypothesis, already confirmed by Marrero and Rodríguez (2012) in the US, needs to be validated in other countries and on different samples in order to gain legitimacy. This paper consequently replicates the benchmark regressions from Marrero and Rodríguez (2012) in an emerging economy, namely Brazil. The results are in complete contradiction with those found in the US: neither inequality of opportunity nor inequality of effort have a significant impact on growth,whatever the econometric specification used.
    Keywords: income inequality, inequality of opportunity, economic growth
    Date: 2013–06
  9. By: Marcela Perticara (Facultad de Economía y Negocios, Universidad Alberto Hurtado); Marcela Roman (CIDE, Universidad Alberto Hurtado)
    Abstract: This study addresses the phenomenon of permanence for long years of low performance (urban) schools, measured by SIMCE. We also analyze mobility of students to other schools of same or better quality. The results show that student´s mobility rates in these schools is almost 11%. Almost 30% of the students who change school go to a school of the same or worse quality. Students with greater probabilities of changing to better performance (higher quality) schools are those pertaining to groups with greater economic resources and cultural capital or better academic performance, which could account for strong segmentation that exists in the Chilean educational system.
    Keywords: Election of schools, Determinants of the change for low quality schools, outflow of students, Chile
    JEL: I2 O54
    Date: 2012–10
  10. By: Helena Garcia Romero; Laura Calderon Etter
    Abstract: Colombia has made progress towards eliminating fuel and diesel subsidies and reducing discretionary spaces allowing for artificially low fuel prices, but challenges remain. Colombia has provided explicit and implicit subsidies to gasoline and diesel since 1983, costing the government up to 1.6% of GDP. This paper discusses the political economy of fuel subsidies in the country to understand why reform has been so slow. It focuses on the groups benefitting from the subsidies and their political participation, as well as other economic impacts that have limited the political will to eliminate them. The Colombian case serves as an example of the difficulty of fully eliminating fuel subsidies once they are already established. La Colombie a fait des progrès pour éliminer les subventions accordées aux carburants et au gazole et réduire les possibilités de faire baisser artificiellement les prix des carburants, mais certaines difficultés demeurent. La Colombie applique depuis 1983 des subventions explicites et implicites à l’essence et au gazole, représentant jusqu’à 1.6 % de son PIB. On trouvera dans le présent rapport une analyse de l’économie politique des subventions aux carburants qui permettra de mieux comprendre la lenteur de la réforme dans ce pays. Le rapport s’intéresse aux groupes qui bénéficient de ces subventions et à leur participation politique, ainsi qu’aux autres impacts économiques qui ont entamé la volonté politique de les supprimer. L’exemple de la Colombie illustre la difficulté d’éliminer complètement les subventions aux carburants une fois établies.
    Keywords: political economy, Colombia, fossil-fuel subsidies, Colombie, économie politique
    JEL: H23 O13 Q48
    Date: 2013–12–10
  11. By: Ramiro De Elejalde (Facultad de Economía y Negocios, Universidad Alberto Hurtado); David Giuliodori (Universidad Nacional de Córdoba); Rodolfo Stucchi (Inter-American Development Bank)
    Abstract: This paper provides evidence about the effect of innovation on employment in Argentina in the period 1998-2001. In particular we quantify the impact of process and product innovations on employment growth and the skill composition. Our result show that (i) Product innovations have a positive impact on employment growth biased towards skill labor (ii) Process innovations do not effect employment growth or composition. (iii) There are no heterogeneous effects in technology intensity and size. (iv) Most of the contraction in employment in this period was explained by non-innovations.
    Keywords: process innovation, Product innovation, Employment Growth, Argentina
    JEL: D2 J23 L1
    Date: 2013–09
  12. By: Rita Almeida; Pedro Carneiro, Renata Narita
    Abstract: There is an open debate on how governments can help the creation of higher quality jobs. This paper explores unique administrative data on the enforcement of labor market regulations across Brazilian cities between 1996 and 2006 to analyze this topic. We proxy job quality with several attributes going beyond wages and formality of the work contract. In the context of a strictly regulated labor market, we find robust evidence of (i) a strong trade-off between the provision of mandated non-wage benefits and wage levels, on the one hand, and the provision of optional job benefits on the other, and (ii) more formality leads to higher mean wages in the economy. We argue that enforcement policies can increase welfare depending on how workers value the benefits they get through formal channels vis-à-vis wages and optional benefits.
    Keywords: Enforcement of labor regulations; Informal sector; Job quality
    JEL: J2 J3 K31 O17
    Date: 2013–11–28

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.