nep-lam New Economics Papers
on Central and South America
Issue of 2014‒06‒22
ten papers chosen by
Maximo Rossi
University of the Republic

  1. Understanding Latin America’s Financial Inclusion Gap - Working Paper 367 By Liliana Rojas-Suarez and Maria Alejandra Amado
  2. The long-awaited rise of the middle class in Latin America is finally happening By Bussolo, Maurizio; Maliszewska, Maryla; Murard, Elie
  3. Pobreza multidimensional en la Argentina. Asimetrías regionales (Parte I) By Jorge Paz
  4. Are Long-Term Inflation Expectations Well Anchored in Brazil, Chile and Mexico? By De Pooter, Michiel; Robitaille, Patrice; Walker, Ian; Zdinak, Michael
  5. Comparing the Incidence of Taxes and Social Spending in Brazil and the United States - Working Paper 360 By Sean Higgins, Nora Lustig, Whitney Ruble, and Timothy Smeeding
  6. Recent changes in wage inequality in Argentina. The role of labor formalization and other factors By Luis, Beccaria; Roxana, Maurizio; Vazquez, Gustavo
  7. Desigualdad y sectores de altos ingresos en Uruguay: un análisis en base a registros tributarios y encuestas de hogares para el período 2009-2011 By Gabriel Burdin; Fernando Esponda; Andrea Vigorito
  8. Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile By Felipe Kast; Dina Pomeranz
  9. Inequality of opportunity and economic growth : a cross-country analysis By Ferreira, Francisco H. G.; Lakner, Christoph; Lugo, Maria Ana; Ozler, Berk
  10. Inflación en Uruguay en 140 años de historia (1870-2010). Un enfoque monetario By Conrado Brum; Carolina Roman; Henry Willebald

  1. By: Liliana Rojas-Suarez and Maria Alejandra Amado
    Abstract: This paper analyzes Latin America’s Financial Inclusion Gap, the difference between the average financial inclusion for Latin America and the corresponding average for a set of comparator countries. At the country level, we assess four types of obstacles to financial inclusion: macroeconomic weaknesses, income inequality, institutional deficiencies and financial sector inefficiencies. A key finding of this paper is that although the four types of obstacles explain the absolute level of financial inclusion, institutional deficiencies and income inequality are the most important obstacles behind the Latin America’s financial inclusion gap. From our analysis at the individual level, we find that there is a Latin America-specific effect of education and income. The results suggest that the effect of attaining secondary education on the probability of being financially included is significantly higher in Latin America than in its comparators. Furthermore, the difference in the probability of being financially included between the richest and the poorest individuals is significantly higher in Latin America than in comparator countries.
    Keywords: financial inclusion, Latin America, government policy and regulation, Findex microdata
    JEL: D14 G21 G28
    Date: 2014–05
  2. By: Bussolo, Maurizio; Maliszewska, Maryla; Murard, Elie
    Abstract: In many developing countries, the supply of skilled workers is likely to continue to be stronger than demand, and this should drive down the skill premium and reduce inequality. Within the limitations of any exercise based on simulations, this paper finds that the recently observed reduction in inequality in Latin America may continue. Building on counterfactual scenarios projecting economic and demographic (including age and education) growth, the paper also highlights that by 2030 the long-awaited rise of the middle class in Latin America will be in full swing, as its share will be 43 percent of the total population, twice the value in 2005. This achievement is not guaranteed, as countries with large initial inequalities will have to achieve very high rates of inclusive growth. At the same time, a larger middle class is likely to exert a stronger influence on international and domestic policy making.
    Keywords: Inequality,Achieving Shared Growth,Economic Theory&Research,Population Policies,Emerging Markets
    Date: 2014–06–01
  3. By: Jorge Paz (CONICET-IELDE/UNSa)
    Abstract: This document presents the results of a Multidimensional Poverty Measurement exercise conducted for minor spatial units (MSU) of Argentina (jurisdictions as well as subdivisions consisting of major cities and other relatively smaller urban centers in terms of population). The data source is the Annual Urban Household Survey that collects information from urban areas of over 1,999 inhabitants. The multidimensional measurement exercise includes indicators related to the economic capacity of households, housing quality, sanitation and social inclusion. The results show a strong asymmetry between MSU, with poverty rates ranging from 2.5% to 40.3%. Argentina’s Northeastern and Northwestern MSU are the most intensely affected by multidimensional poverty. The multidimensional approach, like its predecessor the basic needs approach, widens the traditional poverty approach based on incomes or consumption levels, providing a more comprehensive structural framework to think and design better public policies that go beyond the limited conditional cash transfer programs currently ongoing in Argentina and other several countries in Latin America and the Caribbean.
    Date: 2014–05
  4. By: De Pooter, Michiel (Board of Governors of the Federal Reserve System (U.S.)); Robitaille, Patrice (Board of Governors of the Federal Reserve System (U.S.)); Walker, Ian (Board of Governors of the Federal Reserve System (U.S.)); Zdinak, Michael (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: In this paper, we consider whether long-term inflation expectations have become better anchored in Brazil, Chile, and Mexico. We do so using survey-based measures as well as financial market-based measures of long-term inflation expectations, where we construct the market-based measures from daily prices on nominal and inflation-linked bonds. This paper is the first to examine the evidence from Brazil and Mexico, making use of the fact that markets for longterm government debt have become better developed over the past decade. We find that inflation expectations have become much better anchored over the past decade in all three countries, as a testament to the improved credibility of the central banks in these countries when it comes to keeping inflation low. That said, one-year inflation compensation in the far future displays some sensitivity to at least one macroeconomic data release per country. However, the impact of these releases is small and it does not appear that investors systematically alter their expectations for inflation as a result of surprises in monetary policy, consumer prices, or real activity variables. Finally, long-run inflation expectations in Brazil appear to have been less well anchored than in Chile and Mexico.
    Keywords: Inflation targeting; survey expectations; inflation compensation; Nelson-Siegel model; macro news suprises; Brazil; Chile; Mexico
    Date: 2014–03–19
  5. By: Sean Higgins, Nora Lustig, Whitney Ruble, and Timothy Smeeding
    Abstract: We perform the first comprehensive fiscal incidence analyses in Brazil and the US, including direct cash and food transfers, targeted housing and heating subsidies, public spending on education and health, and personal income, payroll, corporate income, property, and expenditure taxes. In both countries, primary spending is close to 40 percent of GDP. The US achieves higher redistribution through direct taxes and transfers, primarily due to underutilization of the personal income tax in Brazil and the fact that Brazil’s highly progressive cash and food transfer programs are small while larger transfer programs are less progressive. However, when health and non-tertiary education spending are added to income using the government cost approach, the two countries achieve similar levels of redistribution. This result may be a reflection of better-off households in Brazil opting out of public services due to quality concerns rather than a result of government effort to make spending more equitable.
    Keywords: inequality, fiscal policy, taxation, social spending
    JEL: D31 H22 I38
    Date: 2014–03
  6. By: Luis, Beccaria; Roxana, Maurizio; Vazquez, Gustavo
    Abstract: In the last decade Argentina experienced a process of wage inequality reduction that is in stark contrast with the trends of the previous decade. The purpose of this study is to analyze the contribution of different factors to this process. The method employed is a decomposition proposed by Firpo, Fortin and Lemieux (2007, 2011), which allows extending the Oaxaca-Blinder approach to decompose some distributive statistics of income between a ‘composition effect’ and a ‘returns effect’. Similar to other studies, the results reveal that declining returns to education have been a major factor explaining the improvement in the distribution of income observed in the 2003-2012 period. However, the process of labor formalization has also had an equalizing effect over the period.
    Keywords: Inequality, labor formalization, Oaxaca-Blinder, decomposition methods.
    JEL: D31 J31
    Date: 2014–06–17
  7. By: Gabriel Burdin (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Fernando Esponda (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración); Andrea Vigorito (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: After increasing over more than a decade, recent studies based on household surveys data show that income inequality in Uruguay started to decline in 2008. In this study we assess whether this trend is robust to the use of novel micro-data from the recently restored Uruguayan personal income tax for the years 2009-2011. We analyze primary income and pensions and carry out to main comparative exercises. In the first part of the paper, we adjust household surveys to make them comparable to tax records. After that, we follow the methodology proposed by Atkinson et al (2011) and Alvaredo (2011) to compute top income shares and corrected inequality measures. We also investigate the redistributive effect of the personal income tax burden in the two data sets. Inequality indexes depict a similar trend in inequality reduction, even though the decrease is less sharp in tax records than in harmonized household surveys. According to our estimations from income tax data, the share of the top 1% did not decline in this period, and was situated around 14%. Household survey data underestimate the share of the top 1% in total income by approximately 3 p.p. and depict an opposite trend in the top shares evolution throughout the period compared to the one observed in income tax microdata. This result might be revealing an increasing difficulty of ECH for capturing very high incomes. Finally, personal income tax in Uruguay redistributes roughly 2 p.p. of the Gini index. Effective tax rates exhibit a progressive pattern in the case of total income, labour income and pensions, whereas they are slightly regressive when considering capital income.
    Keywords: top incomes, income inequality, personal income taxation, Uruguay
    JEL: D31 H24 O54
    Date: 2014–06
  8. By: Felipe Kast (Centro de Estudios Horizontal); Dina Pomeranz (Harvard Business School, Entrepreneurial Management Unit)
    Abstract: Poverty is often characterized not only by low and unstable income, but also by heavy debt burdens. We find that reducing barriers to saving through access to free savings accounts decreases participants' short-term debt by about 20%. In addition, participants who experience an economic shock have less need to reduce consumption, and subjective well-being improves significantly. Precautionary savings and credit therefore act as substitutes in providing self-insurance, and participants prefer borrowing less when a free formal savings account is available. Take-up patterns suggest that requests by others for participants to share their resources may be a key obstacle to saving.
    JEL: D14 D91 G22 O16
    Date: 2013–07
  9. By: Ferreira, Francisco H. G.; Lakner, Christoph; Lugo, Maria Ana; Ozler, Berk
    Abstract: Income differences arise from many sources. While some kinds of inequality, caused by effort differences, might be associated with faster economic growth, other kinds, arising from unequal opportunities for investment, might be detrimental to economic progress. This study uses two new metadata sets, consisting of 118 household surveys and 134 Demographic and Health Surveys, to revisit the question of whether inequality is associated with economic growth and, in particular, to examine whether inequality of opportunity -- driven by circumstances at birth -- has a negative effect on subsequent growth. The results are suggestive but not robust: while overall income inequality is generally negatively associated with growth in the household survey sample, we find no evidence that this is due to the component associated with unequal opportunities. In the Demographic and Health Surveys sample, both overall wealth inequality and inequality of opportunity have a negative effect on growth in some of the preferred specifications, but the results are not robust to relatively minor changes. On balance, although the results are suggestive of a negative association between inequality and growth, the data do not permit robust conclusions as to whether inequality of opportunity is bad for growth.
    Keywords: Inequality,Equity and Development,Poverty Impact Evaluation,Services&Transfers to Poor,Achieving Shared Growth
    Date: 2014–06–01
  10. By: Conrado Brum (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración); Carolina Roman (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Henry Willebald (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This paper aims at explaining the long-run inflation of Uruguay (1870-2010). A monetary inflation model is used based on the assumption that the long-run inflation results from the equilibrium conditions in the money market. A forward-looking Phillips curve is estimated where the inflation rate depends positively on the inflation expectations, the output gap and the international inflation. Following the Neumann and Greiber (2004) approach, the inflation expectations is explained by the core money growth, which is defined as the growth of long-lasting component of nominal money supply that exceeds the long-run increase of the real money demand, this last one determined by the change of the potential output (output adjusted core money, OACM). In addition, we compare the OACM with effective inflation and we construct a monetization index which enables us to identify processes of "demonetization" and "monetization" that the Uruguayan economy experienced along the last 140 years. The results of the Phillips curve estimation show a positive and significant effect of the core money growth on the inflation rate. In addition, a unit elasticity of the real money demand is found.
    Keywords: inflation, core money, Uruguay
    JEL: E31 E51 N16
    Date: 2014–03

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