nep-lam New Economics Papers
on Central and South America
Issue of 2015‒04‒19
ten papers chosen by

  1. Macroeconomic Effects of Credit Deepening in Latin America By Carlos Carvalho; Nilda Pasca; Laura Souza; Eduardo Zilberman
  2. Returns to Higher Education in Chile and Colombia By Carolina González-Velosa; Graciana Rucci; Miguel Sarzosa; Sergio Urzúa
  3. Energy Subsidies in Latin America and the Caribbean: Stocktaking and Policy Challenges By Gabriel Di Bella; Lawrence Norton; Joseph Ntamatungiro; Sumiko Ogawa; Issouf Samaké; Marika Santoro
  4. The Latin American Middle Class: Fragile After All? By Francesca Castellani; Gwenn Parent; Jannet Zenteno
  5. U.S. Free Trade Agreements and Enforcement of Labor Law in Latin America By Sabina Dewan; Lucas Ronconi
  6. Effects of the U.S. Quantitative Easing on Latin American Economies By César Carrera; Fernando Pérez Forero; Nelson Ramírez-Rondán
  7. Central Banking in Latin America: From the Gold Standard to the Golden Years By Luis Ignacio Jácome
  8. Labor Exclusion and the Erosion of Citizenship Responsibilities By Lucas Ronconi; Rodrigo Zarazaga
  9. Poverty, Vulnerability and the Middle Class in Latin America By Marco Stampini; Marcos Robles; Mayra Sáenz; Pablo Ibarrarán; Nadin Medellín
  10. Training Vouchers and Labor Market Outcomes in Chile By David S. Kaplan; Rafael Novella; Graciana Rucci; Claudia Vazquez

  1. By: Carlos Carvalho; Nilda Pasca; Laura Souza; Eduardo Zilberman
    Abstract: This paper augments a relatively standard dynamic general equilibrium model with financial frictions in order to quantify the macroeconomic effects of the credit deepening process observed in many Latin American (LA) countries in the last decade, most notably in Brazil. In the model, a stylized banking sector intermediates credit from patient households to impatient households and firms. The key novelty of the paper, motivated by the Brazilian experience, is to model the credit constraint faced by (impatient) households as a function of future labor income. In the calibrated model, credit deepening generates only modest abovetrend growth in consumption, investment, and GDP. Since Brazil has experienced one of the most intense credit deepening processes in Latin America, it is argued that the quantitative effects for other LA economies are unlikely to be sizeable.
    Keywords: Public finance, Financial Policy, Microbusinesses & Microfinance, Credit deepening, Financial frictions, Consignado credit, Payroll lending, Financial frictions
    Date: 2015–01
  2. By: Carolina González-Velosa; Graciana Rucci; Miguel Sarzosa; Sergio Urzúa
    Abstract: In the last decades, countries in Latin America and the Caribbean have experienced a dramatic increase in the levels of higher education enrollment. Using administrative data from Chile and Colombia, we find that this phenomenon is not always associated with higher private individual returns. In both countries, there is a significant dispersion in the net returns to higher education and a significant proportion of graduates could be facing negative returns. This means that, for many higher education graduates, net earnings might have been higher if they had not earned a higher education degree. We hypothesize that while there have been major policy efforts to increase coverage, institutional arrangements that encourage quality and relevance has been insufficient. Corrective measures in this direction are urgent. Sustainable growth requires a labor force with relevant skills and capabilities. In light of our results, it is not clear that the higher education systems in these countries are delivering these outcomes.
    Keywords: Higher Education, Labor Policy, Vocational & Technical Education, Labor markets, Higher education, Returns to higher education, Heterogeneity, Inequality, Skills, Productivity
    Date: 2015–03
  3. By: Gabriel Di Bella; Lawrence Norton; Joseph Ntamatungiro; Sumiko Ogawa; Issouf Samaké; Marika Santoro
    Abstract: The oil price decline creates an opportunity to dismantle energy subsidies, which escalated with high oil prices. This paper assesses energy subsidies in Latin America and the Caribbean—about 1.8 percent of GDP in 2011–13 (approximately evenly split between fuel and electricity), and about 3.8 percent of GDP including negative externalities. Countries with poorer institutions subsidize more. Energy-rich countries subsidize fuel more, but low-income countries are more likely to subsidize electricity, as are Central America and the Caribbean. Energy subsidies impose fiscal costs, hurting SOEs, competitiveness, and distribution. The paper overviews country experience with subsidy reform, drawing lessons.
    Keywords: Energy sector;Latin America;Caribbean;Fiscal policy;Energy;Subsidies;Public enterprises;Private investments;Energy Subsidies, Fiscal Policy, Latin America and the Caribbean
    Date: 2015–02–12
  4. By: Francesca Castellani; Gwenn Parent; Jannet Zenteno
    Abstract: This paper joins in the debate on the size of the middle class in Latin America, providing an analysis of its structure and characteristics. Using several measurements, it finds that 40-60 percent of Latin American households are middle class, a share which has consolidated over the past decade. The analysis reveals that gender, age, and education are associated with the likelihood of being middle class. The example of Colombia illustrates that, while growing in size, this income group still faces deficits in crucial dimensions of well-being, such as education, job formality, and health care, which are generally associated with being middle class. The analysis reveals the fragility of this emerging group in the region.
    Keywords: Poverty, Income, Consumption & Saving, Health Care, Multidimensional poverty, Educational achievement, Middle class households, Middle class
    Date: 2014–12
  5. By: Sabina Dewan; Lucas Ronconi
    Abstract: This paper analyzes whether Free Trade Agreements (FTAs) signed between the United States and Latin American countries during the last decade produced higher enforcement of labor regulations. The paper computes before-after estimates of the effect of FTAs on labor inspections and exploits variation across countries using non-signers as a comparison group. The empirical strategy benefits from the fact that about half of Latin American countries have signed a trade agreement with the United States. Difference-in-differences estimates suggest that signing an FTA produced a 20 percent increase in the number of labor inspectors and a 60 percent increase in the number of inspections. The North American Free Trade Agreement (NAFTA), however, does not appear to have the same positive impacts on Mexico. The paper concludes with a discussion of these results.
    Keywords: Labor Policy, Trade Agreements, Social Security, Labor regulations, Free trade agreements, Labor inspections, Labor provisions, Labor inspectors, Labor law, Enforcement, Labor, Trade, Latin America
    Date: 2014–11
  6. By: César Carrera (Central Reserve Bank of Peru); Fernando Pérez Forero (Central Reserve Bank of Peru); Nelson Ramírez-Rondán (Central Reserve Bank of Peru)
    Abstract: Emerging economies have been largely affected for Fed's Quantitative Easing (QE) policies. This paper assesses the impact of these measures in terms of key macroeconomic variables for four small open economies (SOE) in Latin America such as Chile, Colombia, Mexico and Peru. We identify a QE policy shock in a Structural VAR with Block Exogeneity (à la Zha, 1999) and we impose a mixture of zero and sign restrictions (à la Arias et al., 2014). Overall, we find that this QE policy shock has significant effects on financial variables such as aggregate credit and the exchange rate. These effects are larger than the ones produced on output and prices.
    Keywords: Quantitative Easing, Structural Vector Autoregressions, Sign and Zero Restrictions
    JEL: E43 E51 E52 E58
    Date: 2015–04
  7. By: Luis Ignacio Jácome
    Abstract: This paper provides a brief historical journey of central banking in Latin America to shed light on the debate about monetary policy in the post-global financial crisis period. The paper distinguishes three periods in Latin America’s central bank history: the early years, when central banks endorsed the gold standard and coped with the collapse of this monetary system; a second period, in which central banks turned into development banks under the aegis of governments at the expense of increasing inflation; and the “golden years,†when central banks succeeded in preserving price stability in an environment of political independence. The paper concludes by cautioning against overburdening central banks in Latin America with multiple mandates as this could end up undermining their hard-won monetary policy credibility.
    Keywords: Central banking;Latin America;Central bank role;Monetary policy;Inflation targeting;Economic recession;Financial crises;Cross country analysis;Latin America, central banks, inflation.
    Date: 2015–03–17
  8. By: Lucas Ronconi; Rodrigo Zarazaga
    Abstract: This paper shows that workers who do not receive legally mandated benefits due to employer noncompliance have a negative view not only of their employers, as has been documented, but also of the State. Those workers believe that the State did not protect their rights, and hence they feel fewer obligations to comply with their duties as citizens. Using a list experiment, as well as household data from nine Latin American countries, the paper shows that non-registered workers are less likely to obey the law, pay taxes and vote compared to registered workers.
    Keywords: Workforce & Employment, Taxation, Labor Relations, Labor, Informality, Citizenship, Vote, Taxes, Latin America, Citizenship responsibilities
    Date: 2015–03
  9. By: Marco Stampini; Marcos Robles; Mayra Sáenz; Pablo Ibarrarán; Nadin Medellín
    Abstract: Between 2000 and 2013, Latin America has considerably reduced poverty (from 46.3% to 29.7% of the population). In this paper, we use synthetic panels to show that, despite progress, the region remains characterized by substantial vulnerability that also affects the rising middle-class. More specifically, we find that 65% of those with daily income between $4 and 10, and 14% of those in the middle-class, experience poverty at least once over a ten-year period. Furthermore, chronic poverty remains widespread (representing 91% and 50% of extreme and moderate poverty respectively). Differences between rural and urban areas are substantial. Urban areas, which are now home to most moderate poor and vulnerable, are characterized by higher income mobility, particularly upward mobility. These findings have important implications for the design of effective social safety nets. These need to mix long term interventions for the chronic poor, especially in rural areas, with flexible short-term support to a large group of transient poor and vulnerable, particularly in urban areas.
    Keywords: Poverty, Rural development, Urban Development, Transitory and chronic poverty, Poverty dynamics, Vulnerability, Middle-class, Latin America, Panel data, Synthetic panels, Mobility
    Date: 2015–04
  10. By: David S. Kaplan; Rafael Novella; Graciana Rucci; Claudia Vazquez
    Abstract: This paper evaluates the impact of the Bono Trabajador Activo, a training voucher program in Chile, on workers' labor market outcomes. Using detailed administrative datasets of the National Employment Service and the Unemployment Insurance System, we apply difference-in-difference and IV estimators to measure these effects. Our main results indicate that the voucher program has an overall negative impact on employment and earnings, particularly among individuals who expect to change economic sector. In contrast, we find that the program improves labor outcomes for females, particularly for those with lower education. The voucher program also improves employment duration and mobility across economic sectors.
    Keywords: Labor Market Policies, Program evaluation, Active labor market policy, Program evaluation, Training vouchers
    Date: 2015–03

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