nep-lam New Economics Papers
on Central and South America
Issue of 2017‒11‒12
four papers chosen by

  1. The Effect of the Minimum Wage on Employment in Brazil By Saltiel, Fernando; Urzúa, Sergio
  2. On the middle 70%. The impact of fiscal policy on the emerging middle class in Latin America using Commitment to Equity By Daude, Christian; Lustig, Nora; Melguizo, Angel; Perea, Jose Ramon
  3. Financial and real shocks and the effectiveness of monetary and macroprudential policies in Latin American countries By Javier Garcia-Cicco; Markus Kirchner; Julio Carrillo; Diego Rodríguez; Fernando Perez; Rocío Gondo; Carlos Montoro; Roberto Chang
  4. Labour Market Participation in Brazil: A Discrete Game Approach By Marcelo Resende; Vicente Cardoso

  1. By: Saltiel, Fernando; Urzúa, Sergio
    Abstract: During the economic boom of the early 2000s, most Latin American countries increased their minimum wages. In Brazil, the real minimum wage increased by upwards of 60 percent from 2003 through 2012. In this paper, we take advantage of administrative data to explore whether the minimum wage resulted in negative employment impacts in Brazil's formal sector. We explore different measures of the incidence of the minimum wage across states and examine various empirical specifications, yet find no significant disemployment impacts associated with this policy. On the other hand, we find significant negative impacts in microregions which were less exposed to the commodities boom. Since empirical strategies relying on incidence measures are inherently limited, we additionally exploit the introduction of a 2000 law which allowed states to implement regional wage floors. While these floors vary in scope and size, we find that the five states which implemented this policy included provisions directly targeting workers in the accommodation and restaurant sector. As a result, we adapt Dube, Lester and Reich's (2010) empirical strategy to Brazil and estimate the impact of these floors on employment in this sector by exploiting variation in microregions straddling state borders. As in our initial estimates, we find no significant negative employment impacts arising from the wage floors, indicating that during the early 2000s, the minimum wage did not result in negative employment impacts in Brazil's formal sector. Nonetheless, we caution that this result may not hold in a recessionary context, as shown in our commodity boom-incidence results.
    Keywords: Economía, Investigación socioeconómica, Productividad, Trabajo y protección social,
    Date: 2017
  2. By: Daude, Christian; Lustig, Nora; Melguizo, Angel; Perea, Jose Ramon
    Abstract: This paper analyzes the effects of indirect and direct taxes, as well as monetary and in-kind transfers on the income distribution in nine Latin American countries applying the CEQ methodology and using household and expenditure microdata around 2010. In particular, we focus on the effect of fiscal policies on two groups of the emerging middle class: the vulnerable and the middle class. We find that while the vulnerable tend to be net receivers in fiscal terms, especially when including in-kind transfers, the middle class seems to be mainly a net payer. This might be aggravated by the perception of a relatively low quality of in-kind transfers, notably in education and health-care services. We provide some evidence based on subjective surveys pointing in this direction.
    Keywords: Desarrollo social, Economía, Impuestos, Investigación socioeconómica,
    Date: 2017
  3. By: Javier Garcia-Cicco; Markus Kirchner; Julio Carrillo; Diego Rodríguez; Fernando Perez; Rocío Gondo; Carlos Montoro; Roberto Chang
    Abstract: This work compares the impact of monetary and macroprudential policies on financial and real sectors in four Latin American countries: Chile, Colombia, Mexico and Peru, and explores the commonalities and differences in the reaction to shocks to both the financial and real sector. In order to do that, we estimate a New Keynesian small open economy model with frictions in the domestic financial intermediation sector and a commodity sector for each country. Results suggest that financial shocks are important drivers of output and investment fluctuations in the short run for most countries, but in the long run their contribution is small. Furthermore, we evaluate the ability of macroprudential policies to limit the impact on credit growth and its effect on real variables. In a scenario of tighter financial conditions, monetary policy becomes expansionary due to both lower inflation (given the exchange rate appreciation) and weaker output growth, and macroprudential policies further contribute to restoring credit and output growth. However, in the case of a negative commodity price shock, macroprudential policies are less effective but useful as a complement for the tightening of monetary policy. Higher inflation (due to the exchange rate depreciation) and higher policy rates lead to a contraction in output growth, but macroprudential policies could alleviate this by improving credit conditions.
    Keywords: central banking, monetary policy, macroprudential policy, financial frictions
    JEL: E52 F41 F47
    Date: 2017–10
  4. By: Marcelo Resende; Vicente Cardoso
    Abstract: The paper aims to investigate the labour market participation of couples in Brazil in 2013. The observed endogenous variables portraying participation are assumed to be the outcome of a static discrete game between the partners. Different solution concepts are considered (Nash, Stackelberg and imposed Pareto optimality), and the estimations are implemented for rural and urban areas. The evidence, in comparison with previous evidence for more developed and homogeneous countries, displays qualitative similarities in terms of own wage, cross wage and age effects and a stronger inhibiting role of the number of small children in the case of the female partner. In particular, cross-wage effects also indicated gender asymmetry. Additionally, one identifies a more limited role of schooling on labour market participation in rural areas and gender contrasts in terms of the number of persons in the household that have a positive significant effect only for male partners.
    Keywords: labour market participation, discrete game, Brazil
    JEL: J21
    Date: 2017

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