nep-lam New Economics Papers
on Central and South America
Issue of 2018‒07‒30
seven papers chosen by
Maximo Rossi
Universidad de la República

  1. Income terms of trade and economic convergence: Evidence from Latin America By Trofimov, Ivan D.
  2. A community based program promotes sanitation By María Laura Alzúa; Habiba Djebbari; Amy J. Pickering
  3. A Comparison of TFP Estimates via Distribution Dynamics: Evidence from Light Manufacturing Firms in Brazil By Mendez-Guerra, Carlos; Gonzales-Rocha, Erick
  4. Trade Liberalization and Informality in Argentina: Exploring the Adjustment Mechanisms By Guillermo Cruces; Guido Porto; Mariana Viollaz
  5. Two Stories of Wage Dynamics in Latin America: Different Policies, Different Outcomes By Canavire Bacarreza, Gustavo J; Carvajal-Osorio, Luis C.
  6. The Effects of Being Subject to the Colombian Apprenticeship Contract on Manufacturing Firm Performance By Carlos Ospino
  7. Effects of Food Prices on Poverty: The Case of Paraguay, a Food Exporter and a Non-Fully Urbanized Country By Santiago Garriga; María Ana Lugo; Jorge Puig

  1. By: Trofimov, Ivan D.
    Abstract: The paper considers the effects of income terms of trade (ToT) on GDP per capita in Latin American economies and examines whether improvement in the income ToT (in absolute and relative terms) contributes to the stochastic convergence between respective economies and the US. It is shown that in the majority of the economies, income ToT had positive effects on the level of GDP per capita. The stochastic convergence was documented in Chile, Dominican Republic, and Uruguay. The positive effects of income ToT increase on GDP per capita convergence were documented only in Chile and Uruguay. The growth of the volume of exports played a key role in the process, while the effects on the part of net barter ToT were insignificant. In both economies, the improvement in the income ToT relative to the US level played a positive role in convergence.
    Keywords: Terms of trade, convergence, Prebisch-Singer thesis
    JEL: C22 F02 F14 N76
    Date: 2018–06–26
  2. By: María Laura Alzúa (CEDLAS-FCE-UNLP, CONICET.); Habiba Djebbari (Aix Marseille University (Aix Marseille School of Economics) EHESS & CNRS.); Amy J. Pickering (Civil and Environmental Engineering, Tufts University.)
    Abstract: Basic sanitation facilities are still lacking in large parts of the developing world, engendering serious environmental health risks. Interventions commonly deliver in-kind or cash subsidies to promote private toilet ownership. In this paper, we assess an intervention that provides information and behavioral incentives to encourage villagers in rural Mali to build and use basic latrines. Using an experimental research design and carefully measured indicators of use, we find a sizeable impact from this intervention: latrine ownership and use almost doubled in intervention villages, and open defecation was reduced by half. Our results partially attribute these effects to increased knowledge about cheap and locally available sanitation solutions. They are also associated with shifts in the social norm governing sanitation. Taken together, our findings, unlike previous evidence from other contexts, suggest that a progressive approach that starts with ending open defecation and targets whole communities at a time can help meet the new Sustainable Development Goal of ending open defecation.
    JEL: I12
    Date: 2018–05
  3. By: Mendez-Guerra, Carlos; Gonzales-Rocha, Erick
    Abstract: This article compares the distribution dynamics of two commonly used TFP estimation frameworks: the control function approach of Levinsohn and Petrin (2003) (LP for short) and the corrected control function approach of Ackerberg et al. (2015) (ACF for short). Using Brazilian firm-level data for the textile and furniture sectors, we estimate the transitional dynamics and long-run equilibrium of the TFP distribution for each framework over the 2003-2009 period. Results of this comparison are as follows. In the textile sector, the distribution dynamics for both frameworks are to some extent qualitatively similar. In the furniture sector, however, the distribution dynamics are largely different. While the LP framework shows relatively less mobility, two convergence clusters in the transition stage, and a bumpy distribution in the long run; the ACF framework shows relatively more backward mobility, a unique convergence cluster in the transition, and a highly symmetric distribution in the long run. In light of these results, the article concludes urging researchers not to rely too heavily on one or the other framework. It seems more appropriate to consider both frameworks for drawing inferences on productivity convergence and dispersion dynamics
    Keywords: total factor productivity, control function approach, distribution dynamics, manufacturing firms, Brazil
    JEL: D24 O47 O54
    Date: 2018–07–04
  4. By: Guillermo Cruces (CEDLAS-FCE-UNLP, CONICET.); Guido Porto (FCE-UNLP); Mariana Viollaz (CEDLAS-FCE-UNLP)
    Abstract: This paper studies the link between trade reforms and labor informality in Argentina using a long time series spanning the 1980-2001 period. We explore cross-section mechanisms, that operate at the industry level, and time-series mechanisms, that operate at a general equilibrium level. We argue that firms can substitute formal with informal workers to smooth a negative trade shock. In this setting, industries exposed to larger tariffs cuts could experience increases in informality. In general equilibrium, there can be additional aggregate impacts in both manufacturing and non-traded sectors through workers reallocation between sectors, wage adjustments, and firm entry and exit. Using the cross-section variation of the data and an instrumental variable strategy we explore empirically the cross-section mechanisms. We find that reductions in industry tariffs increase labor informality, and the effect is differentially stronger in industries with a larger share of small size firms. Using the time-series variation of the data, we are able to identify some of the general equilibrium effects. We find that the fall in the average national tariff decreased aggregate informality in the manufacturing sector but increased it in the non-traded sector.
    JEL: F13 F14
    Date: 2018–06
  5. By: Canavire Bacarreza, Gustavo J (Inter-American Development Bank); Carvajal-Osorio, Luis C. (Universidad EAFIT)
    Abstract: This article explores the variation in the wage distributions of two Latin American countries, Bolivia and Colombia, which have had different political and economic strategies in recent years. Using data from household surveys, a decomposition of the wage distribution in each country using functional principal component analysis is conducted. The results suggest that Bolivia, which has implemented left-wing economic policies, has experienced a general increase in wages, especially benefiting the least skilled workers and the informal sector. On the other hand, the wage distribution in Colombia, whose economic policy has focused on free-market principles, has become more concentrated around the median wage, mainly due to changes in formal sector wages.
    Keywords: wage dynamics, functional principal component analysis, wage distributions, Latin America, Bolivia, Colombia
    JEL: J31 J38 C14
    Date: 2018–06
  6. By: Carlos Ospino (Universidad de los Andes)
    Abstract: This paper evaluates the intent to treat local average treatment effects of the Colombian apprenticeship contract on manufacturing firm dynamics taking advantage of an exogenous variation generated by the 2002 labor reform and the regulation design. This evaluation is appealing because very little is known about the effects of apprenticeship policies on firm dynamics in developing countries. Moreover, although this regulation has been in place for years it has not been evaluated. Results using a regression discontinuity design which compares small firms subject to the regulation to those that are not, shows positive effects on output per worker (10 log points), total factor productivity (3 log points) and the share of exported sales (2 percentage points). It also shows a negative effect on the average wage bill of directly hired workers (9 log points). These results suggest that small firms which became subject to the regulation adjusted their labor force more efficiently, thus increasing productivity but did not share these gains with workers through higher wages.
    JEL: C21 D22 O47
    Date: 2018–07
  7. By: Santiago Garriga (Paris School of Economics); María Ana Lugo (World Bank); Jorge Puig (CEDLAS-FCE-UNLP)
    Abstract: A vast proportion of households in developing countries like Paraguay are both consumers and producers of food, and thus the effects of food price fluctuations on welfare are not obvious. Historically, the agricultural sector in Paraguay has played a key role in economic development and has contributed significantly, and increasingly, to economic growth. In recent years, sharp movements in commodity prices have been added to the inherent volatility of the sector linked to climate conditions. In this work, we use the 2011/12 expenditure and income survey, as well as monthly price data for 127 food items for the period 2007/15, to simulate the effect of a potential hike in food prices on welfare. Our main results suggest that the expenditure effect is negative and regressive everywhere, but larger in rural than urban areas. The income effect is positive and progressive in rural areas and negligible in urban ones. Therefore, we find that the potential overall impact of an unexpected increase in food prices in Paraguay is a very flat U-shaped curve. We conclude with a simple exercise where we simulate a policy response in order to help those affected by the initial increase in food prices.
    JEL: D31 I38 Q12
    Date: 2018–07

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