nep-lam New Economics Papers
on Central and South America
Issue of 2019‒05‒13
six papers chosen by
Maximo Rossi
Universidad de la República

  1. Income redistribution in Latin America: A microsimulation approach By Jara Xavier; Oliva Nicolás; Arancibia Cristina; Dondo Mariana; Macas David; Riella Rebeca; Urraburu Joana; Rodriguez David
  2. Returns to education, intergenerational mobility, and inequality trends in Brazil By Neri Marcelo; Bonomo Tiago
  3. How do subnational governments react to shocks to revenue sources? Evidence from Argentina By Martin Besfamille; Diego Jorrat; Osmel Manzano; Pablo Sanguinetti
  4. Unemployment insurance and income protection in Ecuador By Jara Xavier
  5. Economic inequality and subjective well-being across the world By D'Ambrosio Conchita; Clark Andrew
  6. Explorando los cambios de la pobreza en Argentina: 2003-2015 By Jessica Bracco; Leonardo Gasparini; Leopoldo Tornarolli

  1. By: Jara Xavier; Oliva Nicolás; Arancibia Cristina; Dondo Mariana; Macas David; Riella Rebeca; Urraburu Joana; Rodriguez David
    Abstract: We analyse the effect of taxes and benefits on income distribution of six Latin American countries: Argentina, Bolivia, Colombia, Ecuador, Uruguay, and Venezuela. Our analysis makes use of tax-benefit microsimulation models based on harmonized household representative survey data and developed within the structure of EUROMOD.The analysis focuses on the relative importance of tax-benefit instruments across countries and on the effect of taxes and benefits on poverty and inequality. The selected countries represent a wide range of cases in terms of the redistributive role of the tax-benefit system with Uruguay providing a large degree of redistribution, whereas the Bolivian system has a very modest role.We further exploit the advantages of our models and perform a simulation exercise whereby the most progressive income tax system of our set of countries is applied to the rest and assess its effect on inequality and revenue.Our paper represents the first study making use of microsimulation techniques to assess the redistributive role of tax-benefit systems in the region in a comparable manner, and highlights the advantages offered by microsimulation models to evaluate the effect of policy reforms aiming to improve social protection in the region.Â
    Keywords: Benefits,EUROMOD,Household surveys,Microsimulation modelling,taxes
    Date: 2019
  2. By: Neri Marcelo; Bonomo Tiago
    Abstract: Education-related changes are often argued as the main reasons for changes in earnings distribution. However, omitted variable and measurement error biases possibly affect econometric estimates of these effects.Brazil experienced a sharp fall of individual labour income inequality between 1996 and 2014. Coincidentally, in the Brazilian National Household Sample Survey ( PNAD) there are special supplements on family background in these two years that allow us to better address the role played by falling education returns.This paper takes advantage of this information to provide new estimates of the level and evolution of the returns to education in Brazil using variable premiums by education level, quantile regressions, and pseudo panels. Regarding measurement error, the empirical strategy is to make use of the information of who responded to the PNAD questionnaire but controlling for availability biases.We find evidence of attenuation bias which reduces mean returns from education between 14 and 31.5 per cent. On the other hand, omitting parents’ education information also accounting for selectivity issues reduces the premium estimates by 24 per cent.Perhaps more importantly, the fall of education premium is heavily underestimated when we do not take family background into account. The highest fall of returns occurred in intermediary levels of education and income. Cohort effects also show that the reduction in the educational premium has been going on for several generations.Finally, we assess how parents’ education affects the educational outcomes of their children and how the intergenerational mobility of education has evolved over the last years. We find a reduction on the intergenerational persistence of education from 0.7 to 0.47 between 1996 and 2014. Cohort effects regarding intergenerational mobility also show that the fall in the persistence of education is also stronger for younger cohorts, which coincides with the fall of education premiums.
    Keywords: Earnings inequality,Intergenerational Mobility,Omitted variable bias,Schooling reurns
    Date: 2018
  3. By: Martin Besfamille; Diego Jorrat; Osmel Manzano; Pablo Sanguinetti
    Abstract: Using the exogenous variability in intergovernmental transfers and hydrocarbon royalties, based on the fiscal regime that prevailed in Argentina from 1988 to 2003, we jointly estimate the effects that changes in these public revenues had on provincial public consumption and debt. When receiving a one-peso increase in intergovernmental transfers, provinces spent 32 centavos of each peso on public consumption and 43 on debt repayment. But when hydrocarbon-producing provinces received a one-peso increase in royalties, they used 75 centavos for debt repayment. These dissimilar reactions to revenue increases are robust to different specifications of the basic regressions. Finally, we provide two alternative explanations for them: the higher volatility of hydrocarbon royalties (relative to intergovernmental transfers) and the exhaustible nature of these revenues.
    Keywords: tax sharing regime, intergovernmental transfers, hydrocarbon royalties, provincial public consumption and debt, Argentina
    JEL: C30 H72 H77
    Date: 2019
  4. By: Jara Xavier
    Abstract: This paper explores the role of the recently introduced unemployment insurance benefit (seguro de desempleo) in protecting incomes in case of unemployment in Ecuador. We use ECUAMOD, the tax-benefit microsimulation model for Ecuador, to simulate entitlement to the unemployment insurance benefit and calculate its effect on household disposable income in case individuals enter unemployment.Our results show that only around a quarter of the working age population would be covered in case of unemployment. Mean net replacement rates would increase from 51.44 to 54.5 per cent whereby protection by and large still rests on market income from other household members. Unemployment insurance would reduce the risk of falling into poverty in case of unemployment and would increase household income stabilization, although to a limited extent.Due to the high levels of informality (i.e. non-affiliation to social security) and the characteristics of the unemployment insurance scheme in Ecuador, the largest gains would be concentrated among middle-aged male employees at the top of the earnings distribution.Our analysis contributes to the recent debates about designing unemployment insurance schemes in Latin America and highlights the importance of considering the relevance of self-employment and informality in the design of such schemes.
    Keywords: Income protection,Unemployment insurance,microsimulation
    Date: 2018
  5. By: D'Ambrosio Conchita; Clark Andrew
    Abstract: We here use repeated cross-section data from the Afrobarometer, Asianbarometer Latinobarometer, and Eurobarometer to analyse the variables that are correlated with both current and future evaluations of standards of living. These are related not only to an individual’s own economic resources but also to the country distribution of resources.We consider resource comparisons (the gap in resources between richer and poorer individuals) and the normative evaluation of distribution (conditional on these gaps), given by the Gini coefficient. The ‘typical’ pattern of a negative effect of gaps on the better-off but a positive effect of gaps on the worse-off is found only in Europe: gaps for the better-off in Africa and Central and Latin America have no correlation with current life evaluations and are associated with more positive expectations of the future.Equally, there is no positive estimated coefficient for gaps to the worse-off in Asia. The Gini coefficient is negatively correlated with current life evaluation only in Asia, and is insignificant everywhere else. On the contrary, future life evaluations are more positive in more unequal countries in Africa and Central and Latin America.The relationship between the distribution of resources and measures of individual well-being over time is far from universal.
    Keywords: Relative deprivation,WIID,Baromters,Gini coefficient,Inequality,Living conditions
    Date: 2018
  6. By: Jessica Bracco (Centro de Estudios Distributivos Laborales y Sociales (CEDLAS) - Instituto de Investigaciones Económicas, Facultad de Ciencias Económicas, Universidad Nacional de La Plata); Leonardo Gasparini (Centro de Estudios Distributivos Laborales y Sociales (CEDLAS) - Instituto de Investigaciones Económicas, Facultad de Ciencias Económicas, Universidad Nacional de La Plata - CONICET); Leopoldo Tornarolli (Centro de Estudios Distributivos Laborales y Sociales (CEDLAS) - Instituto de Investigaciones Económicas, Facultad de Ciencias Económicas, Universidad Nacional de La Plata)
    Abstract: Este trabajo explora los cambios en la pobreza de ingresos en Argentina durante el período 2003-2015 utilizando diversas metodologías de descomposición. Los resultados sugieren que la mejora generalizada en el mercado laboral luego de la crisis fue el principal factor detrás de la fuerte caída de la pobreza en el período 2003-2007. En contraste, la reducción de la pobreza durante la etapa 2007-2011 está asociada al papel más activo que tomó la política social. Finalmente, durante el período 2011-2015 ningún factor contribuyó significativamente a la reducción de la pobreza. This paper explores the changes in income poverty in Argentina during the period 2003-2015 using various decomposition methodologies. The results suggest that the generalized improvement in the labor market after the crisis was the main factor behind the sharp fall in poverty in the period 2003-2007. In contrast, the reduction of poverty between 2007 and 2011 is associated with the most active role played by social policy. Finally, during the period 2011-2015, no factor could contribute significantly to the reduction of poverty
    JEL: C15 D31 D33 I32 J31
    Date: 2019–05

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