nep-lam New Economics Papers
on Central and South America
Issue of 2020‒12‒14
ten papers chosen by
Maximo Rossi
Universidad de la República

  1. Inequality and Social Policy in Latin America By Nora Lustig
  2. Short and Long-Run Distributional Impacts of COVID-19 in Latin America By Nora Lustig; Guido Neidhöfer; Mariano Tommasi
  3. The natural rate of interest for an emerging economy: the case of Uruguay By Elizabeth Bucacos
  4. Commercial and banking credit network in Uruguay By Andrea Barón; María Victoria Landaberry; Rodrigo Lluberas; Jorge Ponce
  5. Structure and Competition in the Uruguayan Banking Sector By Miguel Mello; Jorge Ponce
  6. Fiscal policy and inflation expectations By Miguel Mello; Jorge Ponce
  7. Congestion in Latin American Cities: Innovative Approaches for a Critical Issue By Juan Pablo Bocarejo
  8. The socioeconomic patterns of COVID outside advanced economies: the case of Bogotá. By Marcela Eslava; Oscar Becerra; Juan Camilo Cárdenas; Margarita Isaacs; Daniel Mejía
  9. Price, sales, and the business cycle: a time series principal component analysis By Fernando Borraz; Giacomo Livan; Anahí Rodríguez-Martínez; Pablo Picardo
  10. Pay for Performance for Prenatal Care and Newborn Health: Evidence from a Developing Country By María Laura Alzúa; Noemí Katzkowicz

  1. By: Nora Lustig (Tulane University and Commitment to Equity Institute)
    Abstract: This paper analyzes the evolution and determinants of inequality between 1990 and 2017 in Latin America. Throughout the period, inequality in the region has demonstrated three trends: it increased during the 1990s; decreased between 2002 and 2013; and, since 2014, it has remained constant or even increased depending on the country. The reduction of inequality in the second period corresponded to two main changes in social policy: (I) the expansion in access to education in the previous period, which led to a decrease in the salary gap; and (II) the expansion and progresivity of monetary transfers. However, despite improvements in income distribution, in recent years, there has been a wave of protests in various countries. This paper proposes possible explanations of this apparently paradoxical phenomenon. Finally, this paper analyzes the impact of fiscal policy on inequality and poverty using comparative data from fiscal incidence analysis. Although in all countries the combination of taxes, social spending, and consumption subsidies reduces inequality, it does not always reduce poverty.
    Keywords: Fiscal incidence; Inequality; Poverty; Taxes; Social spending; Latin America.
    JEL: H22 D63 D31 D74
    Date: 2020–11
  2. By: Nora Lustig (Tulane University and Commitment to Equity Institute); Guido Neidhöfer (ZEW Mannheim); Mariano Tommasi (Universidad de San Andrés)
    Abstract: We simulate the short- and long-term distributional consequences of COVID-19 in the four largest Latin American economies: Argentina, Brazil, Colombia and Mexico. We show that the short-term impact on income inequality and poverty can be very significant, but that additional spending on social assistance has a large offsetting effect in Brazil and Argentina. The effect is much smaller in Colombia and nil in Mexico, where there has been no such expansion. To project the long- term consequences, we estimate the impact of the pandemic on human capital and its intergenerational persistence. Hereby, we use information on school lockdowns, educational mitigation policies, and account for educational losses related to health shocks and parental job loss. Our findings show that in all four countries the impact is strongly asymmetric and affects particularly the human capital of children from disadvantaged families. Consequently, inequality of opportunity is expected to increase substantially, in spite of the mitigation policies.
    Keywords: COVID-19; Lockdowns; Inequality; Poverty; Human capital; School closures; Social spending; Intergenerational persistence; Latin America; Argentina; Brazil; Colombia; Mexico.
    JEL: C63 D31 I24 I32 I38 J62
    Date: 2020–11
  3. By: Elizabeth Bucacos (Banco Central del Uruguay)
    Abstract: Vast evidence indicates that the so-called natural rate of interest (NRI) has experienced a sustained fall in both advanced and emerging economies over the last 25 years. This situation threatens the central bank’s ability to guide relevant macroeconomic variables close to their welfare-maximizing path because the range of maneuver is reduced a great deal when interest rates descend to the zero lower bound. In this document, I provide an estimation of the natural interest rate for Uruguay, a small, open and dollarized emerging economy where the monetary policy instrument changes from interest rate to money aggregates in 2013, splitting the sample in two. The fundamentals-based model points a locus for the natural interest rate in the [0.98 2.06] range with 95 percent degree of certainty. This methodological approach is aimed at providing a novel framework for the Uruguayan case that allows to analyze the long-run fundamentals of the NIR and also to explain the reasons for short-run discrepancies between the real rate and its long-run equilibrium value. It is hoped that the fundamentals-based model adds to the myriad methods current in use at the Banco Central del Uruguay to estimate the NIR.
    Keywords: interest rate determination, monetary policy, Uruguay
    JEL: C10 E43 E52
    Date: 2020
  4. By: Andrea Barón (Banco Central del Uruguay); María Victoria Landaberry (Banco Central del Uruguay); Rodrigo Lluberas (Banco Central del Uruguay); Jorge Ponce (Banco Central del Uruguay)
    Abstract: We build a commercial credit network, identify the most central economic sectors in terms of commercial debt, and provide a more complete idea of total indebtedness and financial interlinks between firms and banks in Uruguay. "Commerce", "manufacturing" and "transportation, storage, and communication" are the most central sectors in the commercial credit network. In a stress testing exercise, "transport, communication and storage" and "hotels and restaurants" are deeply affected in all cases. These sectors are the most exposed in terms of contagion. "Commerce" and "manufacturing" are central and have the highest level of indebtedness, but they have a large amount of liquid assets, that allows them to overcome shocks coming from other sectors.
    Keywords: commercial credit network, financial interlinks, financial contagion, financial stability
    JEL: G17 G32 G33 L14
    Date: 2020
  5. By: Miguel Mello (Banco Central del Uruguay); Jorge Ponce (Banco Central del Uruguay)
    Abstract: Using a quarterly data set for 14 banks in Uruguay between 2004 and 2018, we find that this sector is a concentrated oligopoly that exhibits global economies of scale. Specific product economies of scale are only significant in loans to households. Likewise, we find statistically significant economies of scope between loans to households in foreign and in local currency, as well as between loans to firms and deposits in local currency. The credit market to households is the less competitive, behaving like a monopoly or under implicit collusion. The credit market to firms exhibits greater competition than that suggested by the structure of the market, specially in local currency. Overall, the results suggest that there exists room for the development and increasing competition of the Uruguayan banking sector.
    Keywords: Cost function, economies of scale and scope, market structure, competition, banks, Uruguay
    JEL: G21 L10
    Date: 2019
  6. By: Miguel Mello (Banco Central del Uruguay); Jorge Ponce (Banco Central del Uruguay)
    Abstract: We find empirical evidence of a positive correlation between the budget deficit to GDP and inflation expectations of price setters in Uruguay. It implies an interdependence between fiscal and monetary policies: monetary policy faces more challenges to maintain inflation expectation anchored when the fiscal outcome worsen. The result is robust to considering other fiscal variables and to controlling for macroeconomic covariates. During the period under analysis, however, monetary policy has been effective to compensate the distortions introduced by fiscal policy on inflation expectations.
    Keywords: Inflation expectations, budget deficit, fiscal policy, monetary policy, Uruguay
    JEL: E52 E62 E63
    Date: 2020
  7. By: Juan Pablo Bocarejo (Universidad de los Andes)
    Abstract: This paper surveys trends in private vehicle use in Latin American cities and related government policies. It discusses the Colombian government’s initiatives to adopt congestion charging in major cities, highlights the political constraints encountered, and discusses policy changes adopted in response. The paper presents modelling results for the impact of different congestion charging proposals and identifies the principal challenges for adopting them.
    Date: 2020–09–21
  8. By: Marcela Eslava; Oscar Becerra; Juan Camilo Cárdenas; Margarita Isaacs; Daniel Mejía
    Abstract: Using Bogota’s system of socioeconomic division, the “strata”, we show that falling ill with a serious case of COVID has been over eight times more likely for an individual in the lowest stratum, where the poorer population concentrates, compared to one in the highest. Other pieces of evidence are consistent with this being driven by more exposure to contagion, at least partly driven by people in the lower strata being: 1) Less likely to be in occupations fit for telework; 2) Not only more vulnerable ex ante but also disproportionately hit by the economic effects of the crisis, and therefore pushed to go to work; 3) Subject to more crowding at home; 4) Less likely to recognize a high risk of contagion. The mechanisms that we quantify will imply a widening of the socioeconomic gaps resulting from the pandemic, in one of the world’s most unequal societies.
    Keywords: COVID, Inequality, Socioeconomic Impact, Psychological Biases, Latin America, Colombia
    JEL: O17 O20 D91
    Date: 2019–11–25
  9. By: Fernando Borraz (Banco Central del Uruguay); Giacomo Livan (University College London); Anahí Rodríguez-Martínez (Centro de Estudios Monetarios Latinoamericano); Pablo Picardo (Banco Central del Uruguay)
    Abstract: The main contribution of this work consist on studying sales behavior and their relationship with local market conditions like labor market indicators through a time series principal component analysis. We study the correlation structure of a large database on prices and found that all product sectors share a common correlation structure and the highest correlation and significance is achieved between employment variation and the first principal component, mostly in the second week of the following month. Sales or promotions, are a channel for price flexibility because firms can use them to change effective prices keeping sticky reference prices. We use a rich database of retail prices from Uruguay to characterize prices' flexibility, the behavior of sales, and their relationship with local market conditions like labor market indicators. Finally, we find a positive and significant relationship between sales and unemployment and perform a time series principal component analysis to study these relationships.
    Keywords: price rigidity, sales, unemployment, principal component analysis
    JEL: E31 E32 E24 C38
    Date: 2020
  10. By: María Laura Alzúa (CEDLAS-IIE-FCE-UNLP); Noemí Katzkowicz (Instituto de Economía-Universidad de la Republica de Uruguay & Economics department-Hebrew university)
    Abstract: Empirical literature analyzing the effect of pay-for-performance programs (P4P) for healthcare providers on maternal care and newborn health outcomes is scarce. In 2008, Uruguay’s Ministry of Public Health implemented a P4P called Metas Asistenciales (Healthcare Goals), a country-wide program that grants healthcare providers an economic incentive for complying with certain maternal and newborn healthcare goals. Health organizations use these funds to provide maternal and child health services. Using administrative records and a difference-in-difference methodology, we evaluate the effect of the Metas Asistenciales program on maternal and newborn health outcomes. We find that in the institutions affected by the program, 10 percentage points more women received an adequate number of prenatal checkups and pregnancy detection in the first trimester improved by 5 percentage points. We also found better results among newborns for indicators related to birth weight, premature births, and stillbirths. In sum, the program had a positive, significant impact on the rate of pregnant women’s utilization of health services and on newborn health outcomes. This study thus provides evidence supporting the idea that economic incentives are a promising tool for incentivizing healthcare providers to achieve better health services in developing countries.
    JEL: I1 O2 C5
    Date: 2020–12

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