nep-lam New Economics Papers
on Central and South America
Issue of 2021‒04‒12
six papers chosen by

  1. Inequality and Social Policy in Latin America By Nora Lustig
  2. Impact of Changes in Values of Degrees on Wage Inequality: Evidence from Chile By Yoshimichi Murakami; Tomokazu Nomura
  3. Isolating the incapacitative effect of social distancing on crime: Evidence from Ecuador’s Covid-19 lockdown By Clotilde Mahe; Sergio Parra-Cely
  4. Trends in global inequality using a new integrated dataset By Carlos Gradín
  5. Peripherical Financialization and Premature Deindustrialization: A Theory and the Case of Brazil (2003-2015) By José Luis Oreiro; Carmem Aparecida Feijó; Lionelo Franco Punzo; João Pedro Heringer Machado
  6. The Labor Effects of Pro-labor Bias in Bankruptcy By Aloisio Araujo; Rafael Ferreira; Spyridon Lagaras; Flavio Moraes; Jacopo Ponticelli; Margarita Tsoutsoura

  1. By: Nora Lustig (Stone Center for Latin American Studies, Department of Economics, Tulane University, Commitment to Equity Institute (CEQ).)
    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: I38 H22 D63 D31 D74
    Date: 2020–03
  2. By: Yoshimichi Murakami (Research Institute for Economics and Business Administration(RIEB), Kobe University, JAPAN); Tomokazu Nomura (Faculty of Information Technology and Social Sciences, Osaka University of Economics, JAPAN)
    Abstract: Using the latest available data from nationally representative household surveys, we analyze the impact of changes in returns to higher education degrees on the evolution of wage inequality in Chile from 2013 to 2017. Employing a recently developed decomposition method using unconditional quantile regression and controlling for parental education levels, we find that a significant decrease in returns to professional degrees from new private universities plays a prominent role in reducing wage inequality. The effect is especially evident among younger graduates, thereby supporting the "degraded tertiary" hypothesis.
    Keywords: Higher education; Returns to degree; Wage inequality; Unconditional quantile regression; Chile
    JEL: I23 I24 I26 J31 O15 O54
    Date: 2021–03
  3. By: Clotilde Mahe (Department of Economics and Management, Université du Luxembourg); Sergio Parra-Cely (Universidad San Francisco de Quito, Ecuador)
    Abstract: Identifying the impact of incapacitation measures on crime, such as imprisonment or curfews, is challenging since any such intervention simultaneously dissuades from engaging in illegal behaviour. We exploit Covid-19 confinement measures as a quasi-experiment to isolate incapacitative from deterrent effects of mobility restrictions in a developing country, Ecuador. Difference-in-differences and eventstudy estimates show a significant reduction in violent and property crime, relative to comparable months in pandemic-free years. While the fall in violent crime is driven by rape cases, we observe no cross-crime substitution for property crime. Heterogeneity effect analysis indicates that the composite decline in violent crime is entirely attributed to incapacitation. In contrast, the drop in property crime is attenuated in provinces where the economic activity mainly relies on essential sectors and blue-collar occupations, leaving incapacitation to explain 40 to 50% of the composite decrease.
    Keywords: Crime, Incapacitation, Deterrence Non-Pharmaceutical Interventions, Covid-19 Ecuador, Latin America.
    JEL: I18 I19 K42
    Date: 2020
  4. By: Carlos Gradín
    Abstract: This paper presents preliminary evidence of the annual global income distribution since 1950 using a new integrated dataset that aggregates standardized country income distributions at the percentile level estimated from various sources in the World Income Inequality Database. I analyse the extent to which the main global inequality trends depend on specific distributive views, i.e. absolute or relative, or with more emphasis in specific parts of the distribution. The results show absolute inequality increasing almost continuously.
    Keywords: Global inequality, Income distribution, WIID, Income inequality
    Date: 2021
  5. By: José Luis Oreiro (None); Carmem Aparecida Feijó; Lionelo Franco Punzo; João Pedro Heringer Machado
    Abstract: The main objective of this paper is to discuss the concept of financialization in developing economies, arguing that the broad definition of financialization - understood as a growing role of motivations, markets and financial institutions in the operation of domestic and international economies – does not take into consideration important features of those economies, such as the hierarchy of currencies and the subordination to the principles of the so-called Washington Consensus. The latter imposed the adoption of a foreign savings-driven growth model, which mostly applied to Latin American countries. Hence, the financialization process in LDCs will be denominated peripherical financialization, since it is associated with dependence upon capital inflows from developed countries and with the reduction in the autonomy of their macroeconomic policies, even within flexible exchange rate regimes. Attraction of capital inflows to countries with a subordinate position in international financial markets, requires high interest rate differentials which have as side effect a trend to the overvaluation of real exchange rates. This creates a trap, high interest rates with an associated overvalued exchange rate. This trap reduces policy space, turning procyclical even fiscal policy. Moreover, the overvaluation of real exchange rate reduces price competitiveness of the manufacturing industry, becoming the main drive toward these countries’ premature deindustrialization. It will be shown that the macroeconomic performance of the Brazilian economy in the period 2003-2015 fits almost perfectly this model of peripherical financialization.
    Keywords: Financialization, Premature Deindustrialization, high interest rate-overvalued exchange rate trap
    JEL: O11 O14 O16
    Date: 2021–02
  6. By: Aloisio Araujo; Rafael Ferreira; Spyridon Lagaras; Flavio Moraes; Jacopo Ponticelli; Margarita Tsoutsoura
    Abstract: Judicial decisions in bankruptcy are often influenced by the goal to preserve employment in financially distressed firms. What are the effects of these pro-labor decisions on workers' earnings and employment trajectories? We construct a new court-level measure of pro-labor bias based on the text of judicial decisions and exploit the random assignment of cases to courts within judicial districts in the state of Sao Paulo in Brazil to study the effect of pro-labor bias on labor market outcomes. We find that workers of firms assigned to high-pro-labor courts experience 4.4% lower post-bankruptcy earnings. This negative effect is primarily driven by wage adjustment rather than the probability of employment, and it is persistent in the five-year period after bankruptcy. We discuss several mechanisms that can drive this result.
    JEL: G33 J30 K0 O16
    Date: 2021–04

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