nep-lam New Economics Papers
on Central and South America
Issue of 2021‒11‒08
two papers chosen by

  1. Small Firms and the Pandemic: Evidence From Latin America By Christopher Neilson; Maria Guerrero; John Humphries; Naomi Shimberg; Gabriel Ulyssea
  2. Market Power and Inequality: a model of the Brazilian economy By Pedro Cavalcanti Gonçalves Ferreira

  1. By: Christopher Neilson (Princeton University); Maria Guerrero (UCLA); John Humphries (Yale University); Naomi Shimberg (Yale University); Gabriel Ulyssea (UCL)
    Abstract: This paper studies the effects of the COVID-19 pandemic on small businesses between March and November 2020 using new survey data on 35,000 small businesses in eight Latin American countries. We document that the pandemic had large negative impacts on employment and beliefs regarding the future, which in turn predict meaningful economic outcomes in the medium-term. Despite the unprecedented amount of aid, policies had limited impact for small and informal firms. These ï¬ rms were less aware of programs, applied less, and received less assistance. This may have lasting consequences, as businesses that received aid reported better outcomes and expectations about the future.
    Keywords: COVID-19, small business, Latin America
    JEL: I10 D22
    Date: 2021–10
  2. By: Pedro Cavalcanti Gonçalves Ferreira
    Abstract: This paper attempts to draw some lines regarding the interplay between market concentration and income inequality in the Brazilian economy. Our goal is to uncover some of the mechanisms by which market power influences macroeconomic aggregates and, consequently, indicators such as the share of the income appropriated by the richest and the Country's Gini index. For this purpose, we have first conducted an empirical estimation using a PVAR approach with data from Brazilian states. We found that the markup shock is positively related to inequality. Moreover, that result is robust to changes in the model specification or different Cholesky ordering. Second, we built a dynamic general equilibrium model and calibrated it to reproduce the Brazilian economy. The model has three representative agents and heterogeneity in asset market participation and labor supply/skills. Additionally, firms exhibit endogenous oligopolistic and oligopsonistic (in the labor market) behavior. In response to unexpected markup shocks, the model showed a regressive dynamic, transferring income from the bottom to the top of the distribution. Nevertheless, its effects on economic growth may be positive in the short term, due to the increased investment in creating new companies. The disturbances in the TFP reduce inequality on impact, which is due to the countercyclical behavior of the markup. Instead, when we allow the TFP shock to be correlated with the markup, this effect is reversed, with the largest share of income being appropriated by the wealthiest. Finally, it is noteworthy that the labor supply elasticities partially determine the behavior of income distribution between poor and middle-class households.
    Keywords: market power, inequality, markup, general equilibrium, antitrust policy, income distribution, Brazil.
    Date: 2021–11

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.