nep-lam New Economics Papers
on Central and South America
Issue of 2021‒12‒13
two papers chosen by
Maximo Rossi
Universidad de la República

  1. A decomposition method to evaluate the ‘paradox of progress’ with evidence for Argentina By Javier Alejo; Leonardo Gasparini; Gabriel Montes-Rojas; Walter Sosa-Escudero
  2. Labor Unions and the Electoral Consequences of Trade Liberalization By Ogeda, Pedro Molina; Ornelas, Emanuel; Soares, Rodrigo R.

  1. By: Javier Alejo (IECON-Universidad de la Rep´ublica); Leonardo Gasparini (CEDLAS-IIE-FCE-UNLP & CONICET); Gabriel Montes-Rojas (UBA & CONICET); Walter Sosa-Escudero (UdeSA & CONICET)
    Abstract: The ‘paradox of progress’ is an empirical regularity that associates more education with larger income inequality. Two driving and competing factors behind this phenomenon are the convexity of the ‘Mincer equation’ (that links wages and education) and the heterogeneity in its returns, as captured by quantile regressions. We propose a joint least-squares and quantile regression statistical framework to derive a decomposition in order to evaluate the relative contribution of each explanation. The estimators are based on the ‘functional derivative’ approach. We apply the proposed decomposition strategy to the case of Argentina 1992 to 2015.
    JEL: J31 C21 I24 J46 O54
    Date: 2022–01
    URL: http://d.repec.org/n?u=RePEc:dls:wpaper:0293&r=
  2. By: Ogeda, Pedro Molina (Sao Paulo School of Economics); Ornelas, Emanuel (Sao Paulo School of Economics); Soares, Rodrigo R. (Insper, São Paulo)
    Abstract: We show that the Brazilian trade liberalization in the early 1990s led to a permanent relative decline in the vote share of left-wing presidential candidates in the regions more affected by the tariff cuts. This happened even though the shock, implemented by a right-wing party, induced a contraction in manufacturing and formal employment in the more affected regions, and despite the left's identification with protectionist policies. To rationalize this response, we consider a new institutional channel for the political effects of trade shocks: the weakening of labor unions. We provide support for this mechanism in two steps. First, we show that union presence—proxied by the number of workers directly employed by unions, by union density, and by the number of union establishments—declined in regions that became more exposed to foreign competition. Second, we show that the negative effect of tariff reductions on the votes for the left was driven exclusively by political parties with historical links to unions. Furthermore, the impact of the trade liberalization on the vote share of these parties was significant only in regions that had unions operating before the reform. These findings are consistent with the hypothesis that tariff cuts reduced the vote share of the left partly through the weakening of labor unions. This institutional channel is fundamentally different from the individual-level responses, motivated by economic or identity concerns, that have been considered in the literature.
    Keywords: trade shocks, elections, unions, Brazil
    JEL: F13 D72 J51 F16 F14
    Date: 2021–11
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp14849&r=

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