nep-lam New Economics Papers
on Central and South America
Issue of 2022‒03‒07
seven papers chosen by
Maximo Rossi
Universidad de la República

  1. Fiscal Policy, Income Redistribution and Poverty Reduction in Argentina By Juan Cruz López del Valle; Caterina Brest López; Joaquín Campabadal; Julieta Ladronis; Nora Lustig; Valentina Martínez Pabón; Mariano Tommasi
  2. Universal Social Pensions Are Unaffordable … Not! Testing the Unaffordability Hypothesis in Latin America and the Caribbean By Cruz-Martinez, Gibran
  3. The Paradox of Redistribution in Time. Social Spending in 53 Countries, 1967-2018. By Xabier Garcia-Fuente
  4. The COVID-19 Pandemic in Latin American and Caribbean Countries: The Labor Supply Impact by Gender By Viollaz, Mariana; Salazar-Saenz, Mauricio; Flabbi, Luca; Bustelo, Monserrat; Bosch, Mariano
  5. The welfare effects of unemployment insurance in Argentina. New estimates using changes in the schedule of transfers By Martin Gonzalez-Rozada; Hernan Ruffo
  6. Negative Economic Shocks and the Compliance to Social Norms By Bogliacino, Francesco; Charris, Rafael Alberto; Gómez, Camilo Ernesto; Montealegre, Felipe
  7. Economic and political inequality in the management of socio-environmental problems By Bogliacino, Francesco; Mantilla, Cesar; Niño Eslava, Daniel

  1. By: Juan Cruz López del Valle (Departamento de Economía, Universidad de San Andrés); Caterina Brest López (Departamento de Economía, Universidad de San Andrés); Joaquín Campabadal (Departamento de Economía, Universidad de San Andrés); Julieta Ladronis (International Monetary Fund); Nora Lustig (Department of Economics and Commitment to Equity Institute, Tulane University); Valentina Martínez Pabón (Department of Economics and Commitment to Equity Institute, Tulane University); Mariano Tommasi (Departamento de Economía, Universidad de San Andrés)
    Abstract: We implement a fiscal incidence analysis for Argentina with data from the 2017 national household survey. We find that Argentina’s fiscal system reduces inequality and poverty more than it is the case in many other comparable countries. This result is driven more by the size of the state (as measured by social spending to GDP) than by the progressivity of the fiscal system. While there are spending items that are quite progressive and even pro-poor, taxes are unequalizing and a number of subsidies benefit disproportionately the rich.
    Keywords: Fiscal policy, inequality, poverty, incidence, public economics
    JEL: E62 D6 H22 H23 I14 I24 I32
    Date: 2021–08
  2. By: Cruz-Martinez, Gibran (Complutense University of Madrid)
    Abstract: Is universal social assistance unaffordable? Targeting social policy has been praised as a magic solution to select the ‘deserving poor’ and efficiently use the scarce resources in the Global South. The article tests the unaffordability hypothesis using five counterfactual analyses based on expenditure redirection (military expenditure, energy subsidies, and the potential illegal/odious external debt servicing) and increasing tax revenues (income and trade tax) in up to thirty-three countries. The article shows the revenue-generating potential of taxes and reprioritising expenditures from unproductive to productive areas to finance – totally or partly- basic universal social pensions in large part of Latin America and the Caribbean; therefore, dispelling the unaffordability myth.
    Date: 2021–11–16
  3. By: Xabier Garcia-Fuente
    Abstract: Korpi and Palme (1998) famously suggested the existence of a Paradox of Redistribution: although programs targeted to the poor may be more redistributive per unit of expenditure, universal programs reduce distributive conflicts, leading to bigger, more egalitarian welfare states. However, recent works question the existence of this trade-o?. My paper adds a dynamic, long-term perspective to this literature: it analyzes the relationship between the progressivity and the redistributive impact of social transfers in 53 rich and middle-income countries, using microdata from 479 household surveys harmonized by LIS. My results show that the relationship between the redistribution obtained by social transfers and their progressivity is non-monotonic and is contingent on initial policy positions: welfare states that focused on the poor have grown bigger and more egalitarian by moving up the income ladder to include richer constituencies, while welfare states that focus on the rich are unable to reach down the income ladder and remain stuck at very low levels of redistribution. This reflects how social policies shape distributive conflicts: expanding upwards in the income distribution narrows the gap between contributors and beneficiaries, easing distributive conflict and allowing welfare state expansion. In contrast, expanding downwards draws a clear gap between contributors and beneficiaries, making welfare state politics zero-sum. This fits with evidence on the long-term evolution of universal welfare states – as they grew from means-tested cores to earnings-related universalism – and countries with elitist social policies, exemplified by Latin American countries that remain captured by the middle classes and the rich. In short, my results reinforce the idea that increases in redistribution are driven by status-preserving considerations – not by attempts at soaking the rich.
    Date: 2021–10
  4. By: Viollaz, Mariana (CEDLAS-UNLP); Salazar-Saenz, Mauricio (Pontifical Catholic University of Rio de Janeiro (PUC-Rio)); Flabbi, Luca (University of North Carolina, Chapel Hill); Bustelo, Monserrat (Inter-American Development Bank); Bosch, Mariano (Inter-American Development Bank)
    Abstract: We study the labor supply impact of the COVID-19 pandemic by gender in four Latin American and Caribbean (LAC) countries: Brazil, Chile, Dominican Republic, and Mexico. To identify the impact, we compare labor market stocks and labor market flows over four quarters for a set of balanced panel samples of comparable workers before and after the pandemic. We find that the pandemic has negatively affected the labor market status of both men and women, but that the effect is significantly stronger for women, magnifying the already large gender gaps that characterize LAC countries. The main channel through which this stronger impact is taking place is the increase in child care work affecting women with school-age children.
    Keywords: labor supply, labor market transitions, COVID-19, gender differentials, Latin American and Caribbean countries
    JEL: J6 J16 J46 O10 O17
    Date: 2022–02
  5. By: Martin Gonzalez-Rozada; Hernan Ruffo
    Abstract: Unemployment insurance transfers should balance the provision of consumption to the unemployed with the disincentive effects on the search behavior. Developing countries face the additional challenge of informality. Workers can choose to hide their employment state and labor income in informal jobs, an additional form of moral hazard. To provide evidence about the effects of this policy in a country affected by informality we exploit kinks in the schedule of transfers in Argentina. Our results suggest that higher benefits induce moderate behavioral responses in job-finding rates and increase re-employment wages. We use a sufficient statistics formula from a model with random wage offers and we calibrate it with our estimates. We show that welfare could rise substantially if benefits were increased in Argentina. Importantly, our conclusion is relevant for the median eligible worker that is strongly affected by informality.
    Date: 2022–02
  6. By: Bogliacino, Francesco (Universidad Nacional de Colombia); Charris, Rafael Alberto (Universidad Nacional de Colombia); Gómez, Camilo Ernesto (Centro de Investigaciones para el Desarrollo); Montealegre, Felipe (Universidad Nacional de Colombia)
    Abstract: This paper is about why suffering a Negative Economic Shock, i.e. a large loss, may trigger a change in behavior. We conjecture that people trade off a concern for money with a conditional preference to follow social norms, and that suffering a shock makes the first motivation more salient, leading to more norm violation. We study this question experimentally: After administering losses on the earnings from a Real Effort Task, we elicit decisions in set of pro-social and anti-social settings. To derive our predictions, we elicit social norms separately from behavior. We find that a shock increases deviations from norms in antisocial settings — more subjects cheat, steal, and avoid retaliation, with changes that are economically large. This is in line with our prediction. The effect on trust and cooperation is instead more ambiguous. Finally, we conducted an additional experiment to study the difference between an intentional shock and a random shock in a trust game. We found that the two induce partially different effects and that victims of intentional losses are more sensible to the in-group belief. This may explain why part of the literature studying shocks in natural settings found an increase in pro-social behavior, contrary to our prediction.
    Date: 2021–11–15
  7. By: Bogliacino, Francesco (Universidad Nacional de Colombia); Mantilla, Cesar; Niño Eslava, Daniel
    Abstract: We designed and conducted an experiment of common-pool resource management involving economic and political inequality. Participants are assigned to different types differing in their endowments-Poor, Middle and Rich-and play an appropriation dilemma, with and without a voting procedure to select a quota limiting maximum extraction. Political inequality is introduced by allocating a higher likelihood to select the voted quota of a given player type: in the Ptochocracy treatment, the "Poor" type has a higher chance of setting her choice as quota; whereas in the Demarchy and Plutocracy treatments, this is true for the "Middle" and "Rich" types, respectively. These are contrasted with Democracy, where the votes of all three types are equally likely to be selected. Theoretically, each player type selfishly prefers the quota closer (i.e., one unit below) their endowment, although the lower quota would be socially desirable. We find that participants voted for the selfishly preferred quota between half and two-thirds of the time, and the introduction of these quotas decreased the absolute extraction in about 17.5%, even though participants were more likely to choose extraction levels closer to their maximum capacity (now set by the quota). Nonetheless, we do not find systematic differences in extraction patterns between treatments.
    Date: 2021–11–03

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