nep-lam New Economics Papers
on Central and South America
Issue of 2022‒04‒18
three papers chosen by

  1. The welfare effects of unemployment insurance in Argentina. New estimates using changes in the schedule of transfers By Martin González-Rozada; Hernan Ruffo
  2. The Magnitude and Predictors of Overeducation and Overskilling in Latin America: Evidence from PIAAC By Castro, Juan Francisco; Ortega, Lorena; Yamada, Gustavo; Mata, David
  3. Do Trade Agreements contribute to the decline in Labor Share? Evidence from Latin American Countries By Martin González-Rozada; Hernan Ruffo

  1. By: Martin González-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.
    Keywords: Unemployment Insurance, Sufficient statistics, Regression kink design, Instrumental Variables.
    JEL: C41 I38 J65
    Date: 2022–02
  2. By: Castro, Juan Francisco (Universidad del Pacifico); Ortega, Lorena (Universidad de Chile); Yamada, Gustavo (Universidad del Pacifico); Mata, David (Universidad del Pacifico)
    Abstract: Occupational mismatch, defined as a discrepancy between workers' qualifications or skills and those required by their job, is a highly debated phenomenon in developed countries, but rarely addressed in developing economies from a comparative perspective. This study investigates the magnitudes of overeducation and overskilling, and their correlates, in four developing Latin American countries that have undergone a rapid and unregulated expansion of tertiary education participation (i.e. Chile, Ecuador, Mexico and Peru). Using a variety of measures derived from PIAAC data, we find that the magnitudes of subjective overeducation, and objective and subjective overskilling are sizable (particularly in Chile and Mexico), albeit lower than OECD estimates. Differences in objective overskilling between the OECD and LAC countries are largely explained by workforce skill levels. We also find that overeducation, overskilling and credential inflation affect those occupations which arguably require less qualifications. Potential supply and demand side explanations for these patterns are discussed.
    Keywords: Latin America, PIAAC, occupational mismatch, overeducation, overqualification, overschooling, overskilling
    JEL: O54 I26 J24
    Date: 2022–03
  3. By: Martin González-Rozada; Hernan Ruffo
    Abstract: In this paper, we explore the role of trade on the evolution of labor share in Latin American countries. We use trade agreements with large economies (US, EU, and China) to capture the effect of sharp changes in trade. In the last two decades, labor share has a negative trend among those countries that signed trade agreements while in the remaining countries labor share increased, widening the gap in 7 percentage points. We apply synthetic control methods to estimate the average causal impact of trade agreements on labor share. While effects are heterogeneous in our eight case studies, the average impact is negative between 2 to 4 percentage points of GDP four years after the entry into force of the trade agreements. This result is robust to the specification used and to the set of countries in the donor pool. We also find that, after trade agreements, exports of manufactured goods and the share of industry to GDP increase on average, most notably in the case studies where negative effects on labor share are significant. A decomposition shows that all the reduction in labor share is explained by a negative impact on real wages.
    Keywords: Labor share, trade agreements, synthetic control methods.
    JEL: C01 C1 F1 F16
    Date: 2021–08

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.