nep-lam New Economics Papers
on Central and South America
Issue of 2022‒08‒08
five papers chosen by

  1. Intergenerational mobility in education in Latin America By Neidhöfer, Guido; Ciaschi, Matías; Gasparini, Leonardo
  2. New Perspectives on Inequality in Latin America By Manuel Fernández; Gabriela Serrano
  3. Unveiling the Cosmic Race: Racial Inequalities in Latin America * By Luis Guillermo Woo-Mora
  4. Income-based affirmative action in college admissions By Luiz Brotherhood; Bernard Herskovic; Joao Ramos
  5. Minimum Wages in Developing Countries By Fang, Tony; Ha, Viet Hoang

  1. By: Neidhöfer, Guido; Ciaschi, Matías; Gasparini, Leonardo
    Abstract: This document provides a comprehensive analysis of intergenerational mobility in Latin America, focusing on the association between parental education and the education of their children. It updates the estimates provided by Neidhöfer et al. (2018), and shows additional heterogeneities by country, cohort, gender, and city size. A positive trend in intergenerational mobility is found in most countries in the region. In particular, it is observed that the upward mobility of children from the bottom of the distribution has been increasing for decades. This encouraging picture is seriously challenged by the educational disruptions caused by the COVID-19 pandemic.
    Keywords: Desarrollo, Educación, Familia, Género, Investigación socioeconómica, Niñez, Políticas públicas,
    Date: 2021
  2. By: Manuel Fernández; Gabriela Serrano
    Abstract: Latin American countries have some of the highest levels of income inequality in the world. However, earnings inequality significantly changed over the last three decades, increasing during the 1980s and 1990s, declining sharply in the 2000s, and stagnating or even increasing in some countries during the last decade. Macroeconomic instability in the region in the 1980s and early 1990s, and the introduction of structural reforms like trade, capital, and financial liberalization, affected the patterns of relative demand and relative earnings across skill-demographic groups in the 1990s, increasing inequality. Significant gains in educational attainment, the demographic transition, and rising female labor force participation changed the skill-demographic composition of labor supply, pushing education and experience premium downward, but this was not enough to counteract demand-side trends. At the turn of the century, improved external conditions, driven by China's massive increase in demand for commodities boosted economies across Latin America, which began to grow rapidly. Growth was accompanied by a positive shift in the relative demand for less-educated workers, stronger labor institutions, rising minimum wages, and declining labor informality, a confluence of factors that reduced earnings inequality. In the aftermath of the global financial crisis, particularly after the end of the commodities price boom in 2014, economic growth decelerated, and the pace of inequality decline stagnated. There is extensive literature trying to explain the causes of earnings inequality dynamics during the last three decades in Latin America. We discuss this literature regarding themes, methodological approaches, and key findings, emphasizing the latest perspectives. The focus is on earnings inequality and how developments in labor markets have shaped it.
    Keywords: inequality, Latin America, education premium, experience premium, trade reforms, minimum wage, informality
    JEL: D31 D33 F16 J21 J23 J31 O54
    Date: 2022–07–14
  3. By: Luis Guillermo Woo-Mora (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: This paper uses skin tone and income information for over a hundred thousand individuals across 31 Latin American countries to study racial inequalities during the last decade. First, I estimate the welfare consequences of racial inequality. Subnational regions with higher income inequality between racial groups have worse economic development. Next, I provide evidence of a skin tone income premium. In an eleven-color palette, each darker shade in skin tone on average leads to a 3% decrease in income, with heterogeneity across countries. My analysis suggests racial discrimination is the main mechanism behind this income premium.
    Keywords: Race,Inequality,Economic Development,Discrimination
    Date: 2022–03
  4. By: Luiz Brotherhood (Universitat de Barcelona, BEAT, FGV); Bernard Herskovic (UCLA Anderson, NBER); Joao Ramos (University of Southern California)
    Abstract: We study whether college admissions should implement quotas for lower-income applicants. We develop an overlapping-generations model and calibrate it to data from Brazil, where such a policy is widely implemented. In our model, parents choose how much to investin their child’s education, thereby increasing both human capital and likelihood of college admission. We find that, in the long run, the optimal income-based affirmative action increases welfare and aggregate output. It improves the pool of admitted students but distorts pre-college educational investments. The welfare-maximizing policy benefits lower- to middle-income applicants with income-based quotas, while higher-income applicants face fiercer competition in college admissions. The optimal policy reduces intergenerational persistence of earnings by 5.7% and makes nearly 80% of households better off.
    Keywords: Affirmative action, intergenerational mobility, educational investment
    JEL: I2 E24 J62
    Date: 2022
  5. By: Fang, Tony (Memorial University of Newfoundland); Ha, Viet Hoang (Memorial University of Newfoundland)
    Abstract: There is considerable debate on the level and effects of minimum wages for many decades. However, most of the studies are conducted in developed countries. This chapter first reviews the theoretical frameworks of anticipated effects of a minimum wage increase on wages and employment in developing countries. The empirical challenges are then discussed, including potential heterogeneity, simultaneity (or endogeneity) between employment and minimum wages, and possible omitted variable bias, taking into consideration of the different labour market structures and labour market institutions in developing countries, particularly the level of informal sector, extent of binding minimum wages, level of enforcement, and the vulnerability of the workers impacted. Evidence from BRICS members (Brazil, Russia, India, China, and South Africa) are reviewed and discussed. Surprisingly, there is substantial evidence of positive wage effects in both formal and informal sectors, although the adverse effects on employment are generally modest in the formal sector, and almost non-existent in the informal sector. However, when minimum wages are binding and enforced, studies focusing on vulnerable workers do find significant and positive wage effects and strong disemployment effects, implying that the classic trade-off of minimum wages between higher wages and lower employment does occur in developing countries.
    Keywords: minimum wages, labour market outcomes, developing countries
    JEL: J31 J33 J38
    Date: 2022–05

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