nep-lam New Economics Papers
on Central and South America
Issue of 2022‒09‒19
five papers chosen by

  1. Does the Minimum Wage Affect Wage Inequality? A Study for the Six Largest Latin American Economies By Carlo Lombardo; Lucía Ramirez-Veira; Leonardo Gasparini
  2. The perversion of public land distribution by landed elites: power, inequality and development in Colombia By Faguet, Jean-Paul; Sanchez, Fabio; Villaveces, Marta-Juanita
  3. Unemployment insurance in transition and developing countries: moral hazard vs liquidity constraints in Chile By Sehnbruch, Kirsten; Carranza Navarrete, Rafael; Contreras Guajardo, Dante
  4. Labor Market Power, Self-Employment, and Development By Amodio, Francesco; Medina, Pamela; Morlacco, Monica
  5. The impact of the JUNTOS conditional cash transfer programme on foundational cognitive skills: Does age of enrollment matter? By Douglas Scott; Jennifer Lopez; Alan Sánchez; Jere Behrman

  1. By: Carlo Lombardo (CEDLAS-IIE-FCE-UNLP & CONICET); Lucía Ramirez-Veira (CEDLAS-IIE-FCE-UNLP & CONICET); Leonardo Gasparini (CEDLAS-IIE-FCE-UNLP & CONICET)
    Abstract: Minimum wage (MW) policies are widespread in the developing world and yet their effects are still unclear. In this paper we explore the effect of national MW policies in Latin America’s six largest economies by exploiting the heterogeneity in the bite of the national minimum wage across local labor markets and over time. We find evidence that the MW has a compression effect on the wage distribution of formal workers. The effect was particularly large during the 2000s, a decade of sustained growth and strong labor markets. In contrast, the effect seems to vanish in the 2010s, a decade of much weaker labor markets. We also find suggestive evidence of a lighthouse effect: the MW seems to have an equalizing effect also on the wage distribution of informal workers.
    JEL: J22 J31 J38 K31
    Date: 2022–09
  2. By: Faguet, Jean-Paul; Sanchez, Fabio; Villaveces, Marta-Juanita
    Abstract: Over two centuries, Colombia transferred vast quantities of public land into private hands. Much of this process was justified publicly in terms of giving land to the landless and reducing rural poverty. And yet Colombia retains one of the highest concentrations of land ownership in the world. Why? Analyzing the period 1960-2010, we show that the effects of public land distribution across 1100+ municipalities are highly heterogeneous. Where small and medium-sized farms dominate, land distribution increased average farm size, decreased land inequality, and accelerated local development. But where land was concentrated in the hands of a rural elite, distributed land was diverted to bigger farms, resulting in fewer small and more large farms, greater plot size dispersion, and lower levels of development. We explore whether these effects flow through voter turnout, political competition, or public expenditure and taxation. Land distribution increases turnout, makes politics more competitive, and increases public service provision. But landed elites use patron-client ties to distort local policy and decision-making to their benefit. Land distribution’s secondary, institutional effects on the distribution of power outweigh its primary effects on the distribution of land.
    Keywords: land reform; public land distribution; inequality; development; Latifundia; Colombia
    JEL: R14 J01
    Date: 2020–12–01
  3. By: Sehnbruch, Kirsten; Carranza Navarrete, Rafael; Contreras Guajardo, Dante
    Abstract: One of the most complex policy issues that developing countries will face as a result of the employment crisis caused by the Covid crisis is the question of how they can better protect the unemployed. However, the analysis of unemployment insurance (UI) in developing economies with large informal sectors is in its infancy, with few papers providing solid empirical evidence. This paper therefore makes several contributions: first, it applies Chetty’s 2008 landmark work on UI to a transition economy (Chile) and shows that the moral hazard effects expected by policy makers, who designed the system are minimal, while liquidity effects were entirely neglected. Second, it demonstrates that it is not enough merely to quantify effects such as moral hazard, but to understand their causes as unemployment generated by moral hazard or liquidity constraints has different welfare implications and should therefore result in different policies. By means of an RDD, this paper analyses the Chilean UI system using a large sample of administrative data, which allows for an extremely precise analysis of how the system works, thus providing invaluable empirical lessons for other countries.
    Keywords: Chile; Latin America; moral hazard vs. liquidity; unemployment in developing countries; unemployment insurance; welfare systems; Global Professorship Programme [Grant Number GP1n100170; Synergy [Grant 75446]; T&F deal
    JEL: R14 J01 J1
    Date: 2022–08–03
  4. By: Amodio, Francesco (McGill University); Medina, Pamela (University of Toronto); Morlacco, Monica (University of Southern California)
    Abstract: This paper shows that self-employment opportunities shape the market power of employers in low-income countries, with implications for industrial development. Using data from Peru, we document substantial employer concentration and high self-employment rates across manufacturing local labor markets. Where employer concentration is higher, wages are lower, and self-employment is more prevalent but less remunerative. To interpret these facts, we build a general equilibrium model where labor market power in each market arises from (i) strategic interactions among employers and (ii) sorting of heterogeneous workers across wage work and self-employment. We structurally estimate the model and quantify the relevance of these mechanisms for rent-sharing between workers and firms and for the effect of policies promoting manufacturing wage employment. We show that changes in concentration magnify the pass-through of productivity and profitability shocks to wages, but worker sorting across wage and self-employment mitigates these effects. We find that policies that increase firm productivity are more effective in expanding wage employment and increasing workers' earnings than other interventions that improve workers' skills or decrease firm entry cost.
    Keywords: labor market power, monopsony, self-employment, sorting, development
    JEL: J2 J3 J42 L10 O14 O54
    Date: 2022–08
  5. By: Douglas Scott (University of Oxford); Jennifer Lopez (Grupo de Análisis para el Desarrollo (GRADE)); Alan Sánchez (Grupo de Análisis para el Desarrollo (GRADE)); Jere Behrman (University of Pennsylvania)
    Abstract: This paper studies the relationship between the age of enrolment in Peru’s conditional cash transfer programme, JUNTOS, and the foundational cognitive skills of a sample of children aged between 5 and 12 years old. Using a difference-in-differences approach and exploiting within-household variation, we show that younger siblings in recipient households display significantly higher levels of inhibitory control than their older counterparts (0.11 standard deviations), having benefited from the programme for the first time at a relatively earlier age. In high-income countries, this behavioural trait has been linked to later-life outcomes such as job success, physical health, and even reduced risk of criminality. Conversely, we find little evidence that enrolment age is associated with long-term memory, working memory, or implicit learning. Employing a threshold estimator, we show that relative gains in inhibitory control are most clearly defined where a child benefits from the programme before they reach 80 months of age (6.7 years). In an extension to our main results, we then conduct mediation analysis, demonstrating that a small but meaningful proportion of this benefit (6.5%) operates through changes in the probability of the child’s timely entry into primary school.
    Keywords: Cognitive skills; JUNTOS; conditional cash transfer; Peru; inhibitory control
    JEL: J24 I24
    Date: 2022–09–06

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