nep-lam New Economics Papers
on Central and South America
Issue of 2023‒04‒17
four papers chosen by

  1. An Analysis of the Effect of Fiscal Expenditure on the Income Distribution of Chilean Households By Nicolás Garrido; Jeffrey Morales
  2. Informality, Consumption Taxes and Redistribution By Pierre Bachas; Lucie Gadenne; Anders Jensen
  3. Can universal preschool education intensities counterbalance parental socioeconomic gradients? Repeated international evidence from Fourth graders skills achievement By Pierre Lefebvre; Claude Felteau
  4. A Search Model with Self-Employment and Heterogeneity in Managerial Ability By Eliane Badaoui; Olivier Bargain; Prudence Magejo; Eric Strobl; Frank Walsh

  1. By: Nicolás Garrido (Universidad Andrés Bello); Jeffrey Morales (Pontificia Universidad Católica Chile)
    Abstract: This study analyzes the effect of government spending on income distribution in Chile for 2016 using a multiplier model with the Social Accounting Matrix. The results indicate that increasing fiscal expenditure has a regressive effect on the income share of households in the richest quintile and widens the income gap between the two poorest quintiles and the third and fourth quintiles. When the effect of fiscal expenditure is measured by its nominal impact, households with the highest income receive approximately ten times more income than those with the lowest income. Thus, the regressivity of the income share of the richest households conceals an unequal distribution of the nominal income generated by the fiscal expenditure. Using counterfactual simulations, we suggested that fiscal expenditures could become more equalitarian through policies affecting the distribution of labor payments.
    Keywords: Fiscal Expenditure; Fiscal Redistribution; Income Distribution; Social Accounting Matrix; Chile; Multiplier Model
    Date: 2023–03
  2. By: Pierre Bachas (World Bank Research); Lucie Gadenne (Queen Mary University); Anders Jensen (Harvard Kennedy School and NBER)
    Abstract: Can taxes on consumption redistribute in developing countries? Contrary to consensus, we show that taxing consumption is progressive once we account for informal consumption. Using household expenditure surveys in 32 countries we proxy for informal consumption using the type of store where purchases occur. We establish that the budget share spent in informal stores steeply declines with income, so that richer households pay a substantially larger share of their income in taxes. Our findings imply that the widespread policy of exempting food from taxation is hard to justify on equity grounds in low-income countries.
    Keywords: Budget Surveys, Inequality, Informality, Redistribution, Taxes.
    JEL: E26 H21 H23
    Date: 2022–12–09
  3. By: Pierre Lefebvre (Department of Economics, University of Quebec in Montreal); Claude Felteau (Department of Economics, University of Quebec in Montreal)
    Abstract: This study estimates the average multivalued treatment effects (ATET), of preschool attendance measured in years, on students’ international reading, math and science test z-scores in Grade 4. The causal treatment effects come from multiple-years observational data on three levels of preschool duration before entering Grade 1. Among European countries that participated in five international education surveys, PIRLS (2006, 2011, 2016) and TIMSS (2015, 2019), those renowned for having adopted early childhood education (ECE) programs starting at a young age, growing in intensity and improving the number of qualified child-care providers were selected. In addition to four Nordic countries (Denmark, Finland, Norway, Sweden), France, two Belgium jurisdictions (French, Flemish), and two participating Canadian provinces, Ontario and Québec, were retained. The approach exploits the repeated surveys and cross-national comparative international z-scores tests. The data sets besides their test scores provide unique information from a parent questionnaire on their education and occupation levels, literacy and numeracy preschool activities, on child preschool educational childcare span in years and two program types (for some years; before and after age 3). Four key findings can be identified from the data sets and estimations. First, there are large differences in the average scale score and percentiles deviation when converted into the z-score metric, for all categories of test scores across jurisdiction participants, and over time. Second, the estimates of the preschool treatment effects display rather heterogeneous impacts on z-scores with increasing significant and positive achievements over year surveys. Third, in general, preschool treatment effects are scattered in function of duration, programs types, and parental education. Four, results highlight stark gaps in scores related to parental education, socioeconomic statuses, and home learning resources for all year-samples. Evidence from a diversity of estimated gradients suggests established social inequalities in education achievement at ages 9-10 in Grade 4 could be difficult to reverse, even in cases where preschool education and care are implemented at a very young age in rich countries with very generous family policies.
    Keywords: Preschool education years intensities; fourth graders reading, math and science tests scores; multivalued treatment effects; PIRLS (2006, 2011, 2016); TIMSS (2015, 2019); Denmark, Finland, Norway, Sweden, Belgium French, Belgium Flemish, France; Canadian provinces of Québec and Ontario
    JEL: I2
    Date: 2023–02
  4. By: Eliane Badaoui; Olivier Bargain; Prudence Magejo; Eric Strobl; Frank Walsh
    Abstract: The view of informal employment as a last resort in the labour market has recently been challenged by numerous studies documenting the existence of a high degree of heterogeneity within the formal and informal sectors - in particular the presence of high-tier informal work corresponding to voluntary self-employment. There is currently not much theoretical support for these observations. We develop a formal model to explain this growing empirical evidence about substantial heterogeneity within formal/informal labour markets. In our model, workers may enter self-employment or search for jobs as employees, while allowing for heterogeneity across workers’ managerial ability. While workers with higher managerial ability will manage larger firms, workers with lower managerial ability will manage smaller firms and be in self-employment only when they cannot find a salaried formal/informal job. For the latter, self-employment in the informal sector is the outside employment option.
    Keywords: Self-employment; Managerial ability; Informal sector.
    JEL: J31 O17
    Date: 2023

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