nep-lam New Economics Papers
on Central and South America
Issue of 2023‒11‒06
three papers chosen by
Maximo Rossi, Universidad de la República

  1. The positionality of goods and the positional concern's origin By Martín Leites; Analía Rivero; Gonzalo Salas
  2. Higher Inequality in Latin America: A Collateral Effect of the Pandemic By Acevedo, Ivonne; Castellani, Francesca; Cota, María José; Lotti, Giulia; Székely, Miguel
  3. Allocative Efficiency of Government Spending for Growth in Latin American Countries By Pessino, Carola; Altinok, Nadir; Chagalj, Cristian

  1. By: Martín Leites (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Analía Rivero (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Gonzalo Salas (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: We conducted a survey-experimental on a sample of Uruguayan youth to understand what goods are positional, the degree of positional concern, and possible explanations for them. The individual’s degree of positional concern was assessed by asking participants to make a series of choices between hypothetical societies characterized by varying absolute and relative income and consumption levels. We use randomized information treatments to prime participants into competing narratives regarding (i) the goods, (ii) gender, and (iii) sources of inequality in society. The main findings are: (1) the visibility of the goods would not be a necessary condition for their positionality: jewelry, cars, and health insurance are positional goods and; (2) relative income matters; (3) the positional concern is heterogeneous at the individuals level with a bimodal distribution: one group of individuals has a high prevalence of relative concern, while the other is positional-neutral; (4) there are no differences by gender in any case; and (5) individuals are less likely to report positional concerns when differences in income come from effort and inheritance.
    Keywords: positional goods, questionnaire-experiments, visibility, meritocracy
    JEL: D63 D64 D81 C13 C91
    Date: 2023–05
  2. By: Acevedo, Ivonne; Castellani, Francesca; Cota, María José; Lotti, Giulia; Székely, Miguel
    Abstract: Este estudio explora la evolución de la desigualdad en América Latina durante la pandemia de la COVID-19 utilizando datos primarios disponibles de encuestas de hogares y empleo recopilados en 2020. La desigualdad aumentó en promedio un 2% entre 2019 y 2020, el doble del crecimiento anual promedio en el indicador de desigualdad que marcó la década de una desigualdad creciente en los años noventa. Obtuvimos resultados heterogéneos al desagregar por género, área urbana-rural y sector de la actividad económica. Sorprendentemente, encontramos que las diferencias en el ingreso por nivel de educación disminuyeron en la mayoría de los casos. Las remesas tuvieron un efecto modesto, mientras que las transferencias públicas jugaron un rol central para impedir mayores disparidades en la mitad de los países estudiados. Nuestras estimaciones muestran que la disminución de los niveles de empleo debido a la contracción económica provocada por la COVID-19- se asocia con aumentos de la desigualdad del ingreso que, según nuestras proyecciones, disminuirá progresivamente con la recuperación. Sin embargo, la escolaridad perdida y las pérdidas en el nivel educativo debido a la pandemia puede generar presiones sobre la desigualdad en el futuro, una vez que los jóvenes en edad escolar entren en el mercado laboral.
    Keywords: COVID-19;Latin America;Income gaps;Transfers
    JEL: D63 I14 I32 I38 O15
    Date: 2022–01
  3. By: Pessino, Carola; Altinok, Nadir; Chagalj, Cristian
    Abstract: There is scant empirical economic research regarding the way that Latin American governments efficiently allocate their spending across different functions to achieve higher growth. While most papers restrict their analysis to the size of government, much less is known about the composition of spending and its implications for long-term growth. This paper sheds light on how allocating expenditures to investment in quality human and physical capital, and avoiding waste on inefficient expenditures, enhance growth in Latin America. This paper uses a novel dataset on physical and human capital and detailed public spending that includes -for the first time- Latin American countries, which is categorized by a cross-classification that provides the breakdown of government expenditure, both, by economic and by functional heads. The database covers 42 countries of the OECD and LAC between 1985 and 2017. There are five main results. First, the estimated growth equations show significant positive effects of the factors of production on growth and plausible convergence rates (about 2 percent). The estimated effect of the physical investment rate is positive and significant with a long-run elasticity of 1.2. Second, while the addition of years of education as a proxy for human capital tends to have no effect on growth, the addition of a new variable that measures quality-adjusted years of schooling as a proxy for human capital turns out to have a positive and significant effect across all specifications with a long-run elasticity of 1.1. However, if public spending on education (excluding infrastructure spending) is added to the factor specification, growth is not affected. This is mainly because, once quality is considered, spending more on teacher salaries has no effect on student outcomes. Therefore, the key is to increase quality, not just school performance or education spending. Third, both physical and human capital are equally important for growth: the effect of increasing one standard deviation of physical capital or human capital statistically has the same impact on economic growth. Fourth, increasing public investment spending (holding public spending constant) is positive and significant for growth (a 1% increase in public investment would increase the long-term GDP per capita by about 0.3 percent), in addition to the effect of the private investment rate. However, the effect of public spending on payroll, pensions and subsidies does not contribute to economic growth. Fifth, the overall effect of the size of public spending on economic growth is negative in most specifications. An increase in the size of government by about 1 percentage point would decrease 4.1 percent the long-run GDP per capita, but the more effective the government is, the less harmful the size of government is for long-term growth.
    Keywords: government size;growth;human capital;Latin America;public spending
    JEL: H50 I20 O40 O54
    Date: 2022–06

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