Decreasing Inequality Under Latin America's "Social Democratic" and " Populist" Govenments: Is the Difference Real?

This paper addresses the claim that the governments of Argentina, Bolivia, Ecuador and Venezuela, Latin America's so-called "left-populist" governments, have failed to effectively reduce inequality in the 2000s and have only benefitted from high commodity prices and other benign external conditions. In particular, it examines the econometric evidence presented by McLeod and Lustig (2011) that the "social democratic" governments of Brazil, Chile and Uruguay were more successful and finds that their original results are highly sensitive to the use of data from the Socioeconomic Database for Latin America and the Caribbean (SEDLAC). Conducting the same analysis using data on income inequality from the Economic Commission for Latin America and the Caribbean (ECLAC) leads to the exact opposite result: it is the so-called "left-populist" governments who appear to have effectively reduced income inequality over the last decade. The key difference between data from SEDLAC and ECLAC is that the latter corrects for income underreporting -- when households in an income survey underreport their true amount of income, thus biasing the measurement of inequality -- while the former does not. Absent reasonable criteria for choosing one dataset over the other, the paper suggests that any econometric results based on income inequality data should prove robust to both sources

Equity in Latin America Since the 1990s

This paper deals with the social welfare consequences of the stagnation of Latin American growth per capita during the far-reaching economic and social changes that took place during the period 1980-2003. This period of transformation saw large-scale foreign actors gradually increase their economic and political power in Latin America, with negative consequences for domestic economies, especially in terms of increasing income inequality and rising poverty. The only major tendency mitigating these adverse trends was an increase in public expenditure in the social sector during the 1990s, which offset, but did not eliminate, the increased inequality associated with the economic transformation.Latin America, economic change, poverty, income distribution, social policy, health,education

Specialization and Diverging Manufacturing Structures: The Aftermath of Trade Policy Reforms in Developing Countries

Trade barriers have been declining around the world over the last five decades. Countries reduced their tariffs unilaterally as well as concertedly in the framework of regional integration agreements. As a consequence, trade flows among economies have substantially intensified. According to economic theory, this should have had a significant impact on the countries’ specialization patterns. However, to our knowledge, there is no direct robust econometric evidence on the effect of trade policy on the overall degree of countries’ specialization. This paper aims at filling this gap in the literature. We focus on ten Latin American countries members of the LAIA (Latin American Integration Association) over the period 1985-1998. These countries are natural case studies because in the last two decades they implemented road and comprehensive trade liberalization programs, both generally and preferentially, starting from relatively high tariff protection levels. Our econometric results suggest that reducing own MFN tariffs is associated with increasing manufacturing production specialization. Furthermore, we find that preferential trade liberalization and differences in the degree of unilateral openness have resulted in increased dissimilarities in manufacturing production structures across countries. These results are robust to the specialization measure being used, the correction for groupwise heteroscedasticity, cross-sectional correlation, serial correlation and endogeneity biases, and the inclusion of indicators to account for the real exchange misalignment prevailing in the region during the period under examination.Specialization, Trade Policy, Latin America

From the national-bourgeois to the associated dependency interpretation of latin America

In the 1960s and 1970s Latin America was the setting of modernizing militarycoups and of the transition of their intellectuals from nationalism to associated dependency.In the 1950s two groups of public intellectuals, organized around ECLAC, in Santiago, Chile,and ISEB, in Rio de Janeiro, Brazil, pioneer the thinking on Latin American societies andeconomies (including Brazil’s) from a nationalist standpoint. ECLAC mainly criticized thelaw of comparative advantage and its underlying imperialist implications; ISEB focused onthe political definition of a national-developmentalist strategy. The idea of a nationalbourgeoisie was key to this interpretation of Latin America. The Cuban revolution, theeconomic crisis of the 1960s, and the military coups in the South Cone, however, made roomfor criticism of these ideas from a new interpretation – the dependency one. By fully rejectingpossibility of a national bourgeoisie, two versions of the dependency interpretation (the“associated” and the “over-exploitation” interpretations) also rejected the possibility of anational-development strategy. Only a third one, the “national-dependent” interpretation,continued to affirm the need for and possibility of a national bourgeoisie and a nationalstrategy. Yet, it was the associated-dependency interpretation that was dominant in LatinAmerica in the 1970s and 1980s.

ICT in Latin America: A Microdata Analysis

This book is the final report of the ECLAC-IDRC project Observatory for the Information Society in Latin American and the Caribbean (OSILAC), Third Phase”. OSILAC III is a cooperating project between the International Development Research Centre (IDRC) and the Division of Production, Productivity and Management, ECLAC-UN, which aims at understanding the dynamics of the ICT evolution and revolution and producing evidence on its potential to support socio-economic development, particularly in developing countries. As such, microdata analysis drawn from National Household Surveys and National Innovation Surveys in Latin America were used in the framework of the project in the attempt to reach those objectives Both statistical information sources provide attractive potentialities in order to investigate not only determinants of innovation activities and technology diffusion, but also its economic impacts.ICT, Innovation, Productivity

The Latin American experience in pension system reform: Coverage, fiscal issues and possible implications for China

In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes - fiscal unsustainability, low coverage levels and a high degree of segmentation- and barely addressed the non-contributory element. The reform experiences show however that the intended reforms did not manage to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal performance and outcome of the reform was worse than originally planned. The possibilities for the success of these reforms faced several constraints of a structural nature that are independent of the pension system itself and that as a result can not be overcome by a pension reform including mainly the limited savings capacity of some population groups and the instability and precariousness of the labor markets in the region. The Latin American experience shares similarities with that of China in terms of coverage, labor market informality. Both cases attest to the importance of combining contributory and non-contributory components in pension reform design.Pension reform; contributory schemes; coverage; Fiscal unsustainability; Contributory coverage; contribution density; fragmentation; transition costs; pension reform in Latin America; pension reform in China

Did NAFTA Help Mexico? An Update After 23 Years

This paper compares the performance of the Mexican economy with that of the rest of the region and with its own economic performance, over the 23 years since NAFTA took effect, based on the available economic and social indicators. Among the results, it finds that Mexico ranks 15th out of 20 Latin American countries in growth of real GDP per person, the most basic economic measure of living standards; Mexico's poverty rate in 2014 was higher than the poverty rate of 1994; and real (inflation-adjusted) wages were almost the same in 2014 as in 1994. It also notes that if NAFTA had been successful in restoring Mexico's pre-1980 growth rate -- when developmentalist economic policies were the norm -- Mexico today would be a high-income country, with income per person comparable to Western European countries. If not for Mexico's long-term economic failure, including the 23 years since NAFTA, it is unlikely that immigration from Mexico would have become a major political issue in the United States, since relatively few Mexicans would seek to cross the border. This report updates a version released in February 2014

Local Distributional Effects of Government Cash Transfers in Chile

Despite rapid economic growth and poverty reduction, inequality in Chile has remained high and remarkably constant over the last 20 years, prompting academic and public interest in the subject. Due to data limitations, however, research on inequality in Chile has concentrated on the national and regional levels. The impact of cash subsidies to poor households on local inequality is thus not well understood. Using poverty mapping methods to asses this impact, we find heterogeneity in the effectiveness of regional and municipal governments in reducing inequality via poverty-reduction transfers, suggesting that alternative targeting regimes may complement current practice in aiding the poor.http://deepblue.lib.umich.edu/bitstream/2027.42/57252/1/wp872 .pd

Economic and Institutional Determinants of FDI Flows to Latin America: A Panel Study

This paper estimates a pooled (fixed-effects) FDI investment function that seeks to identify some of the major economic and institutional determinants of FDI flows to nine major Latin American countries during the 1980-2001 period. First, it develops a conceptual framework of analysis that seeks to identify some of the major economic and institutional determinants of FDI. Second, the paper gives an overview of FDI flows to Latin America during the 1990-2006 period, with particular emphasis on their contribution to the financing of gross capital formation. Third, an empirical model for FDI flows to Latin America is outlined and an economic rationale is provided for the included variables and their expected signs. Fourth, the estimates from a panel regression designed to explain the variation in FDI flows to Latin America during the 1980-2001 period suggests that market size (proxied by real GDP), credit provided by the private banking sector, government expenditures on education, the real exchange rate, and the level of economic freedom have a positive and significant effect. On the other hand, public investment spending, the debt-service ratio, and the volatility of the real exchange rate have a negative and significant effect on FDI flows. The panel unit root tests on the residuals of the relevant panel regressions also suggest that there is a stable, long-term relationship among the included variables; i.e., the selected variables in the reported regressions are cointegrated over the relevant time period. Finally, the paper summarizes the major findings and offers some policy prescriptions for attracting FDI flows to the region and enhancing their positive direct and indirect effectsADF Fisher statistic. Economic Freedom Index (EFI), Foreign Direct Investment (FDI), Latin America, Panel Unit Root Tests, Pedroni Residual Cointegration Test, Pooled Regression, and Seemingly Unrelated Regression (SUR)