Sebastiano Fadda, & Pasquale Tridico, (edt.), The Economic Crisis in Social and Institutional Context

Book Revie

40 Years after Hirschman's Tunnel Parable: Income Inequality, Economic Development and Aspirations Failures in Latin America

Originating from Albert O. Hirschman's tunnel parable and the recently evolving aspirations literature, this paper investigates the effect of income and economic variables at country level on an individual's aspiration level. A locus of control variable from the World Values Survey is used to estimate these effects in a multilevel model for six Latin American countries. The results seem to be in line with key aspects of Hirschman's tunnel effect: different interplays of growth and inequality dynamics can lead to different patterns of perceived control within a society. Growth is associated to higher perceived control in all income spheres when it is inclusive. This is important in the context of poverty alleviation and development because aspiration levels have been shown to be an important determinant of economic behavior and decision-making

The role of the commodity price boom in shaping public social spending: Evidence from Latin America

We study the potential impact of the commodity price boom of 2003 to 2013 on public social spending in Latin America. We estimate structural vector autoregressions and local projections for 16 Latin American countries over the period from 1990 to 2019 and investigate if we can attribute increases in public spending on health, education, and social protection to increases in a country’s net commodity terms-of-trade. By focusing on the impulse responses derived from country-specific estimations, we find a huge variety in response patterns. Our study finds that two countries experienced lasting increases in public social spending due to the commodity boom (Argentina, Ecuador). Some others observed at least temporary increases of few years (Brazil, Mexico), reacted first with declines and then rises (Chile), and yet others did not respond at all (Bolivia, Colombia, Peru). As expected, we cannot relate public social spending with commodity prices in countries without commodity price boom. Among countries with positive responses, there is no clear tendency concerning the function of spending that benefits most. We discuss potential explanations behind the heterogeneity of our country-wise results and conclude that the presence of left-wing governments, fiscal rules, natural resource funds and economic diversification provide plausible explanations for single country cases, but no general patterns emerge. We conclude that the commodity price boom was neither necessary nor sufficient for social policy expansion in Latin America, and factors explaining its effects differ from country to country. Our study highlights the importance of in-depth examinations of country-specific factors and the need of (currently lacking) high-quality time series data in development research

Interpreting sufficiency in fsQCA: A reply to Marques and Salavisa (2017)

Marques and Salavisa (2017) use fuzzy set qualitative comparative analysis (fsQCA) to analyze age-based labour market dualization in Southern European, Anglo-Saxon and a few Nordic countries. They argue that segmentation at the expense of young outsiders is driven by several factors in non-linear ways: different configurations of deindustrialization, labour market coordination, employment protection, and liberalization can lead to youth outsiderness. We question the validity of their empirical analysis and argue that a more complete interpretation of fsQCA measures of fit does not confirm their conclusions. We use the occasion for a hands-on discussion of how the consistency and PRI scores of the sufficiency solution terms are calculated. A good understanding of these allows the researcher to understand which cases and configurations drive high or low scores, and thus facilitates a better understanding of the results

The heterogeneous relationship between income and inequality: a panel co-integration approach

We study the relationship between per-capita income and income inequality with a heterogeneous panel co-integration approach. We extend previous studies in two dimensions: first, we compile a more extensive data set for 61 countries over 26-51 years and consider measures for both pre-tax and post-tax income inequality; second, we take into account country heterogeneity rather than relying on average panel estimates alone. We find a negative group-mean based relationship using pre-tax income inequality, but no such relationship for post-tax income inequality. Moreover, we find estimates on the country level to be heterogeneous in both cases

Global and domestic inequalities and the political economy of the midde-income trap

Some middle-income economies, many of which Latin American, have not achieved to make the transition into high-income status for long years and are allegedly trapped in middle-income status. While there is considerable consensus on the proximate causes of this phenomenon, we present a global political economy perspective to the discussion, arguing that global and domestic inequalities, both political and economic, are key to understand the issue. We subject our argument to empirical scrutiny, using fuzzy-set qualitative comparative analysis (fsQCA) on data spanning the years 1976-2009. Both domestic economic equality and political independence from the influence of an external power turn out to be robust characteristics supporting growth convergence of middle-income countries