Macroeconomic regime, trade openness, unemployment and inequality. The Argentine Experience. Roxana Maurizio Universidad Nacional de General Sarmiento Argentina IDEAs Conference on Policy Perspective on Growth, Economic Structure and Poverty Reduction, Beijing, 2007
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Macroeconomic regime, trade openness, unemployment and inequality. The Argentine Experience. Roxana Maurizio Universidad Nacional de General Sarmiento.
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Macroeconomic regime, trade openness, unemployment and
inequality. The Argentine Experience.
Roxana Maurizio Universidad Nacional de General Sarmiento
Argentina
IDEAs Conference on Policy Perspective on Growth, Economic Structure and Poverty Reduction, Beijing, 2007
MOTIVATION
• On the one hand, Argentina is one of the Latin American countries that experienced the most dramatic long-term changes with respect to income inequality and welfare.
• On the other hand, the experience of Argentina indicates that it is possible to verify significant increments of the domestic product together with a very strong worsening of the personal and household income distribution.
OBJECTIVE
Analyze the Argentine experience focusing on the interactions among macroeconomic regime, labour performance, income distribution and poverty incidence.
LONG-TERM PERSPECTIVE Graph 1
Evolution of Real Wages. Index 1970=1
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1940
1950
1960
1970/74
1975/79
1980
1990
2000
LONG-TERM PERSPECTIVEGraph 3
Household's Poverty Index GBA
4
9
14
19
24
29
34
39
44
1991-94
1997-00
1994-96
2001-02
1986-90
2003-06
REGIONAL PERSPECTIVE
Gini Index of Per Capita Household Income Selected Latin American Countries
0.3
0.35
0.4
0.45
0.5
0.55
0.6
0.65
1990 2000
Poverty Index. Individuals. Selected Latin American Countries
0
1020
30
4050
60
Uruguay Argentina CostaRica
Chile Brasil México
1990 2000
Macroeconomic regime and labour market during the nineties • Convertibility Plan from 1991 to 2001 (Currency
board regime)
• Trade openness and financial liberalization
• Structural reforms (Washington Consensus)
-Privatization
-State reforms
-Labour flexibilization
Convertibility Plan: phases and final crisis
• 1991-1994: vigorous inflow of foreign capital, very high economic growth and sharp reduction in inflation rates. Real appreciation.
• 1995: “Tequila Crisis”
• 1996-1998: new flows of external capital and economic recovery
• 1998-2001: new contractionary phase and collapse of fixed exchange rate.
Graph 7 Real income of the employed and active population
GBA ( in constant 1999 prices)
550
600
650
700
750
800
850
900
M91 M92 M93 M94 M95 M96 M97 M98 M99 M00 M01 Employed Activ e population
20%
17% 3%
- 9%
Graph 6
Employment rate and full-time employment rateGBA
26
28
30
32
34
36
38
40
Employment rate Full-time employment rate
Involuntary underemployment
Graph 10Poverty indexes
GBA
10
15
20
25
30
35
40
May
-91
May
-92
May
-93
May
-94
May
-95
May
-96
May
-97
May
-98
May
-99
May
-00
May
-01
Households Individuals
Graph 8 Gini index of employed and active population
Graph 9Per Capita Family Income. Rrelationship between fifth and first quintile
GBA
12
11
15
16
15
16
17
18
20
10
11
12
13
14
15
16
17
18
19
20
21
May
-91
May
-94
May
-98
May
-99
Oct-
99
May
-00
Oct-
00
May
-01
Oct-
01
Assessing the distributional worsening : the role of the macroeconomic and labour market
Some hypotheses:• “Unified Theory”. Shifts of different intensity in the
relative demand and supply of labour between skills due to (1) Trade openness and (2) technological changes.
• Argument based on the idea that macroeconomic regime determines the global performance of the labour market and has, through this channel, a direct impact on the level and distribution of welfare. This vision emphasizes the role of the aggregate labour demand over considerations which refer only to the shift in the composition of labour demand.
Reversion and perdurability after the macroeconomic regime change
• Macroeconomic and social crisis as a consequence of the collapse of Convertibility : -GDP decreased by more than 11%-Unemployment climbed to 21%-55% of the population lived in households with incomes below the poverty line.
• From the second half of 2002 some reversion of the trends of the labour market indicators but with different intensities.
Reversion and perdurability after the macroeconomic regime change
• Positive facts: Labour dynamics. Very high employment generation, real wage recovery, unemployment reduction, fall in inequality and poverty.
• Negative facts: the “stocks”. Still significant precariousness, high unemployment rate, inequality and social vulnerability.
ReversionGraph 11
Production and employment in manufacturing activitiesIndex 1997=100
65
75
85
95
105
115
125
Employment Index of fisical volumen
TOTAL EMPLOYMENT 21% 100%CategoryWage-earners 28% 96%
QUINTILE I SEM 2003 II SEM 2003 I SEM 2004 II SEM 2004 I SEM 2005 II SEM 2005 I SEM 20061 2% 3% 3% 3% 3% 3% 3%2 7% 7% 8% 8% 8% 8% 8%3 12% 12% 13% 13% 13% 13% 14%4 21% 21% 21% 21% 21% 21% 22%5 57% 57% 56% 55% 54% 54% 53%
TOTAL 100% 100% 100% 100% 100% 100% 100%
25 21 18 17 16 16 15
Quintile distribución of Per Capita Family Income
Average income fifth Q / first Q
QUINTILE I SEM 2003 II SEM 2003 I SEM 2004 II SEM 2004 I SEM 2005 II SEM 2005 I SEM 20061 3% 4% 4% 4% 4% 4% 4%2 9% 9% 10% 10% 10% 10% 10%3 15% 14% 15% 15% 15% 15% 15%4 22% 22% 21% 22% 22% 22% 22%5 51% 51% 51% 49% 49% 50% 48%
TOTAL 100% 100% 100% 100% 100% 102% 100%
Quintile distribution of incomes from main occupation
Graph 17Poverty and indigence
28 urban centres
35.938.3
53.0
57.554.7 54
47.844.3
40.238.5
33.831.4
26.9
11.613.6
24.827.5 26.3 27.7
20.517.0
15.0 13.6 12.2 11.28.7
0
10
20
30
40
50
60
70
M01 O01 M02 O02 M03 1 S 03 2 S 03 1 S 04 2 S 04 1 S 05 2 S 05 1 S 06 2 S 06
CONCLUSIONS• Macroeconomic regime matters in term of
distributional and living conditions outcomes There are environments that, in spite of producing important GDP growths, do not benefit the employment creation and therefore contribute to the inequality increase.
• Negative effects that some macroeconomic configurations have on the labour market and income distribution persist even after the country returns to its growth path.
CONCLUSIONS (cont.)
• Argentina has experienced a pattern where the successive crises worsen the income distribution as long as the recovery cycles find boundaries for the complete reversion of these trends.
• High real exchange rate alone do not solve all labour and social problems.