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Reforms and Social Outcomes Suzanne Duryea Carmen Pagés Research Department Inter-American Development Bank.

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Presentation on theme: "Reforms and Social Outcomes Suzanne Duryea Carmen Pagés Research Department Inter-American Development Bank."— Presentation transcript:

1 Reforms and Social Outcomes Suzanne Duryea Carmen Pagés Research Department Inter-American Development Bank

2 Social outcomes did not improve much in the nineties... Poverty declined from 43% to 39% Extreme poverty from 16.8 to 15.6% Inequality increased by 2 Gini points Average unemployment increased from 7% in 1990 to more than 10% in 2000 The share of unregistered jobs did not decline

3 Reforms or lack of Reforms to blame? % 0% 10% 20% 30% 40% 50% 60% 70% 80% TotalTradeFinanceTaxPrivatizationLabor Until 1989 Until 1994 Until % 0% 10% 20% 30% 40% 50% 60% 70% 80% Until 1989Until 1994 Until 1999

4 Are reforms to blame? By the mid nineties: Rising contention but lack of hard evidence. RES worked with micro data that was increasingly available but hardly used Major contributions in measuring reforms & in assessing their effects

5 Findings—Trade Reforms Link between trade reforms and inequality & poverty is still the focus of intense research Behrman, Birdsall and Székely find trade reforms did not increase inequality or poverty during the 90´s Using pooled household survey data for LAC

6 Findings—Trade Reforms Link between trade reforms and inequality & poverty is still the focus of intense research Evidence for skill-biased technological change (Colombia, Brazil, Colombia) Reduction of tariffs related to initial pattern of protection with lower-skilled more protected (increasing inequality) (Mexico, Argentina, and Ecuador) Growing consensus that overall the effect of the trade reforms on the wage distribution are small

7 Findings—Trade Reforms Trade reforms cannot seemingly be blamed for rising unemployment. Effects on total employment or on unemployment are very small Effects on employment reallocation also surprisingly small But some adverse effects in manufacturing employment in Brazil and Uruguay (not in Mexico)

8 Findings—Trade Reforms And measured effects on quality of jobs are so far small Some in Colombia No effects in Brazil or Ecuador But evidence that wages declined

9 Labor Markets are highly regulated Job Security Index (0- 1) Uruguay Jamaica Chile Rep. Dominicana Argentina Bolivia Colombia Venezuela Ecuador Panamá Brasil Perú México Industrial Anglosaxon South Asian Region East Asia and Pacific Islands Sub-Saharan Africa Industrial Continental Europe Middle East and North Africa Eastern Europe and Central Asia Latin America and Caribbean

10 Findings-Labor Reforms Labor Institutions & regulations Matter Rudimentary social protection Soc. sec. reduces employment & increases unemployment Job. Sec. reduces turnover & biases employment againts the youth and unskill But, not clearly linked to rising U

11 Ongoing research How to explain rising U? Is it cyclical or structural? Is lower inflation to blame for low wage adjustment? What is the role of institutions and policies? Role for training, intermediation What explains cross-country differences?

12 Ongoing research Why is wage inequality on the rise? What is the role of IT? What is the role of capital imports? What implications for skill formation policies? What to do about it?


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