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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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Presentation on theme: "Macroeconomic regime, trade openness, unemployment and inequality. The Argentine Experience. Roxana Maurizio Universidad Nacional de General Sarmiento."— Presentation transcript:

1 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

2 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.

3 OBJECTIVE Analyze the Argentine experience focusing on the interactions among macroeconomic regime, labour performance, income distribution and poverty incidence.

4 LONG-TERM PERSPECTIVE

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6 REGIONAL PERSPECTIVE

7 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

8 Convertibility Plan: phases and final crisis : vigorous inflow of foreign capital, very high economic growth and sharp reduction in inflation rates. Real appreciation. 1995: Tequila Crisis : new flows of external capital and economic recovery : new contractionary phase and collapse of fixed exchange rate.

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11 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.

12 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.

13 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.

14 Reversion

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18 Perdurability

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20 Decomposition of poverty variation (households)

21 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.

22 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.


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