in Latin America in the 2000s Guillermo Cruces Gary S. Fields - - PowerPoint PPT Presentation

The Growth-Employment-Poverty Nexus in Latin America in the 2000s

Guillermo Cruces

CEDLAS-FCE-UNLP, CONICET and IZA

Gary S. Fields

Cornell University, IZA and WIDER

David Jaume

Cornell University and CEDLAS-FCE- UNLP

Mariana Viollaz

CEDLAS-FCE-UNLP

Motivation

• Interest in the links between growth, employment,

and poverty.

• Main questions:
• Has economic growth resulted in economic development

via improved labor market conditions in the 2000s?

• Have these improvements halted or been reversed since

the Great Recession of 2008?

• How do the rate and character of economic growth,

changes in the various employment and earnings indicators, and changes in poverty and inequality indicators relate to each other?

Our outputs

• 18 working papers:
• 16 country papers
• 2 cross-country papers
• To appear as WIDER working papers
• To be collected into a book

Brief summary of LA findings

• For the region as a whole: real GDP pc grew during

the 2000s, all employment and earnings indicators improved, and poverty and inequality fell.

• For individual countries: real GDP pc grew during the

2000s in all LA countries, most LMI improved in all countries but one, poverty rates fell in all countries but one.

• Huge contrast with U.S. and other OECD countries.

Data and Methodology

Data sources

• Microeconomic data from SEDLAC (CEDLAS and

World Bank) for 16 countries, from 2000 to 2012/2013:

• More than 150 household surveys, 5 million households

and 18 million people.

• Comparable time series for a wide range of labor market,

poverty and income inequality indicators.

• Aggregate macroeconomic indicators from WDI

(World Bank) and data on social expenditure from ECLAC (United Nations).

Labor market indicators and Evaluation criteria

Change from Welfare improving initial to final year change Employment and earnings indicators Unemployment rate ∆Yik Reduction Shr of low-earnings occupations ∆Yik Reduction Shr of high-earnings occupations ∆Yik Increase Shr of paid employees ∆Yik Increase Shr of self-employment ∆Yik Reduction Shr of unpaid workers ∆Yik Reduction Shr of low-earnings sectors ∆Yik Reduction Shr of high-earnings sectors ∆Yik Increase Shr of low-educated workers ∆Yik Reduction Shr of high-educated workers ∆Yik Increase Shr of workers registered with SS ∆Yik Increase Real monthly labor earnings ∆%Yik Increase Poverty and inequality indicators 2.5 USD-a-day poverty rate ∆Yik Reduction 4 USD-a-day poverty rate ∆Yik Reduction Gini hpci ∆%Yik Reduction Gini labor earnings ∆%Yik Reduction Index of improving changes (Zi) (1/K)∑Yik

+

Increase Labor market indicators (Yik)

Labor market indicators and Evaluation criteria

Change from Welfare improving initial to final year change Employment and earnings indicators Unemployment rate ∆Yik Reduction Shr of low-earnings occupations ∆Yik Reduction Shr of high-earnings occupations ∆Yik Increase Shr of paid employees ∆Yik Increase Shr of self-employment ∆Yik Reduction Shr of unpaid workers ∆Yik Reduction Shr of low-earnings sectors ∆Yik Reduction Shr of high-earnings sectors ∆Yik Increase Shr of low-educated workers ∆Yik Reduction Shr of high-educated workers ∆Yik Increase Shr of workers registered with SS ∆Yik Increase Real monthly labor earnings ∆%Yik Increase Poverty and inequality indicators 2.5 USD-a-day poverty rate ∆Yik Reduction 4 USD-a-day poverty rate ∆Yik Reduction Gini hpci ∆%Yik Reduction Gini labor earnings ∆%Yik Reduction Index of improving changes (Zi) (1/K)∑Yik

+

Increase Labor market indicators (Yik)

Labor market indicators and Evaluation criteria

Change from Welfare improving initial to final year change Employment and earnings indicators Unemployment rate ∆Yik Reduction Shr of low-earnings occupations ∆Yik Reduction Shr of high-earnings occupations ∆Yik Increase Shr of paid employees ∆Yik Increase Shr of self-employment ∆Yik Reduction Shr of unpaid workers ∆Yik Reduction Shr of low-earnings sectors ∆Yik Reduction Shr of high-earnings sectors ∆Yik Increase Shr of low-educated workers ∆Yik Reduction Shr of high-educated workers ∆Yik Increase Shr of workers registered with SS ∆Yik Increase Real monthly labor earnings ∆%Yik Increase Poverty and inequality indicators 2.5 USD-a-day poverty rate ∆Yik Reduction 4 USD-a-day poverty rate ∆Yik Reduction Gini hpci ∆%Yik Reduction Gini labor earnings ∆%Yik Reduction Index of improving changes (Zi) (1/K)∑Yik

+

Increase Labor market indicators (Yik)

Labor market indicators and Evaluation criteria

Change from Welfare improving initial to final year change Employment and earnings indicators Unemployment rate ∆Yik Reduction Shr of low-earnings occupations ∆Yik Reduction Shr of high-earnings occupations ∆Yik Increase Shr of paid employees ∆Yik Increase Shr of self-employment ∆Yik Reduction Shr of unpaid workers ∆Yik Reduction Shr of low-earnings sectors ∆Yik Reduction Shr of high-earnings sectors ∆Yik Increase Shr of low-educated workers ∆Yik Reduction Shr of high-educated workers ∆Yik Increase Shr of workers registered with SS ∆Yik Increase Real monthly labor earnings ∆%Yik Increase Poverty and inequality indicators 2.5 USD-a-day poverty rate ∆Yik Reduction 4 USD-a-day poverty rate ∆Yik Reduction Gini hpci ∆%Yik Reduction Gini labor earnings ∆%Yik Reduction Index of improving changes (Zi) (1/K)∑Yik

+

Increase Labor market indicators (Yik)

Labor market indicators and Evaluation criteria

Change from Welfare improving initial to final year change Employment and earnings indicators Unemployment rate ∆Yik Reduction Shr of low-earnings occupations ∆Yik Reduction Shr of high-earnings occupations ∆Yik Increase Shr of paid employees ∆Yik Increase Shr of self-employment ∆Yik Reduction Shr of unpaid workers ∆Yik Reduction Shr of low-earnings sectors ∆Yik Reduction Shr of high-earnings sectors ∆Yik Increase Shr of low-educated workers ∆Yik Reduction Shr of high-educated workers ∆Yik Increase Shr of workers registered with SS ∆Yik Increase Real monthly labor earnings ∆%Yik Increase Poverty and inequality indicators 2.5 USD-a-day poverty rate ∆Yik Reduction 4 USD-a-day poverty rate ∆Yik Reduction Gini hpci ∆%Yik Reduction Gini labor earnings ∆%Yik Reduction Index of improving changes (Zi) (1/K)∑Yik

+

Increase Labor market indicators (Yik)

Labor market indicators and Evaluation criteria

Change from Welfare improving initial to final year change Employment and earnings indicators Unemployment rate ∆Yik Reduction Shr of low-earnings occupations ∆Yik Reduction Shr of high-earnings occupations ∆Yik Increase Shr of paid employees ∆Yik Increase Shr of self-employment ∆Yik Reduction Shr of unpaid workers ∆Yik Reduction Shr of low-earnings sectors ∆Yik Reduction Shr of high-earnings sectors ∆Yik Increase Shr of low-educated workers ∆Yik Reduction Shr of high-educated workers ∆Yik Increase Shr of workers registered with SS ∆Yik Increase Real monthly labor earnings ∆%Yik Increase Poverty and inequality indicators 2.5 USD-a-day poverty rate ∆Yik Reduction 4 USD-a-day poverty rate ∆Yik Reduction Gini hpci ∆%Yik Reduction Gini labor earnings ∆%Yik Reduction Index of improving changes (Zi) (1/K)∑Yik

+

Increase Labor market indicators (Yik)

Labor market indicators and Evaluation criteria

Change from Welfare improving initial to final year change Employment and earnings indicators Unemployment rate ∆Yik Reduction Shr of low-earnings occupations ∆Yik Reduction Shr of high-earnings occupations ∆Yik Increase Shr of paid employees ∆Yik Increase Shr of self-employment ∆Yik Reduction Shr of unpaid workers ∆Yik Reduction Shr of low-earnings sectors ∆Yik Reduction Shr of high-earnings sectors ∆Yik Increase Shr of low-educated workers ∆Yik Reduction Shr of high-educated workers ∆Yik Increase Shr of workers registered with SS ∆Yik Increase Real monthly labor earnings ∆%Yik Increase Poverty and inequality indicators 2.5 USD-a-day poverty rate ∆Yik Reduction 4 USD-a-day poverty rate ∆Yik Reduction Gini hpci ∆%Yik Reduction Gini labor earnings ∆%Yik Reduction Index of improving changes (Zi) (1/K)∑Yik

+

Increase Labor market indicators (Yik)

Changing Labor Market Indicators and the Rate of Economic Growth in Latin America during the 2000s

Changing labor market indicators and economic growth

• Q: From beginning to end, how GDP per capita and LMI

changed?

• We studied:
• Annualized GDP per capita growth rates and changes in LMI

from beginning to end for the region and country-by-country.

• We found:
• For the region as a whole: real GDP per capita grew, all

employment and earnings indicators improved, and poverty and inequality fell.

• For individual countries: real GDP per capita grew in all LA

countries, most employment and earnings indicators improved in all countries but one, poverty rates fell in all countries but

• ne.

Country-by-Country: Economic growth

0.8 1.4 1.7 2.1 2.2 2.4 2.4 2.9 3.0 3.0 3.1 3.2 3.6 3.6 5.6 5.6

0.0 1.0 2.0 3.0 4.0 5.0 6.0 MX (2000-2012) SV (2000-2012) VE (2000-2012) HN (2001-2012) BO (2000-2012) PY (2001-2013) BR (2001-2012) CR (2001-2009) CL (2000-2011) EC (2003-2012) UY (2000-2012) CO (2002-2013) AR (2000-2012) DO (2000-2012) PE (2003-2012) PA (2001-2012)

Annualized growth rate of GDP per capita (USD 05 PPP)

Country-by-Country: Economic growth

0.8 1.4 1.7 2.1 2.2 2.4 2.4 2.9 3.0 3.0 3.1 3.2 3.6 3.6 5.6 5.6

0.0 1.0 2.0 3.0 4.0 5.0 6.0 MX (2000-2012) SV (2000-2012) VE (2000-2012) HN (2001-2012) BO (2000-2012) PY (2001-2013) BR (2001-2012) CR (2001-2009) CL (2000-2011) EC (2003-2012) UY (2000-2012) CO (2002-2013) AR (2000-2012) DO (2000-2012) PE (2003-2012) PA (2001-2012)

Annualized growth rate of GDP per capita (USD 05 PPP)

Country-by-Country: Economic growth

0.8 1.4 1.7 2.1 2.2 2.4 2.4 2.9 3.0 3.0 3.1 3.2 3.6 3.6 5.6 5.6

0.0 1.0 2.0 3.0 4.0 5.0 6.0 MX (2000-2012) SV (2000-2012) VE (2000-2012) HN (2001-2012) BO (2000-2012) PY (2001-2013) BR (2001-2012) CR (2001-2009) CL (2000-2011) EC (2003-2012) UY (2000-2012) CO (2002-2013) AR (2000-2012) DO (2000-2012) PE (2003-2012) PA (2001-2012)

Annualized growth rate of GDP per capita (USD 05 PPP)

Country-by-Country: Economic growth

0.8 1.4 1.7 2.1 2.2 2.4 2.4 2.9 3.0 3.0 3.1 3.2 3.6 3.6 5.6 5.6

0.0 1.0 2.0 3.0 4.0 5.0 6.0 MX (2000-2012) SV (2000-2012) VE (2000-2012) HN (2001-2012) BO (2000-2012) PY (2001-2013) BR (2001-2012) CR (2001-2009) CL (2000-2011) EC (2003-2012) UY (2000-2012) CO (2002-2013) AR (2000-2012) DO (2000-2012) PE (2003-2012) PA (2001-2012)

Annualized growth rate of GDP per capita (USD 05 PPP) LA region: 2.9% OECD: 1.0% USA: 0.9%

Country-by-Country: Changes in LMI

87.5 87.5 62.5 93.8 100 93.8 75.0 18.8 81.3 62.5 81.3 75.0 81.3 100 100 92.9

10 20 30 40 50 60 70 80 90 100

VE UY SV PY PE PA MX HN EC DO CR CO CL BR BO AR

Percentage of improving indicators (Zi)

Country-by-Country: Changes in LMI

87.5 87.5 62.5 93.8 100 93.8 75.0 18.8 81.3 62.5 81.3 75.0 81.3 100 100 92.9

10 20 30 40 50 60 70 80 90 100

VE UY SV PY PE PA MX HN EC DO CR CO CL BR BO AR

Percentage of improving indicators (Zi)

All but one improved at least 63% of LMI

Country-by-Country: Changes in LMI

87.5 87.5 62.5 93.8 100 93.8 75.0 18.8 81.3 62.5 81.3 75.0 81.3 100 100 92.9

10 20 30 40 50 60 70 80 90 100

VE UY SV PY PE PA MX HN EC DO CR CO CL BR BO AR

Percentage of improving indicators (Zi)

All but three improved at least 75% of LMI

Comparison between two successful countries

• Bolivia and Panama improved all or almost all LMI

from beginning to end.

• The annualized growth rates of GDP per capita were

quite different: 2.2% (BO) and 5.9% (PA).

• Their growth experiences were also different:
• Bolivia growth was based on hydrocarbon and mineral

exports.

• Panama growth was based on the provision of services to

the rest of the world.

Bolivia (I)

3,488 4,552

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GDP per capita (USD at 2005 PPP)

+30.5% RER appreciation; Devaluation of BR; Crisis in AR Increases in hydrocarbon and mineral exports; Increase in fiscal revenue and reduction in public debt Hydrocarbon revenue savings improved the resilience to external shocks

International Crisis

Bolivia (II)

5.9 3.9

Unemployment rate

• 2.0pp

447.3 589.3

Mean earnings (USD 2005 PPP)

+31.7% 59.9 29.5

Poverty 4 dollars-a-day

• 30.4pp

44.7 38.3

Share of self-employed

• 6.4pp

Panama (I)

7,869 14,320

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GDP per capita (USD at 2005 PPP)

+82.0% Slow growth of the developed world Expansion of sectors that provide services to the rest

• f the world: Panama Canal,

the international banking centre, Colon Free Trade Zone Public infrastructure projects (Panama Canal) and increase in domestic consumption International Crisis

Panama (II)

9.6 3.7

Unemployment rate

• 5.9pp

641.7 715.8

Mean earnings (USD 2005 PPP)

+13.8%

43.4 20.9

Poverty 4 dollars-a-day

• 22.5pp

20.7 23.5

Share of high-earnings sectors

+2.8pp

Summary of findings

• Real GDP per capita grew for the average of the

region, all employment and earnings indicators improved, and poverty and inequality fell.

• Real GDP per capita grew in all LA countries, most

employment and earnings indicators improved in all countries but one, poverty rates fell in all countries but

• ne.
• GDP per capita growth seems not to be the most

important factor to explain the improvement in labor market conditions in LA countries.

Cross-country analysis of the growth-employment- poverty nexus

Cross-country analysis of the growth- employment-poverty nexus.

• We focus on cross-country evidence about:

1) Growth-employment and growth-poverty nexus. 2) The role of macroeconomic variables other than the rate of economic growth in determining changes in LMI. 3) The employment-poverty nexus.

• Q: Did countries with a higher rate of economic

growth experience larger improvements in LMI?

• Across countries, we studied:
• The relationship between the annualized rate of economic

growth and the percentage of LMI that improved over the 2000s.

• The relationship between the annualized rate of economic

growth and the annualized changes in LMI.

• We concluded:
• Faster growth is associated with larger improvements in

LMI, but the goodness of fit of the relationships is generally low.

Growth-employment nexus

Growth-employment nexus

Percentage of improving LMI and annualized growth rate of GDP per capita

AR BO BR CL CO CR DO EC HN MX PA PE PY SV UY VE

20 40 60 80 100 1 2 3 4 5 6 % GDPpc at PPP 2005 With HN Without HN

Regression details: With HN: Y=65.4+5.26(3.95)X, R2= .112 Without HN: Y=75.3+3.24(2.43)X, R2= .12

Growth-employment nexus

Percentage of improving LMI and annualized growth rate of GDP per capita

AR BO BR CL CO CR DO EC HN MX PA PE PY SV UY VE

20 40 60 80 100 1 2 3 4 5 6 % GDPpc at PPP 2005 With HN Without HN

Regression details: With HN: Y=65.4+5.26(3.95)X, R2= .112 Without HN: Y=75.3+3.24(2.43)X, R2= .12

R2 = 0.11

Growth-labor earnings

Annualized changes in mean labor earnings and annualized growth rate of GDP per capita.

AR BO BR CL CO CR DO EC SV HN MX PA PY PE UY VE

• 4
• 2

2 4 % 1 2 3 4 5 6 Annual growth in GDP per capita

Regression details: Y=.05+.23(.336)X. R2=.032

R2 = 0.03

Growth-unemployment

Annual changes in the unemployment rate and annualized growth rate of GDP per capita

AR BO BR CL CO CR DO EC SV HN MX PA PY PE UY VE

• 1
• .5

.5  1 2 3 4 5 6 % GDPpc at PPP 2005

Regression details: Y=-.07-.07(.064)X. R2=.09

R2 = 0.09

Growth-job mix

Annual change in the share of registered workers and annualized growth rate of GDP per capita

AR BO BR CL CO CR DO EC SV HN MX PA PY PE UY VE

• 1

1 2 3 4  2 4 6 8 Annual growth in GDP per capita

Regression details: Y=-.54+.44(.132)X. R2=.439

R2 = 0.44

Growth-poverty nexus

Annual change in the Poverty 4-USD-a-day and annualized growth rate of GDP per capita

AR BO BR CL CO CR DO EC SV HN MX PA PY PE UY VE

• 3
• 2
• 1

1  1 2 3 4 5 6 Annual growth in GDP per capita

Regression details: Y=-.68-.25(.194)X. R2=.105

R2 = 0.056

• Across countries:
• Faster growth is associated with larger improvements in

LMI.

• In general, the relationships are not tight (low R2).
• The weak relationship seems to be driven by the

experiences of the countries which grew at moderate rates by Latin American standards.

Summary of findings: Growth- employment and growth-poverty nexus

• Q: Were improvements in LMI related to other factors beyond

economic growth?

• Across countries, relationship between improvements in LMI and:
• Initial GDP
• Initial level of LMI
• Annualized change in macroeconomic variables other than GDP
• We concluded:
• Initial GDP was unrelated to changes in LMI.
• Convergence pattern in 5 /16 LMI: unemployment, share of unpaid family

workers, both poverty measures, inequality of HIPC.

• Increases in some macroeconomic variables are associated with changes in

labor market conditions during the 2000s.

• No unique configuration of macroeconomic variables that was associated with

the several successful experiences among our sample of 16 countries.

Beyond Economic Growth

Number of LMI indicators positively or negatively correlated to each macroeconomic variable.

Macroeconomic variables and changes on LMI

3 1 6 8 12 3 1 6 6 7 9 2 4 6 8 10 12 14 Public expend. in social security (% of GDP) Foreign direct investment (% of GDP) Terms of trade Share of industry in GDP Share of services in GDP Revenues from natural resources (% of GDP) Domestic expenditure (% of GDP) Exports (% of GDP) Stock of public debt (% of GDP) Number of LMI Welfare worsening correlation Welfare improvement correlation

Cross-Country relationship between the percentage of improving LMI and the annualized changes in services and exports

AR BO BR CL CO CR DO EC HN MX PA PE PY SV UY VE

20 40 60 80 100

• .6
• .4
• .2

.2 .4

% Services

Regression details: With HN: Y=79.7-18.0(13.2)X, R2= .116 Without HN: Y=84.1-9.64(8.38)X, R2= .092 AR BO BR CL CO CR DO EC HN MX PA PE PY SV UY VE

20 40 60 80 100

• 1

1 2

% Exports

Regression details: With HN: Y=74.0+15.2(6.32)X, R2= .293 Without HN: Y=80.2+9.54(3.97)X, R2= .307 With HN Without HN

• Across countries:
• Changes in some macroeconomic variables are associated

with improvements in LMI.

• We might have found a number of alternate configurations
• f macroeconomic variables behind the successful LM

stories.

Findings on macroeconomic variables

Cross-country employment-poverty nexus

• Q: Are larger improvements in employment and

earnings indicators associated with larger reductions in poverty?

• We studied:
• Cross-country correlations between annualized changes in

employment and earnings indicators and poverty.

• Cross-country regressions controlling for growth rate of

GDP pc.

• We concluded:
• Strong and consistent cross-country association between

reductions in poverty and extreme poverty, and improvements in earnings and employment indicators.

Cross-country correlations between the annualized changes in the poverty rate 4 USD- a-day and LMI during the 2000s

0.17 0.28 0.41 0.47 0.51 0.58 0.59 0.61 0.61 0.62 0.63 0.73 0.75 0.88 0.0 0.2 0.4 0.6 0.8 1.0 Increase in workers registered with SS Decrease in self-employment Decrease in unemployment Increase in high-earnings occupations Decrease in low educated workers Decrease in workers in low-earnings sectors Increase in wage/salaried employees Decrease in unpaid family workers Increase in high-earnings sectors Decrease in GINI HPCI Increase in highly educated workers Decrease in low-earnings occupations Decrease in GINI of labor earnings Increase in mean labor earnings

Correlations of Δpoverty 4 USD-a-day and ΔLMI

Cross-country correlations between the annualized changes in the poverty rate 4 USD-a-day and LMI during the 2000s

0.17 0.28 0.41 0.47 0.51 0.58 0.59 0.61 0.61 0.62 0.63 0.73 0.75 0.88 0.0 0.2 0.4 0.6 0.8 1.0 Increase in workers registered with SS Decrease in self-employment Decrease in unemployment Increase in high-earnings occupations Decrease in low educated workers Decrease in workers in low-earnings sectors Increase in wage/salaried employees Decrease in unpaid family workers Increase in high-earnings sectors Decrease in GINI HPCI Increase in highly educated workers Decrease in low-earnings occupations Decrease in GINI of labor earnings Increase in mean labor earnings

Correlations of Δpoverty 4 USD-a-day and ΔLMI

Cross-country correlations between the annualized changes in the poverty rate 4 USD-a-day and LMI during the 2000s

0.17 0.28 0.41 0.47 0.51 0.58 0.59 0.61 0.61 0.62 0.63 0.73 0.75 0.88 0.0 0.2 0.4 0.6 0.8 1.0 Increase in workers registered with SS Decrease in self-employment Decrease in unemployment Increase in high-earnings occupations Decrease in low educated workers Decrease in workers in low-earnings sectors Increase in wage/salaried employees Decrease in unpaid family workers Increase in high-earnings sectors Decrease in GINI HPCI Increase in highly educated workers Decrease in low-earnings occupations Decrease in GINI of labor earnings Increase in mean labor earnings

Correlations of Δpoverty 4 USD-a-day and ΔLMI

Cross-country correlations between the annualized changes in the poverty rate 4 USD-a-day and LMI during the 2000s

0.17 0.28 0.41 0.47 0.51 0.58 0.59 0.61 0.61 0.62 0.63 0.73 0.75 0.88 0.0 0.2 0.4 0.6 0.8 1.0 Increase in workers registered with SS Decrease in self-employment Decrease in unemployment Increase in high-earnings occupations Decrease in low educated workers Decrease in workers in low-earnings sectors Increase in wage/salaried employees Decrease in unpaid family workers Increase in high-earnings sectors Decrease in GINI HPCI Increase in highly educated workers Decrease in low-earnings occupations Decrease in GINI of labor earnings Increase in mean labor earnings

Correlations of Δpoverty 4 USD-a-day and ΔLMI

Cross-country correlations between the annualized changes in the poverty rate 4 USD-a-day and LMI during the 2000s

0.17 0.28 0.41 0.47 0.51 0.58 0.59 0.61 0.61 0.62 0.63 0.73 0.75 0.88 0.0 0.2 0.4 0.6 0.8 1.0 Increase in workers registered with SS Decrease in self-employment Decrease in unemployment Increase in high-earnings occupations Decrease in low educated workers Decrease in workers in low-earnings sectors Increase in wage/salaried employees Decrease in unpaid family workers Increase in high-earnings sectors Decrease in GINI HPCI Increase in highly educated workers Decrease in low-earnings occupations Decrease in GINI of labor earnings Increase in mean labor earnings

Correlations of Δpoverty 4 USD-a-day and ΔLMI

Annualized changes in mean labor earnings and annualized changes in the poverty rate 4 USD-a-day.

AR BO BR CL CO CR DO EC SV HN MX PA PY PE UY VE

• 3
• 2
• 1

1 

• 4
• 2

2 4 % Mean labor earnings

Regression details: Y=-1.0-.53(.075)X. R2=.779

Labor earnings and poverty

R2 = 0.78

Annualized changes in share of wage/salaried employee and annualized changes in the poverty rate 4 USD-a-day.

AR BO BR CL CO CR DO EC SV HN MX PA PY PE UY VE

• 3
• 2
• 1

1 

• .5

.5 1  Shr of wage/sal. employees

Regression details: Y=-1.0-1.55(.568)X. R2=.348

Wage/salaried employment and poverty

R2 = 0.348

Summary of employment-poverty findings

• Across-countries:
• Large association between improvements in

earnings and employment indicators and reductions in poverty.

Within-country analysis of the growth-employment- poverty nexus

Labor market indicators, poverty and growth

• Previous evidence based on 16 observations – one per

country, annualized changes over the period.

• Here: use variation within country over time to study:
• response of LMI to growth;
• response of poverty to employment and earnings changes;
• changes in earnings across the earnings distribution.
• Subtle difference. Previous question: Across countries,

were differences in poverty reductions 2000-2012 linked to differences across countries in economic growth rates?

• Question: if a country grows faster, what is the effect of

faster growth on poverty? And LMI/poverty?

• Economic growth reduces poverty, but at different rates in

different countries.

• Changes in poverty related in the welfare improving direction

with percentage changes in some employment and earning indicators, but again varying substantially between country.

Unemployment and GDP in Latin America during the 2000s

117 77 88 119

20 25 30 35 40 45

70 80 90 100 110 120 130

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GDPpc GDPpc GDPpc Unemployment

Labor earning and GDP in Latin America during the 2000s

101 109 88 119

20 25 30 35 40 45

70 80 90 100 110 120 130

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GDPpc GDPpc GDPpc Mean Labor earnings

Poverty and GDP in Latin America during the 2000s

88 119 40 25

20 25 30 35 40 45

70 80 90 100 110 120 130

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GDPpc GDPpc GDPpc Poverty 4 dollars-a-day

GDP elasticity, selected indicators

Pooled data for all country-years, country FE

• Strong negative elasticity of unemployment of about -2.
• Broadly: job mix/quality of employment + correlated with GDP.
• Earnings increased more than proportionately w.r.t. GDP.
• Poverty strongly correlated with GDP (1.5/2 pov./ext.), but not inequality.
• Some surprising lacks of association: high/low earnings occupations-sectors.
• Heterogeneity in elasticities between countries

LM Indicator GDP elasticity LM Indicator GDP elasticity Unemployment

• 1.953

Mean labor earnings 1.133 (0.331)** (0.155)** 0.156 2.5 dollars-a-day poverty

• 2.100

(0.055)** (0.354)** Share of self-employment

• 0.337

4 dollars-a-day poverty

• 1.427

(0.096)** (0.261)** 0.541 Gini of labor earnings

• 0.123

(0.157)** (0.069) Share of wage/salaried employees Share of workers registered with SS

Country heterogeneity in GDP elasticities

Poverty/extr. elasticities w.r.t. selected indicators

Pooled data for all country-years, country FE

LM Indicator Extreme poverty elasticity Poverty elasticity Unemployment 0.332 0.193 (0.096)** (0.066)**

• 1.501
• 0.972

(0.368)** (0.259)** Share of self-employment 1.115 0.802 (0.259)** (0.181)**

• 0.114
• 0.104

(0.186) (0.116) Mean labor earnings

• 1.236
• 0.950

(0.171)** (0.111)** Share of wage/salaried employees Share of workers registered with SS

• Unemployment elasticity significant, higher for extreme poverty.
• Earnings elasticity >1 for extr. pov., about 1 for moderate. Lower than poverty-

growth elasticities: changes in labor earnings “attenuated” compared to GDP.

• Quality of employment also correlated, but not for registered work for instance.
• Heterogeneity in elasticities between countries

Changes of Labor Earnings across the Earnings Distribution within Country: Growth Incidence Curves

Growth incidence curves for labor earnings

• Earnings: main source of income for LA households. Increase

at the bottom of the distribution and reductions in inequality.

• Mean labor earnings increased in 11 countries, decreased in 5.
• For 9 countries, positive changes along all the distribution (and

2 more: all but top decile).

• 70% of deciles experienced increases in labor earnings.
• 30% of deciles with no growth (5 countries where mean earnings fell)
• In more than half of the countries, changes in percentage

terms were largest for poorer deciles. Others: middle deciles.

• Absolute changes:

– In 10 countries, larger in the 9th/10th deciles. – Earnings mostly unchanged in $ for the poorest decile - % changes large because of low base rates.

Progressive changes, but high heterogeneity

Selected relative growth incidence curves

• 40

40 80 120 1 2 3 4 5 6 7 8 9 10

Bolivia 2000-2012

• 40

40 80 120 1 2 3 4 5 6 7 8 9 10

Brazil 2001-2012

• 40

40 80 120 1 2 3 4 5 6 7 8 9 10

Chile 2000-2011

• 40

40 80 120 1 2 3 4 5 6 7 8 9 10

Colombia 2002-2013

• 40

40 80 120 1 2 3 4 5 6 7 8 9 10

Costa Rica 2000-2009

• 40

40 80 120 1 2 3 4 5 6 7 8 9 10

Dominican Republic 2000-2012

• 40

40 80 120

Summary of findings for the within country analysis

• Response of LMI to growth:
• Year by year percentage changes in some LMI and all poverty

indicators improved with increases in GDPpc, but with heterogeneity in correlations between countries.

• Response of poverty to employment and earnings changes:
• Year by year percentage change in poverty rates related in the

welfare improving direction with some LMI (unemployment, share

• f salaried employees) and with earnings. Heterogeneous again.
• Changes in earnings across the earnings distribution:
• Most deciles (70%) experienced positive growth in percentage

terms, with positive changes concentrated at the bottom of the distribution.

The 2008 Economic Crisis and Changes in Labor Market Indicators

The Great Recession, labor market indicators, poverty and growth

• Average GDPpc was stagnant in 2000-2003 but then

increased every year after that, except for 2008.

• Crisis milder in LA than in OECD (-1.5% vs -4%).
• Unemployment increased in 2000-2002, then fell every

year except for 2008. Also: fall in share of salaried work.

• Notably, poverty increased in only 5 and fell in 8 out of

the 16 countries during the crisis. Extreme pov. in only 1.

• Average poverty rate did not increase during the crisis.

Countercyclical policies, social protection programs.

• Quicker recovery too: growth again in all LA countries.
• Initial worsening, but relatively quick recovery of LMI.

Some surpassed pre-crisis level at the end of the period.

20 25 30 35 40 45 70 80 90 100 110 120 130 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Poverty 4 dollar-a-day Unemployment, Labor earnings and GDPpc Unemployment Labor Earnings GDPpc Poverty 4 dollar-a-day

The Great Recession and Latin America. Newfound resilience?

The Great Recession and Latin America.

% of LMI not affected/recovered

0% 20% 40% 60% 80% 100% VE UY SV PY PE PA MX HN EC DO CO CL BR BO AR Not affected Total recoveries Partial recoveries Continued worsening

• 2.5
• 2.0
• 1.5
• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 2.5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Poverty GDP Inequality High growth Crisis and Deceleration Stagnation The 1990s

Source: Gasparini, Galiani, Cruces and Acosta 2015, based on SEDLAC (CEDLAS and World Bank) and WDI

What happened next?

Final Remarks

Summary of findings

• Original questions:
• Has economic growth resulted in economic development via

improved labor market conditions in LA in the 2000s?

• Have these improvements halted or been reversed since the

Great Recession of 2008?

• Relationship growth/LMI/poverty/inequality?
• For the region as a whole: real GDP pc grew during the

2000s, all employment and earnings indicators improved, and poverty and inequality fell.

• By-country: real GDP pc grew during the 2000s in all LA

countries, most LMI improved in all countries but one, poverty rates fell in all countries but one.

Summary of findings

• Across countries:
• Faster growth weakly associated with larger LMI

improvements

• Some macro factors associated with changes in LMI.
• Larger improvements in employment and earnings were

associated with larger reductions in poverty.

• Within countries:
• Faster growth related to more rapid LMI improvements and

subsequently faster poverty reduction.

• Heterogeneity in magnitudes and patterns.
• Strongly progressive patterns of changes in labor market

earnings.

Conclusion: New questions

• Is this time different for Latin America?
• Long run: “Structural change”: new pattern of more inclusive

growth mediated by labor markets? Or transient?

• Short run: Resilience to the crisis (macro & LM): new aspect of

the region, or was it a different crisis?

• More on the micro-macro channel: from macro

aggregates to labor markets and income distribution. Aggregate demand? Expenditure? Trade? Etc.

• Differential demand by skills.
• Role of expanded social protection & LM policies?
• Political economy of these processes.
• Which policies can foster these channels and ultimately

facilitate work based inclusive growth.

Augmenting Bourguignon’s Triangle

• Bourguignon 2003:
• Do these results imply that growth has no

significant impact on distribution? Certainly not. They simply mean that there is too much country specificity in the way growth may affect distribution for any generalization to be possible.

• Indeed, case studies… show that distributional

changes in a given country have much to do with the pace and structural features of economic growth in the period under analysis….

• …Mediated through labor markets.

Thank you! Kiitos!