Pablo Sanguinetti

The impact of trade liberalization on wage inequality: evidence from Argentina

Wage inequality in Argentina greatly increased during the nineties. During this period, a rapid and deep process of trade liberalization was implemented. In this paper we study whether trade liberalization played any role in shaping the Argentine wage structure during the nineties. Specifically, we test whether those sectors where import penetration deepened are also the sectors where, ceteris paribus, a higher increase in wage inequality is observed. Even though we find some evidence that supports this hypothesis, as has been found for some developed economies, trade deepening can only explain a relatively small proportion of the observed rise in wage inequality.

Politics, institutions, and fiscal performance in a federal system: an analysis of the Argentine provinces

Abstract We posit that the fiscal behavior of Argentine provinces is determined by a common pool game at two levels: within each province, and across political units. In the latter game, the national government has a greater incentive than the provincial governments to internalize the negative externality of fiscal imprudence. Given relatively strong party discipline, the president is able to induce governors from his party to internalize a portion of the externality to a greater extent than opposition governors. In Argentina “party matters” for fiscal behavior, but it does so for reasons different from those identified in studies of OECD countries.

Decentralization, Fiscal Discipline in Sub-National Governments and the Bailout Problem: The Case of Argentina

This paper examines the determinants of fiscal performance of sub-national governments in Argentina. This will be done through analysis and examination of the overall regime of incentives, through an analysis of salient episodes of `bailout` and through cross-sectional empirical analysis. The bailout episodes to be analyzed will include mostly those that occurred in the relationship between the national and provincial governments. Of primary interest will be the process that caused the crises and how both the provinces and the federal government reacted, with an emphasis on the incentives and constraints each faced. The paper will also try to explain the actual form that the bailout takes. The empirical analysis will emphasize those determinants of bailout related to the institutional design of intergovernmental fiscal institutions. Thus, the study will have direct implications regarding the strengths and weaknesses of the current institutional framework in generating sound fiscal behavior by the different levels of government.

Learning about Trends: Spending and Credit Fluctuations in Open Economies

This chapter is inspired by an old theme. The view that misperceptions about the future outcomes of current plans can generate business fluctuations has a long tradition in the literature. Theories that allow for the existence of intertemporal co-ordination failures can have different specific features (see Leijonhufvud (1968, 1981)). They have in common the argument that agents decide on the basis of a less than perfect knowledge of the ‘laws of motion’ of the environment, and that the consequent difficulties in forming expectations can have noticeable macroeconomic consequences. In particular, a class of cyclical ups and downs may emerge when agents cannot forecast accurately the characteristics of the economy’s growth path.

Fiscal inconsistencies and high inflation

Abstract This paper presents a simple model of steady-state inflationary financing. The discrepancy between the target level of spending and a (fixed) taxing capacity indicates the degree of fiscal pressures; this variable need not be monotonically related to the measured deficit, since actual expenditures are endogenous. Large fiscal inconsistencies generate unique steady states located on the ‘bad’ side of the inflation-tax Laffer curve. There, high inflation may coexist with low observed deficits, and the revenue constraint results in ‘repressed spending’. Such situations correspond qualitatively with the loss of control over fiscal policies typical of high inflation economies.

Trade Liberalization, Macroeconomic Fluctuations, and Contingent Protection in Latin America

The main purpose of this paper is to analyze the main determinants of antidumping actions in Latin America. From a policy perspective, it would be interesting to know whether the application of trade remedy instruments was associated with episodes of a depressed level of economic activity or real exchange rate appreciations or both. These developments favor the finding of industry injury and dumping practices, making the case for antidumping more justifiable. An alternative hypothesis is that antidumping measures have been erected simply as replacements for formal tariff protection so that there should be a negative relationship between antidumping measures and tariff levels. Moreover, antidumping actions may be associated less with macroeconomic variables affecting injury and dumping and more with political economy-type variables such as industry concentration. The main purpose of this study is to investigate these hypotheses employing a very detailed database for the three main antidumping countries in Latin America: Argentina, Brazil, and Mexico. We find support for the hypothesis that in these countries contingent protection has been employed to protect domestic industries in times of macroeconomic hardship. In particular, real exchange rate appreciations and sluggish GDP growth is associated with increasing antidumping actions. The estimated quantitative impact seems quite significant: on average a real appreciation of 25 percent raises expected antidumping initiations by about 20 percent. Also a 4 percentage point decline in GDP raises expected antidumping activity by 27 percent. Besides these macrodeterminants, we also investigate whether antidumping actions were established to replace protection given by regular tariffs or whether they were affected by political economy variables such as industry concentration We find some evidence consistent with the first proposition but not with the second.

Public-Private Co-operation for Gas Provision in Poor Neighbourhoods of Buenos Aires: Impact on Housing Improvements and Health

This study examines the programme Redes Solidarias, a public-private initiative that connected to natural pipelined gas 4,000 households in the Great Buenos Aires Area during 2005. The main features of the institutional framework are described and the main results of an impact estimation analysis are reported. The mechanism of selection of neighbourhoods for the connection represents a ‘natural experiment’, which allows the estimation of the causal effects of the programme on several indicators, including housing improvements, health and happiness related variables. We perform this analysis using data from two surveys we collected on the neighbourhoods in 2006 and 2007. The programme was found to generate improvements on dwelling walls, and the …

Optimal Taxes and Penalties When the Government Cannot Commit to Its Audit Policy

We examine the problem of a utilitarian government that sets taxes and fines for evaders but cannot commit to any enforcement policy. Given the tax law, the government and taxpayers —some of whom are honest— play a report-audit game that, depending on taxes, fines and audit costs, generates either full evasion and no audits, or partial evasion and random auditing. Anticipating both possibilities, we characterize the optimal tax law. We show that it may be optimal for the government not to fine evaders as a way to commit not to audit. Moreover, social welfare is nonmonotonic in the audit cost.