This paper examines the experience in Argentina and Uruguay with EU data adequacy decisions. Building on existing evidence showing that data adequacy can boost bilateral trade in digitally deliverable services, the analysis shows that both countries recognized its trade-facilitating potential, in addition to benefits from data protection from a rights perspective. In addition, their experience with regulatory reform, based on the objective of obtaining an adequacy decision, has supported ongoing efforts more broadly in the region to develop data protection standards. There have been significant spillovers in a regulatory sense, as well as institutional adaptations on a regional level through the development of EU-based and non-EU-based adequacy clubs. A quantitative analysis using a structural gravity model that incorporates the latest developments in the causal analysis literature supports these claims. It shows that the effect of data adequacy on bilateral trade builds over time, potentially taking five years or more to fully develop. In Argentina, adequacy led to an increase of around 28 percent in bilateral exports of digitally deliverable services with other adequate countries. In Uruguay, the effect was smaller but still substantial, at 11 percent.
This paper examines the motives, constraints, and sequencing behind Argentina's 2017 tax reform, drawing on the authors' direct involvement in its design and implementation. We document how a large inherited fiscal imbalance, a disinflation program that mechanically raised real pension spending under the pre-existing indexation rule, minority status in Congress, and limited administrative capacity jointly narrowed the feasible policy set. Within those constraints, the reform aimed to be near-revenue-neutral while rebalancing the system toward investment and employment: phasing down corporate rates with dividend taxation and inflation adjustment, reducing the labor wedge at the bottom via a per-worker deduction, rationalizing VAT and excises (including carbon and health-motivated taxes), and coordinating with provinces to cap and de-cascade the turnover tax (ISIB) through a Fiscal Consensus. We trace how coalition politics and sectoral vetoes reshaped the package, why forward guidance and escape clauses were embedded ex ante, and how the 2018 sudden stop, followed by policy reversals, limited the reform's realized growth dividend. We draw four lessons: credibility is a fiscal instrument; provincial coordination beats technocratic perfection; discretionary levers invite rent-seeking; and targeting informality and compliance margins yields higher returns than blunt rate changes. The analysis offers a pragmatic template for tax reform under macroeconomic fragility, federal fragmentation, and state-capacity constraints.
We evaluate a center-based public early childhood education (ECE) program in Panama. Utilizing the randomized allocation of slots for children living in the neighborhoods of 16 centers, we measure the impacts of ECE on child development, hours of care, family labor supply and earnings, home environment, and expenditures on children's items. We find an increase in center-based care that substitutes informal care. Children exposed to ECE experience a substantive improvement in language development. However, we do not find impacts on outcomes related to family labor supply and earnings, parental time use, or parental investments.
This study advances a quantitative political economy analysis of development banking within federative systems, focusing on Brazil's National Bank for Economic and Social Development (BNDES). Moving beyond traditional fiscal transfer models, we investigate the mechanisms through which federal credit operations are allocated to municipal governments, emphasizing the political incentives that influence these disbursements. We adapt the Strategic Partisan Transfers Hypothesis (SPTH) to the development banking context, formalizing the interaction between federal, state, and local political alignments within Brazil's regulatory structure. Using an extensive panel dataset and a regression discontinuity design (RDD), we provide empirical evidence that double-aligned municipalities-those aligned with the president's party but governed by an opposition-aligned state-have a higher probability of receiving federal loans. The RDD, by leveraging quasi-random variation in close mayoral elections, addresses the limitations of panel models and corrects their tendency to underestimate the true causal effect of mayor-president alignment, particularly in the absence of state-level alignment. Our empirical strategy incorporates detailed controls reflecting the institutional decision-making processes governing municipal access to credit, ensuring that our findings account for both political and bureaucratic determinants of development finance distribution.
This paper argues that Colombia's taxation problems reflect a deeper political economy equilibrium shaped by extractive institutions, extreme inequality, and cultural norms that favor individual solutions over collective ones. Historical legacies produced a weak and often distrusted state, which in turn fostered social norms that legitimize rule-bending, low tax morale, and clientelistic exchanges. These institutional and cultural arrangements proved mutually reinforcing for decades. Since the 1990s, however, political openness expanded inclusion and triggered greater demand for public goods. The result has been a more responsive state, yet one constrained by persistent political inequality, clientelism, low trust, and reluctance to fund public spending through broad taxation. The mismatch between rising expectations and limited fiscal capacity has now produced a fragile and increasingly untenable fiscal position. Colombia faces a critical choice: renew its fiscal pact on new, more consensual terms or risk recurring crises and democratic erosion as an expensive but ineffective state structure constrains long-run development.
In this article, we evaluate the impact of a targeted fee subsidy program that reduced the registration cost of the Caribbean Secondary Education Certificate (CSEC) Spanish exam—a standardized regional assessment for high school leavers seeking to demonstrate language proficiency. The subsidy covered the oral exam fee, which is about 40% of the total subject cost, effectively reducing the financial barrier to choosing Spanish. As a result, the Spanish exam became cost-comparable to subjects with only written exams (e.g., Mathematics) and less expensive than those with both written and non-written assessments (e.g., French). By combining inverse probability weighting with the difference-in-differences design and using administrative student-level data, we examine the impact of the program on Spanish exam registration and student performance. We find that the program increased registration by 0.05 SD. However, this expanded access likely imposed unintended costs, as treated schools experienced higher absenteeism (0.10 SD) and an increase in the number of students failing (0.11 SD) the Spanish exam. These adverse effects were most pronounced among female students and those attending urban, low-, and high-performing high schools. We also document negative spillovers on subjects that are close substitutes, but find no effects on core subjects. JEL Classification Codes: I22; L31; N36; Z13
Most barriers to trade in services stem from regulatory measures. This study assesses the degree of regulatory restrictiveness affecting trade in services across Latin America and the Caribbean and the degree of disparities in these measures. It then analyzes the impact of both the level of restrictions and the extent of regulatory divergence on service trade flows. Latin America emerges as a region with a mixed level of service trade restrictions and with a significant level of regulatory disparity across the individual countries. The econometric results indicate that higher regulatory barriers and greater regulatory disparities are both negatively associated with trade in services. The findings suggest that countries in the region could enhance service trade by reducing regulatory restrictions and harmonizing regulatory frameworks.
This paper investigates poverty dynamics in Brazil, highlighting how the frequency and patterns of movements into and out of poverty shape our understanding of stratification, social mobility, and the design of public policies. Using PNADC microdata from 2015 to 2020, we develop and implement an algorithm (Pynad) that links individuals and households across survey waves to construct panels. We then compare results across three measures of intertemporal poverty. The findings show that the choice of measure substantially affects estimated poverty levels. Transitory poverty contributes markedly to overall poverty in nearly all combinations of lines and measures, although its relative weight declines as the poverty line rises. These results suggest that, while poverty monitoring may rely on cross-sectional data, the design of public policies must take poverty dynamics into account, as the size of the target population varies considerably across approaches. Finally, we discuss the implications of these findings for targeted income transfer programs.
This paper studies the fiscal costs of unemployment insurance (UI). It surveys alternative methods used in the literature to estimate the impact of UI on government budgets and compares them within a unified framework that incorporates behavioral responses, wage effects, and fiscal externalities. These methods are then applied to administrative data from Argentina. Combined with estimates of the consumption drop following unemployment, the paper evaluates the Marginal Value of Public Funds (MVPF) for UI and finds that, while results vary depending on the treatment of fiscal externalities, MVPF is generally above one—indicating that the social benefits of marginal increases in UI outweigh their fiscal costs. JEL Classification Codes: I38; J65; D61; C41
Argentina has struggled with persistently high inflation for the past two decades, surpassing 200% in 2023. While there is a broad consensus on the need for fiscal consolidation to curb inflation in the country, the path to disinflation is fraught with challenges. The objective of this paper is to provide an analysis of the frictions that arise in the process of reducing inflation through fiscal consolidation in Argentina. To accomplish this, we embed Argentina's unique institutional features-particularly those related to fiscal spending and inflation dynamics-into an otherwise standard macroeconomic framework, drawing on the logic of Sargent and Wallace (1981), which links fiscal deficits to inflation. We then use the model to analyze the potential short-and long-term inflationary consequences of different strategies for closing fiscal imbalances.
Several studies have investigated the fiscal sustainability of Latin American and Caribbean (LAC) countries. However, country-specific analyses fail to account for common factors and cross-dependence, while a single-panel approach is inadequate due to the region's economic diversity. Building on this, recent studies have proposed grouping LAC countries based on income, financial and trade integration, or export categories. Nevertheless, as neither of these criteria are primary determinants of a country's fiscal situation, some groups were too heterogeneous with regard to fiscal issues, which led to weak findings. The present work employs an econometric cluster analysis to group LAC countries for the purposes of examining fiscal sustainability. This technique allows us to account for indicators of compliance with fiscal rules, which are supposed to be closely related to the proposed investigation. The groups we obtained led to stronger and more conclusive findings on the fiscal sustainability of LAC countries than previous studies, as supported by hypothesis tests. Our approach also made it possible to take the most advantage of the discriminative power of these indicators, as well as to identify which of them played an essential role in distinguishing between sustainable and unsustainable clusters of countries-information that can be of great value to policymakers.
This paper assesses the vulnerability of Latin American and Caribbean (LAC) economies to external crises. It shows that while the average LAC economy has made significant strides to reduce vulnerability to crises to its historical minimum, there is still considerable room for improvement, compared to both advanced and non-advanced economies. When compared to other non-advanced economies, the average LAC economy displays a higher level of vulnerability, mainly due to slower improvements in portfolio composition and less accumulation of international reserves since 2000. Advanced economies have lower exposure to external risk factors and a structural resilience advantage to prevent exposure from leading to crises. This analysis highlights the need for LAC economies to focus more on enhancing their risk-mitigating strategies concerning the composition of their external portfolios and reserves accumulation, which will provide a stronger buffer against external shocks and promote overall economic resilience.
Does the political regime experienced during youth have long-lasting effects on political beliefs and preferences? I exploit time and country variation in political regimes in Latin America using data from the 1995 to 2010 Latinobarometer and find that exposure to non-democratic regimes during youth reduces subsequent preference for democracy, satisfaction with democracy, and confidence in institutions. These results suggest exposure to dictatorships during formative years permanently eroded democratic values. Exposure to non-democratic regimes also affects self-location in an ideology scale, reducing identification with the Right and increasing identification with the Left; which suggests dictatorships also shaped the political orientation of voters. JEL Classification Codes: D72; P16; Z13
This paper investigates the potential impact of extended school days in reducing teenage fertility. We study the Jornada Escolar Extendida program, which doubled the school-day length from 4 to 8 hours in the Dominican Republic, and exploit the geographic and time variation induced by its gradual implementation. We find evidence that a higher exposure to JEE in the municipality, measured as the percentage of secondary students covered by the program, reduces the incidence of teenage pregnancies, and that the effect is stronger after the program has reached at least half of secondary students in the municipality. The estimates are robust to various specifications and alternative checks. These results suggest that extended school-day policies can have spillover effects regarding teenagers fertility choices.
This study investigates the impact of property informality on rural land prices in Colombia. It utilizes data for 16 land size categories for a fifth of Colombia’s municipalities. It employs the Gaussian copula approach to overcome endogeneity issues. The main finding is that an exogenous variation of property informality significantly reduces rural land prices for properties larger than three hectares, but not for smaller ones. Property informality is strongly endogenous to land prices (inversely for small properties but directly for larger properties). Our results indicate that exogenously reducing property informality of large landholdings by one standard deviation could increase their prices by 24 percent, equivalent to 44 percent of the municipalities’ GDP. These findings suggest that addressing property informality could substantially enhance the economic value of rural lands above certain size threshold, which would strengthen local tax revenues and improve rural economic conditions. Updating of cadaster values of large lands, which is often opposed by landholders, is crucial to unlock the potential of land titling. JEL Classification Codes: K25: Real Estate Law; O17: Formal and Informal Sectors; Q15: Land Ownership and Tenure
How much correspondence is there between the income measured in microeconomic inequality studies and the income measured in macroeconomic growth statistics? The presence of significant gaps would question both our assessment of the relevance of economic growth across the population and our confidence in mainstream distributional statistics as accurate representations of income flows in an economy. In this paper, we document large gaps between income estimates from household surveys, administrative tax records and national accounts for ten Latin American countries, a region that experienced a relatively unique combination of strong growth and falling income inequality according to official statistics since the early twenty-first century. We find that surveys only account for around half of the macroeconomic income, and thus growth, of these countries over the past twenty years. We estimate that less than half of this gap is due to conceptual differences, the remainder coming from growing measurement issues, which mainly concern capital incomes. Comparing top tails of administrative data and surveys, we find diverging average incomes, especially for non-wage incomes, and differing shapes. We discuss the implications of such discrepancies for our understanding of inequality and growth. JEL Classification Codes: D3; E01; N36; O54
Employment losses in 2020 were larger in Latin America than in any other region. We show that the prevalence of informality, micro-entrepreneurship, and jobs-not-fit for remote work in nonessential sectors accounts for this outcome in both simulations and ex post data. When considering lockdowns and demand shocks, amplified by input–output linkages and a Keynesian multiplier, these distinctive characteristics imply that the risk of employment losses in a typical Latin American economy is at least five times higher than that of a counterfactual United States. Our framework explains over 70 percent of the observed cross-sector variation in work hours in the second quarter of 2020. Early blanket lockdowns, such as those implemented in part of Latin America, affect informality differently and outweigh other factors. JEL Classification Codes: F; O47; O20; O17
Approximately one in three people in Latin America and the Caribbean live in poverty, and one in seven in extreme poverty. This paper provides an overview of who the poor are and how they live, using 18 recent household surveys from the region. It examines (1) how many people are poor, (2) how the poor are distributed geographically, (3) how poverty affects specific groups, (4) how much of the poverty in the region is chronic versus transitory, and (5) how poverty numbers have changed over time. Second, it identifies how the poor live. Specifically, it discusses (6) the living arrangements of the poor, (7) their assets, (8) how they earn their incomes, (9) how they access human capital services, and (10) their access to social safety nets. This descriptive analysis may be useful for targeting efforts and for generating hypotheses for poverty reduction that can be tested causally. JEL Classification Codes: I25; J20; O10; O12; O15; O18
Mexico has one of the highest self-employment rates among OECD (Organization for Economic Cooperation and Development) countries. In this paper, I study the relationship between business ownership and migration from Mexico to the US. Using a large panel data set, I found that the self-employed in Mexico have a substantially lower probability of moving north, especially illegally. Furthermore, this inverse relationship holds for rural and urban areas, communities with low and high migration rates, individuals interviewed recently and a long time ago, people working in all industries, sectors demanding different skill sets, and economic conditions in both countries. The findings highlight the role of self-employment in a developing country in the likelihood of emigration in the context of an increase in arrivals to the US during the Biden administration.
