Argentina: a decade of currency board. An analysis of growth, employment and income distribution

Abstract

The paper begins by presenting and testing a macroeconomic model for the Argentine economy under the convertibility regime of the nineties. We then present and test a model for the labor market to explain the aggregate behavior of employment, underemployment, and unemployment. An analysis of the ôanatomyö of employment follows with a description of its composition by activity sector and by category of worker. The evolution of average incomes of both the employed and active individuals is examined, to focus later on their behavior for different labor categories: by type of occupation, gender, and educational level. We next focus on income distribution. Gini and Theil indexes are estimated for households, as well as for both the employed workers and the active population. The Theil index is decomposed to capture the separate impact of three different factors on income distribution inequality among jobholders. Firstly, the impact of changes in inequality within groups; secondly, the effect of changes between groups, and finally, the impact of the evolution of the structure of employment by category. A wage function is also estimated to determine the reaction of real incomes to changes in the unemployment rate. We then employ a methodology of microsimulations based on microdata from a household survey to assess the separate effect of several variables (like the unemployment rate, the structure of employment, the incomes by category, and the educational levels of the workforce) on the Gini index of income inequality. Finally, the analysis of income distribution is completed by examining the evolution of poverty and indigence in the nineties