The welfare effect of the new wave of protectionism: The case of Argentina (original) (raw)

A Case Study on Trade Liberalization: Argentina in the 1990s

SSRN Electronic Journal, 2000

The link between trade and wages is embodied in the Stolper-Samuelson theorem and its generalizations. The Stolper-Samuelson logic is that trade affects relative factor rewards by changing relative prices. Since in Argentina non-skilled labor was neither as abundant a factor as land nor as scarce as capital it could not be expected to be the big winner in the opening-up process of the Argentine economy nor could it be expected to be a big loser. So, the huge amount of unemployment experienced by the Argentine economy in the 1990s as well as the widening wage gap between skilled and unskilled labor came as a complete surprise. This paper gives some reasons for this unexpected result. In Argentina, trade liberalization meant mainly import liberalization by lowering tariffs that protected labor-intensive industries like textiles. So, the short-run effect was massive destruction of jobs in non-skilled labor-intensive activities. The opening up of the economy significantly lowered the price of capital goods. This encouraged a drastic process of capital for labor substitution as well as promoting an increase in the demand for skilled labor. In those industries in which the import penetration increased the most, the wage inequality widened relatively more between unskilled and skilled workers. The reasons for the persistence of unemployment are discussed, the impact of the increasing unemployment and growing inequality in wage distribution on income distribution is analyzed, the alternatives of shock therapy vs. gradualism are discussed and finally some general conclusions are drawn from the analysis of the Argentine case.

Trade Reforms and Industry Wage Premium: Evidence from Argentina

Research Papers in Economics, 2017

This paper studies the impact of Argentina trade liberalization during the nineties on the industry wage premium structure. We find that accounting for unobserved timeinvariant industry characteristics is crucial. When we do not control for industry fixed effects, we find that workers in protected sectors receive lower wages. However, introducing industry fixed effects reverses the results; tariff protection creates sector specific rents that are in part translated to workers in terms of greater wages. Since Argentina’s tariff structure during this period protected relatively more sectors employing higher proportions of skilled workers, nineties trade policy may have had an adverse effect on Argentina’s income distribution

The Distortionary Effects of Tariff Exemptions in Argentina

Social Science Research Network, 1990

Argentina suffers from the indiscriminie use of tariff exemptionsexemptions granted to an industry no matter what its export performance, or exemptions granted only for specific inputs (often capital goods). The Policy. Resarch. and Extenal Affais C-ntplex disuibtus PRE Working Papem to diamte hefindings of work in pn nd to acoage the change of ideas among Bank staff and all otes intetd in develomnemt issue. The= papen cuny the nanes of the authors,reflect only heir views, and should oeused and cited accordingly. The findings, inuepatios, and coclusion ae the authors' own. They shold not be attributed to the World Bank, its Board of Directors. its management. or any of its member coaies.

Trade liberalization and adjustment in Argentina

The Journal of International Trade & Economic Development, 2003

This paper looks at trade liberalization attempts in Argentina since 1970 with particular attention to the 1991-98 period, estimates the size of the adjustments required by the changes in the trade regimes, and looks at the degree of adjustment attained as manifested by the real effective exchange rate.

Trade liberalisation and wage premium in Argentina Further evidence from the 1990s

2000

Latin American countries have been implementing policies directed to the removal of barriers on international trade. Among the reasons for following this strategy were the expectations it would help to reduce income inequality. The empirical evidence available is far from being conclusive. In the case of Argentina, the country started at the end of 1988 a unilateral reduction of imports

Export Taxes, World Prices, and Poverty in Argentina: A Dynamic CGE-Microsimulation Analysis

SSRN Electronic Journal, 2000

In this paper we implement a sequential dynamic computable general equilibrium model combined with microsimulations to assess (1) the short-and long-run economic impacts of a gradual reduction in the export tax that was introduced during the economic crisis that hit Argentina at the end of 2001, and (2) the impact of a decrease in the world prices of food products, one of the country's main export product. Our results show that the elimination of the export tax would have different long run effects depending on the fiscal instrument that is used by the government to compensate for the loss in tax revenue. On the one hand, when the government budget is equilibrated by an increased deficit, the average annual growth rate for 2008-2015 is lower than in the baseline scenario. On the other hand, when the government budget is equilibrated by an increased direct tax rate, there is a long-run positive effect on growth. In any case, the employment level is lower and the price of food items is higher. Therefore, the poverty headcount ratio increases. As expected, a reduction in the world price of food items (i.e., a worsening in Argentina's terms of trade) would impact negatively on the country's GDP growth rate and poverty, particularly in the rural areas. Laborde, Véronique Robichaud, Bernard Decaluwé, and an anonymous referee for helpful comments and suggestions. The usual disclaimer applies. Therefore, we consider relevant to ask about the impact of (1) gradually eliminating the export tax, and (2) a decrease in the world prices of food, which is Argentina's main export product and the main source of export tax revenue.

Trade Liberalization and Wage Premium in Argentina: The Role of Trade Factor Intensity

The Developing Economies, 2012

During the 1990s, several Latin American countries implemented policies directed to the removal of barriers on international trade. However, there is a perception that reforms, especially trade liberalization, failed to deliver on their promises, easing the way for policies aimed at reversing some of them. Following Wood's hypothesis, we allow for the effects of liberalization to vary, depending on the skill intensity of production. The evidence confirms that the role of trade liberalization has been relatively small, but controlling for the presence of endogeneity gives larger estimates. Contrary to previous evidence, the wage premium of skilled workers was more sensitive to the increase of skill-intensive exports than to that of unskilled-intensive imports.

Trade Reform and Household Welfare: The Case of Mexico

Policy Research Working Papers, 1999

We use a two step computationally simple procedure to analyze the effects of Mexico's potential unilateral tariff liberalization. First, we use an already available CGE model provided by the Global Trade Analysis Project (GTAP) as the new price generator. Second, we apply the price changes to Mexican household data in order to assess the effects of the policy simulation on poverty and income distribution. Although Mexico already widely liberalized most of its imports by the mid 90's, one salient feature is its membership in the North American Free Trade Agreement (NAFTA) with Canada and United States. By choosing GTAP as the price generator, we are able to model the differential tariff structure quite appropriately (almost zero for NAFTA members and higher tariffs for non-members). Even starting with a low level of tariff protection, simulation results show that the impact of tariff reform on welfare will be positive in general for all expenditure deciles. We find that, when we assume non-homothetic individual preferences, trade liberalization benefits people in the poorer deciles more than those in the richer ones.