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Income Distribution in Argentina, 1974-2000

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Income Distribution in Argentina, 1974-2000 CEPAL REVIEWCEPAL REVIEW78 • DECEMBER 78 2002 53 Income distribution in Argentina, 1974-2000 Oscar Altimir ECLAC, United Nations, Over the last quarter-century, the distribution of income in [email protected] Argentina has deteriorated steadily. This article utilizes Luis Beccaria microsimulation analysis to decompose the impact that Universidad Nacional labour changes have had on the distribution of family de General Sarmiento, Buenos Aires, Argentina, income. In the 1970s, the deterioration was due to real [email protected] reduction and relative dispersion of wages; in the1980s, it Martín González Rozada was linked to growing unemployment resulting from Universidad Torcuato Di Tella, successive crises; in the1990s, under the new economic Buenos Aires, Argentina, [email protected] order, the deterioration continued as a result of the unemployment generated by the restructuring of production and the increase in labour force participation, coupled, in the last phase, with greater inequality in wage levels. The article concludes that the new economic model involves, beyond currency appreciation and the ultimate collapse of the macroeconomic regime, a lower employment elasticity of growth –thereby generating more structural unemployment– and a larger wage gap between workers at different skill levels. INCOME DISTRIBUTION IN ARGENTINA, 1974-2000 •DECEMBER OSCAR AL 2002TIMIR, LUIS BECCARIA AND MARTIN GONZALEZ ROZADA 54 CEPAL REVIEW 78 • DECEMBER 2002 I The evolution of income distribution Dynamic analysis of income distribution is highly in the peak years of each period in which a particular conditioned by the availability of microdata from macroeconomic regime and policy prevailed; these comparable surveys. In the case of Argentina, such were the years in which the level of economic activity analysis is limited by the availability of data from the reached a relative maximum and, therefore, the Permanent Household Survey (Encuesta Permanente economy was closest to its productive frontier4 de Hogares (EPH)). For 1974 and for the years since (table 1). The reason for selecting periods in this 1980 there are data for Greater Buenos Aires, but only manner, in addition to considerations relating to the after 1990 did comparable data become available for availability of data, was to reduce the influence of ten urban agglomerations in the country’s interior.1 cyclical disturbances on the determination of However, it is possible to take a longer-term distributive results in order to identify as clearly as retrospective view, looking only at the probable possible the trends and structural changes that have evolution of inequality, based on measurements derived shaped income distribution in this quarter-century. from various sources –and therefore not strictly If only the years selected according to the stated comparable– prior to 1974. This has been done criterion are considered, a steady worsening trend in elsewhere (Altimir, 1986; Altimir and Beccaria, 2000a; the distribution of household income (and therefore Altimir and Beccaria, 2001), and the results indicate well-being) throughout the quarter-century is noted, that: i) between 1953 and 1961, with a yearly per capita resulting in an exacerbation of inequality as evidenced growth rate of over 2%, inequality among households by the rise in the Gini coefficient from 0.36 in 1974 to at the national level appears to have increased by only 0.51 in 2000 (figure 1). Moreover, this trend was 5% as measured by the Gini coefficient, although the compounded by temporary deteriorations during increase among non-farming households was 10%; and periods of crisis: the hyperinflation of the late 1980s, ii) inequality in Greater Buenos Aires (and, presumably, the “tequila episode” and the most recent recession, in all urban areas) seems to have remained unchanged which continues today. During the period 1991/1993, throughout the 1960s and the early 1970s up to 1974.2 in contrast, the level of inequality was below the Our analysis of the evolution of income distribution indicated trend. encompasses the period from 1974 to 2000 and is based However, income distribution among employed on data from the EPH.3 It compares income distribution individuals (which is more reflective of wages generated in the productive apparatus) evolved somewhat differently: after worsening in 1974/1980 –even more We are grateful for the comments of José Antonio Ocampo and sharply than income distribution among households– Juan V. Sourrouille, who, however, bear no responsibility for the the trend (marked in our interpretation by distributive final content of this article. situations closest to the structural distribution) remained 1 The twenty-eight urban agglomerations now covered by the EPH 5 have been added gradually over the years by the National Institute relatively stable until 1994 and then rose again, with of Statistics and Censuses (INDEC), and not all of them have been the Gini coefficient increasing 3% by 1997. included every year. 2 However, if the data from the surveys are adjusted for the effect connection, see Altimir (1986) and Altimir and Beccaria (2000a). of underreporting of income, the concentration may have tended It is assumed, however, that the underestimation and omissions to increase moderately between 1970 and 1974/1975 (Altimir, have not changed significantly, meaning that they have not increased 1986). As the original survey data show a virtually constant or decreased the relative difference between measured and actual concentration between 1970 and 1975, it can be concluded that inequality. despite the notable growth in real wages in the latter year (as seen 4 This was not the case, however, in 1990, which was chosen because in figure 4 below), income distribution in that same year (in which it was the last year prior to the change of regime, nor was it the economic activity increased markedly) did not differ greatly from case in 2000, during which the recession that had begun in 1998 that of earlier years. continued; however, it is the last year for which data were available. 3 This does not mean that we have overlooked the possible 5 The 3.8% decrease, between 1980 and 1986, in the value of the underestimation and omissions of income in the EPH or the effect Gini coefficient of this distribution is statistically significant at 95%, that they may have had on the concentration of income; in that based on the confidence intervals estimated by a bootstrapping INCOME DISTRIBUTION IN ARGENTINA, 1974-2000 • OSCAR ALTIMIR, LUIS BECCARIA AND MARTIN GONZALEZ ROZADA CEPAL REVIEW 78 • DECEMBER 2002 55 TABLE 1 Argentina: macroeconomic framework for the observations of income distribution Macroeconomic Date of Real per capita GDP level Urban Urban Monthly Real wage Real periods observation mean income (1980=100) employment unemployment inflation exchange rate of households, Total Non-farm (1980=100) (%) (%) (1980 = 100) Greater Buenos Aires 1973-1975 Populist stablilization III 1974 110.1 90.0 89.2 92.8 3.4 3.0 118.5 125.3 1976-1980 Orthodox stabilization with liberalization III 1980 100.0 101.8 101.4 100.0 2.5 4.2 100.0 100.0 1981-1984 Chaotic adjustment and return to populism 1985-1986 Transitory stabilization III 1986 91.7 99.7 98.7 108.5 5.2 7.6 92.6 268.2 1987-1990 Slide to hyperinflation III 1990 62.8 91.2 97.4 114.8 6.2 13.9 62.9 168.7 1991-2000 Stabilization III 1991 72.7 100.5 99.4 118.8 6.0 1.9 70.0 124.5 and new III 1994 82.4 126.9 126.8 120.4 12.2 0.6 81.0 101.9 economic III 1997 81.0 141.5 142.1 129.1 13.7 0.3 75.4 105.1 regime III 2000 81.2 139.9 140.2 14.7 0.1 78.4 113.3 Source: Developed by the authors on the basis of data from ECLAC and the EPH. FIGURE 1 Argentina: income distribution among households and individual income earners, 1974–2000 (Gini coefficients) 0.55 Total per capita income of households Total personal income of employed individualsincome earners 0.50 0.45 Gini coefficients 0.40 Crisis Reforms Reforms 0.35 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Greater Buenos Aires Interior Source: Developed by the authors on the basis of data from the EPH. INCOME DISTRIBUTION IN ARGENTINA, 1974-2000 • OSCAR ALTIMIR, LUIS BECCARIA AND MARTIN GONZALEZ ROZADA 56 CEPAL REVIEW 78 • DECEMBER 2002 Subsequently, with the economy already in recession, The evolution of income inequality in the cities of inequality oscillated around a rising trend, and by 2000 the interior in the 1990s did not differ greatly from the the Gini coefficient was 4.7% higher than in 1997, the pattern observed in Greater Buenos Aires, especially last “normal” year from the perspective of economic in the years for which the trend was analysed,6 during activity (figure 1). which the degree of concentration of personal income The contrast between the evolution of income in the ten cities studied7 was very similar to that of the distribution among households and employed Buenos Aires metropolitan area.8 The inequality of individuals has been determined –as will be revealed family income in the interior also showed a similar in the analysis that follows– by changes in labour- pattern –though at lower Gini coefficient levels– to that market participation and unemployment. The influence observed in the distribution among metropolitan of these two factors, coupled with that of the structure households, except that among households in the other of wages, on household income distribution is analysed cities the greatest worsening occurred in 1991, rather by means of a microsimulation exercise.
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