REVIEW ECONOMIC COMMISSION FOR LATIN AMERICA AND THE CARIBBEAN NO119 AUGUST • 2016 Alicia Bárcena Executive Secretary Antonio Prado Deputy Executive Secretary REVIEW ECONOMIC COMMISSION FOR LATIN AMERICA AND THE CARIBBEAN Osvaldo Sunkel Chairman of the Editorial Board Miguel Torres Technical Editor ISSN 0251-2920 The CEPAL Review was founded in 1976, along with the corresponding Spanish version, Revista CEPAL, and it is published three times a year by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), which has its headquarters in Santiago, Chile. The Review, however, has full editorial independence and follows the usual academic procedures and criteria, including the review of articles by independent external referees. The purpose of the Review is to contribute to the discussion of socioeconomic development issues in the region by offering analytical and policy approaches and articles by economists and other social scientists working both within and outside the United Nations. The Review is distributed to universities, research institutes and other international organizations, as well as to individual subscribers. The opinions expressed in the signed articles are those of the authors and do not necessarily reflect the views of ECLAC. The designations employed and the way in which data are presented do not imply the expression of any opinion whatsoever on the part of the secretariat concerning the legal status of any country, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries. 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A RTICLES Purchasing power parities for Latin America and the Caribbean, 2005-2013: methods and results 7 Hernán Epstein and Salvador Marconi Official development assistance, social capital and growth in Latin America 29 Isabel Neira, Maricruz Lacalle-Calderón and Marta Portela Peru, 2002-2012: growth, structural change and formalization 45 Juan Chacaltana Fiscal decentralization and economic growth in Colombia: evidence from regional-level panel data 65 Ignacio Lozano and Juan Manuel Julio The effect of ICTs on academic achievement: the Conectar Igualdad programme in Argentina 83 María Verónica Alderete and María Marta Formichella Brazil: capital goods industry during the 2003-2008 boom and following the global crisis 101 Guilherme Riccioppo Magacho Socioeconomic school segregation in Chile: parental choice and a theoretical counterfactual analysis 123 Humberto Santos and Gregory Elacqua Income inequality in Costa Rica according to the national household income and expenditure surveys of 2004 and 2013 139 Andrés Fernández Aráuz The labour content of Mexican manufactures, 2008 and 2012 155 Gerardo Fujii G., Rosario Cervantes M. and Ana Sofía Fabián R. Tertiarization in Chile: cultural inequality and occupational structure 175 Modesto Gayo, María Luisa Méndez and Berta Teitelboim Guidelines for contributors to the CEPAL Review 195 Explanatory notes The following symbols are used in tables in the Review: … Three dots indicate that data are not available or are not separately reported. (–) A dash indicates that the amount is nil or negligible. A blank space in a table means that the item in question is not applicable. (-) A minus sign indicates a deficit or decrease, unless otherwise specified. (.) A point is used to indicate decimals. (/) A slash indicates a crop year or fiscal year; e.g., 2006/2007. (-) Use of a hyphen between years (e.g., 2006-2007) indicates reference to the complete period considered, including the beginning and end years. The word “tons” means metric tons and the word “dollars” means United States dollars, unless otherwise stated. References to annual rates of growth or variation signify compound annual rates. Individual figures and percentages in tables do not necessarily add up to the corresponding totals because of rounding. Purchasing power parities for Latin America and the Caribbean, 2005-2013: methods and results Hernán Epstein and Salvador Marconi ABSTRACT This work sets out some methodological aspects and gross domestic product (GDP) series for Latin America and the Caribbean for the period 2005-2013, expressed in purchasing power parities (PPP), and points out a number of limitations applying to this sort of exercise. Comparisons are made with series (at current and constant prices) denominated in dollars at market exchange rates, and also with the results of the 2005 round of the International Comparison Programme. A number of hypotheses are advanced to interpret the behaviour of the main economic variables calculated in the study. KEYWORDS Gross domestic product, purchasing power, prices, comparative analysis, Latin America JEL CLASSIFICATION C1, E0, O11 AUTHORS Hernán Epstein is an associate statistician in the Division for Treaty Affairs of the United Nations Office on Drugs and Crime. [email protected] Salvador Marconi is a former staff member of the Economic and Environmental Statistics Unit of the Economic Commission for Latin America and the Caribbean (eclac). [email protected] 8 CEPAL REVIEW 119 • AUGUST 2016 I Introduction Series of purchasing power parities (ppp) and of the main economic variables calculated in the framework components of gross domestic product (gdp) —or at of the investigation. more disaggregated levels— are extremely useful for Unlike an earlier work by the same authors, in which analysing competitiveness, supporting negotiations on trade ppp series (2000-2011) were calculated on the basis of agreements and making economic policy decisions. They the 2005 round of icp, the series presented in this study can also be used in international poverty measurements. are based on the 2011 icp results published by the icp In a recent piece of work, entitled Global absolute Global Office, as well as in more recent national accounts poverty fell by almost half on Tuesday, Dykstra, Kenny data published by the countries of Latin America and and Sandefur (2014) show the substantial changes in the Caribbean for the period 2005-2013 (Epstein and many countries’ poverty estimates based on the results Marconi, 2014). of the 2005 round of the International Comparison Simply put, ppp between two countries (A and B) Programme (icp) and on extrapolations from the results is the ratio between the number of country A’s monetary of the 2011 round. This work shows the importance and units required to buy —in country A— a product of equal the sensitivity of such calculations. quality and in equal quantity as could be bought by one Accordingly, it is important to devote the necessary of country B’s monetary units in country B. Here, B is resources to obtain robust ppp figures through theicp the reference country. rounds, at least under a rolling benchmark scheme Using econometric calculations, these ppps —initially similar to that used by Eurostat and the Organization calculated for staple products— can be calculated for for Economic Cooperation and Development (oecd). groups of products (known as basic headings), and even Meanwhile, in the region we may use estimates which, at the level of gdp and its components. notwithstanding the methodological limitations set forth On the basis of ppp, price differences can be in the following pages, are reported in this work. analysed between countries and spatial comparisons made The literature on the technical aspects of ppp is (geographical dimension), selecting a given country as extremely broad. There is also a long list of publications a reference (usually the United States). on methods of calculation and the particular results ppps are used to measure not only the “real” size of a obtained in icp rounds, both from academia (such as country’s or a region’s economy, but also to obtain more the Penn World Tables) and from international agencies robust indicators of level of economic development (such (World Bank, oecd, among others). By contrast, few as per capita gdp expressed in ppp), and of productivity works generate and analyse regional statistical series and competitiveness, as well as better measurements prepared on the basis of methodologies that complement of poverty. those used to calculate ppp in the years of major statistical Several Latin American countries (Ecuador, El operations (rounds) when prices are surveyed and Salvador and Panama) have adopted dollarization as weights calculated. an exchange-rate regime, which means forgoing some The main objective of this work is to present some degrees of monetary policy freedom. Together with methodological aspects and gdp series for Latin America the calculation of real exchange rates, the updated ppp and the Caribbean for the period 2005-2013, expressed series afford these countries’ economic authorities useful in ppp, as well as some of the limitations of this exercise. indicators of competitiveness. Comparisons are made with the results of the 2005 round Currently, ppps are calculated in the framework of icp and with dollar-denominated series (at current and of an exercise coordinated by the World Bank and constant prices) at market exchange rates. A number of implemented globally through the icp.