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FDI and Inequality in Latin American Middle-Income Economies
Unformatted Document Text:  10 GDP per capita Growth (data from WDI 2007) is used as a measure for overall economic development. An increment of GDP per capita Growth should have an incremental effect on the employment level. To capture the degree of openness of the economy I use exports and imports as a percentage of the gross domestic product (WDI 2007). I expect that the more open the economy is, the less protection domestic firms have and, as a consequence, given the position of Latin American countries in the global market as mainly exporters of raw materials and laggards in terms of both industrial and service sectors, the employment level would experience a reduction in both manufacturing industry and wholesale trade. This variable is also included with a one year lag because employment adjustment is not instantaneous. Inflation, measured as the percentage change in consumer prices, is expected to reduce the employment level because of its negative effect on consumption and therefore on the demand for labour. As hyperinflation was controlled in all the seven countries by 1994, I do not expect the effect to be significant. Net enrollment on Secondary education (WDI 2007) is a measure of the spread of education in the population. The improvement of human capital is a positive factor for the expansion of labor demand. Furthermore, it is a reasonable proxy of the availability of skilled population, a factor that is relevant for high-tech FDI allocation. I expect this variable to be positively related to the employment level, especially for wholesale trade. A drawback of the models is the lack of a measure on informality. Time series data about informality for the region is scarce and, when available, missing values constitutes a serious and recurrent problem. 13 13 PREALC data of informality has great variation among the various estimates of informality in Latin American economies. This is partially due to whether the estimate is based upon urban informality only or urban combined with rural informality (or the modern agricultural sector) and whether the percentage is estimated for the urban, total, or non-agricultural economically active population. PREALC data is available in: Mercado de Trabajo en Cifras: 1950-1980. Santiago: PREALC; Urbanización y Sector Informal en América Latina: 1960-1980. Santiago: PREALC. Other sources are: Portes, A. 1995. En Torno

Authors: Bogliaccini, Juan.
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background image
10
GDP per capita Growth (data from WDI 2007) is used as a measure for overall economic
development. An increment of GDP per capita Growth should have an incremental effect
on the employment level.
To capture the degree of openness of the economy I use exports and imports as a
percentage of the gross domestic product (WDI 2007). I expect that the more open the
economy is, the less protection domestic firms have and, as a consequence, given the
position of Latin American countries in the global market as mainly exporters of raw
materials and laggards in terms of both industrial and service sectors, the employment
level would experience a reduction in both manufacturing industry and wholesale trade.
This variable is also included with a one year lag because employment adjustment is not
instantaneous.
Inflation, measured as the percentage change in consumer prices, is expected to reduce
the employment level because of its negative effect on consumption and therefore on the
demand for labour. As hyperinflation was controlled in all the seven countries by 1994, I
do not expect the effect to be significant.
Net enrollment on Secondary education (WDI 2007) is a measure of the spread of
education in the population. The improvement of human capital is a positive factor for
the expansion of labor demand. Furthermore, it is a reasonable proxy of the availability of
skilled population, a factor that is relevant for high-tech FDI allocation. I expect this
variable to be positively related to the employment level, especially for wholesale trade.
A drawback of the models is the lack of a measure on informality. Time series data about
informality for the region is scarce and, when available, missing values constitutes a
serious and recurrent problem.
13
13
PREALC data of informality has great variation among the various estimates of informality in Latin
American economies. This is partially due to whether the estimate is based upon urban informality only or
urban combined with rural informality (or the modern agricultural sector) and whether the percentage is
estimated for the urban, total, or non-agricultural economically active population. PREALC data is
available in: Mercado de Trabajo en Cifras: 1950-1980. Santiago: PREALC; Urbanización y Sector
Informal en América Latina: 1960-1980.
Santiago: PREALC. Other sources are: Portes, A. 1995. En Torno


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