Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

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the one hand, Carabineros de Chile still checks the family records of a potential wife of a policeman to avoid incompatibilities with policing tasks. On the other hand, they encourage strong socialization with the families of other Carabineros. This is a further fundamental transformation that increases the relative value of belonging to the organization, making even harder the punishment of a dishonorable discharge. In general, Argentinean Police Organizations seem to intervene less in the private lives of agents. 2. Compensation: Chileans cops get neither higher income nor have higher pensions. If any it is the opposite. One natural mechanism to make the value of being in the organization higher than the expected value of being kicked out is to pay people well. Indeed, wages have been shown to lower corruption in other areas of the Argentinean public sector (Di Tella and Schargrodsky 2003). However, the wages of Carabineros do not seem higher than those of policemen on the other side of the Andes. In Chile, a Mincerian regression 3 of the wage shows a penalty of roughly the size of the minimum wage for being a policeman. Thus, people of the same age and education make – on average – more money in other jobs than in the Police. This is fully consistent with the common wisdom held in Chile, and is even stronger if we consider that a Carabinero does not receive any payment for working beyond eight hours a day. 4 For Argentina, we were able to get data on four local Police forces: Rio Negro and Tierra del Fuego, Province and City of Buenos Aires 5 . This sample accounts for roughly 40% of the total number of street level cops, working for a half of the country’s population. Wages for Police Distribution of wages for observationally equivalent Workers (dollars) Province Mean - Mean - Mean 25th Median 75th Superior Subordinate percentile percentile Officer Officer Buenos 2660 770 363 203 291 407 Aires Province Rio 605 200 421 232 349 581 Negro Tierra 2442 1309 595 349 494 697 del Fuego Buenos 390 240 348 218 291 407 Aires City (*) (*) Agents of the PFA. “Comparable wages” correspond to 25 to 45 year-old male individuals with 9 years of education that are currently working according to INDEC (2003) survey Table 1. Comparison between Police wages in 2008 and the wage of workers reported in the National Household Survey (2003), adjusted by inflation and measured in constant US Dollars of 2008. Source: authors’ calculations based on: INDEC survey (2003) , National Decree 1327/2005 (federal police wage act), Internal Sources of the Province of Buenos Aires Police, Census and Statistics General Direction of Rio Negro and Tierra del Fuego’s local newspaper. In contrast with the Chilean case, there seems to be no penalty in wages for being a policeman in Argentina (Table 2). Moreover, high rank policeman’s wages appear higher than the ones of 3 Using 1998 data. Regressing the logarithm of wage as a linear function of age, age 2 , education. 4 However, as it will be discussed later, there are other non monetary benefits that can compensate this. 5 Note that there is no consistent source for policeman wages in the 23 provincial police forces
observationally equivalent individuals. For subordinate agents, the situation varies depending on the jurisdiction. In the Province of Buenos Aires, policeman earn more than observationally equivalent individuals, and agents of the PFA earn approximately the same as the median counterfactual wage. If the comparisons are meaningful 6 , these figures confirm that the explanation for the reversal of fortune does not seem t to arise from a particularly low monetary compensation. Moreover, unlike the Chilean case, Argentinean policeman get overtime payments, which can account for an additional 50 % of the wage in the PFA (Cordoba and Pastor, 2003) or even 100% of their wage in the Police of the Province of Buenos Aires 7 . Pensions Becker and Stigler’s theory (1974) suggest that in order to always keep the future value of being in the Organization above the malfeasance threshold, optimal contracts need to offer good pensions. This back-ends a substantial portion of the compensation aligning incentives because the premium is paid after chances for misbehavior are over. In Chile the replacement rate (i.e. the ratio between the last salary and the pension) is 100%, so policemen keep their last salary forever. In Argentina it is also complete, although with some exceptions 8 . Timing is the other big ingredient impacting the net present value of Pension benefits. In Chile policeman can retire after 30 years in the organization. In Argentina it is after 35 years for agents of the Police of the Province of Buenos Aires and national security forces, except the PFA, which is after 30 years. For people that leave the Organization before this period, both police forces include a 20 year threshold that entitle policeman with some level of pension. The differences seem – again – relatively minor between the two countries. Both have early retirement vis-a-vis alternative occupations. Thus, prima facie, there seems to be no radical differences in terms of monetary wage and pension compensation that can fully justify the difference in performance between Chile and Argentina. As benchmark, wages of police officers in the US are higher than the average and also higher than the median wage for their observationally equivalent indivduals. 9 In contrast with Chile and Argentina, developed countries seem to weight more the compensation of active policeman and less the back ending of benefits. 1. Non-wage benefits In both countries there are important non-wage benefits. Both Chile and Argentina have special health insurance and hospital for the police officers and their families. Similarly, taking advantage of the superior level of repayment monitoring, in both countries there is special access to credit. In the Police of the Province of Buenos Aires, for example, there are special credit facilities for members of the organization sponsored by the Provincial Pensions Administration. Namely, credits for up to 48 payment periods and the possibility of having more than one loan at the same time. In Chile many Carabineros can benefit from a partially subsidized assignment of publicly owned housing. In particular, this is more relevant for 6 Note that to get compatibility between the administrative data and the household survey we used an estimate of inflation. Inflation measurement and misreport by authorities is a whole issue in Argentina today. 7 Calculations based on the fact that policemen are allowed to do 8 extra hours per day, and that they are worth between 2 and 4 dollars per hour, depending on the service. 8 In Argentina the replacement rate de facto is difficult to calculate, but seems well above 80% . Part of the wages are not considered for pension purposes to avoid the fiscal burden of indexation. By law, wage increases in the active Argentinean Police forces should also be mirrored by an increase in the pension payments for retired policeman. To avoid that, part of the benefits, which take the form of familiar allowances for members of the PFA and Buenos Aires Police, are technically paid as non wages but are de facto wages. This makes a de jure 100% replacement rate to be a de facto around 80%, roughly. 9 See Wagner, 2008
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Exceptional Argentina Di Tella, Gla
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A third explanation of Argentina’
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Maddison's "Western Offshoots" by l
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A final point on this mechanistic a
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GDP in 1900 at 12,100 (in constant
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nationalized railways and banks, to
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country interacted with initial con
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1900. As there is an extremely stro
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Between the 1940s and 1970s income
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particularly in terms of food consu
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Even before the 2001 crisis, Argent
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Scandinavia and Northern Europe the
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Figure 4. A modified Human Developm
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Figure 6. Per capita GDP across Arg
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production 15 . Moreover, beyond st
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Figure 10. Average weight of export
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etween the prewar export-led growth
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which was wholly bound to local dem
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protectionism", certainly stronger
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agricultural pastures and cropland
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far. Argentina's differential popul
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Appendix Figure A. 1. Argentina's r
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Peru 35 38 25 34 34 34 32 29 26 27
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Like the Llach paper, the Campante
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I. Introduction Both Buenos Aires a
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across the ocean. Over the course o
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Buenos Aires’ hinterland rose dra
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significantly greater education lev
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Why is there such a difference in l
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illion dollars today). Each Chicago
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Chicago also appears to have been a
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casualties. Roca secured the presid
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capital to St. Petersburg he was pr
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and the logarithm of per capita GDP
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Moreover, years of schooling today
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y its overwhelming political import
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200 Figure 2a: Annual Wage Data 187
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Figure 3: Real Monthly Wages in Chi
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Log GDP per capita 2000 5 6 7 8 9 1
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Figure 7 Log GDP per capita 2000 7
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Table 2: Top 5 Industries in Chicag
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Table 4: 19th Century Variables and
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A simple calculation suggests that
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toy model with a minimum of paramet
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were lifted, but import taxes remai
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to compute that the MPK term above
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versus foreigners, on most occasion
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X institutions policies income p
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series variation. The coincidence o
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Figure 1—The Great Divergence and
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Figure 3—Trade taxes
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Transition Remarks The previous ess
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CHAPTER FOUR Argentine Trade Polici
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Argentine comparative advantage lie
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thousands of product lines in Argen
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Japan). Third, the agricultural pro
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different preferences over trade pr
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two nomenclatures had to be manuall
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esult, soybeans were finally adopte
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Figure 1 Trade Openness Exports + I
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Figure 5 Relative Sectoral Protecti
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Figure 7 Average Export Taxes 0 10
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Figure 9 Average Export Taxes at 2-
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Figure 11 Evolution of Argentine Ag
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Figure 13 Yields in Agriculture: Wh
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Table 2 Livestock per Capita 1895 C
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Table 5 Mean Share of Exports (Impo
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Table 7 Tariff Statistics for perio
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Table 9 Evolution of Industrial Pro
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CHAPTER FIVE Path-Dependent Import-
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actors, and they were demanding pro
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the primary sector, using land and
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Figure 1: The Long Run: Four Region
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Finally, in the reversal of pattern
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Figure 3: Medium Run Preferences ov
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sector to give rise to a protection
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technological improvements or incre
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Argentina did relatively well when
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World War, a second globalization e
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Argentine primary sector and ensure
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Clearly, world market conditions we
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for the years to come. The most imp
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governments zigzagged in their poli
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public spending on infrastructure s
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understand the rise of the urban-ru
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To sum up, by the beginning of the
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has a comparative advantage in the
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L λ = m L K κ = m K That is, λ i
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K c a = 1− α 1−α T A ( κ )
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Given a set of parameters ϒ , φ a
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consumption of good i. For any agen
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Proposition 3 In the short run, pro
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ρ 1/ 1 ρ ρ 1 ( ξ ξ ) 1 TT K ,
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Up to 2008, the FPV government had
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negative correlation between the pr
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policies would, supposedly, eviscer
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I. Introduction In a seminal study,
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terms, Peronist beliefs in the 1990
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Several authors have emphasized the
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foreign capital and trade as the gl
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of already available information. A
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having the need to do more than wak
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Argentines (who implement these pol
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opinion about elements of capitalis
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intense (the proportion is under 1.
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involved in social ordering that wi
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cost of the deviating firm, since w
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Admissible Region Bounds on w b Nex
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The previous proposition may be par
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and note that Peron insists on the
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Appendix 2: Definitions of Variable
Page 223 and 224: Table II: The Beliefs of Peronists
Page 225 and 226: Transition Remarks The previous cha
Page 227 and 228: CHAPTER SEVEN A Short Episodic Hist
Page 229 and 230: the income distribution between 193
Page 231 and 232: empirical evidence and on existing
Page 233 and 234: of commodities. The country was off
Page 235 and 236: accounts increased by 8% between 19
Page 237 and 238: Argentina in 1942 (4.1%) is not ver
Page 239 and 240: This change in inequality is also r
Page 241 and 242: 1982, when Mexico’s default on it
Page 243 and 244: 1995. While growth bounced back qui
Page 245 and 246: The main characteristics of this ep
Page 247 and 248: skilled workers that more than offs
Page 249 and 250: Household Expenditure Survey. An in
Page 251 and 252: The relationship between internatio
Page 253 and 254: machinery and equipment can acceler
Page 255 and 256: occurred not only in production tec
Page 257 and 258: a relative abundance of rents to sh
Page 259 and 260: even when the number of well-off in
Page 261 and 262: and similar patterns emerge when co
Page 263 and 264: This chapter described the level an
Page 265 and 266: Transition Remarks Economic success
Page 267 and 268: CHAPTER EIGHT Why do Argentines tru
Page 269 and 270: in the 1970s and 1980s. Despite the
Page 271 and 272: Figure 5. Percentage of the populat
Page 273: analysis of the Argentinean and Chi
Page 277 and 278: the low rank policeman. 13 4. The C
Page 279 and 280: Figure 7. Share of people having a
Page 281 and 282: 6. Why did the Argentinean Police d
Page 283 and 284: instability, σ, a worried leader h
Page 285 and 286: the deeper question of why the Arge
Page 287 and 288: Table 2. Comparative facts for cano
Page 289 and 290: of formal education, whereas in the
Page 291 and 292: only bargaining tool to get money.
Page 293 and 294: Table 6. Tierra del Fuego Subinspec
Page 295 and 296: 4. Police deaths during the 20th ce
Page 297 and 298: Of course, these conclusions depend
Page 299 and 300: “stop go” dynamics 4 ). In fact
Page 301 and 302: income distribution and earnings gr
Page 303 and 304: Figure 2. Basic Statistics Food Clo
Page 305 and 306: Table 2 Dep. Var.: Share of food Sm
Page 307 and 308: Figure 3. Variety in food retailing
Page 309 and 310: Table 3 Dep. Var.: Share of food at
Page 311 and 312: 3.3 Income distribution effects The
Page 313 and 314: Figure 6. Individual Effects Using
Page 315 and 316: Expenditure Income 5000 6000 4000 4
Page 317 and 318: Figure 10. Income distribution Dens
Page 319 and 320: Appendix A: Estimation strategy Est
Page 321 and 322: w ijt where [ ln( 1+ ∏ ) − ln(
Page 323 and 324: 2.2 Income distribution effects Fol
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Appendix B: The data To run our est
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Appendix C: Additional tables C1: B
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C3: Table 3 coefficients Dummy for
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CONCLUSION 20 th century Argentina
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can be harbingers of worse things t
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Ahumada, Hildegart, Alfredo Canaves
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Barro, Robert J. 2005. “Rare Even
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Burzaco, Eugenio et al. 2004. “Ma
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Cortés Conde, Roberto and María M
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Di Tella, Rafael, Juan Dubra and Ro
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Gaggero, Horacio and Alicia Garro.
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Gerchunoff, Pablo, Fernando Rocchi
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James, Daniel. 1988. “October 17
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Maddison, Angus. 2006. The World Ec
Page 353 and 354:
Piketty, T. 2003. “Income Inequal
Page 355 and 356:
Spiller, Pablo and Mariano Tommasi.
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Williamson, Jeffrey G. 1995. “The
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