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Strengthening long-term growth in Argentina D. Artana, E. Bour, J.L. Bour y N. Susmel OECD Seminar “Beyond the crisis – Returning to sustainable growth in Latin America” Paris, November 24th 2010
Labor regulation is also rigid in our estimate of the EPL3 More rigidity Source: FIEL
And the tax burden is also high Source: Artana, D. & I. Templado “Is the Argentine Revenue Effort Too High?” 2010.
New Exploration Contracts between 3.5 & 5 • Manufacturerspayonaverage US$ 3 per million BTU
Price controls of energy products are one factor that explains a declining stock of reserves and production of natural gas
Therewas a reduction in informality, but 2003-09 averageissimilar to 1993-2000 Informality rates
Reallocation from low productivity to high productivity sectors was not very important • Within-sector more consistent with some external force that drives labor productivity up in all economic sectors
And quality of education deteriorated in spite of some increase in public expenditures as % of GDP Quality improved Quality worsened
We estimated determinants of growth in Argentina in the period 1981-2009 • Stock of capital adjusted by utilization • Labor adjusted by number of hours worked • We also opened for Formal and Informal Workers • Country risk as separate variable • Terms of trade (Kehoe and Ruhl, 2007; Becker and Mauro, 2003; Edwards, 2007; Cavalcanti Ferreira et al (2010) • Gain is similar to technological improvement
We can estimate how much the gain in terms of trade contributed to growth in 2003-2009 • One third when informal employment is included • 73% in our best estimate that takes into account lagged effects.
Conclusions • Good luck made a substantial contribution to Argentina’s growth since 2003 • Fiscal challenges that were a key factor behind Argentina’s dismal performance in the past are not such a big challenge (low debt, moderate deficit). But filling the gap with taxes will be costly given the already high tax rates on formal activities • Evidence points to the need to improve the quality of micro policies and the investment climate … or to bet for permanent luck