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Firms and the Fragility of Inequality Reduction: Evidence from Argentina

Author

Listed:
  • Santiago Hermo
  • Nicolás Sidicaro
  • Martín Trombetta

Abstract

Earnings inequality in Latin America fell during the 2000s and stagnated in the 2010s, with cross-country inequality reversals associated with growth slowdowns. Using Argentine matched employer-employee data, we show that firm wage premia compressed in the 2000s and dispersed in the 2010s. Rising firm-effect dispersion drove Argentina's inequality reversal, which was concentrated among smaller firms. Worker-effect dispersion fell in the 2000s without subsequently increasing. The reversal coincided with declining productivity and weakening negotiated wage floors and was correlated with informality. These findings suggest that macroeconomic stagnation can reverse inequality reduction by allowing low-paying firms to fall behind.

Suggested Citation

  • Santiago Hermo & Nicolás Sidicaro & Martín Trombetta, 2026. "Firms and the Fragility of Inequality Reduction: Evidence from Argentina," RFBerlin Discussion Paper Series 26265, ROCKWOOL Foundation Berlin (RFBerlin).
    • Handle: RePEc:crm:wpaper:26265
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    Keywords

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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