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Permanent Effects of Economic Crises on Household Welfare: Evidence and Projections from Argentina’s Downturns

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  • Cruces, Guillermo
  • Gluzmann, Pablo
  • Lopez-Calva, Luis Felipe

Abstract

The quantification of the impact of crises on household welfare and socioeconomic outcomes is a fundamental input for the design of ex ante safety nets and ex post alleviation programs. Economic downturns have direct effects through employment and household income, but whether these and other impacts are permanent rather than transitory is harder to establish. This study of Argentina estimates the relationship between GDP growth and severe crises on poverty, youth unemployment, and a series of human capital related outcomes, such as infant and maternal health, and school enrollment and progression. The identification strategy relies on provincial variation in GDP, and on a difference in differences estimation from the severe 1999-2002 crisis. The objective is twofold. On the one hand, the study documents the effects of past episodes. On the other hand, it extrapolates past results to provide bounds for the impact of the 2007-2009 financial crisis in Argentina. Besides the expected and well-documented relationship between crises and poverty levels, the main finding of this study is a strong effect on infant mortality and low weight at birth. Moreover, there is an asymmetry in these effects: the negative impact of downturns is greater than the positive evolution during recoveries. The results for education variables are more ambiguous, and even counter-cyclical in some cases. The document discusses the implications of these estimates for the current episode. Overall, these results provide evidence of permanent effects of economic crises through lower levels of human capital, worsening health outcomes and increased mortality.

Suggested Citation

  • Cruces, Guillermo & Gluzmann, Pablo & Lopez-Calva, Luis Felipe, 2010. "Permanent Effects of Economic Crises on Household Welfare: Evidence and Projections from Argentina’s Downturns," MPRA Paper 42949, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42949
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    References listed on IDEAS

    as
    1. Guillermo Cruces & Quentin Wodon, 2003. "Argentina’s crises and the Poor, 1995-2002," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0(1-2), pages 55-96, January-D.
    2. Norbert Schady, 2006. "Early Childhood Development in Latin America and the Caribbean," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 185-225, January.
    3. Florencia Lopez-Boo, 2008. "How Do Crises Affect Schooling Decisions? Evidence from Changing Labor Market Opportunities and a Policy Experiment," Research Department Publications 4602, Inter-American Development Bank, Research Department.
    4. Christina Paxson & Norbert Schady, 2005. "Child Health and Economic Crisis in Peru," World Bank Economic Review, World Bank Group, vol. 19(2), pages 203-223.
    5. Norbert R. Schady, 2004. "Do Macroeconomic Crises Always Slow Human Capital Accumulation?," World Bank Economic Review, World Bank Group, vol. 18(2), pages 131-154.
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    More about this item

    Keywords

    crisis; infant mortality; maternal mortality; low birth weight; poverty; Argentina;
    All these keywords.

    JEL classification:

    • I00 - Health, Education, and Welfare - - General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises

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