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Paper One: Analyzing a World Bank Report Through the Lens of Dependency or Post-Development Theory

Open Posted By: ahmad8858 Date: 15/02/2021 High School Coursework Writing

 For this assignment, you will read the Executive Summary of a World Bank report on your research country and analyze it in up to 500 words with reference to the concepts presented in the first three weeks of the course.

  • You are only required to read the Executive Summary of the World Bank report, however, you may find it necessary to refer to other sections of the report for information about economic activity or social inequality. This is particularly true of the two countries with brief executive summaries (Tunisia and Bangladesh).
  • Your essay should be divided into three sections. Create a section title for each section.
  • When you cite evidence from the World Bank report please include the page number from which you derived this evidence in parentheses.
  • Remember to put any exact quotes in quotations and cite the page number.
  • *Please reference the rubric. Relatively more weight is assigned to Section Three of the report as this assignment is designed to develop your understanding of dependency theory/post-development theory.*
  • For Section Three, please ensure that you are analyzing the report from the standpoint of a dependency theorist OR a post-development theorist BUT not both.

Section One

Development is conventionally understood as the realization of human improvement through economic growth.  According to the authors of your report, what human improvements have already been achieved in your country and to what forms of economic activity are these improvements attributed? Cite supporting evidence and examples from the report.

Section Two 

According to the report’s authors, what social inequalities exist in your country? How do the report’s authors propose rectifying these social inequalities through economic growth? Cite supporting evidence and examples from the report.

Section Three

Explain how either a dependency theorist OR a post-development theorist would respond to the report. First, briefly define dependency theory or post-development theory. Then, explain what aspects of the report that the dependency theorist or post-development theorist would find commendable or objectionable and the reasons why this would be so. Finally, briefly describe how a dependency theorist or post-development theorist may propose to rectify the social inequalities highlighted in the report.

Category: Accounting & Finance Subjects: Behavioral Finance Deadline: 24 Hours Budget: $80 - $120 Pages: 2-3 Pages (Short Assignment)

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ARGENTINA: Escaping crises,

sustaining growth, sharing prosperity

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© 2018 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; www.bancomundial.org.ar

This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denomi- nations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.

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Attribution—Please cite the work as follows: World Bank Group. 2018, Argentina: Escaping crises, sustaining growth, sharing pros- perity. World Bank, Washington, DC. © World Bank.

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ARGENTINA: Escaping crises, sustaining growth, sharing prosperity

ARGENTINA: ESCAPING CRISES, SUSTAINING GROWTH, SHARING PROSPERITY2

LIST OF ABBREVIATIONS AND ACRONYMS

ALMP Active Labor Market Policies AMBA Metropolitan Area of Buenos Aires (Área Metropolitana de Buenos Aires) ANSES National Social Security Administration (Administración Nacional de la Seguridad Social) AUH Universal Child Allowance (Asignación Universal por Hijo) BCRA Central Bank of the Republic of Argentina (Banco Central de la República Argentina) CABA Autonomous Federal Capital of Buenos Aires (Ciudad Autónoma de Buenos Aires) CEDLAS Centro de Estudios Distributivos, Laborales y Sociales ECD Early Childhood Development EPH Permanent Survey of Households (Encuesta Permanente de Hogares) EPHC Continuous Survey of Households (Encuesta Permanente de Hogares-Continua) EU European Union FAO Food and Agriculture Organization FTA Free Trade Agreement GCI Global Competitiveness Index GDP Gross Domestic Product GHG Greenhouse Gases GFS Government Finance Statistics GMO Genetically Modified GP Global Practice, World Bank GSURR Global Practice for Social, Urban and Rural Development GVCs Global Value Chains IDB Inter-American Development Bank IFC International Finance Corporation ILO International Labour Organization IMF International Monetary Fund IPs Indigenous Populations INDEC National Statistical and Census Institute (Instituto Nacional de Estadística y Censos) LAC Latin America and the Caribbean MERCOSUR El Mercado Común del Sur MSMEs Micro, Small, and Medium-Sized Enterprises NAFTA North American Free Trade Agreement New HICs New High-Income Countries NGO Nongovernmental Organization NREL National Renewable Energy Laboratory NTMs Nontariff Measures O*Net Occupational Information Network Database Information Network database

ARGENTINA: ESCAPING CRISES, SUSTAINING GROWTH, SHARING PROSPERITY 3

OECD Organization for Economic Co-operation and Development PISA Program for International Student Assessment, OECD PIT Personal Income Tax PPP Purchasing Power Parity PPPs Public–Private Partnerships PUAM Universal Pension for the Elderly (Pensión Universal para el Adulto Mayor) R&D Research And Development RAP Political Action Network (Red de Acción Política) RC Routine Cognitive RER Real Exchange Rate SEDLAC Socio-Economic Database for Latin America and the Caribbean SCD Systematic Country Diagnostic SITC Standard International Trade Classification SMEs Small And Medium Enterprises STI Science, Technology and Innovation TFP Total Factor Productivity Trapped MICs Middle-Income Trapped Countries UK United Kingdom U.S. United States of America WBG World Bank Group WDI World Bank’s World Development Indicators WDR World Development Report WEF World Economic Forum WHO World Health Organization WTO World Trade Organization WWF World Wildlife Fund

ARGENTINA: ESCAPING CRISES, SUSTAINING GROWTH, SHARING PROSPERITY4

ACKNOWLEDGMENTS

“Argentina: Escaping crisis, sustaining growth, sharing prosperity”, a systematic country diagnosis (SCD), was produced by the World Bank Group Argentina Country Team. Members from all Global Practices and the International Finance Corporation (IFC) contributed to the preparation of the document in a collaborative process, through the provision of a large number of substantive inputs, participation in consultations, advice, and feedback. In addition, the team benefitted greatly from conversations with authorities, partners, and stakeholders throughout the preparation of the document. The report was completed at the beginning of August 2018 amid the continued economic turmoil that has hit Argentina. The focus of the report is on medium- to longer-term development challenges in Argentina, rather than contemporaneous macroeconomic developments.

The report has been written by Fernando Giuliano, Economist; María Ana Lugo, Senior Economist; Giovanni Ruta, Senior Environment Economist; and Emily Sinnott, Lead Economist and Program Leader based on inputs from a wide team of sector and country experts, and under the guidance of Jesko Hentschel, Country Director. The core team included Ignacio Apella, Social Protection Economist; Agustin Arakaki, Consultant; Laura Calderón, Consultant; Julián Folgar, Research Analyst; and Marco Larizza, Senior Public Sector Specialist. On the IFC side, the team consists of Luciana Harrington, Strategy Officer; Zeinab Partow, Principal Country Economist; and Valeria di Fiori, Operations Officer. The team relied on the contributions and support of many colleagues, country office staff, and consultants, including but not limited to the list below. The team gratefully acknowledges the overall guidance of Oscar Calvo-Gonzalez, Practice Manager Poverty and Equity; Valerie Hickey, Practice Manager Environment, Pablo Saavedra, Country Director for Mexico; Argentina program leaders Carole Megevand and Rafael Rofman, and Latin American and the Caribbean Chief Economist Carlos Vegh (LCRCE). The team also benefitted from insightful comments and suggestions of the peer reviewers: Marianne Fay, Chief Economist of the Sustainable Development Vice-Presidency; Luis-Felipe López-Calva, UN Development Programme (UNDP) Assistant Administrator and Regional Director for Latin America and the Caribbean; and David Rosenblatt, Manager of Strategy and Operations, Development Economics unit.

ARGENTINA: ESCAPING CRISES, SUSTAINING GROWTH, SHARING PROSPERITY 5

“ARGENTINA: ESCAPING CRISIS, SUSTAINING GROWTH, SHARING PROSPERITY” EXTENDED TEAM

Global Practice (GP) GP Input Provider

Agriculture Tomas Ricardo Rosada Villamar, Michael Morris

Education Francisco Haimovich, Helena Rovner

Energy & Extractives Lucia Spinelli

Environment & Natural Resources Giovanni Ruta (co-Task Team Leader), Laura Calderon, Pablo Herrera

Finance, Competitiveness and Innovation John Pollner, Steen Byskov, Daniel Gomez Gaviria

Governance Marco Larizza, Silvana Kostenbaum

Health, Nutrition, Population Maria Eugenia Bonilla, Daniela Romero, Vanina Camporeale

Macroeconomics, Trade and Investment (Macro-Fiscal)

Emily Sinnott (co-Task Team Leader), Fernando Giuliano, Stefano Curto, Julian Folgar, Mariano Villafane, Daniela Dborkin

Macroeconomics, Trade and Investment (Trade, competition, and investment)

Tanja Goodwin, Martha Licetti, Mariana Iootty De Paiva Dias

Poverty Maria Ana Lugo (co-Task Team Leader), Agustín Arakaki, Lourdes Rodríguez-Chamussy, Jonna Lundvall

Social Protection, Labor & Jobs Ignacio Apella, Marcela Salvador, Juan Martin Moreno

Transport & ICT Santiago Arias, Camila Rodriguez, Verónica Raffo

Social Development German Freire, Santiago Scialabba

Urban/DRM Nancy Lozano, Beatriz Eraso, Cathy Lynch

Water Gustavo Saltiel, Maria Catalina Ramirez, Victor Vazquez, Javier Zuleta

Climate Ana Bucher

Gender Jonna Lundvall, Maria Emilia Sparks

IFC Luciana Harrington, Zeinab Partow, Valeria Di Fiori

Overall team Support Geraldine Garcia, Maria Emilia Sparks

Communications Kelly Alderson, Carolina Crerar, Yanina Budkin

ARGENTINA: ESCAPING CRISES, SUSTAINING GROWTH, SHARING PROSPERITY6

TABLE OF CONTENTS

Acknowledgments 4

Executive Summary 9 Setting the Stage 9 What sets Argentina apart? 12 A history of economic and policy volatility 14 Recent growth and shared prosperity trends 16 Pathway to shared prosperity 19

Chapter 1. Setting the Stage 31 Introduction 31 Falling behind 32 Argentina’s defining characteristics 36 Convergence postponed 39 The Challenge going forward 46 Pathway to shared prosperity 48

Chapter 2. Growth 53 Drivers of economic growth 53 Pathway 1: Putting in place the institutional and macroeconomic fundamentals for growth 57 Macroeconomic stability: moving beyond boom-bust cycles 57 Expenditure and revenue policies to support growth 60 Institutions for growth 65 Pathway 2: Open, outward-oriented development model 69 Creating financial capital 69 Creating the infrastructure to support growth 71 Creating an economy open to trade, competition and investment 75 Enhancing the capacity of firms to benefit from expanded markets 80

Chapter 3. Toward a more inclusive society 87 Recent trends in poverty and shared prosperity and challenges ahead 87 Pathway 3: Releasing constraints to productive inclusion 94

ARGENTINA: ESCAPING CRISES, SUSTAINING GROWTH, SHARING PROSPERITY 7

Chapter 4. Sustainability and investing in natural capital 110 Overview of challenges and institutional context 111 The role of natural capital in Argentina’s economy 112 Pathway 4: Investing in natural capital and ensuring environmental sustainability 117

Chapter 5. Priorities for a sustained and inclusive growth 131 Prioritizing reforms for shared prosperity 131 Prioritization process 132 Priorities 132 Knowledge and analytical gaps 140

References 142

Annexes 152 Annex I: Poverty measurement in Argentina 152 Annex II: Profile of the Poor and Bottom 40 153 Annex III: Selected WBG Analytical Work 155 Annex IV: Data diagnostics for WBG client countries 157 Annex V: Consultations 159

ARGENTINA: ESCAPING CRISES, SUSTAINING GROWTH, SHARING PROSPERITY8

ARGENTINA: ESCAPING CRISES, SUSTAINING GROWTH, SHARING PROSPERITY 9

EXECUTIVE SUMMARY

Setting the Stage

“Argentina: Escaping crisis, sustaining growth, sharing prosperity” is an analysis on the medium-term agenda to ensure growth and shared prosperity in Argentina and comes at a time when the country is embarking on deepening structural reforms while dealing with recent sudden financial market pressures that emerged in April 2018. The current government came into office at the end of 2015 facing a difficult legacy of macroeconomic and structural imbalances. It has made significant progress since then on important reforms. However, continued macroeconomic imbalances—with a primary deficit of 4.2 percent of gross domestic product (GDP) in 2017 and inflation of 24.8 percent at the end of 2017—combined with high external financing needs made Argentina vulnerable to increased emerging market turmoil at the end of April 2018, when the country experienced a large depreciation of the peso and a rise in country risk. In response, the government requested an emergency credit line with the International Monetary Fund in early May and accelerated some key reforms. This report was completed at the beginning of August 2018 amid Argentina’s continuing economic turmoil. The focus of the report is on medium- to longer-term development challenges in Argentina, rather than contemporaneous macroeconomic developments. The report looks at the policies needed to Argentina to end its vicious circle of 14 economic crisis since 1950, that the country experienced. This includes a substantial focus on macroeconomic policies to set in place the foundations for medium-term growth and shared prosperity by boosting jobs and productivity.1 Achieving macroeconomic stabilization is a precondition for creating a healthy and vibrant economy. But deep reforms in areas varying from enhancing domestic competition, to developing capital

1 Shared prosperity requires that economic growth results in a sustainable increase in the living standards of the less well-off. The World Bank Group monitors progress in shared prosperity using the income growth of the population in the bottom 40 percent of the income distribution.

markets, to significantly improving education outcomes are necessary to ensure that the population benefits from a resurging private sector and renewed connection with the global economy. Learning from other countries’ experience in implementing structural reforms and gradually opening up their economies (like Australian reforms from the early 1980s and Sweden’s in the 1990s) is a long-term agenda, and a strong societal consensus will need to develop to support the changes for reforms to endure. Not to be underestimated is the importance of ensuring a strong safety net to support those who may be hit by structural changes in the economy.

Argentina is rich in natural capital assets and has a historically strong middle class. Along with its 2.8 million square kilometers, its extraordinary fertile land makes Argentina one of the largest agricultural producers in the world. The beef and soy sectors apply some of the most modern practices in the world and are leaders in breeding, agricultural machinery, and innovation. Argentina has vast natural resources in energy, with world-class wind and solar potential and the second-highest shale gas and fourth highest shale oil reserves in the world. In addition, Argentina has significant opportunities in some manufacturing subsectors and high-tech, innovative services. Argentina has a historically large and strong middle class. Social indicators are mostly good, and society deeply values education and knowledge as a means for potential mobility and improving status. Noted successes in research and innovation (four of the six most successful Latin American tech unicorn companies, with a value of over US$1 billion, are Argentine [see Mander 2016]) makes the country a potential destination for high- value-added industries.

Nonetheless, compared to that of its peers, Argentina’s long-run economic performance has been disappointing, affecting the country’s ability to reduce poverty and increase incomes of its citizens. Average long-run economic growth in Argentina has been only 2.7 percent— about half that of high-performing countries in the region and less than a third the level of emerging countries in

ARGENTINA: ESCAPING CRISES, SUSTAINING GROWTH, SHARING PROSPERITY10

Figure ES.1: Argentina’s long decline from the top

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Argentina’s GDP per capita as a percentage of the average of rich economies, 1950–2016

Source: Data from Maddison Project Database, version 2018. Bolt, Jutta, Robert Inklaar, Herman de Jong and Jan Luiten van Zanden (2018). Note: Rich economies are Australia, Canada, Denmark, Germany, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, and the United States.

Asia. As a result, the country has consistently lost ground relative to rich economies; GDP per capita, which was similar to the average of a group of rich economies at the beginning of the 20th century, fell to only 38 percent of these rich countries’ economic output per person today (see figure ES.1). Given its secular decline from relatively high levels of income per capita, Argentina can be referred as a unique country that did not grow, but rather fell, into middle-income status, and remained there. Furthermore, 40 percent of its population is today still vulnerable to falling into poverty, and growth has come at the expense of environmental sustainability (with 12 percent of forest loss between 2001 and 2014—double the world average). The lack of job creation in Argentina in recent years limited the significant progress made on poverty and shared prosperity in the previous decade, as the labor market deteriorated significantly since 2012.

The main explanation for this poor performance is Argentina’s unusually volatile macroeconomic environment, reflected in large swings in economic activity. During the period 1950–2016, Argentina went through 14 recessions (one or more consecutive years of negative growth), with an average duration of 1.6 years. As a result, the country spent roughly one-third of the time since 1950 in recession. This is the most time of any country in the world except the Democratic Republic of the

Congo (figure ES.2), ranking with fragile states like Iraq and Syria and highly hydrocarbon-dependent countries. Uruguay, a neighboring country affected by Argentina’s cycles, and arguably subject to similar external shocks, spent less than one-fifth of the time in recession. Recessions in Argentina not only occur often but also are deep. In an average recession cycle, Argentina’s GDP contracts 3.5 percent per year. The result is a relatively weak growth performance: Average long-run economic growth in Argentina has been only 2.7 percent, below that of its regional peers (3.7 percent), new high-income countries (3.9 percent, see box 1.1 in the main report for a definition of this group), and Organisation for Economic Co-operation and Development countries (3.2 percent).

Institutions have played a central role in shaping the policy-making process in Argentina and—consequently— the volatility in economic policy making that has emerged. This report argues that economic policies are only one of many reasons for Argentina’s decline in income relative to advanced economies. Economic policies are influenced as much by the quality of the institutions as by the “rules of the game” under which political and social actors interact. The way institutions function in Argentina has historically undermined the incentives to establish, enforce, and sustain intertemporal agreements on the content and direction of economic policies. Specifically,

ARGENTINA: ESCAPING CRISES, SUSTAINING GROWTH, SHARING PROSPERITY 11

Source: Calculations based on data from the Conference Board’s Total Economy Database. Note: The graph shows the number of years in recession as a percentage of total years, 1950–2016.

Figure ES.2: Since 1950, Argentina spent one-third of the time in recession

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DR Congo, Argentina

Iraq Syria

Zambia Zimbabwe

Bulgaria Venezuela

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Madagascar Uruguay

Iran Russia Federation

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Iceland Ghana Poland

Barbados Bolivia

Qatar New Zealand

Cyprus Greece

Burkina Faso Mozambique

Tunesia Uganda

Cambodia Czech Republic

Chile Peru

Saudi Arabia Ireland

Portugal Sweden

United Kingdom Cameroon

Ethiopia Suoth Africa Bangladesh

Brazil St. Lucia

United Arab Emirates Belgium Finland

Switzerland Malawi

Marocco Myanmar

Turkey United States

Netherlands Spain Kenya

China (Alternative) Indonesia Malaysia

Singapore Dominican Republic

Mexico Jordan

Denmark Germany

Italy Luxembourg

Tanzania China (Official)

Sri Lanka Vietnam

Oman Yemen Malta India

Japan Philippines

Thailand Costa Rica

Ecuador Canada Austria

Hong Kong South Korea

Albania Guatemala

Bahrain France

Taiwan Israel

Australia Norway

Egypt Pakistan

Colombia

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there is historically a lack of success of major political institutions—including the executive, the legislature, the judiciary, and the state bureaucracy—in enforcing credible commitment and fostering cooperative behavior among actors. This lack leads to policies that are either too volatile (reflecting political opportunism and short- term calculations among actors—cortoplacismo) or too rigid (reflecting noncooperative behavior and distrust among actors, forcing them to ex ante rigid solutions to mitigate opportunistic behavior). These institutional features, which can be traced back to constitutional and electoral rules, as well as to a history of political instability, have limited the time horizon of policy makers, making longer-term structural reform programs difficult to get off the ground and sustain. Over the past years, important institutional reforms have commenced and an open dialogue about the need to foster and strengthen core institutions is taking place. The urgency to reform core institutions; foster functioning checks and balances between the legislative, executive, and judiciary; and ensure accountability of those holding office has recently been laid open by the widening notebook (cuadernos) scandal, involving fraud and corruption charges of public officials and a large number of private sector businessmen or representatives.

Distributive conflicts between the federal and the provincial governments have been at the heart of Argentina’s political history, underlying the country’s structural challenges. The stark economic inequalities among provinces and the structural features of Argentina’s federal system imply that most provinces are highly dependent on the national government to finance their expenditures. In turn, presidents need to secure votes in Congress to implement economic policies. As a result, the policy-making process can be characterized as one of “deals” or “exchanges” between the Executive and provinces whereby governors grant political support in exchange for fiscal transfers. Historically, these political economy dynamics have translated into a fiscal transfer system that tends to favor resource-poor but vote-rich regions to strengthen the national ruling coalitions, undermining efficiency in resource allocations. They have also weakened the functional role of Congress as

an institutionalized arena to discuss and define public policies, and created incentives for short-term policies that are often fiscally unsustainable and associated with long-term economic costs. Recent developments are encouraging: they point to the emergence of a more fruitful dynamic. The Fiscal Pact agreed on between the national government and 23 of 24 provinces in November 2017 is an important step in coordinating fiscal policy at the national and provincial levels. The pledge to contain recurrent spending and public employment growth at the provincial level is core to avoiding a worsening of fiscal imbalances of the provinces in a time of high fiscal consolidation pressures.

What sets Argentina apart?

Natural resource abundance. Argentina is rich in natural capital, but underinvestment is holding back the country’s potential. With 6.24 hectares per person, the country has one of the largest land endowments per capita in the world. Water is also abundant at the national level, though with wide regional variations. A favorable temperate climate makes Argentina’s land fertile for rainfed crop production and cattle. Argentina has one of the largest continental shelves and is rich in marine and coastal resources. It is also rich in renewable energy resources, including hydro, wind, solar, and biofuels, which are largely untapped. Mineral and renewable resources are likely to play a growing role in the country’s economic future. Finally, natural diversity and landscapes attract international visitors, building a strong tourism sector that importantly contributes to GDP and job creation.

A historically large middle class with unmet high- income country aspirations. Between 1880 and 1915, the country benefitted from an abundance of fertile land and the expansion of world trade. Land owners became increasingly wealthy, benefiting also from land policy that facilitated land concentration. The massive influx of immigrants, especially from Europe, dramatically changed the social structure of the country. By 1914, a third of Argentines were foreign immigrants, a large share of whom had nonmanual work experience. Favorable international trade conditions after the Second World

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War, combined with industrialization and redistributive policies, led to a real income increase and a rapid decline in inequality (the income share of the top 1 percent). By the mid-20th century, Argentina had a strong and educated middle class, full employment, and many could enjoy a certain standard of living previously unseen. In a context of full employment, the construction of a social welfare state in which most contributed, ensured health care and generous pensions for an increasing proportion of the population. These benign economic conditions for workers and the establishment of a welfare state, led to a working class that aspired to become middle-class.

Marked by significant vertical fiscal imbalance, Argentina is a very unequal federation, with areas as rich as developed nations and provinces as poor as lower- middle-income countries. Argentina is a federal country comprising 23 provinces and the autonomous federal capital of Buenos Aires (Ciudad Autónoma de Buenos Aires, CABA). Heterogeneity across provinces in terms of income is very large.2 Figure ES.3 compares the standard

2 CABA, the richest district of the country, has a GDP per capita of US$28,358, whereas Formosa, the poorest province, has a GDP per capita of US$3,704.

deviation of (log) GDP per capita across subnational governments. Argentina is a clear outlier among comparator countries. Many important expenditure responsibilities lie at the provincial level, such as basic health care and education, whereas revenues are mostly collected at the national level. To help fund expenditures, a portion of revenues is redistributed back to provinces through an automatic revenue-sharing scheme (coparticipación), and by discretionary transfers by the executive branch. Although some degree of mismatch between expenditure and collection responsibilities is inevitable to guarantee the provision of relatively homogeneous services, in Argentina this is very large, with a sizable discretional component. The need to provide homogeneous services across heterogeneous provinces generates perverse expenditure and revenue collection incentives, resulting in substantial fiscal challenges.

Source: Data from Gennaioli et al. 2014. Note: OECD = Organisation for Economic Co-operation and Development.

Figure ES.3: Argentina’s regions have very heterogeneous income levels

Country Data

Regional Countries

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