Firms and the Fragility of Inequality Reduction: Evidence from Argentina

Santiago Hermo, Nicolás Sidicaro and Martín Trombetta

No 26265, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

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.

Keywords: earnings inequality; firm wage premia; macroeconomic stagnation; collective bargaining; informality; Latin America; Argentina (search for similar items in EconPapers)
JEL-codes: E24 J31 J38 J46 J52 O15 (search for similar items in EconPapers)
Date: 2026-10
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