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HOMENews Lacea LamesLatin America and the Development of Its Skills

Latin America and the Development of Its Skills

Lacea-Lames will continue this Friday and Saturday throughout the day in different spaces of Universidad EAFIT. In the picture, Lucila Berniell’s and Sergio Urzua’s presentation.

• Lucila Berniell, chief economist at the socioeconomic division of CAF, presented this Thursday afternoon November 10th her research work on the skills for work and life and their relationship with inequality in Latin America.

• According to this research—which was presented during the first day of the Lacea-Lames 2016—, for their development of skills the time parents spend with children is more important than the money invested in them.

After months of research in 10 capital cities of Latin America and through surveys to ten thousand people, a group of economists, led by the Argentinian Lucila Berniell, chief economist at the socioeconomic division of the Development Bank of Latin America (CAF), was able to determine how people’s skills not only impact in a radical way their quality of life, but also reduce inequality in the region.

Without being conclusive in this matter, the research work presented this Thursday November 10th during the first day of the Lacea-Lames meeting—event that will continue until Saturday November 12th at Universidad EAFIT—made it clear not only that Latin American inhabitants have few skills to cope with life, but also that these few skills are very unequally distributed among the population. This would explain, to a great extent, why Latin America remains one of the world’s most unequal regions.

During her presentation, the economist demonstrated how biological, family, educational, working (place of work) and environmental factors determine the number of skills for daily life. When she mentions, for instance, the family aspect and the way parents invest in their children, she prioritizes time over money: “For the children’s future and the development of their skills, the time parents spend with them is much more important than the money invested in them”, said Berniell.

In addition, she provided statistics that show how serious the childhood issue in the region is: only 50% of pregnancies are wanted, 20% of women under the age of 19 are already mothers or are pregnant, and almost 80% of children are not provided with a balanced diet.

Then, she emphasized on the educational factors and focused her conclusions on teachers’ skills rather than on young people’s skills. The reason why is obvious: “skills acquired by children in schools depend, basically, on the quality of their teachers.” Although she acknowledged the increase of educational coverage in all Latin American countries, the quality in education remains an encumbrance. The problem lies in the selection of teachers, their training and incentives. “The entire institutional effort should be focused on that,” said the economist.

Using comparative tables and statistical formulas, Lucely finished her lecture concluding that people who have “a better education and better socio-emotional skills are more competitive than people who don’t.” This would partially explain why 50% of people in Latin America have informal jobs.

For his part, Sergio Urzua (University of Maryland), who shared his opinion on the CAF’s research work, praised these findings; however, he observed that skills have to do with the tasks that people perform in a company too, and posed the following question to the audience: “If a store doesn’t reach its monthly sales goal, is this due to its employees’ poor skills or because they got the wrong job despite having certain skills?”

Ultimately and despite the unpromising statistics of the region, both researchers agreed that childhood and education are the key. As long as children get to schools better prepared from their homes and, then, are able to acquire new skills thanks to the quality of their teachers, inequality in the region should decrease.

Impact of Financial Markets on the Current Crisis

During the Macroeconomic Implications of Rising Inequality and Stagnation: Heterodox Perspectives session, included in Lacea-Lames 2016, three economists discussed the role of financial markets and how these can be used to explain the current crisis that developed economies are facing and that hasn’t allowed them to overcome the 2008 recession.

Thomas Palley suggested that the fundamental problem of the macro-conventional or orthodox theory leaves out key elements of the financial system in the economies. He stated that the economic theory and policy cause the economies to distance from full employment, which explains the current recession.

For his part, Photis Lysandrou (University of London) questioned whether the financing of the economy, i.e. the growth of the financial system over the past decades, is in itself a problem. His main hypothesis is that it isn’t, since, actually, the financial system plays a very important role, but it grows in a dysfunctional way. Therefore, what should be done is to adjust this growth to the financial system so that it is in line with the markets’ behavior.

With his lecture Absolute Income Inequality and Rising Housing Prices, Thomas Goda, professor at Universidad EAFIT, tried to answer whether the increasing inequality can be associated with the rise of housing prices and the real estate bubble. This is one of the reasons that explain the financial crisis of many emerging countries. Based on that, the increasing inequality is urging investors to invest in real estate, which is reflected in the rise of assets prices, in this case, above what should be expected.

Financial Decisions

One of the presentations of Lacea-Lames 2016 held this Thursday afternoon November 10th was related to the individuals’ behaviors in terms of their ability to decide in the world of economics.

Experimental Economics and Behavioral Finance was the title of the lecture that Harrison Hong, professor at Columbia University, and Monica Capra, from Claremont Graduate University, presented together. They addressed the factors influencing the individuals’ economic decisions and how important it is to acknowledge them in scientific research.

Hong explained that, in order to understand which stocks people invest in, it is necessary to take into account the place where they live in, since individuals are prone to buy stocks in companies that are closer to their place of residence.

Moreover, he emphasized that, currently, there is a location bias that isn’t financially healthy. “Investing only in local companies’ stocks leads to portfolios not being diversified, which is not healthy for the economy,” said Hong.

For her part, Monica Capra presented the different tools that enable scholars to collect data on the neurological processes leading to economic decision-making. “In the studies we have conducted, we noticed that there are two aspects that seem to further influence the financial decisions: one is the cognitive effort or attention people give to financial information and the other one is emotions and their control,” she expressed.
Contact information for journalists 

Press Room Lacea-Lames 2016
Alejandro Gómez Valencia
Phone: 2619500 ext. 9931
Email: jgomez97@eafit.edu.co
Mobile: 3007842646

Juan Carlos Luján Sáenz
Phone: 2619500 ext. 9883
Email: jlujans@eafit.edu.co
Mobile: 3167448573