Aggregate shocks and urban Labor market responses: Evidence from Argentina's financial crisis

In this article, I study the short-term effect of the 2002 financial crisis on households in Argentina and their labor market responses. Using panel data from an urban household labor force survey, the Encuesta Permanente de Hogares (EPH), I am able to determine how aggregated the shock actually was and whether it had a differential impact. Section II provides an overview of the macroeconomic effects of the crisis and information on expectations about 2002 in the run-up to the crisis. I use this to argue that the inflation was largely unexpected and so real income changes were "shocks." Section III describes the labor force survey used for most of the analysis, and Section IV details the effect of the crisis on male and female wages and determines how aggregated the crisis actually was. The main labor market responses to the crisis are studied in Section V. Section VI examines whether households began relying more on nonlabor sources of income during the crisis, while Section VII provides our decomposition of the change in household income into its various components. Section VIII concludes. © 2004 by The University of Chicago. All rights reserved.