“Firms and the Fragility of Inequality Reduction: Evidence from Argentina”.
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 from 1995–2019, we show that firm wage premia compressed in the 2000s and dispersed again 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.
JEL codes: J31, E24, O15, J38, J52, J46
Suggested citation: Hermo, S., N. Sidicaro y M. Trombetta (2026). Firms and the Fragility of Inequality Reduction: Evidence from Argentina. CEDLAS Working Papers Nº 385, November, 2026, CEDLAS-IIE-FCE-Universidad Nacional de La Plata, Argentina.