Determinantes urbanos, económicos y estructurales en la generación de empleo en Argentina

16 impact on the local production structure. Given that the fixed exchange rate prohibited corrective depreciation, the resulting RER appreciation in conjunction with the radical opening to imports obligated firms to become more competitive or shut down. Firms responded by increasing the use of imported inputs, importing products previously produced domestically (as imports were favored by the exchange rate), and substituting labor with capital – all measures aimed at reducing costs and increasing productivity. The result was an intense loss of jobs in tradable sectors, particularly manufacturing (Damill et al., 2011). Industrial sector employment fell from 28% of total employment in 1995 to 23% of total employment in 2000, amounting to the loss of approximately 57 million manufacturing jobs (Castillo et al., 2002 as cited in Mazorra & Becarria, 2007). The impact on manufacturing is important given that structural economists (such as Hirshmann, Rosentein-Rodan, and Gerschenkron) cite the manufacturing sector as the engine of development via its linkages with productivity increases [which via forward and backward linkages, knowledge spillovers and technological externalities give way to increasing returns] (Kaldor 1996 as cited in Cimoli, Novick, & Palomino, 2007). Pieper (2000) (as cited in Cimoli et al., 2007) that low industrial sector growth results in few virtuous cycles as countries remain on the track of low-road development in which there is a trade-off between productivity growth and employment growth. Moreover short-term adjustments via unemployment, lower salaries and reduced public spending can have long term effects on the “dynamic efficiency� of the economy via hard to reverse destruction of human capital, thereby inhibiting future growth possibilities (Van der Hoeven, 2000 as cited in Cimoli, Novick & Palomino, 2007).

1.3 MANIFESTATION IN THE LABOR MARKET Having reviewed the exchange rate and output trends of the two regimes, the following section presents their cumulative effects on employment. The main channels of transmission from the macroeconomic regime to the labor market are via aggregate demand (and consequently level of activity) and relative price ratios (RER, real wage, etc.) which determine labor utilization.