The Influence of Governance Conditions and Extreme Events on Salaries in Argentina: Establishing Subsidies by Decree‐Laws, Currency Devaluations, and Covid‐19

ABSTRACT We study how salary variation coefficient growth rates are affected by two governance conditions (a decree law and a currency devaluation) and an extreme event (Covid‐19) in Argentina, using an event study approach. We find statistically significant novel evidence that, depending on the chosen model, (1) the Covid‐19 pandemic originated a negative daily average growth rate of the salary variation coefficient of approximately the same quantity as the positive effect of decree number 332/2022 in absolute value, when the salary variation coefficient was declared to be used to establish energy subsidies for clients with low and medium income; (2) we find that although a 50% currency devaluation has repercussions that increase nominal‐salary growth rates, decree number 332/2022 already accounts for at least half of the same dangerous effect—as if a 25% currency devaluation was applied—, or the same as a 50% currency devaluation, depending on the employed model. Our findings have relevant policy implications for regulators since they should know the consequences of changing governance conditions and extreme events.