Antonio C. David, T. Komatsuzaki, Samuel Pienknagura
This paper estimates the macroeconomic effects of market-oriented reforms in Latin America and the Caribbean using the IMF Structural Reform database. We find that large changes in the reform index have positive effects on GDP that exceed 2 percent after five years. Furthermore, reforms boost employment, investment, exports, and imports and reduce export concentration, in addition to favoring tradable sectors. The evidence on the effects of reforms on business confidence is mixed, and the effects on total factor productivity are positive, but less precisely estimated. Nonetheless, our results also indicate that the effects of reforms have not been uniform across different segments of the population. Our results are robust to the use of an instrumental variables approach that exploits regional waves of reform to deal with endogeneity concerns. These findings bring to the forefront the need to consider accompanying policies to ensure that reforms promote inclusive growth.
{"title":"The Macroeconomic and Socioeconomic Effects of Structural Reforms in Latin America\u0000 and the Caribbean","authors":"Antonio C. David, T. Komatsuzaki, Samuel Pienknagura","doi":"10.31389/eco.227","DOIUrl":"https://doi.org/10.31389/eco.227","url":null,"abstract":"This paper estimates the macroeconomic effects of market-oriented reforms in Latin\u0000 America and the Caribbean using the IMF Structural Reform database. We find that large\u0000 changes in the reform index have positive effects on GDP that exceed 2 percent after\u0000 five years. Furthermore, reforms boost employment, investment, exports, and imports and\u0000 reduce export concentration, in addition to favoring tradable sectors. The evidence on\u0000 the effects of reforms on business confidence is mixed, and the effects on total factor\u0000 productivity are positive, but less precisely estimated. Nonetheless, our results also\u0000 indicate that the effects of reforms have not been uniform across different segments of\u0000 the population. Our results are robust to the use of an instrumental variables approach\u0000 that exploits regional waves of reform to deal with endogeneity concerns. These findings\u0000 bring to the forefront the need to consider accompanying policies to ensure that reforms\u0000 promote inclusive growth.","PeriodicalId":100390,"journal":{"name":"Economía Informa","volume":"19 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73606293","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study exchange rate dynamics around government changes conditional on the exchange rate regime, which we identify by combining the IMF de jure and the Reinhart and Rogoff de facto exchange rate regime classifications. This allows distinguishing whether the official exchange rate regime announcements match actual policy or are inconsistent with it. Using monthly data from Latin American democracies, we do not find significant exchange rate depreciations before the change of government in any of the regimes we identify. However, we do detect a gradual real exchange rate overvaluation when the de jure regime is fixed but the de facto policy is flexible, which is abruptly corrected after the change of government; this pattern of real exchange rate misalignments when the announcement does not match actual behavior is linked to incumbents that postpone devaluations until the successor steps in. This pattern of broken promises is typical until 1999, but it becomes exceptional thereafter.
{"title":"Broken Promises: Regime Announcements and Exchange Rates around Elections","authors":"Pablo Garofalo, Jorge M. Streb","doi":"10.31389/eco.224","DOIUrl":"https://doi.org/10.31389/eco.224","url":null,"abstract":"We study exchange rate dynamics around government changes conditional on the\u0000 exchange rate regime, which we identify by combining the IMF de jure and the Reinhart\u0000 and Rogoff de facto exchange rate regime classifications. This allows distinguishing\u0000 whether the official exchange rate regime announcements match actual policy or are\u0000 inconsistent with it. Using monthly data from Latin American democracies, we do not find\u0000 significant exchange rate depreciations before the change of government in any of the\u0000 regimes we identify. However, we do detect a gradual real exchange rate overvaluation\u0000 when the de jure regime is fixed but the de facto policy is flexible, which is abruptly\u0000 corrected after the change of government; this pattern of real exchange rate\u0000 misalignments when the announcement does not match actual behavior is linked to\u0000 incumbents that postpone devaluations until the successor steps in. This pattern of\u0000 broken promises is typical until 1999, but it becomes exceptional thereafter.","PeriodicalId":100390,"journal":{"name":"Economía Informa","volume":"93 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80262575","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper develops a static general equilibrium model of occupational choice with heterogeneity in both labor and entrepreneurial skills that generates high levels of employment informality. The model uses a detailed structure of personal income taxes (PITs) and subsidies to formal workers to capture the labor wedges present in many countries. These features enable the model to assess how changes in PITs and subsidies affect labor market outcomes and the government’s fiscal accounts. The model is calibrated for Mexico, which, like many developing countries, has high levels of labor informality. The model’s simulations shed light on the impact of a series of reforms to PITs and subsidy schemes aimed at increasing labor formality among low-income workers. The results suggest that adjusting the current structure of the formal employment subsidy combined with PIT exemptions for low-income workers could reduce informality while marginally improving the government’s fiscal balance.
{"title":"Taxing Labor Income in an Economy with High Employment Informality","authors":"A. Antón, Alejandro Rasteletti","doi":"10.31389/eco.225","DOIUrl":"https://doi.org/10.31389/eco.225","url":null,"abstract":"This paper develops a static general equilibrium model of occupational choice with\u0000 heterogeneity in both labor and entrepreneurial skills that generates high levels of\u0000 employment informality. The model uses a detailed structure of personal income taxes\u0000 (PITs) and subsidies to formal workers to capture the labor wedges present in many\u0000 countries. These features enable the model to assess how changes in PITs and subsidies\u0000 affect labor market outcomes and the government’s fiscal accounts. The model is\u0000 calibrated for Mexico, which, like many developing countries, has high levels of labor\u0000 informality. The model’s simulations shed light on the impact of a series of reforms to\u0000 PITs and subsidy schemes aimed at increasing labor formality among low-income workers.\u0000 The results suggest that adjusting the current structure of the formal employment\u0000 subsidy combined with PIT exemptions for low-income workers could reduce informality\u0000 while marginally improving the government’s fiscal balance.","PeriodicalId":100390,"journal":{"name":"Economía Informa","volume":"144 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77452835","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT:We study the effect of a trade-induced competitive shock, defined as rising import competition from China, on Chilean manufacturing plants. For identification, we exploit the fact that in 1995–2006, Chinese import penetration increased sharply in Chile, but this expansion varied widely across manufacturing industries. We use Chinese export growth in high-income industry-country pairs as an instrument for Chinese import penetration. Our results suggest that plants in more exposed industries exhibit relative declines in revenue, employment, and physical capital and face a higher probability of exiting the panel than comparable plants in less exposed industries. All these effects are concentrated among establishments with low initial levels of productivity.
{"title":"Heterogeneous Effects of Chinese Import Competition on Chilean Manufacturing Plants","authors":"A. César, Guillermo Falcone","doi":"10.1353/eco.2020.0002","DOIUrl":"https://doi.org/10.1353/eco.2020.0002","url":null,"abstract":"ABSTRACT:We study the effect of a trade-induced competitive shock, defined as rising import competition from China, on Chilean manufacturing plants. For identification, we exploit the fact that in 1995–2006, Chinese import penetration increased sharply in Chile, but this expansion varied widely across manufacturing industries. We use Chinese export growth in high-income industry-country pairs as an instrument for Chinese import penetration. Our results suggest that plants in more exposed industries exhibit relative declines in revenue, employment, and physical capital and face a higher probability of exiting the panel than comparable plants in less exposed industries. All these effects are concentrated among establishments with low initial levels of productivity.","PeriodicalId":100390,"journal":{"name":"Economía Informa","volume":"13 1","pages":"1 - 60"},"PeriodicalIF":0.0,"publicationDate":"2020-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91307874","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT:This paper examines the predictive power of different global rankings on country growth. An influential framework to shape policy decisions is to look at a specific global ranking and implement policies to reduce gaps with respect to best practices or the frontier. Using panel data regressions, we show that different rankings predict growth with quite dissimilar levels of success. Rankings with a focus on government effectiveness or, to a lesser extent, on globalization offer statistically significant and economically relevant guidance when we consider three-year-ahead growth. Others, usually presented as focused on competitiveness assessments, show zero correlation with future growth. When there are effects, they appear in trend, rather than cyclical, GDP and in foreign direct investment. Total factor productivity growth and exports do not change appreciably. We do not detect nonlinear effects.
{"title":"All That Glitters Is Not Gold: A Ranking of Global Rankings","authors":"Ela Díaz, R. Valdes","doi":"10.1353/eco.2020.0001","DOIUrl":"https://doi.org/10.1353/eco.2020.0001","url":null,"abstract":"ABSTRACT:This paper examines the predictive power of different global rankings on country growth. An influential framework to shape policy decisions is to look at a specific global ranking and implement policies to reduce gaps with respect to best practices or the frontier. Using panel data regressions, we show that different rankings predict growth with quite dissimilar levels of success. Rankings with a focus on government effectiveness or, to a lesser extent, on globalization offer statistically significant and economically relevant guidance when we consider three-year-ahead growth. Others, usually presented as focused on competitiveness assessments, show zero correlation with future growth. When there are effects, they appear in trend, rather than cyclical, GDP and in foreign direct investment. Total factor productivity growth and exports do not change appreciably. We do not detect nonlinear effects.","PeriodicalId":100390,"journal":{"name":"Economía Informa","volume":"102 1","pages":"223 - 254"},"PeriodicalIF":0.0,"publicationDate":"2020-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77114234","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT:This paper explores the role of specific structural distortions in explaining Mexico’s weak productivity growth through the misallocation of resources across firms. The paper makes two contributions. First, we show that there is a close correlation between the level of resource misallocation and per capita income across Mexican states. Second, we exploit the large variation in resource misallocation within industries and across states, together with unusually rich data at the establishment, local, and industry levels, to shed light on its determinants. We identify several well-defined and observable distortions that have a statistically and economically meaningful effect on productivity via resource misallocation. In particular, we find that misallocation rises with the prevalence of labor informality, crime, corruption, and market concentration and with weaker access to financial and telecommunications services.
{"title":"The Drivers and Consequences of Resource Misallocation: Exploiting Variation across Mexican Industries and States","authors":"F. Misch, Christian Saborowski","doi":"10.1353/eco.2020.0003","DOIUrl":"https://doi.org/10.1353/eco.2020.0003","url":null,"abstract":"ABSTRACT:This paper explores the role of specific structural distortions in explaining Mexico’s weak productivity growth through the misallocation of resources across firms. The paper makes two contributions. First, we show that there is a close correlation between the level of resource misallocation and per capita income across Mexican states. Second, we exploit the large variation in resource misallocation within industries and across states, together with unusually rich data at the establishment, local, and industry levels, to shed light on its determinants. We identify several well-defined and observable distortions that have a statistically and economically meaningful effect on productivity via resource misallocation. In particular, we find that misallocation rises with the prevalence of labor informality, crime, corruption, and market concentration and with weaker access to financial and telecommunications services.","PeriodicalId":100390,"journal":{"name":"Economía Informa","volume":"30 1","pages":"61 - 96"},"PeriodicalIF":0.0,"publicationDate":"2020-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78225859","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT:The Central Bank of Chile determines Chile’s monetary policy rate and circulates press releases that explain policy decisions after each of its policy meetings. The information contained in these press releases includes current policies, economic outlook, and signals about likely future policies. In this paper, we examine this type of policy communication by using semi-automated content analysis to study the information contained in the releases. Based on this information, we create a quantitative measure that we call the sentiment score index, which we then use to evaluate the effectiveness of the central bank’s communication strategy. In this examination, we analyze whether the central bank’s communication conveys information regarding the future path of the policy rate. We also study the impact of the monetary policy statement on financial markets. We find that the central bank’s communication provides information that helps anticipate the future stance of monetary policy and that causes significant short-term impacts on equity markets.
{"title":"Signaling and Financial Market Impact of Chile’s Central Bank Communication: A Content Analysis Approach","authors":"Mario Gonzalez, R. Tadle","doi":"10.1353/eco.2020.0005","DOIUrl":"https://doi.org/10.1353/eco.2020.0005","url":null,"abstract":"ABSTRACT:The Central Bank of Chile determines Chile’s monetary policy rate and circulates press releases that explain policy decisions after each of its policy meetings. The information contained in these press releases includes current policies, economic outlook, and signals about likely future policies. In this paper, we examine this type of policy communication by using semi-automated content analysis to study the information contained in the releases. Based on this information, we create a quantitative measure that we call the sentiment score index, which we then use to evaluate the effectiveness of the central bank’s communication strategy. In this examination, we analyze whether the central bank’s communication conveys information regarding the future path of the policy rate. We also study the impact of the monetary policy statement on financial markets. We find that the central bank’s communication provides information that helps anticipate the future stance of monetary policy and that causes significant short-term impacts on equity markets.","PeriodicalId":100390,"journal":{"name":"Economía Informa","volume":"42 1","pages":"127 - 178"},"PeriodicalIF":0.0,"publicationDate":"2020-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88462220","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT:The hypothesis on the strategic use of debt argues that governments issue more debt when facing higher probabilities of electoral defeat. Testing this hypothesis has proven challenging, since measures of those probabilities are potentially endogenous. However, during presidential transitions, the probability of electoral defeat becomes one if the incumbent was defeated in the election and zero if the incumbent was reelected. I thus use ex post electoral outcomes as a proxy of the probability of electoral defeat to construct measures of the electoral surprise and to estimate their impact on the budget deficit. Monthly data from Latin American democracies in 1980–2005 reveal that higher magnitudes of surprise defeats (wins) produce higher (lower) deficits when the executive controls the legislature, but there is no effect when the legislature is controlled by the opposition. While previous studies find that unified governments facilitate the manipulation of fiscal resources for electoral gain, here I show that such manipulation is extended even beyond electoral defeats, during presidential transitions.
{"title":"Strategic Debt and Unified Governments: Evidence from Latin American Presidential Transitions","authors":"Pablo Garofalo","doi":"10.1353/eco.2020.0004","DOIUrl":"https://doi.org/10.1353/eco.2020.0004","url":null,"abstract":"ABSTRACT:The hypothesis on the strategic use of debt argues that governments issue more debt when facing higher probabilities of electoral defeat. Testing this hypothesis has proven challenging, since measures of those probabilities are potentially endogenous. However, during presidential transitions, the probability of electoral defeat becomes one if the incumbent was defeated in the election and zero if the incumbent was reelected. I thus use ex post electoral outcomes as a proxy of the probability of electoral defeat to construct measures of the electoral surprise and to estimate their impact on the budget deficit. Monthly data from Latin American democracies in 1980–2005 reveal that higher magnitudes of surprise defeats (wins) produce higher (lower) deficits when the executive controls the legislature, but there is no effect when the legislature is controlled by the opposition. While previous studies find that unified governments facilitate the manipulation of fiscal resources for electoral gain, here I show that such manipulation is extended even beyond electoral defeats, during presidential transitions.","PeriodicalId":100390,"journal":{"name":"Economía Informa","volume":"1 1","pages":"126 - 97"},"PeriodicalIF":0.0,"publicationDate":"2020-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79949121","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT:Exploring the expansion of FIES—a large student lending program in Brazil— we test whether eligibility for subsidized student lending causes tuition to rise, in accordance with the Bennett hypothesis. FIES rules created arguably exogenous variation in eligibility across different majors and higher education institutions, which we exploit in a difference-indifferences framework. Using unique information on tuition, we document that FIES eligibility caused tuition to rise. We then estimate a structural demand model to explore whether a reduction in the sensitivity of demand to price increases is one of the possible mechanisms behind this credit-driven tuition rise. Our results show that FIES expansion is associated with a reduction in the tuition elasticity of demand.
{"title":"The Effect of the Availability of Student Credit on Tuition: Testing the Bennett Hypothesis Using Evidence from a Large-Scale Student Loan Program in Brazil","authors":"João M. P. De Mello, I. F. Duarte","doi":"10.1353/eco.2020.0000","DOIUrl":"https://doi.org/10.1353/eco.2020.0000","url":null,"abstract":"ABSTRACT:Exploring the expansion of FIES—a large student lending program in Brazil— we test whether eligibility for subsidized student lending causes tuition to rise, in accordance with the Bennett hypothesis. FIES rules created arguably exogenous variation in eligibility across different majors and higher education institutions, which we exploit in a difference-indifferences framework. Using unique information on tuition, we document that FIES eligibility caused tuition to rise. We then estimate a structural demand model to explore whether a reduction in the sensitivity of demand to price increases is one of the possible mechanisms behind this credit-driven tuition rise. Our results show that FIES expansion is associated with a reduction in the tuition elasticity of demand.","PeriodicalId":100390,"journal":{"name":"Economía Informa","volume":"10 1","pages":"179 - 222"},"PeriodicalIF":0.0,"publicationDate":"2020-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81590045","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-08-11DOI: 10.18800/economia.202002.004
Fabiana A. Alves, Osvaldo Candido
Combining data from the last three editions of the Programme for International Student Assessment (PISA) with a multilevel approach, we aim to assess the effect of Latin American schools on student attainment and identify factors that contribute to their performance. It is found that family background, students’ characteristics and school community profile (peer effect) are paramount in explaining student performance. Regarding the school facilities, the disciplinary climate in the classroom and the existence and adequacy of pedagogical resources are the determinants that stood out the most. Moreover, the use of a multilevel approach is of utmost importance, since a considerable art of student performance variation is explained by differences among schools (school effect). Finally, the peer effect and the school effect suggest that the socioeconomic inequality in Latin American countries is quite important in determining the students’ performance.
{"title":"School Effect and Student Performance: a Latin American Assessment from PISA","authors":"Fabiana A. Alves, Osvaldo Candido","doi":"10.18800/economia.202002.004","DOIUrl":"https://doi.org/10.18800/economia.202002.004","url":null,"abstract":"Combining data from the last three editions of the Programme for International Student Assessment (PISA) with a multilevel approach, we aim to assess the effect of Latin American schools on student attainment and identify factors that contribute to their performance. It is found that family background, students’ characteristics and school community profile (peer effect) are paramount in explaining student performance. Regarding the school facilities, the disciplinary climate in the classroom and the existence and adequacy of pedagogical resources are the determinants that stood out the most. Moreover, the use of a multilevel approach is of utmost importance, since a considerable art of student performance variation is explained by differences among schools (school effect). Finally, the peer effect and the school effect suggest that the socioeconomic inequality in Latin American countries is quite important in determining the students’ performance.","PeriodicalId":100390,"journal":{"name":"Economía Informa","volume":"37 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89511371","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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