nep-lam New Economics Papers
on Central and South America
Issue of 2005‒05‒07
six papers chosen by
Maximo Rossi
Universidad de la República

  1. Minimum Wages in Colombia: Holding the Middle With a Bite on the Poor By Carlos A.Arango; Angélica Pachón
  2. Disinflation Costs Under Inflation Targeting in Small Open Economy Economy By Paulina Restrepo Echavarría
  3. Measuring Transactions Costs from Observed Behavior: Market Choices in Peru By Renos Vakis; Elisabeth Sadoulet; Alain de Janvry
  4. The Impact of Farmer-Field-Schools on Knowledge and Productivity: A Study of Potato Farmers in the Peruvian Andes By Erin Godtland; Elisabeth Sadoulet; Alain de Janvry; Rinku Murgai; Oscar Ortiz
  5. Public Expenditures, Bureaucratic Corruption and Economic Development By K Blackburn; N Bose; M E Haque
  6. Do Individual Accounts Postpone Retirement: Evidence from Chile By Estelle James; Alejandra Cox Edwards

  1. By: Carlos A.Arango; Angélica Pachón
    Abstract: This paper exploits the long history of the minimum wage in a relatively stable developing economy like Colombia in order to see whether it may alleviate the living conditions of low income families and reduce income inequality. The paper does not only explore how the minimum wage may serve these purposes, but also how it may distort market outcomes to do so. We found significant negative minimum wage effects on both the likelihood of being employed and hours worked for all family members, being it stronger for women, and the young and less educated people. We also found a positive effect on non-head participation especialilly in families with low human capial. But, more important, we found evidence that the minimum wage ends up being regressive, improving the living conditions of families in the middle and the upper part of the income distribution with net losses for those at the bottom.
    Keywords: Minimum wage, income distribution,income inequality, public policy.
    JEL: J31 J42 J48
    URL: http://d.repec.org/n?u=RePEc:bdr:borrec:280&r=lam
  2. By: Paulina Restrepo Echavarría
    Abstract: Since 1991, inflation in Colombia was reduced from 25% on average to about 6% more recently. Although this performance is in line with a long run inflation target of 3%, some analysts ask whether the Central Bank should continue disinflating. In this paper we present a dynamic stochastic general equilibrium model of inflation targeting for a small open economy to answer this question. We calibrate the model to the Colombian economy and compute the welfare cots and benefits of achieving the long run inflation target. We find that the long run welfare gains are about 4.54% in terms of capital. Furthermore, accounting for the transition the welfare gains are about 1.18% in terms of capital. Our results differ from previous findings because transition costs are introduced and our environment considers the presence of real rigidities (monopolistic competition) and nominal rigidities (sticky information) in a small open economy. We also analyze the sensitivity of the results to some key parameters and conclude that higher price flexibility leads to lower gains from reducing inflation and that a country with markups. The weight given to the inflation gap in the monetary policy rule is important, as a more aggressive Central Bank can improve welfare. Finally, we find that disinflation is more expensive in the case of a closed economy.
    Keywords: Small Open Economy,Inflation Targeting,Compensation;Colombia.
    JEL: E31 E32 E52 F41
    URL: http://d.repec.org/n?u=RePEc:bdr:borrec:328&r=lam
  3. By: Renos Vakis (World Bank); Elisabeth Sadoulet (University of California, Berkeley); Alain de Janvry (University of California, Berkeley)
    Abstract: Farmers incur proportional and fixed transactions costs in selling their crops on markets. Using data for Peruvian potato farmers, we propose a method to measure these transactions costs. When opportunities exist to sell a crop on alternative markets, the observed choice of market can be used to infer a monetary measure of transactions costs in market participation. The market choice model is first estimated at the reduced form level with a conditional logit, as a function of variables that explain transactions costs. We then use these market choice equations to control for selection in predicting the idiosyncratic prices that would be received on all markets and the idiosyncratic proportional transactions costs that would be incurred to reach all markets. The net between the two gives us a measure of effective farm-level prices. This allows us to estimate a semi-structural conditional logit of the market choice model. In this model, the choice of market is a function of predicted effective farm-level prices, and of market information that accounts for fixed transactions costs. We can use the estimated coefficients to derive the price equivalence of the fixed cost due to information. We find that the information on market price that farmers receive from their neighbors reduces fixed transactions costs by the equivalent of doubling the price received, and is equal to four times the average transportation cost.
    Keywords: transactions costs, market choice, information,
    Date: 2003–10–01
    URL: http://d.repec.org/n?u=RePEc:cdl:agrebk:962&r=lam
  4. By: Erin Godtland (U.S. General Accounting Office); Elisabeth Sadoulet (University of California, Berkeley); Alain de Janvry (University of California, Berkeley); Rinku Murgai (Development Economics Research Group, The World Bank); Oscar Ortiz (International Potato Center, Consultative Group on Agricultural Research)
    Abstract: Using survey-data from Peru, this paper evaluates the impact of a pilot farmer-field-school (FFS) program on farmers' knowledge of integrated pest management(IPM) practices related to potato cultivation. We use both regression analysis controlling for participation and a propensity score matching approach to create a comparison group similar to the FFS participants in observable characteristics. Results are robust across the two approaches as well as with different matching methods. We find that farmers who participate in the program have significantly more knowledge about IPM practices than those in the non-participant comparison group. We also find that improved knowledge about IPM practices has a significant impact on productivity in potato production.
    Keywords: agricultural innovations, agricultural productivity, integrated pest management, potato cultivation,
    Date: 2003–11–01
    URL: http://d.repec.org/n?u=RePEc:cdl:agrebk:963&r=lam
  5. By: K Blackburn; N Bose; M E Haque
    Abstract: This paper presents a dynamic general equilibrium analysis of public sector corruption and economic growth. In an economy with government intervention and capital accumulation, state-appointed bureaucrats are charged with the responsibility for procuring public goods which contribute to productive efficiency. Corruption arises because of an opportunity for bureaucrats to appropriate public funds by misinforming the government about the cost and quality of public goods provision. The incentive for each bureaucrat to do this depends on economy-wide outcomes which, in turn, depend on the behaviour of all bureaucrats. We establish the existence of multiple development regimes, together with the possibility of multiple, frequency-dependent equilibria. The predictions of our analysis accord strongly with recent empirical evidence on the causes and consequences of corruption in public office.
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:man:cgbcrp:53&r=lam
  6. By: Estelle James (Urban Institute); Alejandra Cox Edwards (California State University)
    Abstract: Postponing retirement will become increasingly important as a means to increase the labor force, its output and old age security, as populations age. Recent research has focused on incentives stemming from the social security system that influence the worker’s decision to retire. Defined benefit systems (both public and private) often contain penalties for postponing access to pensions or continuing to work while receiving a pension. In contrast, the tight link between contributions and accumulations and the actuarial conversion of accumulations into pensions in privately managed defined contribution systems may lead workers to postpone pensions or to continue working after withdrawals begin. The experience of Chile, which implemented its new system in 1982, offers an opportunity to test if the change in incentives has indeed produced the expected change in retirement behavior. Using probit analysis of household survey data from 1960 to 2002, we estimate the impact of the pension reform on the probability of 1) becoming a pensioner and 2) dropping out of the labor force, for older workers. We find strong effects of the new system on both propensities, in the aggregate and at the individual level after controlling for individual and macro-economic variables. In particular, restricted access to early pensions and the exemption of pensioners from the pension payroll tax appear to exert a powerful effect on labor force participation rates.
    Date: 2005–05
    URL: http://d.repec.org/n?u=RePEc:mrr:papers:wp098&r=lam

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