New Economics Papers
on Central and South America
Issue of 2006‒05‒13
four papers chosen by

  1. Individual’s religiosity enhances trust: Latin American evidence for the puzzle By Pablo Brañas-Garza; Maximo Rossi; Dyane Zaclicever
  2. The Impact of Brazil’s Tax-Benefit System on Inequality and Poverty By Herwig Immervoll; Horacio Levy; José Ricardo Nogueira; Cathal O’Donoghue; Rozane Bezerra de Siqueira
  3. Ineffective controls on capital inflows under sophisticated financial markets: Brazil in the nineties By Márcio Gomes Pinto Garcia; Bernando S. de M. Carvalho
  4. Creating a Regional Security Community in Southern Latin America: The Institutionalisation of the Regional Defence and Security Policies By Daniel Flemes

  1. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada); Maximo Rossi (Universidad de la República, Uruguay); Dyane Zaclicever (Universidad de la República, Uruguay)
    Abstract: This paper explores the effect of religious observance and affiliation to the dominant religion (Catholicism) on trust in institutions, towards others and market attitudes. The analysis is performed using a Latin American database of twenty thousand respondents from 2004 by means of ordered probit models. The most interesting results are: i) Trust toward others is positively correlated with religious observance and with Catholic affiliation. ii) There is a positive correlation between trust in the government, in the police, in the armed forces, in the judiciary and in the banking system and religious practice in general. Identical positive results are obtained for Catholic affiliation. iii) Correlations with attitudes toward the market, in general, are heterogeneous but never negative. In sum, individual’s level of religiosity crucially affects trust in institutions and toward peers. We also found that Catholicism encourages both trust in institutions and towards others. Thus, we found a positive effect of “religiosity” on social capital. In fact, we never found any negative (and significant) effect on the variables considered.
    Keywords: trust in institutions, economic behavior, religious practise, Catholics.
    JEL: Z12 Z13
    Date: 2006–05–05
  2. By: Herwig Immervoll (ISER, University of Essex and IZA Bonn); Horacio Levy (ISER, University of Essex); José Ricardo Nogueira (Universidade Federal de Pernambuco, Recife); Cathal O’Donoghue (National University of Ireland, Galway and IZA Bonn); Rozane Bezerra de Siqueira (Universidade Federal de Pernambuco, Recife)
    Abstract: The Brazilian government raises taxes amounting to 35% of GDP and spends more than two thirds of this on social programmes. These shares are in pair with the OECD averages and well in excess of Latin America averages. However, while tax-benefit systems in most OECD countries reduce income disparities very significantly, the Brazilian government has been much less successful in alleviating inequality and poverty. Focussing on taxes and cash transfers, this paper investigates the impact of the government budget on the income distribution in Brazil, and evaluates its efficiency and effectiveness in reducing inequality and poverty. We present BRAHMS, a new tax-benefit microsimulation model for Brazil and illustrate its use by evaluating the impact of policy on economic inequality. It is argued that microsimulation provides a valuable analytical tool for policy makers in emerging and developing countries in particular.
    Keywords: Brazil, inequality, poverty, redistribution, microsimulation
    JEL: H22 H23 C81
    Date: 2006–05
  3. By: Márcio Gomes Pinto Garcia (Department of Economics PUC-Rio); Bernando S. de M. Carvalho (Gávea Investimentos)
    Abstract: We analyze the Brazilian experience in the 1990s to access the effectiveness of controls on capital inflows in restricting financial inflows and changing their composition towards long term flows. Econometric exercises (VARs) lead us to conclude that controls on capital inflows were effective in deterring financial inflows for only a brief period, from two to six months. The hypothesis to explain the ineffectiveness of the controls is that financial institutions performed several operations aimed at avoiding capital controls. We then conducted interviews with market players in order to provide several examples of the financial strategies that were used in this period to invest in the Brazilian fixed income market while bypassing capital controls. The main conclusion is that controls on capital inflows, while they may be desirable, are of very limited effectiveness under sophisticated financial markets. Therefore, policy-makers should avoid spending the scarce resources of bank supervision trying to implement them and focus more in improving economic policy.
    JEL: E44 F32 F34 F36 G15
    Date: 2006–03
  4. By: Daniel Flemes (GIGA Institute for Ibero-American Studies)
    Abstract: Interdependence, collective identities and common institutions are the preconditions for the evolution of a pluralistic security community. While the interaction of the states of Southern Latin America already meets the first two criteria, this article focuses on the third one, particularly the common institutions of the regional defence and security sector. The bilaterally organised defence cooperation has been attested democratic deficiencies because military actors are over-proportionally represented in these committees. Military nationalism and an exaggerated notion of national sovereignty in the military academies of the region can be regarded as cooperation hampering qualifiers. Non-military threats (organised crime, transnational terrorism) have centripetal effects on the subregional cooperation, which is structured multilaterally and shows a relatively high degree of institutionalisation.
    Keywords: security community, regional cooperation, defence and security policies, Latin America, Mercosur, Argentina, Brazil, Chile
    Date: 2005–12

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