New Economics Papers
on Central and South America
Issue of 2007‒11‒17
six papers chosen by

  1. The Political Economy of Exchange Rate in Brazil By Cristina Terra
  2. The impact of the Central America free trade agreement on the Central American textile maquila industry: By Jansen, Hans G.P.; Morley, Sam; Kessler, Gloria; Piñeiro, Valeria; Sánchez, Marco; Torero, Maximo
  3. What Do You Think of the IDB? Conclusions from an Opinion Survey of Latin American Leaders about Multilateral Organizations By Marina Bassi
  4. Occupational Training to Reduce Gender Segregation: The Impacts of ProJoven By Hugo Ñopo; Jaime Saavedra-Chanduvi; Miguel Robles
  5. Discrimination in Latin America: An Elephant in the Room? By Alberto Chong; Hugo Ñopo
  6. An Extension of the Blinder-Oaxaca Decomposition to a Continuum of Comparison Groups By Hugo Ñopo

  1. By: Cristina Terra
    Date: 2007–10
  2. By: Jansen, Hans G.P.; Morley, Sam; Kessler, Gloria; Piñeiro, Valeria; Sánchez, Marco; Torero, Maximo
    Abstract: "While the Central America Free Trade Agreement (CAFTA) remains a hotly debated issue in all five Central American countries that are part of the treaty, most discussions are based on preconceived opinions rather than grounded in research-based results. The point of departure of the paper is that the provisions in the agreement concerning the textile maquila industry are likely to have a significant impact on household welfare, despite the already existing preferential access of textile maquila exports to the U.S. market under the rules of origin set by the Caribbean Basin Initiative (CBI) and the U.S.–Caribbean Basin Trade Partnership Act (CBTPA). What CAFTA does for maquila production in Central America is to make permanent and expand the liberalized rules of origin (granted temporarily and unilaterally by the United States and likely to be revoked in 2008) for inputs to the maquila industry. Therefore, to assess the true impact of the maquila provisions in CAFTA, we need to compare the situations without CAFTA or the CBI/CBTPA with the situation that includes CAFTA, instead of the situations before and after CAFTA. The objectives of the paper are to analyze the likely impacts of CAFTA on the apparel value chain in Central America; assess the bottlenecks and constraints to productivity growth in the apparel industry; and identify the requirements for continuing success in the value chain. In researching the paper, we made use of a variety of methodologies, including literature review, Internet sourcing, field visits, and personal interviews with key players in the sector in all five Central American CAFTA countries. We also used computable general equilibrium (CGE) models and combined these with microsimulations based on household surveys, in order to quantify the likely effect of the maquila provisions in CAFTA on economic growth, employment, and poverty. The results suggest that, depending on the country, the maquila provisions in CAFTA add between 0.01% and 1.4% to annual economic growth and between 0.005% and 1.4% per year to employment of particularly female unskilled labor. As a result and depending on the specific country, the rate of total poverty is likely to fall by between virtually zero (Costa Rica) and 0.73% (Honduras) per year relative to a situation without CAFTA's maquila provisions. However, the model-based analyses do not take account of the fact that the quota system for textiles and clothing (the so-called Agreement on Textiles and Clothing, or ATC) expired January 1, 2005, greatly improving the access of China and other low-cost exporters to the U.S. market. Although China has so far voluntarily restricted its apparel exports to the U.S. market, in the longer term market share will increasingly go to countries with the highest comparative advantage. The qualitative analysis in the paper suggests that a survival strategy for the Central American maquila industry should consist of two main elements. First, and in order to make maximum use of the liberalized rules of origin under CAFTA, countries should increasingly move toward full-package production instead of pure assembly. Second, identification of market niches that demand higher-quality apparel produced by firms that respect socially responsible production conditions and are able to deliver fast responsiveness is a crucial means by which the Central American textile industry can develop a comparative advantage vis-à-vis Asian suppliers, needed to survive in an increasingly competitive export market." from Authors' Abstract
    Keywords: Apparel industry, Central America Free Trade Agreement (CAFTA), CGE model, Maquila,
    Date: 2007
  3. By: Marina Bassi (Inter-American Development Bank)
    Abstract: This document analyzes the results of a Web-based survey conducted by the Research Department to assess how the IDB is viewed by political and corporate leaders in the region. The questionnaire included 31 questions that compared the IDB to the IMF, World Bank, CAF, BCIE and CDB. The sample includes the responses of 336 representatives from the 26 Latin American and Caribbean IDB member countries. In general, the IDB has a better image than the other multilateral organizations in understanding development problems and contributing to their solutions. Its main comparative advantage is in the design of social service projects (education, health and social security). The IDB also is clearly perceived to outperform its peers in public sector modernization and infrastructure projects. The IDB’s weakest areas are related to its efficiency (lengthy loan approvals) and efforts to help discipline macroeconomic and other policies. Respondents believe that all international organizations should expand their technical assistance and knowledge activities not tied to projects or loans. For the IDB, the survey results also assign a high priority to increasing projects in social areas.
    Date: 2007–10
  4. By: Hugo Ñopo (Inter-American Development Bank); Jaime Saavedra-Chanduvi (World Bank); Miguel Robles (University of California)
    Abstract: This paper discusses program evaluation for ProJoven, the Peruvian youth labor training program. Complementing detailed fieldwork, the econometric work implements a two-stage matching procedure on propensity scores, gender and labor income. This allows identification of differentiated program impacts on males and females and attacks the problem of Ashenfelter’s Dips. The evaluation shows substantial differences in ProJoven’s impact for males and females. Eighteen months after participation in the program, employment rates for females improve by about 15 percent (while employment for males reduces by 11 percent), gender occupational segregation reduces by 30 percent, and females’ labor income improves by 93 percent (while males’ earnings increase by 11 percent). Nonetheless, gender equality promotion represents only 1.5 percent of ProJoven’s budget. These results suggest that labor-training programs that promote equal gender participation have disproportionately positive effects on outcomes for women trainees in a labor market with substantial gender differences.
    Date: 2007–10
  5. By: Alberto Chong (Inter-American Development Bank); Hugo Ñopo (Inter-American Development Bank)
    Abstract: This paper surveys evidence on discrimination in Latin America and shows that there is a widespread perception of discrimination, especially against the poor, the uneducated and those who lack connections. The channels through which discrimination occurs may be built on the basis of economic factors. However, while perception surveys may be informative, they are less than ideal at helping pinpoint the extent and mechanisms related. Recent experimental evidence suggests little room for discriminatory practices in the region. This puzzle, where individuals perceive discrimination is in the air, but few act discriminatorily, is consistent with an explanation about stereotyping that vanishes when information flows operate well.
    Keywords: Economic Experiments, Discrimination, Latin America
    JEL: J15 J16 J71 C93 O54
    Date: 2007–10
  6. By: Hugo Ñopo (Inter-American Development Bank)
    Abstract: This paper proposes an extension of the Blinder-Oaxaca decomposition from two to a continuum of comparison groups. The proposed decomposition is then estimated for the case of racial wage differences in urban Peru, exploiting a novel data set that allows the capturing of mestizaje (racial mixtures).
    Keywords: Blinder-Oaxaca decomposition, Race, Gender, Informality
    JEL: J1 J7 O17
    Date: 2007–10

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