New Economics Papers
on Central and South America
Issue of 2009‒12‒11
six papers chosen by

  1. Schooling, Cognitive Skills, and the Latin American Growth Puzzle By Hanushek, Eric A.; Woessmann, Ludger
  2. Employment and Inequality of Outcomes in Brazil By Menezes, Naercio Filho; Scorzafave, Luiz
  3. Institutional Quality and Fiscal Transparency By Nicolo Andreula; Alberto Chong; Jorge Guillen
  4. Political Institutions and Street Protests in Latin America By Fabiana Machado; Carlos Scartascini; Mariano Tommasi
  5. Financial Dependence, Formal Credit and Informal Jobs - New Evidence from Brazilian Household Data By Luis Catao; Carmen Pages; Maria Fernanda Rosales
  6. Investor Behavior and Fund Performance under a Privatized Retirement Accounts System: Evidence from Chile By Elena Krasnokutskaya; Petra Todd

  1. By: Hanushek, Eric A. (Stanford University); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: Economic development in Latin America has trailed most other world regions over the past four decades despite its relatively high initial development and school attainment levels. This puzzle can be resolved by considering the actual learning as expressed in tests of cognitive skills, on which Latin American countries consistently perform at the bottom. In growth models estimated across world regions, these low levels of cognitive skills can account for the poor growth performance of Latin America. Given the limitations of worldwide tests in discriminating performance at low levels, we also introduce measures from two regional tests designed to measure performance for all Latin American countries with internationally comparable income data. Our growth analysis using these data confirms the significant effects of cognitive skills on intra-regional variations. Splicing the new regional tests into the worldwide tests, we also confirm this effect in extended worldwide regressions, although it appears somewhat smaller in the regional Latin American data than in the worldwide data.
    Keywords: human capital, economic growth, cognitive skills, Latin America
    JEL: H4 I2 O4 N16
    Date: 2009–11
  2. By: Menezes, Naercio Filho; Scorzafave, Luiz
    Date: 2009–10
  3. By: Nicolo Andreula; Alberto Chong; Jorge Guillen
    Abstract: This paper uses new data on fiscal transparency for a cross-section of countries; these data possess several advantages. First, the data are based on in-depth reports using a standardized methodology and protocol. Second, this study covers 82 countries, more than previous comparable studies. Third, the fiscal measures used have been obtained with the collaboration of government authorities, which makes them particularly reliable. Finally, the data collection has been undertaken at a high level. These new data permit examination of a relevant but little-studied issue, the role of institutional quality in a country’s fiscal transparency. It is shown that there is in fact a causal relationship between institutions and transparency. The findings are robust to changes in specification and a host of transparency sub-measures.
    Keywords: Fiscal management, Institutions, Public administration, Transparency
    JEL: H50 H83
    Date: 2009–12
  4. By: Fabiana Machado; Carlos Scartascini; Mariano Tommasi
    Abstract: This paper argues that where institutions are strong, actors are more likely to participate in the political process through institutionalized arenas, while where they are weak, protests and other unconventional means of participation become more appealing. This relationship is explored empirically by combining country-level measures of institutional strength with individual-level information on protest participation in 17 Latin American countries. Evidence is found that weaker political institutions are associated with a higher propensity to use alternative means for expressing preferences, that is, to protest. Also found are interesting interactions between country-level institutional strength and some individual-level determinants of participation in protests.
    Keywords: Political institutions, Public policies, Institutional strength, Protests, Alternative Political Technologies, Political party representation, Ideology, Ideological extremism, Latin America
    JEL: D72 D74 D78 H89 K42
    Date: 2009–11
  5. By: Luis Catao; Carmen Pages; Maria Fernanda Rosales
    Abstract: This paper examines a much overlooked link between credit markets and formalization: since access to bank credit typically requires compliance with tax and employment legislation, firms are more likely to incur such formalization costs once bank credit is more widely available at lower cost. The relevance of this credit channel is gauged using the Rajan-Zingales measure of financial dependence and a difference-in-differences approach applied to household survey data from Brazil. It is found that formalization rates increase with financial deepening, especially in sectors where firms are typically more dependent on external finance. Also found is that, decomposing shifts in formalization rates into those within each firm size category and those between firm sizes, financial deepening significantly explains the former but not so much the latter. Some key policy implications are derived.
    Keywords: Credit Markets, Financial Dependence, Informality, Brazil
    JEL: E26 G21 O4 O16
    Date: 2009–12
  6. By: Elena Krasnokutskaya (University of Pennsylvania); Petra Todd (University of Pennsylvania)
    Abstract: In the U.S. and in Chile, there have been heated debates about the relative merits of a decentralized privatized pension system relative to a more traditional social security system. On the firm side, there are concerns that pension funds engage in anticompetitive behavior and take advantage of consumers’ by charging high fees and account maintenance changes. On the consumer side, there are concerns that consumers do not select wisely among funds and take on too much risk. Any pension system with insurance features to protect against low levels of pension accumulations is potentially subject to moral hazard problems, in the form of consumers’ taking on too much risk. In the case of Chile, the government provides a minimum pension benefit to those with low pension accumulations, which can make some consumers more willing to take risks. For these reasons, the Chilean government introduced regulations on pension fund firms’ investments designed to limit risk. This paper analyzes the determinants of consumers’ choices of pension fund and of pension fund characteristics (performance and fees), taking into account governmental regulations. In particular, it estimates a demand and supply model of the pension fund investment market using a longitudinal household dataset gathered in 2002 and 2004 in Chile, administrative data on fund choices, and longitudinal data on cost determinants of pension funds. We find that the existing regulation actually increases the level of risk in the market, reduces heterogeneity across firms, and reduces incentives for consumers to participate in the pension fund program. We suggest alternative more effective forms of regulation.
    Date: 2009–09

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