New Economics Papers
on Central and South America
Issue of 2010‒04‒17
seven papers chosen by

  1. Is Corruption Really Bad for Inequality? Evidence from Latin America By Carlyn Dobson; Antonio Rodríguez
  2. With Exhaustible Resources, Can A Developing Country Escape From The Poverty Trap? By Cuong Le Van; Katheline Schubert; Tu-Anh Nguyen
  3. A Concise History of Exchange Rate Regimes in Latin America By Roberto Frenkel; Martin Rapetti
  4. Peace and goodwill? Using an experimental game to analyse the Desarrollo y Paz initiative in Colombia By Orazio Attanasio; Luca Pellerano; David Phillips
  5. The Decline of Large Brazilian Companies By Alexandre Pavan Torres; Emílio Araujo Menezes; Fernando A. Ribeiro Serra; Manuel Portugal Ferreira
  6. Understanding the mechanisms of economic development By Angus S. Deaton
  7. An Axiomatic Approach to the Measurement of Corruption: Theory and Applications By James E. Foster, Andrew W. Horowitz and Fabio Méndez

  1. By: Carlyn Dobson (Nothingam Business School); Antonio Rodríguez (School of Public Health, Department of Health Services Research, University of Aarhus)
    Abstract: This paper presents new evidence on the relationship between corruption and income inequality. Using a panel data methodology, we find that lower corruption is associated with higher income inequality in Latin America. This result is in contrast to other empirical studies but it makes sense in Latin America for a number of reasons. The finding of an inverse relationship between inequality and corruption suggests that institutional reform policies by themselves may be misguided.
    Keywords: Corruption, Inequality, Latin America
    JEL: D73 O15 O43
    Date: 2010–03
  2. By: Cuong Le Van (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, University of Exeter Business School - University of Exeter Business School); Katheline Schubert (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Tu-Anh Nguyen (Central Insitute of Economic Management - Central Insitute of Economic Management)
    Abstract: This paper studies the optimal growth of a developing non-renewable natural resource producer. It extracts the resource from its soil, and produces a single consumption good with man-made capital. More- over, it can sell the extracted resource abroad and use the revenues to buy an imported good, which is a perfect substitute of the domes- tic consumption good. The domestic technology is convex-concave, so that the economy may be locked into a poverty trap. We show that the extent to which the country will escape from the poverty trap depends, besides the interactions between its technology and its impatience, on the characteristics of the resource revenue function, on the level of its initial stock of capital, and on the abundance of the natural resource.
    Keywords: optimal growth, non-renewable resource, convex-concave technology, poverty trap, resource curse.
    Date: 2010
  3. By: Roberto Frenkel (Centro de Estudios de Estado y Sociedad (CEDES)); Martin Rapetti (University of Massachusetts Amherst)
    Abstract: The paper analyzes exchange rate regimes implemented by the major Latin American countries since the Second World War, with special attention on the period of the second globalization process beginning in the 1970s. The analysis follows a historical narrative aiming to provide an understanding of the domestic and external circumstances in which various regimes were adopted. A simple conceptual framework is developed in order to emphasize how the exchange rate regime may affect key nominal and real variables in a small open economy. After an overview of the main trends followed by the major countries in the region over the last 60 years, the paper focuses on regimes that were implemented 1) with stabilization purposes (nominal anchors) and 2) with the aim of targeting the level of the real exchange rate. These two sections analyze in greater detail some experiences illustrating the pros and cons of both strategies. The paper closes with an assessment about exchange rate experiences in Latin America. JEL Categories: F41, N16, F31
    Keywords: Latin America, exchange rate regimes, real exchange rate, inflation targeting.
    Date: 2010–02
  4. By: Orazio Attanasio (Institute for Fiscal Studies and University College London); Luca Pellerano (Institute for Fiscal Studies); David Phillips (Institute for Fiscal Studies)
    Abstract: <p><p>Several decades of conflict, rebellion and unrest severely weakened civil society in parts of Colombia. Desarollo y Paz is the umbrella term used to describe the set of locally-led initiatives that aim at addressing this problem through initiatives to promote sustainable economic development and community cohesion and action. </p><p></p><p> </p><p></p><p>In this paper we analyse the findings from a series of 'public good' games that were conducted between November 2005 and February 2007 in 104 municipalities in rural and urban Colombia with mainly poor participants. The data covers municipalities both with ('treatment') and without ('control') a PRDP in place, and within the 'treatment' municipalities, both beneficiaries and non beneficiaries of the PRDP initiative. The data for 'control' municipalities was collected as part of the evaluation of Familias en Accion (FeA), Colombia's conditional cash transfer programme. </p><p></p><p> </p><p></p><p>The game is structured as a typical free-rider problem with the act of contributing to the 'public good' (a collective money pot) being always dominated by non-contribution. We interpret contribution as an act consistent with a high degree of social capital. </p><p></p><p> </p><p></p><p>Potentially endogenous selection into the programme makes identifying programme effects difficult but we find strong and suggestive evidence that exposure to PRDPs improve social capital and that this extends beyond direct beneficiaries of the programme. In particular, the duration of programme operation and the proportion of programme beneficiaries in a game session increase contribution to the public good, suggesting that in order to have a major impact the programme must be sufficiently 'intensive'.</p></p>
    JEL: C93 I38 D74 H41
    Date: 2009–10
  5. By: Alexandre Pavan Torres (Universidade Federal de Santa Catarina); Emílio Araujo Menezes (Universidade Federal de Santa Catarina); Fernando A. Ribeiro Serra (Universidade do Sul de Santa Catarina); Manuel Portugal Ferreira (Instituto Politécnico de Leiria)
    Abstract: This article focuses on the organizational decline and, more specifically, the evolution of a selected group of Brazilian companies that were included in the Largest and Best ranking of Exame magazine in the period between 1974 and 2006. Our descriptive analysis shows two main effects: firstly a high rate of decline among the largest Brazilian enterprises and secondly, that there is an acceleration of the decline process, that is: the companies have become gradually less capable of maintaining a superior level of competitiveness during an extended period of time. The study of the strategy, as a discipline, that seeks to understand and aid companies to capture and sustain a competitive advantage shall be reinforced by the understanding of the causes of unsuccessfulness and the loss of their ability to sustain competitiveness. Organizational Decline is, in this context, a process that warrants further analysis.
    Keywords: organizational decline, Brazil, strategy
    JEL: M0 M1
    Date: 2010–03–11
  6. By: Angus S. Deaton
    Abstract: I argue that progress in understanding economic development (as in other branches of economics) must come from the investigation of mechanisms; the associated empirical analysis can usefully employ a wide range of experimental and non-experimental methods. I discuss three different areas of research: the life-cycle saving hypothesis and its implication that economic growth drives higher rates of national saving, the theory of speculative commodity storage and its implications for the time-series behavior of commodity prices, and the relationship between economic growth and nutritional improvement. None of these projects has yet been entirely successful in offering a coherent account of the evidence, but all illustrate a process of trial and error, in which although mechanisms are often rejected, unlikely theoretical propositions are sometimes surprisingly verified, while in all cases there is a process of learning about and subsequently modifying our understanding of the underlying mechanisms
    JEL: C01 E21 O1 O15 O16 O4
    Date: 2010–04
  7. By: James E. Foster, Andrew W. Horowitz and Fabio Méndez
    Abstract: In this paper we demonstrate that the axiomatic measurement approach developed in the poverty and inequality literature can be usefully applied to the measurement of corruption. We develop a conceptual framework for organizing corruption data and discuss several objective, aggregate corruption measures consistent with axiomatic requirements. We then provide an empirical application of the methodology and estimate the respective corruption measures for a sample of over 25 countries during the year 2000. Our empirical analysis reveals significant discrepancies between the country rankings generated by these measures and those provided by the Corruption Perception Index (CPI) from Transparency International. To our knowledge, this paper represents a first analysis of corruption measurement using an axiomatic framework.
    Keywords: corruption, illegal behaviour, corruption measurement, legal institutions
    JEL: K42 O17 P37
    Date: 2009–05

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.