nep-lam New Economics Papers
on Central and South America
Issue of 2011‒08‒22
ten papers chosen by
Maximo Rossi
University of the Republic

  1. Ethanol expansion and indirect land use change in Brazil By Joaquim Bento de Souza Ferreira Filho; Mark Horridge
  2. Structural change, National Innovation System and balance-of-payments contraint: a theoretical and empirical analysis of the Brazilian case By João Prates Romero; Fabrício Silveira; Gustavo Britto
  3. The Relationship Between Illicit Coca Production and Formal Economic Activity in Peru By Concha Verdugo Yepes; Peter Pedroni
  4. More than you can handle : decentralization and spending ability of Peruvian municipalities By Loayza, Norman V.; Rigolini, Jamele; Calvo-Gonzalez, Oscar
  5. Structural Transformation and Productivity in Latin America By Silva, Leonardo Fonseca da; Ferreira, Pedro Cavalcanti
  6. On The Evolution of TFP in Latin America (revised) By Ferreira, Pedro Cavalcanti; Pessôa, Samuel de Abreu; Veloso, Fernando A.
  7. Micro and Macro Determinants of trade temporary barriers: the Brazilian case over the last two decades By Marcel Vaillant; Marcelo Olarreaga
  8. Public Expenditure on Education and Skill Formation: Is There a Simple Rule to Maximize Skills? By Rossana Patrón; Marcel Vaillant
  9. El traspaso de las tasas de interés en el sistema bancario uruguayo. By Diego Gianelli
  10. When more schooling is not worth the effort: another look at the dropout decisions of disadvantaged students in Uruguay. By Rossana Patrón

  1. By: Joaquim Bento de Souza Ferreira Filho (Escola Superior de Agricultura Luiz de Queiroz, Universidade de São Paulo); Mark Horridge (Centre of Policy Studies – COPS, Monash University)
    Abstract: In this paper we analyze the Indirect Land Use Change (ILUC) effects of ethanol production expansion in Brazil through the use of an inter-regional, bottom-up, dynamic general equilibrium model calibrated with the 2005 Brazilian I-O table. A new methodology to deal with ILUC effects is developed, using a transition matrix of land uses calibrated with Agricultural Censuses data. Agriculture and land use are modeled separately in each of 15 Brazilian regions with different agricultural mix. This regional detail captures a good deal of the differences in soil, climate and history that cause particular land to be used for particular purposes. Brazilian land area data distinguish three broad types of agricultural land use, Crop, Pasture, and Plantation Forestry. Between one year and the next the model allows land to move between those categories, or for Unused land to convert to one of these three, driven initially by the transition matrix, changing land supply for agriculture between years. The transition matrix shows Markov probabilities that a particular hectare of land used in one year for some use would be in an other use next period. These probabilities are modified endogenously in the model according to the average unit rentals of each land type in each region. A simulation with ethanol expansion scenario is performed for year 2020, in which land supply is allowed to increase only in states located on the agricultural frontier. Results show that the ILUC effects of ethanol expansion are of the order of 0.14 hectare of new land coming from previously unused land for each new hectare of sugar cane. This value is higher than values found in the Brazilian literature. ILUC effects for pastures are around 0.47. Finally, regional differences in sugarcane productivity are found to be important elements in ILUC effects of sugar cane expansion.
    JEL: C68 D58 E47 Q15 Q16
    Date: 2011
  2. By: João Prates Romero (Cedeplar/UFMG); Fabrício Silveira (Cedeplar/UFMG); Gustavo Britto (Cedeplar/UFMG T)
    Abstract: The paper explores the relationship between the income elasticities of demand for exports and for imports, economic growth, the technological content of local production, and the level of development of the National Innovation System (NIS). According to the literature, differences in long-run growth rates are associated with differences in the income elasticities of demand, which would in turn be determined by the maturity of the NIS. Mature NIS imply higher degrees of product diversification, leading to trade patterns which favour exports of goods with higher technological content (high income elasticity of demand), and imports of basic goods (low income elasticity). Hence, we test the relationship between the exports and imports of Brazilian high-tech products and the number of Brazilian patents registered in the USPTO, as a proxy for the level of development of the Brazilian NIS. The results of the analysis are corroborated by the investigation of innovations of the variables, through impulse response functions and forecast error decomposition, which confirm the theoretical hypothesis discussed.
    Keywords: Balance-of-Payments Constraint, Income Elasticities, Growth, Structural Change, National Innovation System.
    JEL: F43 L16 O11
    Date: 2011–08
  3. By: Concha Verdugo Yepes; Peter Pedroni
    Abstract: This paper investigates the relationship between unrecorded economic activity associated with the production of illicit coca and formally recorded economic activity in Peru. It does so by attempting to construct new regional level estimates for coca production and by implementing recently developed panel time series methods that are robust to regional heterogeneity and unobserved regional inter-dependencies. The paper finds that on balance illicit coca production crowds out formal sector production at the regional level, regardless of whether unanticipated changes occur nationally or regionally. However, total output nevertheless increases, since formal sector production is crowded out less than one for one.
    Date: 2011–08–01
  4. By: Loayza, Norman V.; Rigolini, Jamele; Calvo-Gonzalez, Oscar
    Abstract: In the past three decades, emerging countries have gone through extensive decentralization reforms. Yet, there are no studies assessing quantitatively the relative importance of various factors known to affect the success of decentralization. This paper builds on a comprehensive dataset the authors constructed for Peru, which merges municipal fiscal accounts with information about municipalities'characteristics such as population, poverty, education, and local politics. The paper then analyzes the leading factors affecting the ability of municipalities to execute the allocated budget using complementary methodologies, from least squares to quantile regression analyses. According to the existing literature and the Peruvian context, the analysis divides these factors into four categories: the budget size and allocation process; local capacity; local needs; and political economy constraints. Although all four factors affect decentralization, the largest determinant of spending ability is the adequacy of the budget with respect to local capacity. The results confirm the need for decentralization to be implemented gradually over time in parallel with strong capacity building efforts.
    Keywords: Public Sector Expenditure Policy,Subnational Economic Development,Debt Markets,Political Economy,Municipal Financial Management
    Date: 2011–08–01
  5. By: Silva, Leonardo Fonseca da; Ferreira, Pedro Cavalcanti
    Abstract: We investigate the role of sectorial differences in labor productivity and the process of structural transformation (reallocation of labor across sectors) in accounting for the time path of aggregate productivity across six Latin American countries (Brazil, Chile, Argentina, Colombia, Mexico and Venezuela) from 1950 to 2003. We used a general equilibrium model with three sectors (agriculture, industry and services) calibrated to those six economies. The model is used to compare the trajectory of productivity in each sector of activity with that of the United States and it impact on aggregate productivity.While in Brazil and Argentina, the Service Sector was responsible for reversing the process of catch up in productivity that occurred until the 1980s, in others, like Colombia, Mexico and Venezuela, low productivity growth of the three sectors explain their poor performance.
    Date: 2011–08–12
  6. By: Ferreira, Pedro Cavalcanti; Pessôa, Samuel de Abreu; Veloso, Fernando A.
    Abstract: Due to several policy distortions, including import-substitution industrialization, widespread government intervention and both domestic and international competitive barriers, there has been a general presumption that Latin America has been much less productive than the leading economies in the last decades. In this paper we show, however, that until the late seventies Latin American countries had high productivity levels relative to the United States. It is only after the late seventies that we observe a fast decrease of relative TFP in Latin America. We also show that the inclusion of human capital in the production function makes a crucial di¤erence in the TFP calculations for Latin America.
    Date: 2011–08–12
  7. By: Marcel Vaillant (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Marcelo Olarreaga (University of Geneva and CEPR)
    Abstract: When the process of trade liberalisation started in Brazil in the late 1980s, a regime of temporary trade protection was put in place. This paper describes the use of TTB by Brazilian’s authority over the last two decades. We found them to be highly concentrated in a few sectors and to heavily rely on antidumping measures, rather than countervailing or safeguards measures. We also develop a simple empirical model to explain the micro and macroeconomic determinants of TTBs in Brazil. After controlling for the political strength of each HS six-digit sector in Brazil, as well as the time invariant characteristic of each trading partner and the level of domestic economic activity using fixed effects, we found that low import prices are not an important determinant of TTB in Brazil even though more than ninety percent of TTB that were put in place over the last two decades were antidumping cases. TTBs are more likely to be observed when imports are large. But, perhaps more interestingly, in sectors with low MFN tariffs and where MFN tariffs are falling, which suggest that MFN tariffs and TTBs are substitutes. Finally, changes in the bilateral exchange rate are important determinants of TTBs, with appreciations of the domestic currency making the imposition of restrictive TTBs more likely.
    Keywords: Temporary Trade Barriers, Brazil, Exchange rate
    JEL: F10 F11
    Date: 2011–05
  8. By: Rossana Patrón (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Marcel Vaillant (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: The ratio of skill to unskilled labour stocks in the economy is widely acknowledged to have an important role for development. Can education policy affect the evolution of this ratio? This paper shows that it can, and it also shows that the actual effect of education policy depends on the allocation rule of the budget across educational levels. The consideration of a stylized hierarchical education model allows us to develop analytical conditions under which the allocation rule favours the accumulation of skills. The analysis has implication for policy makers in developing countries, where skill formation is much needed, because it shows that observed allocation rules usually violate the maximization condition by the assignment of higher-than-optimal resources to higher education.
    Keywords: education budget, skills accumulation
    JEL: I21 I22 I2
    Date: 2011–02
  9. By: Diego Gianelli (Banco Central del Uruguay)
    Abstract: Banking interest rates are closely related to monetary policy transmission than overnight interest rates. Since overnight interest rates are used as policy instrument since September 2007 by Uruguayan Central Bank, it is important to quantify the extent to which overnight interest rates are transmitted to banking interest rates. This paper quantifies the interest rate pass-through, both in the long and the short run, considering the structural changes observed in the underlying economic structure, and controlling for the fundamentals of financial intermediation margins. I find a significant pass-through from overnight interest rates to banking interest rates denominated in domestic currency but no significant passthrough to those denominated in foreign currency. I also find a notorious reduction in the level and the speed of the pass-through since the adoption of quantitative monetary target, and a positive correlation between financial margins and aggregate macroeconomic risk perception. The apparent reduction in the interest rate pass-through since 2004 represent a challenge for conducting monetary policy under a flexible inflation targeting regime.
    Keywords: Monetary Policy, interest rate pass through
    JEL: E44 G12 C01
    Date: 2011–01
  10. By: Rossana Patrón (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: In Uruguay, similar to many developing countries, the economic return to lower secondary studies is low. When heterogeneity is introduced in the analysis, it can be shown that differences in the quality of education and in the probability of repetition mark the contrast between an attractive and an inconvenient investment in secondary education between advantaged and disadvantaged students. The values of internal rate of return computed for the Uruguayan case allow concluding that, paradoxically, lower secondary education is an inconvenient investment for disadvantaged students, even disregarding the possibility of them not being able to afford the opportunity costs, explaining the heavy dropout rates of this student type. These results cast some serious doubts on the fairness of compulsory schooling laws that are not accompanied by complementary policies to ensure equal learning outcomes across socioeconomic groups.
    Keywords: education returns, school quality, repetition rates
    JEL: I21 J24
    Date: 2011–02

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