New Economics Papers
on Central and South America
Issue of 2012‒07‒23
nine papers chosen by

  1. Agricultural Productivity Growth, Efficiency Change and Technical Progress in Latin America and the Caribbean By Ludena, Carlos E.
  2. Capital Requirements under Basel III in Latin America: The Cases of Bolivia, Colombia, Ecuador and Peru - Working Paper 296 By Liliana Rojas-Suarez, Arturo J. Galindo, and Marielle del Valle
  3. Optimal Holdings of International Reserves: Self-Insurance against Sudden Stop By Guillermo A. Calvo; Alejandro Izquierdo; Rudy Loo-Kung
  4. The Politics of Federalism in Argentina: Implications for Governance and Accountability By Martin Ardanaz; Marcelo Leiras; Mariano Tommasi
  5. Capital Controls in Brazil – Stemming a Tide with a Signal By Yothin Jinjark; Ilan Noy; Huanhuan Zheng
  6. "Toward an Understanding of Crises Episodes in Latin America: A Post-Keynesian Approach" By Esteban Perez Caldentey; Matias Vernengo
  7. The Impact of Bank Credit on Employment Formality in Uruguay By Nestor Gandelman; Alejandro Rasteletti
  8. Gender and Cooperation in Children: Experiments in Colombia and Sweden By Juan-Camilo Cárdenas; Anna Drebber; Emma von Essen; Eva Ranehill
  9. Birth Order and Human Capital Development: Evidence from Ecuador By de Haan, Monique; Plug, Erik; Rosero, José

  1. By: Ludena, Carlos E.
    Abstract: This paper analyses total factor productivity growth in agriculture and its subsectors in Latin America and the Caribbean between 1961 and 2007. To estimate productivity growth we use the Malmquist index, which is a non-parametric methodology that uses data envelopment analysis (DEA) methods. The results show that among developing regions, Latin America and the Caribbean shows the highest agricultural productivity growth, growing at an average rate of 1.9 percent, relative to a world average of 1.7 percent. The higher growth within the region has occurred in the last two decades, especially due to improvements in efficiency and the introduction of new technologies. This result denotes convergence of the region to productivity levels of developed countries such as the United States. Country level results within the region are very heterogeneous. However, land abundant countries such as Argentina, Chile and Colombia consistently outperform land constrained countries such as Central American and Caribbean countries (except for Costa Rica). Within agriculture, crops and non-ruminant sectors have shown the strongest growth between 1961 an 2001 with average growth rates of 0.8 and 2 percent, respectively. Ruminant production has performed the worst with 0.1 percent average growth. We further analyze the cases of Brazil and Cuba to show how policies and external shocks can influence agricultural productivity. These case studies show that policies that do not discriminate the agricultural sectors and that remove price and production distortions may help improve productivity growth in agriculture.
    Keywords: Total factor productivity, agriculture, crops, livestock, Latin America and the Caribbean, Malmquist Index, Agricultural and Food Policy, International Development, O13, O47, O54,
    Date: 2012
  2. By: Liliana Rojas-Suarez, Arturo J. Galindo, and Marielle del Valle
    Abstract: A number of banks in developed countries argue that the new capital requirements under Basel III are too stringent and that implementing the proposed regulation would require raising large amounts of capital, with adverse consequences on credit and the cost of finance. In contrast, many emerging market economies claim that their systems are adequately capitalized and that they have no problems with implementing the new capital requirements. This paper conducts a detailed calculation of capital held by the banks in four Latin American countries—known as the Andean countries: Bolivia, Colombia, Ecuador and Peru—and assesses the potential effects of full compliance with the capital requirements under Basel III. The conclusions are positive and show that while capital would decline somewhat in these countries after they make adjustments to comply with the new definition of capital under Basel III, they would still meet the Basel III recommendations on capital requirements. More importantly, these countries would hold Tier 1 capital to risk-weighted-asset ratios significantly above the 8.5 percent requirement under Basel III. That is, not only the quantity, but also the quality of capital is adequate in the countries under study. While encouraging, these results should not be taken as a panacea since the new regulations are only effective if coupled with appropriate risk management and supervision mechanisms to control the build-up of excessive risk-taking by banks. Further research into these areas is needed for a complete assessment of the strength of banks in the Andean countries.
    JEL: G21 G28 G32 G38
    Date: 2012–05
  3. By: Guillermo A. Calvo; Alejandro Izquierdo; Rudy Loo-Kung
    Abstract: This paper addresses the issue of the optimal stock of international reserves in terms of a statistical model in which reserves affect both the probability of a Sudden Stop–as well as associated output costs–by reducing the balance-sheet effects of liability dollarization. Optimal reserves are derived under the assumption that central bankers conservatively choose reserves by balancing the expected cost of a Sudden Stop against the opportunity cost of holding reserves. Results are obtained without using calibration to match observed reserves levels, providing no a priori reason for our concept of optimal reserves to be in line with observed holdings. Remarkably, however, observed reserves on the eve of the global financial crisis were–on average–not distant from optimal reserves as derived in this model, indicating that reserve over-accumulation in Emerging Markets was not obvious. However, heterogeneity prevailed across regions: from a precautionary standpoint, Latin America was closest to model-based optimal levels, while reserves in Eastern Europe lay below optimal levels, and those in Asia lay above. Nonetheless, there are other motives for reserve accumulation: we find that differences between observed reserves and precautionary-motive optimal reserves are partly explained by the perceived presence of a lender of last resort, or characteristics such as being a large oil producer. However, to a first approximation, there is no clear evidence supporting the so-called neo-mercantilist motive for reserve accumulation.
    JEL: E42 E58 F15 F31 F32 F33 F41
    Date: 2012–07
  4. By: Martin Ardanaz; Marcelo Leiras; Mariano Tommasi
    Abstract: This paper contributes to an agenda that views the effects of policies and institutional reforms as dependent on the structure of political incentives for national and subnational political actors. The paper studies political incentive structures at the subnational level and the mechanisms whereby they affect national-level politics and policymaking at the national level in Argentina, a highly decentralized middle-income democracy, Argentina. The Argentine political system makes subnational political power structures very influential in national politics. Moreover, most Argentine provinces are local bastions of power dominated by entrenched elites, characterized by scarce political competition, weak division of powers, and clientelistic political linkages. Political dominance in the provinces and political importance at the national level reinforce each other, dragging the Argentine political and policymaking system towards the practices and features of its most politically backward regions.
    JEL: D72 D73 D78 H11 H70 H77
    Date: 2012–06
  5. By: Yothin Jinjark (SOAS, University of London); Ilan Noy (University of Hawaii and Victoria Business School in Wellington); Huanhuan Zheng (The Chinese University of Hong Kong)
    Abstract: Controls on capital inflows have been experiencing a period akin to a renaissance since the beginning of the global financial crisis in 2008, with several prominent countries choosing to impose controls; e.g., Thailand, Korea, Peru, Indonesia, and Brazil. We focus on the case of Brazil, a country that instituted five changes in its capital account regime in 2008-2011, and ask what the impacts of these policy changes were. Using the Abadie et al. (2010) synthetic control methodology, we construct counterfactuals (i.e., Brazil with no capital account policy change) for each policy change event. We find no evidence that any tightening of controls was effective in reducing the magnitudes of capital inflows, but we observe some modest and short-lived success in preventing further declines in inflows when the capital controls are relaxed as was done in the immediate aftermath of the Lehman bankruptcy in 2008 and in January 2011 by the newly inaugurated government of Dilma Rousseff. We hypothesize that price-based capital controls’ only perceptible effect are to be found in the content of the signal they broadcast regarding the government’s larger intentions and sensibilities. Brazil’s left-of-center government was widely perceived as ambivalent to markets. An imposition of controls was not perceived as ‘news’ and thus had no impact. A willingness to remove controls was perceived, however, as a noteworthy indication that the government was not as hostile to the international financial markets as many expected it to be.
    Keywords: Capital control; Brazil; Global financial crisis; Mutual fund flows; Exchange rate
    JEL: F32 G15 G18 G23 E60
    Date: 2012–07–17
  6. By: Esteban Perez Caldentey; Matias Vernengo
    Abstract: Conventional wisdom about the business cycle in Latin America assumes that monetary shocks cause deviations from the optimal path, and that the triggering factor in the cycle is excess credit and liquidity. Further, in this view the origin of the contraction is ultimately related to the excesses during the expansion. For that reason, it follows that avoiding the worst conditions during the bust entails applying restrictive economic policies during the expansion, including restrictive fiscal and monetary policies. In this paper we develop an alternative approach that suggests that fiscal restraint may not have a significant impact in reducing the risks of a crisis, and that excessive fiscal conservatism might actually exacerbate problems. In the case of Central America, the efforts to reduce fiscal imbalances, in conjunction with the persistent current account deficits, implied that financial inflows, with remittances being particularly important in some cases, allowed for an expansion of a private spending boom that proved unsustainable once the Great Recession led to a sharp fall in external funds. In the case of South America, the commodity boom created conditions for growth without hitting the external constraint. Fiscal restraint in the South American context has resulted, in some cases, in lower rates of growth than what otherwise would have been possible as a result of the absence of an external constraint. Yet the lower reliance on external funds made South American countries less vulnerable to the external shock waves of the Great Recession than Central American economies.
    Keywords: Business Fluctuations; Great Recession; Latin America
    JEL: E32 E65 O54
    Date: 2012–07
  7. By: Nestor Gandelman; Alejandro Rasteletti
    Abstract: This paper examines the effect of bank credit on employment formalization in Uruguay. Using a difference-in-differences methodology proposed by Cata~o, Page´s and Rosales (2011), the paper finds that financial deepening decreases informality, especially in more financially dependent sectors. The effect is additionally found to be greater for women and younger workers. Despite the severe economic crisis and a sharp contraction of bank credit experienced by the economy in the period of analysis, no evidence is found that the effect of bank credit on employment formality has changed over time.
    JEL: E26 G21 O16 O4
    Date: 2012–04
  8. By: Juan-Camilo Cárdenas; Anna Drebber; Emma von Essen; Eva Ranehill
    Abstract: This paper compares cooperation among Columbian and Swedish children aged 9-12. We illustrate the dynamics of the prisoner’s dilemma in a new task that is easily understood by children and performed during a physical education class. We find some evidence that children cooperate more in Sweden than in Colombia. Girls in Colombia are less cooperative than boys, whereas our results indicate the opposite gender gap in Sweden. On average, children are more cooperative with boys than with girls.
    Date: 2012–07–01
  9. By: de Haan, Monique (University of Amsterdam); Plug, Erik (University of Amsterdam); Rosero, José (University of Amsterdam)
    Abstract: In this paper we examine the effect of birth order on human capital development in Ecuador using a large national database together with self-collected survey data. Using family fixed effects models we find significant positive birth order effects; earlier born children stay behind in their human capital development from early childhood to adolescence. Turning to potential mechanisms we find that earlier born children receive less quality time from their mothers than later born children. In addition, they are breastfed shorter. The estimated birth order effects are largest for children in their teens growing up in poor, low educated families.
    Keywords: birth order, human capital development, parental time allocation, Ecuador
    JEL: D1 I2 J1
    Date: 2012–07

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