New Economics Papers
on Central and South America
Issue of 2014‒05‒24
25 papers chosen by

  1. The Efficiency of Education Expenditure in Latin America and Lessons for Colombia By Andrés Felipe SALAZAR CUELLAR
  2. Latin America: En Fuego! Challenges and Opportunities in Growing Markets By Darragh, Sean; Stacy, Carmen
  3. Taxation and Economic Growth in Latin America By Gustavo Canavire-Bacarreza; Jorge Martínez-Vázquez; Violeta Vulovic
  4. Benchmarking Container Port Technical Efficiency in Latin America and the Caribbean By Javier Morales Sarriera; Tomás Serebrisky; Gonzalo Araya; Cecilia Briceño-Garmendia; Jordan Schwartz
  5. Is Entrepreneurship a Channel of Social Mobility in Latin America? By Francesca Castellani; Eduardo Lora
  6. Tobacco Cultivation in Latin America By Jorge Tovar
  7. Industrial Clusters and Economic Performance in Brazil By Jose Claudio Linhares Pires; Tulio Cravo; Simon Lodato; Caio Piza
  8. Is the Glass Half Empty or Half Full?: School Enrollment, Graduation, and Dropout Rates in Latin America By Juan Sebastián Muñoz; Matías Busso; Marina Bassi
  9. Energy Intensity: A Decomposition and Counterfactual Exercise for Latin American Countries By Raúl Alberto Jiménez; Jorge Enrique Mercado Díaz
  10. Wealth Gradients in Early Childhood Cognitive Development in Five Latin American Countries By Renos Vakis; Christina Paxson; Daniela Marshall; Karen Macours; Florencia López Bóo; David Bravo; Raquel Bernal; Rodrigo Azuero; María Caridad Araujo; Jere R. Behrman; Norbert Schady
  11. Government Debt and Economic Growth By César Calderón; J. Rodrigo Fuentes
  12. Intercontinental Evidence on Socioeconomic Status and Early Childhood: Cognitive Skills: Is Latin America Different? By Florencia López Bóo
  13. Labour formalization and declining inequality in Argentina and Brazil in the 2000s a dynamic approach By Maurizio, Roxana
  14. Las externalidades de los programas de transferencias condicionadas sobre el crimen: El caso de Familias en Acción en Bogotá By Adriana Camacho; Daniel Mejía
  15. The Distance between Perception and Reality in the Social Domains of Life By Eduardo Lora
  16. Productive Development Policies and Innovation Spillovers through Labor Force Mobility: The Case of the Brazilian Innovation Support System By Inter-American Development Bank (IDB); Ingtec; USP Research Group
  17. Lecciones a partir de experimentos de formalización empresarial By Sebastián Galiani; Marcela Meléndez Arjona
  18. The Unemployment Subsidy Program in Colombia: An Assessment By Jorge Andrés Tamayo; Jairo Núñez; Carlos Medina
  19. Taxation and Economic Growth in Colombia By Roberto Steiner
  20. Nivel y desigualdad por género en el uso del tiempo en la Argentina. Una nota introductoria By Paz, Jorge; Arévalo, Carla
  21. Credit Constraints, Sector Informality and Firm Investments: Evidence from a Panel of Uruguayan Firms By Néstor Gandelman; Alejandro Rasteletti
  22. Decentralization, Fiscal Effort and Social Progress in Colombia at the Municipal Level, 1994-2009: Why Does National Politics Matter? By Fabio Sánchez Torres; Mónica Pachón
  23. Optimal Adaptation and Mitigation to Climate Change in Small Environmental Economies By Sebastián J. Miller; Sebastián Galiani; Omar O. Chisari
  24. Towards a "New" Inflation Targeting Framework: The Case of Uruguay By Martín Sola; Martin González-Rozada
  25. Equality under threat by the talented: evidence from worker-managed firms By Gabriel Burdín

  1. By: Andrés Felipe SALAZAR CUELLAR
    Abstract: This paper appraises quantitatively the efficiency of public expenditure of 15 Latin American countries using cross-country data for averages between 2000 and 2009. For this purpose two non-parametric methods are used: Data Envelopment Analysis (DEA) and Free Disposal Hull (FDH). Selected output indicators in primary and secondary school are evaluated respect to public spending in education per student. As a study case, Colombia's efficiency scores are compared with the most efficient peers in each of the educational levels to identify best practices and achieve better results.
    Keywords: Education, Efficiency, Latin America, Benchmarking
    JEL: H11 H52 I22
    Date: 2014–01–14
  2. By: Darragh, Sean; Stacy, Carmen
    Keywords: Marketing,
    Date: 2014
  3. By: Gustavo Canavire-Bacarreza; Jorge Martínez-Vázquez; Violeta Vulovic
    Abstract: Tax policy is among the most common and relevant instruments in the toolkit of policy-makers when thinking about promoting growth, yet there is not compelling evidence regarding its effect in Latin American countries. Using a variety of approaches, we estimate the effects on growth of the most important taxes for the region, namely personal income tax, corporate income tax, general taxes on goods and services, including value added and other sales taxes, and revenues from natural resource. We evaluate the effect of these tax instruments on growth for Argentina, Brazil, Mexico, and Chile using vector autoregressive techniques, and for close to the entire region and a worldwide sample of developing and developed countries using panel data estimation. We find that, for the most part, personal income tax does not have the expected negative effect on economic growth in Latin America, which is largely explained by the small collections in the region. For corporate income tax, our results suggest reducing tax evasion and greater reliance on collection may boost economic growth in the region as a whole and especially for natural resource exporting countries. But, we also find small negative effects of corporate income tax on growth for individual countries, specifically Argentina, Mexico, and Chile. Finally, our results suggest that greater reliance on consumption taxes has significant positive effects on growth in Latin American in general, although we again find slight negative effects in some of the selected countries. On the other hand, natural resource revenues do not seem to contribute to growth.
    Keywords: Fiscal Policy, Investment, Social Security, taxation, growth, Latin America, personal income tax, corporate income tax, goods and sales tax, natural resources tax.
    Date: 2013–08
  4. By: Javier Morales Sarriera; Tomás Serebrisky; Gonzalo Araya; Cecilia Briceño-Garmendia; Jordan Schwartz
    Abstract: We developed a technical efficiency analysis of container ports in Latin America and the Caribbean using an input-oriented stochastic frontier model. We employed a 10-year panel with data on container throughput, port terminal area, berth length, and number of available cranes in 63 ports. The model has three innovations with respect to the available literature: (i) we treated ship-to-shore gantry cranes and mobile cranes separately, in order to account for the higher productivity of the former; (ii) we introduced a binary variable for ports using ships¿ cranes, treated as an additional source of port productivity; and (iii) we introduced a binary variable for ports operating as transshipment hubs. Their associated parameters are highly significant in the production function. The results show an improvement in the average technical efficiency of ports in the Latin American and Caribbean region from 36% to 50% between 1999 and 2009; the best performing port in 2009 achieved a technical efficiency of 94%with respect to the frontier. The paper also studies possible determinants of port technical efficiency, such as ownership, corruption, transshipment, income per capita, and location. The results revealed positive and significant associations between technical efficiency and both transshipment activities and lower corruption levels.
    Keywords: Ports & Waterways, technical efficiency, ports, Latin America, benchmarking, stochastic frontier analysis
    Date: 2013–12
  5. By: Francesca Castellani; Eduardo Lora
    Abstract: This paper provides a summary of the findings contained in a forthcoming issue of the Latin American Journal of Economics on entrepreneurship in Latin America as a vehicle for upward social mobility, especially for the middle class. The income persistence coefficients estimated with pseudo-panel data for Colombia, Ecuador, and Uruguay indicate that entrepreneurial activity is a channel of intergenerational mobility, while the estimates of asset persistence for Mexico using a special survey show that entrepreneurship increases mobility across generations. Although persistence coefficients do not indicate the direction of such mobility, the estimates of income differentials between entrepreneurs and non-entrepreneurs for Ecuador and Mexico lend support to the hypothesis that upward mobility dominates.
    Keywords: Income, Consumption & Saving, Business Development, Social Development, social mobility
    Date: 2013–07
  6. By: Jorge Tovar
    Abstract: This paper evaluates the importance of tobacco cultivation in Latin America. To this end the main variables of the sector will be analyzed, such as the quantity and value of production, the number of cultivated hectares and crop yields. The value of the sector as export strength is also studied. In addition, a comparison of direct employment generated by tobacco cultivation in tobacco countries of Latin America is created based on different sources. The results show that the production of Latin-American countries as a whole has been increasing in recent years, making the share of production of this continent close to 16% of world production. Argentina and Brazil stand out for their production to be placed among the ten largest producers in the world. The extension of cultivated area in the region reaches 13.55% of the area dedicated to tobacco in the world. The increase in production has driven a growth in the productivity of the product with a growing trend for the past several lustrums. This positive trend has been accompanied by an increase in prices paid to the grower, particularly since 2007. It is then a sector with a significant impact on the region. Tobacco cultivation has the capacity of generating 650,000 direct jobs and exporting U.S. $ 3,788 million annually. Considering the analysis only involves direct employment, these figures are very significant.
    Keywords: Tobacco Cultivation, Direct Employment in Tobacco
    JEL: Q10 Q18 O54
    Date: 2014–03–12
  7. By: Jose Claudio Linhares Pires; Tulio Cravo; Simon Lodato; Caio Piza
    Abstract: Industrial clusters, which are commonly targeted to receive financial support allocated to locally based development projects, are seen as an effective industrial policy tool for improving productivity and generating employment. Nevertheless, identifying clusters and assessing their economic performance is a challenge for policymakers. This paper aims to address this challenge by identifying the location of clusters based on neighbor relationships and specialization in Brazil and providing some insights on their effects on employment generation. The paper uses both Location Quotient and Local Indicator of Spatial Association to identify potential clusters in 27 industrial sectors in 5564 Brazilian municipalities. In addition, it uses annual municipal panel data for 2006-2009 to assess whether the presence of potential clusters is correlated with employment generation. The results show that clusters located in municipalities whose neighbors have similar industrial structures perform better than those that present industry specialization only.
    Keywords: Industrial clusters
    Date: 2013–10
  8. By: Juan Sebastián Muñoz; Matías Busso; Marina Bassi
    Abstract: This paper uses 113 household surveys from 18 Latin American countries to document patterns in secondary school graduation rates over the period 1990-2010. It is found that enrollment and graduation rates increased dramatically during that period, while dropout rates decreased. Two explanations for these patterns are provided. First, countries implemented changes on the supply side to increase access, by increasing the resources allocated to education and designing policies to help students staying in school. At the same time, economic incentives to stay in school changed, since returns to secondary education increased over the 1990s. Despite this progress, graduation rates are low, and there persist remarkable gaps in educational outcomes in terms of gender, income quintiles, and regions within countries. In addition, wage returns have recently stagnated, and the quality of education in the region is low, casting doubts on whether the positive trend is sustainable in the medium term.
    Keywords: Primary & Secondary Education, School enrollment, IDB-WP-462
    Date: 2013–10
  9. By: Raúl Alberto Jiménez; Jorge Enrique Mercado Díaz
    Abstract: This paper investigates trends in energy intensity in Latin American countries over the last 40 years. It applies the Fisher Ideal Index to decompose the energy intensity into the relative contributions of energy efficiency and the activity mix, and then analyzes the determinants of these energy indexes through panel data regression techniques. Finally, the paper compares the performance of Latin American countries to that of a similar set of countries chosen through the synthetic control method. The authors find that the energy intensity in Latin American countries has decreased about 20 percent, closing the gap with respect to its synthetic counterfactual. In both Latin American countries and its synthetic control, efficiency improvements drive these changes, while the activity mix component does not represent a clear source of change. The regression analysis shows that per capita income, petroleum prices, fuel-energy mix, and GDP growth are main determinants of energy intensity and efficiency, while there are no clear correlations with the activity component.
    Keywords: Energy policy, Energy efficiency, energy intensity; energy policy; synthetic control
    Date: 2013–09
  10. By: Renos Vakis; Christina Paxson; Daniela Marshall; Karen Macours; Florencia López Bóo; David Bravo; Raquel Bernal; Rodrigo Azuero; María Caridad Araujo; Jere R. Behrman; Norbert Schady
    Abstract: Research from the United States shows that gaps in early cognitive and non-cognitive ability appear early in the life cycle. Little is known about this important question for developing countries. This paper provides new evidence of sharp differences in cognitive development by socioeconomic status in early childhood for five Latin American countries. To help with comparability, we use the same measure of receptive language ability for all five countries. We find important differences in development in early childhood across countries, and steep socioeconomic gradients within every country. For the three countries where we can follow children over time, there are few substantive changes in scores once children enter school. Our results are robust to different ways of defining socioeconomic status, to different ways of standardizing outcomes, and to selective non-response on our measure of cognitive development.
    Keywords: Poverty, Cognitive development
    Date: 2014–01
  11. By: César Calderón; J. Rodrigo Fuentes
    Abstract: The growth prospects of a nation are stymied by the burden of government debt. This study has two goals: first, it tests whether public debt hinders growth; and, second, it explores whether economic policy ameliorates this effect. A large panel data of countries for 1970-2010 reveal a negative and robust effect of public debt on growth. Strong institutions, high quality domestic policies, and outward-oriented policies partly mitigate this adverse effect. An enhanced policy environment and its interaction with public debt has helped explain the improved growth performance of industrial and developing countries for the years 2001-05 compared to the years 1991-95. Viewing the actual performance of the Latin America and the Caribbean region, South America encompasses the group of countries more benefited by improvement of economic policies, while Central America and the Caribbean lag considerably. A simultaneous sharp reduction in public debt and an improvement in the policy environment induce an increase in the growth rate per capita of 1.7 percentage points for the Caribbean and 2 percentage points for South America. A more conservative scenario that considers an upgrade in quality of policies and a reduction of public debt leads to lower but still significant growth benefits for the Caribbean and South America, by 0.85 and 1.5 percentage points, respectively.
    Keywords: Public debt, Fiscal Policy, Financial Markets, Investment, Public debt, policy environment, growth
    Date: 2013–10
  12. By: Florencia López Bóo
    Abstract: This paper documents disparities in cognitive development- as measured by a receptive vocabulary test-between children from households with high and low socioeconomic status (SES) in two different phases of childhood (before and after early school years) in four developing countries: Peru, Ethiopia, India, and Vietnam. Intercontinental evidence on the timing, shape, pattern, and persistence of these disparities is provided. The nonparametric analysis suggests that disparities found at age 5 persist into the early school years across all four countries, and the conditional analysis shows that SES disparities seem to fall over time. However, both the magnitude of the gap and the degree of persistence vary. The main result is that Peru stands out, not only as the country with the largest cross-section disparity between rich and poor (of around 1.30-1.40 standard deviations), but also as the country with the highest persistence in cognitive development, as shown by the value-added specification. The latter suggests fewer opportunities for convergence in cognitive development between rich and poor over time in this Latin American country. Some channels behind these trends are discussed, but overall, the SES gradient persists even when controlling for a large number of important mediators, such as preschool, early nutrition, and schooling. Past performance on the Peabody Picture Vocabulary Test (PPVT) is the most important mediator of the SES gradient at age 8.
    Keywords: Nutrition, Poverty, Cognitive development, Cognitive development
    Date: 2013–08
  13. By: Maurizio, Roxana
    Keywords: labour flexibility, income distribution, employment, working conditions, informal economy, data collecting, methodology, trend, Argentina, Brazil, flexibilité du travail, répartition du revenu, emploi, conditions de travail, économie informelle, collecte des données, méthodologie, tendance, Argentine, Brésil, flexibilidad del trabajo, distribución del ingreso, empleo, condiciones de trabajo, economía informal, recopilación de datos, metodología, tendencia, Argentina, Brasil
    Date: 2014
  14. By: Adriana Camacho; Daniel Mejía
    Abstract: En este trabajo estudiamos los efectos indirectos del mayor programa de transferencias condicionadas (PTC) de Colombia, Familias en Acción, sobre los niveles de criminalidad en el área urbana de la ciudad de Bogotá. Para realizar este estudio combinamos las siguientes dos fuentes de información: el Sistema de Información de beneficiarios de Familias en Acción (SIFA) y los reportes administrativos de criminalidad de la Policía Nacional. En el estudio evaluamos dos posibles canales por los cuales Familias en Acción puede afectar los niveles de criminalidad. Por un lado, el efecto ingreso, para el cual explotamos la variación existente en las fechas de pago del programa. Nuestros resultados indican que a través de este efecto el programa reduce el crimen a la propiedad.
    Keywords: Seguridad ciudadana y prevención de la delincuencia, Programa de transferencias condicionadas, Crimen, Familias en Acción
    Date: 2013–04
  15. By: Eduardo Lora
    Abstract: The distance between perception and reality with respect to the social domains of life is often striking. Using survey data collected on Latin American countries, this paper provides an overview of the main empirical findings on the gaps between perception and reality in four social domains--health, employment, the perception of security, and social ranking. The overview emphasizes the psychological biases that may explain the gaps. Biases associated with cultural values are very relevant with respect to health and job satisfaction. Cultural differences across countries are pronounced in perceptions of health, while cultural differences across socioeconomic groups are more apparent with respect to job satisfaction. Affect and availability heuristics are the dominant sources of bias in the case of perceptions of security. The formation of subjective social rankings appears to be less culturally dependent but more dependent on the socioeconomic development in the country. The gaps between objective and subjective indicators in the social domains of life are a rich source of data to help understand how perceptions are formed, identify important aspects of people's lives that do not appear in official indicators, inform public debate on social policy, and shed light on public attitudes on key social issues.
    Keywords: Social Development, IDB-WP-423
    Date: 2013–08
  16. By: Inter-American Development Bank (IDB); Ingtec; USP Research Group
    Abstract: This paper focuses on two research problems. The first is to measure the direct impacts of innovation support measures in Brazil, and the second is to test the hypothesis of indirect effects of innovation policies on non-beneficiary firms through the labor mobility channel, whether resulting from direct support programs or indirect support via tax incentives. For this purpose, mobility is defined as the movement of workers in technical-scientific occupations, as identified by Araujo et al. (2009). It is found that, with the exception of a subvention program, direct support in the form of credit or cooperative projects fosters more innovative effort than tax incentives. Nonetheless, direct and tax- based incentives for innovation have different purposes, and sound innovation relies on both types of incentive.
    Keywords: Labor, Innovation, Industrial Policy, Productivity, Propensity-score matching, IDB-WP-459
    Date: 2013–11
  17. By: Sebastián Galiani; Marcela Meléndez Arjona
    Abstract: En este documento se exploran, en un contexto experimental, el impacto de dos intervenciones dirigidas a incentivar la formalización empresarial en Bogotá, Colombia, y el impacto de la formalización sobre varias dimensiones de desempeño de los negocios. El diseño experimental de la evaluación permite establecer relaciones de causalidad y avanzar sobre lo aprendido hasta ahora en esta literatura. Encontramos que uno de los programas que actualmente emplea la Cámara de Comercio de Bogotá (CCB), entidad a cargo del registro que hace formal a un negocio en Colombia, para incentivar la formalización no tiene ningún efecto sobre la decisión de formalización, mientras que el otro sí tiene un efecto muy importante. Encontramos también que la decisión de formalización impacta positivamente en los ingresos operacionales y los activos de las firmas, pero no afecta el empleo, el acceso al crédito, ni la rentabilidad de los negocios.
    Keywords: Política financiera, Mercados financieros, Servicios financieros, informalidad, emprendimiento, experimentos de campo, comportamiento de la firma, Colombia
    Date: 2013–08
  18. By: Jorge Andrés Tamayo; Jairo Núñez; Carlos Medina
    Abstract: This paper assesses the effects of the Colombian Unemployment Subsidy (US), which includes benefits as well as training for some recipients. Using regression discontinuity and matching differences-in-differences estimators, the study finds that participation in the labor market, earnings of beneficiaries, and household income do not increase, and for some populations decrease during the 18 months after leaving the US program. Enrollment in formal health insurance falls. Effects on male heads of household include reductions in their earnings, decreases in their labor participation, and increases in their unemployment rates. The study also finds a small though statistically significant positive effect on beneficiaries¿ school attendance, but none on their children¿s weight or height at birth. The results are sensitive to the type of training that beneficiaries receive. Overall, the program serves more as a mechanism for smoothing consumption and providing social assistance than for increasing labor market efficiency.
    Keywords: Social Security, Fiscal Policy, Workforce & Employment, Unemployment, Social assistance, Labor markets
    Date: 2013–05
  19. By: Roberto Steiner
    Abstract: This Working Paper assesses the impact on investment of a reduction in corporate taxes and the impact on employment, labor formality, and growth of a reduction in non-wage labor costs in Colombia. First, and following Hall and Jorgensen (1967), we estimate an investment function, which depends on the user cost of capital, one of whose determinants is the corporate tax rate. Our estimations suggest that a reduction of the corporate tax rate from 33 to 23 percent--as originally envisioned by the government in early 2012, but finally not included in the reform submitted to Congress--has very different short and long-term effects on investment in machinery and equipment. While the user cost of capital declines 0.9 percent, investment (excluding the oil and mining sector) increases on impact only 28 bps in relation to GDP, an increase that does not compensate the fiscal cost incurred. In the long term, however, it is likely that the significant boost in investment (of around 5 percent of GDP) makes such a policy intervention fiscally sustainable. Second, using a computable general equilibrium model calibrated for Colombia, we estimate that the reduction of the "pure tax" component of non-wage labor costs approved in late 2012 is associated with a 0.5 percent increase in overall employment and, more importantly, with a 1.4 percent increase in formal sector employment. Our estimations indicate that this is achieved at no fiscal cost since government revenue increases as a result of higher output and employment.
    Keywords: Economic Development & Growth, Fiscal management, Taxation, Computable general equilibrium models, Investment, User cost of capital, Corporate taxation, Non-wage labor costs
    Date: 2014–03
  20. By: Paz, Jorge; Arévalo, Carla
    Abstract: Este trabajo analiza las desigualdades de tiempo de trabajo remunerado y no remunerado de los adultos urbanos. Se utilizan datos de la Encuesta de Uso del Tiempo (EUT) de la Ciudad de Buenos Aires en 2005. Muchas de las variables que se analizaron en conjunto con la EUT, provienen de la encuesta de hogares de esa jurisdicción. Se aplicó un análisis multivariante mediante el método de Heckman (1979) para controlar la posible sesgo causado por la auto-selección muestral. Los principales resultados muestran que las mujeres y los hombres de los grupos comparables no difieren demasiado en el número de horas que dedican a la generación de valor económico. No se observaron tampoco diferencias significativas tampoco en las tasas de empleo corregidas sumando a las horas de trabajo las dedicadas a las tareas domésticas y de cuidado. También se pudo observar que no hay división sexual significativa de mano de obra y que son las mujeres las que tienen sobrecarga demográfica por la presencia de niños en el hogar. This paper analyzes paid and unpaid work-time inequalities among urban adults. Data from the Time Use Survey (TUS) 2005 of Buenos Aires City are used. Many of the variables that were analyzed in conjunction with the TUS, come from the survey of households that jurisdiction. Multivariate analysis was applied using the method of Heckman (1979 ) to control the possible bias caused by sample selection. The main results show that comparable women and men groups did not differ in the number of hours they devoted to them and generating economic value, but significant differences were seen in employment rates corrected by the addition of housework and care. Also it could be seen that there is significant sexual division of labor and that women who bear demographic overload imposed by children.
    Keywords: [Uso del tiempo] [Género] [Desigualdad] [Argentina]
    JEL: D13 J16 J22 O15
    Date: 2014–05–19
  21. By: Néstor Gandelman; Alejandro Rasteletti
    Abstract: This paper explores whether the extent of informality in a sector affects a firm's investment decision directly or indirectly through a credit availability channel. The dataset used in the estimation of the econometric models consists of an unbalanced panel of Uruguayan firms for the period 1997-2008. The results suggest that financial restrictions affect investment decisions in Uruguay, as an increase in credit to the private sector translates into higher investment rates. A one percentage point increase in overall credit growth translates into a one half percent increase in investment rates. It is also found that, although there is no direct effect of informality on the firm investment decision, there is an indirect effect through the borrowing channel. More specifically, financial restrictions reduce the amount of investment undertaken by Uruguayan firms, the effect being smaller if the firm operates in a sector with lower informality.
    Keywords: Financial Services, IDB-WP-392
    Date: 2013–03
  22. By: Fabio Sánchez Torres; Mónica Pachón
    Abstract: The present paper explores the relationship between political competition and effective public goods delivery systems in a decentralized context to study whether the awareness generated through such a competitive environment and the existence of more political options are a part of the causal mechanisms for effective governance. In particular, we want to observe the effect of electoral competition on the incentives to build fiscal capacity and provide public goods such as education and water, that are to a large extent the responsibility of the local municipalities. The research hypothesis is that political competition strengthens the decentralized municipalities through building their local fiscal capacity. In turn, the fiscal capacity is the fundamental variable that explains the differences in sector performance across local governments. Local fiscal capacity brings about better policy outcomes, as well as a better match between resources and the needs - what we call responsiveness - which simultaneously ensures greater efficiency in local spending. Using a rich panel municipal dataset from 1994 till 2009, we have shown that on comparing the differences across education and the water and sewerage sectors, the power of fiscal effort appears to be the driving force behind better policy outcomes than any other resource commonly made available to the municipalities, such as national transfers or royalties.
    Keywords: Democracy, Decentralization, fiscal policy, local policy, water, sanitation
    Date: 2013–07
  23. By: Sebastián J. Miller; Sebastián Galiani; Omar O. Chisari
    Abstract: This paper compares the optimal dynamic choices between policies of mitigation and adaptation for three economies: Brazil, Chile and the United States. The focus is on the optimal role of mitigation and adaptation for "environmentally small economies", i. e. , economies that are witnessing an exogenous increase in emissions to which they are contributing very little. The simulations lead to three main conclusions. First, small economies should concentrate their environmental efforts, if any, on adaptation. This is not a recommendation that such economies indulge in free-riding. Instead, it is based on considerations of cost effectiveness, ceteris paribus. Second, small economies that are unable to spend enough on adaptation may end up spending less on mitigation owing to their impoverishment as a result of negative climate shocks. Third, higher mitigation expenditures may arise not only as a result of greater optimal adaptation expenditures, but also because of increased adaptation to the incentives for mitigation provided by richer countries.
    Keywords: Environmental Policy, Climate Change, adaptation policies, IDB-WP-417
    Date: 2013–10
  24. By: Martín Sola; Martin González-Rozada
    Abstract: Using a dynamic stochastic general equilibrium model with financial frictions, this paper evaluates the effects of a rule that incorporates not only the interest rate but also the legal reserve requirements as instruments of monetary policy. It is found that reserve requirements can be used to achieve the Central Bank's inflation objectives. The use of this instrument, however, produces a real appreciation of the Uruguayan peso. When the Central Bank uses the monetary policy rate as an instrument, the effect of an increase in reserve requirements is to contribute to reducing the negative impact on consumption, investment and output. Nevertheless, the quantitative results in terms of inflation reduction are rather poor. The policy rate becomes more effective in reducing inflation when the reserve requirement instrument is solely directed at achieving financial stability. The paper's main policy conclusion is that a well-targeted non-conventional policy instrument can help to effectively control inflation.
    Keywords: Monetary Policy, Inflation targeting, IDB-WP-486
    Date: 2014–02
  25. By: Gabriel Burdín (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: Are high-ability individuals more likely to quit egalitarian regimes? Does the threat of exit by talented individuals restrict the redistributive capacity of democratic organizations? This paper revisits that long-standing debate by analyzing the interplay between compensation structure and quit behavior in the distinct yet underexplored institutional setting of worker-managed firms. The study exploits two novel administrative data sources: a panel of Uruguayan workers employed in both worker-managed and conventional firms; and a linked employer–employee panel data set covering the population of Uruguayan worker-managed firms and their workers from January 1997 to April 2010. A key advantage of the data is that it enables one to exploit within-firm variation on wages to construct an ordinal measure of the worker ability type. The paper's four main findings are that (1) worker-managed firms redistribute in favor of low-wage workers; (2) in worker-managed firms, high-ability members are more likely than other members to exit; (3) the hazard ratio of high-ability members is lower for founding members and for those employed by worker-managed firms in which there is less pay compression; and (4) high-ability members are less likely to quit when labor market conditions in the capitalist sector are less attractive. This paper contributes to the study of the interplay between equality and incentives that permeates many debates in public finance, comparative economic systems, personnel and organizational economics.
    Keywords: labor managed firms, redistribution, compensation structure, job mobility
    JEL: H00 J54 J62 M52 P0
    Date: 2013–10

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