nep-lam New Economics Papers
on Central and South America
Issue of 2015‒09‒26
five papers chosen by

  1. Determinants and home-country effects of FDI outflows: Evidence from Latin American countries By Padilla, Ramón; Gomes Nogueira, Caroline
  2. Fighting the Last Economic War: How Crises Lead to Ideological Change in Latin America By Stephen Kaplan
  3. The Great Divide: The Paths of Industrial Competitiveness in Brazil and South Korea By João Prates Romero; Elton Freitas; Gustavo Britto; Clara Coelho
  4. On the effects of enforcement on illegal markets : evidence from a quasi-experiment in Colombia By Mejía,Daniel; Restrepo,Pascual; Rozo,Sandra V.
  5. Why is Fiscal Policy Often Procyclical? By Alberto Alesina; Filipe Campante; Guido Tabellini

  1. By: Padilla, Ramón; Gomes Nogueira, Caroline
    Abstract: Foreign direct investment (FDI) by Latin American companies has increased sharply since the beginning of the 2000s. While most investment flows correspond to firms from large economies (i.e. Argentina, Brazil, Chile, Mexico and Colombia), small economies have also witnessed the increasing internationalisation of their domestic companies. This study examines the strategies followed by multinational enterprises (MNEs) from Latin America when they decide to invest in other countries, highlighting differences by sector and issuer-country size. To that end a new database, which comprises quantitative information on the main operations abroad of Latin American enterprises (both greenfield, and mergers and acquisitions) was constructed, based on fDi Markets and Thomson Reuters Datastream. It also investigates the home-country effects of outward foreign direct investment (OFDI) by conducting a case study of Costa Rica through a representative sample of firms investing abroad.
    Date: 2015–08
  2. By: Stephen Kaplan
    Abstract: Political economy theory expects that changes in macroeconomic governance are often catalyzed by institutional factors, such as partisanship or elections. I challenge and contextualize this view by incorporating the role of technocratic advisors into a domestic policymaking framework. I contend that structural and elite-level explanations are also important to understanding ideational shifts, particularly in regions like Latin America that suffer from severe economic volatility. Presidents tend to govern from the lens of their crisis past, appointing economic hawks (or mainstream economists) who embrace austerity in the shadow of inflation crises, and economic doves (heterodox economists) who drift from budget discipline following unemployment shocks. Employing an originally constructed data index, the Index of Economic Advisors, I conduct a statistical test of 16 Latin American countries from 1960 to 2011, finding support for sustained idological shifts in technocratic composition and fiscal governance, based on the nature of past shocks.
    JEL: B22 E31 E60 E62 E65 H30 H60 N16 O54 O57
    Date: 2015–08
  3. By: João Prates Romero (PhD Candidate, Land Economy Department, University of Cambridge); Elton Freitas (PhD Candidate, Cedeplar-UFMG); Gustavo Britto (Cedeplar-UFMG); Clara Coelho (Research Assistant, Cedeplar-UFMG)
    Abstract: The present paper expands the approach developed by Hidalgo et al. (2007), Hausmann et al. (2007) and Hidalgo and Hausmann (2009) to analyse the relationship between structural change and economic sophistication. To do so, the paper shows product space networks for each decade since the 1960’s and analyses revealed comparative (dis)advantages indictors for Brazil and South Korea from the 1960s to 2000s. The results show that although having similar per capita GDPs in the beginning of the series, South Korea achieved faster growth than Brazil by specialising in high sophistication, technology intensive goods.
    Keywords: Economic Complexity; Capabilities; Product Space, Brazil; South Korea.
    JEL: O14 O19 O57 F14
    Date: 2015–09
  4. By: Mejía,Daniel; Restrepo,Pascual; Rozo,Sandra V.
    Abstract: This paper studies the effects of enforcement on illegal behavior in the context of a large aerial spraying program designed to curb coca cultivation in Colombia. In 2006, the Colombian government pledged not to spray a 10 km band around the frontier with Ecuador due to diplomatic frictions arising from the possibly negative collateral effects of this policy on the Ecuadorian side of the border. This variation is used to estimate the effect of spraying on coca cultivation by regression discontinuity around the 10 km threshold and by conditional differences in differences. The results suggest that spraying one additional hectare reduces coca cultivation by 0.022 to 0.03 hectares; these effects are too small to make aerial spraying a cost-effective policy for reducing cocaine production in Colombia.
    Keywords: Pest Management,Science Education,International Terrorism&Counterterrorism,Public Sector Corruption&Anticorruption Measures,Crops and Crop Management Systems
    Date: 2015–09–02
  5. By: Alberto Alesina; Filipe Campante; Guido Tabellini
    Abstract: Fiscal policy is procyclical in many developing countries. We explain this policy failure with a political agency problem. Procyclicality is driven by voters who seek to ?starve the Leviathan? to reduce political rents. Voters observe the state of the economy but not the rents appropriated by corrupt governments. When they observe a boom, voters optimally demand more public goods or lower taxes, and this induces a procyclical bias in fiscal policy. The empirical evidence is consistent with this explanation: Procyclicality of fiscal policy is more pronounced in more corrupt democracies.

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