nep-lam New Economics Papers
on Central and South America
Issue of 2016‒03‒10
four papers chosen by
Maximo Rossi
Universidad de la República

  1. Illicit activity and money laundering from an economic growth perspective : a model and an application to Colombia By Villa,Edgar; Misas,Martha A.; Loayza,Norman V.
  2. Combustible renewables and waste consumption, agriculture, CO2 emissions and economic growth in Brazil By Ben Jebli, Mehdi; Ben Youssef, Slim
  3. Can we fight drugs using communication campaigns? A framed field experiment By Marcela Ibanez; Juanita Vasquez
  4. Explaining Inequality and Poverty Reduction in Bolivia By Mauricio Vargas; Santiago Garriga

  1. By: Villa,Edgar; Misas,Martha A.; Loayza,Norman V.
    Abstract: This paper contributes to the economic analysis of illicit activities and money laundering. First, it presents a theoretical model of long-run growth that explicitly considers illicit workers, activities, and income, alongside a licit private sector and a functioning government. Second, it generates estimates of the size of illicit income and provides simulated and econometric estimates of the volume of laundered assets in the Colombian economy. In the model, the licit sector operates in a perfectly competitive environment and produces a licit good through a standard neoclassical production function. The illicit sector operates in an imperfectly competitive environment and is composed of two different activities: The first activity produces an illicit good that nonetheless is valuable in the market (for example illicit drugs); the second does not add value to the economy but only redistributes wealth (for example robbery, kidnapping, and fraud). The paper provides a series of comparative statics exercises to assess the effects of changes in government efficiency, licit sector productivity, and illicit drug prices. From the model, the analysis derives a set of estimable macroeconometric equations to measure the size of laundered assets in the Colombian economy in the period 1985 to 2013. The paper assembles a data set whose key components are estimates of illicit income from drug trafficking and common crime. Illicit incomes increased drastically until 2001, reaching a peak of nearly 12 percent of gross domestic product and then decreasing to less than 2 percent by 2013. The decline overlaps not only in a period of high economic growth, but also after the implementation of Plan Colombia. The data set is used to estimate the volume of laundered assets in the economy by applying the Kalman filter for the estimation of unobserved dynamic variables onto the derived macroeconometric equations from the model. The findings show that the volume of laundered assets increased from about 8 percent of gross domestic product in the mid-1980s to a peak of 14 percent by 2002, and declined to 8 percent in 2013.
    Keywords: Currencies and Exchange Rates,Economic Theory&Research,Emerging Markets,Environmental Economics&Policies,Investment and Investment Climate
    Date: 2016–02–25
  2. By: Ben Jebli, Mehdi; Ben Youssef, Slim
    Abstract: This paper employs the autoregressive distributed lag (ARDL) approach and Granger causality tests to examine the dynamic causal links between per capita combustible renewables and waste (CRW) consumption, agricultural value added (AVA), carbon dioxide (CO2) emissions, and real gross domestic product (GDP) for the case of Brazil, spanning the period 1980-2011. The Fisher statistic of the Wald test confirms the existence of long-run cointegration between the considered variables. Short-run empirical findings reveal that there is a unidirectional causality running from agriculture to CO2 emissions and to GDP. However, there is long-run bidirectional causality between all considered variables. The ARDL long-run estimates show that both CRW consumption and AVA contribute to increase economic growth and to decrease CO2 emissions. Agricultural production and CRW consumption seem to play substitutable roles in the Brazilian economy as increasing CRW consumption reduces AVA in the long-run, and vice versa. In addition, economic growth increases agricultural production at the expense of CRW production. We recommend that Brazil should continue to encourage agricultural and biofuels productions. The actual substitutability between agricultural and biofuels production should be reduced or even stopped by encouraging second-generation biofuels and discouraging first-generation biofuels. This may be done by policies of subsidization or taxation, encouraging R&D, and giving competitive credits.
    Keywords: Autoregressive distributed lag; Granger causality; combustible renewables and waste; agricultural value added; Brazil.
    JEL: C32 O13 O54 Q42 Q54
    Date: 2016–02–24
  3. By: Marcela Ibanez (Georg-August University Göttingen); Juanita Vasquez (University of Göttingen)
    Abstract: This paper uses a framed field experiment to test the effect of persuasive communication as a strategy in the fight against drugs in Colombia. Our design varies the salience and the degree of informativeness of the messages that participants receive, while highlighting particular negative effects of growing coca in the community. We find that messages that make the relation of coca cultivation with violence salient are the most effective at reducing coca investments. Our results suggest that the main mechanism at play is attitudinal change rather than a change in beliefs. Interestingly, we find that exposure to persuasive messages translates into lower intentions to cultivate coca in the future. We conclude that interventions that aim at increasing “awareness” of the negative effects that coca has in the community are a promising policy instrument in the fight against drugs.
    Keywords: Field experiment; attitudinal change; communication campaigns; illegal behavior
    JEL: A13 G11 D03 D83 K42 Z13
    Date: 2016–02–29
  4. By: Mauricio Vargas; Santiago Garriga
    Abstract: We investigate the factors driving Bolivia’s success in reducing inequality and poverty during the last 15 years. Our evidence suggests that the reduction was driven mainly by labor income growth at the bottom end of the income distribution. Increases in non-labor income (rents, transfers, remittances) also played a role, but a smaller one, although the introduction of Renta Dignidad has made a big difference for the elderly poor. Labor income increases were concentrated in the informal, low-skilled service and manufacturing sectors. As the gains from the commodity boom go into reverse, and the fiscal envelope becomes much tighter, it will be essential that labor and social policies are well designed and targeted to preserve the poverty and inequality reduction of the last 15 years.
    Keywords: Bolivia;Poverty;Western Hemisphere;Inequality, income, household income, income distribution, Equity, Justice, and Other Normative Criteria and Measurement, Measurement and Analysis of Poverty,
    Date: 2015–12–18

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