nep-lam New Economics Papers
on Central and South America
Issue of 2016‒07‒23
two papers chosen by
Maximo Rossi
Universidad de la República

  1. Do Government Audits Reduce Corruption? Estimating the Impacts of Exposing Corrupt Politicians By Eric Avis; Claudio Ferraz; Frederico Finan
  2. Job Creation in a Multi-Sector Labor Market Model for Developing Economies By Basu, Arnab; Chau, Nancy H; Fields, Gary S; Kanbur, Ravi

  1. By: Eric Avis (UC Berkeley); Claudio Ferraz (Department of Economics, PUC-Rio); Frederico Finan (UC Berkeley)
    Abstract: Political corruption is considered a major impediment to economic development, and yet it remains pervasive throughout the world. This paper examines the extent to which government audits of public resources can reduce corruption by enhancing political and judiciary accountability. We do so in the context of Brazil’s anti-corruption program, which randomly audits municipalities for their use of federal funds. We find that being audited in the past reduces future corruption by 8 percent, while also increasing the likelihood of experiencing a subsequent legal action by 20 percent. We interpret these reduced-form findings through a political agency model, which we structurally estimate. Based on our estimated model, the reduction in corruption comes mostly from the audits increasing the perceived threat of the non-electoral costs of engaging in corruption. Creation-Date: 2016-07
    URL: http://d.repec.org/n?u=RePEc:rio:texdis:652&r=lam
  2. By: Basu, Arnab; Chau, Nancy H; Fields, Gary S; Kanbur, Ravi
    Abstract: This paper proposes an overlapping generations multi-sector model of the labor market for developing countries with three heterogeneities - heterogeneity within self-employment, heterogeneity in ability, and heterogeneity in age. We revisit an iconic paradox in a class of multisector labor market models in which the creation of high-wage employment exacerbates unemployment. Our richer setting allows for generational differences in the motivations for job search to be reflected in two distinct inverted U-shaped relationships between unemployment and high-wage employment, one for youth and a different one for adults. In turn, the relationship between overall unemployment and high-wage employment is shown to be non-monotonic and multi-peaked. The model also sheds light on the implications of increasing high-wage employment on self-employed workers, who make up most of the world's poor. Nonmonotonicity in unemployment notwithstanding, increasing high-wage employment has an unambiguous positive impact on high-paying self-employment, and an unambiguous negative impact on free-entry (low-wage) self-employment.
    Keywords: Harris- Todaro Model.; Multisector Labor Market; Overlapping Generations; Poverty Reduction
    JEL: I32 O17
    Date: 2016–07
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:11386&r=lam

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