nep-lam New Economics Papers
on Central and South America
Issue of 2018‒02‒05
two papers chosen by

  1. Can Audits Backfire? Evidence from Public Procurement in Chile By Gerardino, Maria Paula; Litschig, Stephan; Pomeranz, Dina
  2. Of Cities and Slums By Alexander Monge-Naranjo; Pedro Cavalcanti Ferreira; Luciene Torres de Mello Pereira

  1. By: Gerardino, Maria Paula; Litschig, Stephan; Pomeranz, Dina
    Abstract: Audits are generally intended to monitor compliance with existing rules. However, audits can also create unintended effects and incentives through the specific protocol by which they are executed. In particular, audits can discourage the use of complex administrative procedures with more rules for auditors to check. This paper investigates the effects of procurement audits on public entities' choice of purchase procedures in Chile. While the national procurement legislation tries to promote the use of more transparent and competitive auctions rather than discretionary direct contracts for selection of suppliers, auctions are significantly more complex and the audit protocol mechanically leads to more scrutiny and a higher probability of further investigation for auctions than for direct contracts. Using a regression discontinuity design based on a scoring rule of the National Comptroller Agency, we find that audits lead to a decrease in the use of auctions and a corresponding increase in the use of direct contracts. In order to further test the underlying mechanism, we develop a new approach to conduct subgroup analysis in regression discontinuity designs while holding other observables constant.
    Date: 2017–12
  2. By: Alexander Monge-Naranjo (Federal Reserve Bank of St. Louis); Pedro Cavalcanti Ferreira (EPGE/FGV, Rio de Janeiro); Luciene Torres de Mello Pereira (EPGE/FGV, Rio de Janeiro)
    Abstract: The emergence of slums is a frequent feature of a country's path toward urbanization, structural transformation, and development. Based on salient micro and macro evidence from Brazilian labor, housing, and education markets, we construct a simple dynamic model to examine the conditions for slums to emerge. We use the model to determine whether slums are barriers or stepping-stones for the ascension of low-skilled households and the development of the country as a whole, exploring the dynamic interaction of slums, housing costs and sectoral productivities with the human capital formation and structural transformation of a country. We calibrate our model to Brazilian data, and use it to conduct counterfactual experiments. We find that cracking down on slums could slow down the acquisition of human capital in the low-end of the skill distribution, the growth of cities proper (outside slums) and induce even larger slums in the future. We find that the impact of housing costs in the city depends crucially on the human capital distribution of the country. Finally, procuring slum-dwelling children some access to schools in the city would eventually lead to larger cities and smaller slums.
    Keywords: urbanization, Housing, human capital, skill development
    JEL: O15 O18 R23 R31
    Date: 2018

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