nep-lam New Economics Papers
on Central and South America
Issue of 2022‒05‒23
two papers chosen by

  1. The Real Effects of Banking the Poor: Evidence from Brazil By Julia Fonseca; Adrien Matray
  2. Denialism, Politics and the Covid-19 pandemic in Brazil: an empirical analysis on observational data By Marta Castilho; Valéria Pero; François Roubaud; Mireille Razafindrakoto; João Saboia

  1. By: Julia Fonseca (University of Illinois at Urbana-Champaign); Adrien Matray (Princeton University)
    Abstract: We study how financial development affects economic development and wage inequality. We use a large expansion of government-owned banks into Brazilian cities with low bank branch coverage and combine it with data on the universe of employees from 2000–2014. We find that higher financial development fosters firm growth, higher labor demand, and higher average wages, especially for cities initially in banking deserts. However, these gains are not shared equally. Instead, they increase with workers’ productivity, implying a substantial increase in wage inequality. The changes to inequality are concentrated in cities where the initial supply of skilled workers is low, indicating that talent scarcity can drive how financial development affects inequality. Our results are inconsistent with alternative explanations such as differential exposure to Brazil’s economic boom, an overall increase in government lending, and other government or social welfare programs. These results motivate embedding skill heterogeneity into macro-finance development models in order to capture these distributional consequences.
    Keywords: Banking, Economic Development, Financial Development, Wage Inequality
    JEL: O10
    Date: 2022–03
  2. By: Marta Castilho (Instituto de Economia da Universidade Federal do Rio de Janeiro - Brazil); Valéria Pero (Instituto de Economia da Universidade Federal do Rio de Janeiro - Brazil); François Roubaud (DIAL-LEDa, IRD, Université Paris-Dauphine, PSL Université); Mireille Razafindrakoto (DIAL-LEDa, IRD, Université Paris-Dauphine, PSL Université); João Saboia (Instituto de Economia da Universidade Federal do Rio de Janeiro - Brazil)
    Abstract: Brazil is among the countries most affected by Covid-19 in terms of number of confirmed cases and deaths. This happens in a national context marked by a denialist positioning of the federal government in combating the pandemic. This study examines, along with other socioeconomic, health and demographic factors, how the political orientation of municipalities is related to the Covid-19 mortality rate. Using several sources of municipal data, a negative binomial model is applied, contemplating the two waves of the pandemic. Subsequently, two other econometric models were estimated in order to analyse two different transmission channels through which political factors impact on the Covid19 mortality rate: one associated with non-pharmacological measures to combat Covid-19 (the mobility of people) and another associated with pharmacological measures (the vaccination). Among the factors analysed, the most striking result concerns the ‘Bolsonaro effect’: the estimations show that mortality rates are higher in the municipalities where the president had the most expressive vote in the 2018 elections. This relationship persists over time in the most recent period. The results regarding population mobility confirm that this is one of the main transmission mechanisms of Covid-19 fatalities. Indeed, the Bolsonaro’ score in the 2018 election is also shown to be significantly and positively correlated with the population mobility in particular when the pandemic reached its most critical levels. Finally, the denialist position at the top of the Federal Government does not seem to compromise the complete vaccination rate of the population beyond the first months after the beginning of the campaign. This result suggests to some extent the increasing awareness of the president's supporters of the risks involved and the effectiveness of vaccines against Covid19. But above all, it reflects apparently the success of the National Immunization Program in Brazil, based on a long tradition, recognized at the international level.
    Keywords: Brazil; Bolsonaro effect; Covid-19; Social distancing; Political Factors; Mobility; Mortality; Public Policies; Socioeconomic Inequalities; Vaccination
    JEL: I14 I18 I38 P16 O54
    Date: 2022–05

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