Long-term Impacts of Conditional Cash Transfers on Economic Mobility: Evidence using welfare ranks and trajectories

Lugar W-102
Conferencista Irene Clavijo, Paris School of Economics
Abstract There is recent optimism about the increase in economic mobility in Latin America. This paper exploits the randomized evaluation design of a renowned CCT program to measure the long-run impact on intragenerational socioeconomic mobility. In particular, I use two distinct approaches to examine the effect of differential exposure to the program (welfare ranks and trajectories). More specifically, I evaluate the impact of differential exposure to the program on the likelihood that a household presents a path of sustained poverty, mobility, vulnerability or resilience. The results using the ranks approach suggest the effect on mobility was not sustained in the long-term. In contrast, the impacts from the trajectories estimates do persist into the long term. Moreover, the heterogeneity analysis suggests the program has a compensating effect in some cases (for the less connected and less educated households) and a mitigating effect against adversity (for natural disaster shocks). However, there are other cases in which existing inequalities are reinforced (for households with children at critical transition ages).
Fecha 18/05/2017
Hora 12:30 a 1:45 pm.

Cities and Inequality: From Large and Equal to Large and Unequal

Lugar W-102
Conferencista Santiago Caicedo, University of Chicago
Abstract Recent literature has shown that large US cities are nowadays the most unequal ones. What is less known is this wasn't always the case. Back in the 1940, big US cities were the most equal ones. In this paper I document this change in correlation between income inequality and city size. I find evidence suggesting occupation and industry composition were more important in the early period while skill composition is more important now. To explain this fact, I propose a mechanism where big cities used to have mass production technologies and workers preformed similar tasks; whereas, nowadays , large cities have industries where skills are more important. I argue this technological change had profound implications on the sorting of individuals across cities and their selection into different occupations over this time period. I develop a spatial equilibrium model with heterogeneous agents to understand and quantify these margins. The model can rationalize the change in correlation between city size and inequality, and is also consistent with data on the growing importance of managerial occupations and the sorting patterns of high educated individuals into large cities.
Fecha 16/05/2017
Hora 12:30 a 1:45 pm.

Flexible Minimum Wages: Optimal Design and Quantitative Analysis

Lugar W-102
Conferencista Zachary Mahone, University of Toronto
Coautor Pau Pujolas (McMaster University)
Abstract We adapt the Vickrey-Clarke-Groves mechanism to determine the minimum wage in a model of job search with Nash bargaining, where the laissez-faire equilibrium generates an inefficient number of job postings and unemployment.  The mechanism demands minimal information, achieves near-efficiency and implies a flexible minimum wage that responds to cyclical fluctuations.  We calibrate a dynamic version of the model to the U.S. business cycle and find that the mechanism yields an increase in real income of 4.5%.  In a stochastic economy, a simpler version of the mechanism that requires much less information to be implemented already generates 58% of the full efficiency gains.
Fecha 11/05/2017
Hora 12:30 a 1:45 pm.

Higher Taxes at the Top: The Role of Entrepreneurs

Lugar W-102
Conferencista Bettina Brueggemann, McMaster University
Abstract This paper contributes to the recent and growing literature on optimal top marginal income tax rates. It computes optimal marginal tax rates for top earners in a Bewley-Aiyagari type economy explicitly accounting for entrepreneurs. Entrepreneurs make up more than one third of the highest-earning one percent in the income distribution despite representing less than ten percent of the population. They are thus disproportionately affected by an increase in the top marginal income tax rate. Since entrepreneurs overall also employ half of the private-sector workforce, such policy changes can have important repercussions for aggregate labor demand and productivity. In the model households face an occupational choice between working for the market wage or starting their own business. Borrowing constraints induce entrepreneurs to save in order to grow. Consistent with the data, entrepreneurs significantly influence aggregate productivity, generate 50 percent of total output, and account for 40 percent of taxpayers in the top tax bracket. Nonetheless, the welfare maximizing top marginal tax rate amounts to 82.5 percent, and the revenue maximizing one to 90 percent. A steady state comparison between the benchmark economy featuring the current US tax system and the economy with the welfare maximizing top marginal tax rate illustrates the underlying mechanisms. The substantial increase in taxes leads to a large degree of redistribution, yielding sizable welfare gains for low-income working and entrepreneurial households. The welfare gains decline with income for workers, as middle-income workers are hurt by lower equilibrium wages. These lower wages however benefit medium-sized entrepreneurs and enable them to grow, such that all entrepreneurs except those directly affected by the higher tax experience considerable welfare gains, and the size of the entrepreneurial sector grows.
Fecha 09/05/2017
Hora 12:30 a 1:45 pm.

Losing Your Dictator: Firms During Political Transition

Lugar W-102
Conferencista Mounu Prem, Universidad del Rosario
Coautor Felipe González (UC Berkeley)
Abstract Can firms transfer distortions across political regimes? To answer this question, we use novel firm-level data, network analysis, and a differences-in-differences framework to study firms during Chile’s transition to democracy. We find that firms with links to the dictatorship were relatively unproductive before the transition, increased their productive capacity and obtained more loans from state-owned banks during political transition, and had better market outcomes in democracy. We discuss and test for different explanations and provide suggestive evidence consistent with strategic behavior. These results suggests that distortions can be transferred across political regimes and constrain the effects of democratizations.
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Fecha 02/05/2017
Hora 12:30 a 1:45 pm.

Effects of a quality enhancement to a national public parenting program in Colombia on child development: a cluster-randomized controlled trial

Lugar W-102
Conferencista Raquel Bernal, Universidad de los Andes
Coautores Orazio Attanasio (UCL), Helen Baker-Henningham (Bangor University), Costas Meghir (Yale University) y Marta Rubio-Codina (Inter-American Development Bank)
Abstract In this paper, we evaluate the effects of the implementation of a structured early stimulation curriculum and a nutritional intervention through public parenting support services for vulnerable families living in rural areas of Colombia (known as FAMI), on children’s development and parental behaviors. We use a clustered randomized controlled trial that assigns 87 municipalities to treatment and control, to evaluate the effects of these interventions on children growth and development. 1,460 children younger than 1 year of age were assessed at baseline. The interventions were also complemented with training, supervision and coaching of FAMI program facilitators. We assessed program effects on children’s nutritional status by anthropometric measures, cognitive, receptive and expressive language, and fine and gross motor using the Bayley scales of infant development-III and socio-emotional development based on the Ages and Stages Questionnaire for the socioemotional domain. The interventions had positive and significant effects on Bayley-III cognitive scale (0.15 SD), receptive language (0.11 SD), expressive language (0.14 SD) and gross motor development (0.14 SD). We also report a reduction in the risk of stunting of -0.13 SDs. We do not find any effects on socio-emotional development. We report positive and statistically significant effects on the number of toy materials at home (0.36 SD), the number of varieties of play materials (0.28 SD), and the number of varieties of play activities with adults at home over the past three days (0.17 SD).
Fecha 25/04/2017
Hora 12:30 a 1:45 pm.

State building in the city: The effects of public security and services on crime, violence and state legitimacy in Bogotá

Lugar W-102
Conferencista Santiago Tobón, Universidad de los Andes
Coautores Christopher Blattman, Donald Green y Daniel Ortega
Abstract Bogotá’s government set out to reduce crime and violence and increase state legitimacy by raising state presence on city streets, either doubling police patrol time or delivering clean-up and lighting services. We identified 1,919 high-crime street segments and randomized them to eight months of increased security, services, both, or neither. Interventions at this scale, in a dense network of streets, require us to account for spillovers into control segments. The policy implications also hinge on these spillovers. We show how to design place-based experiments to test for spatial spillovers over varying distances, and estimate direct and spillover effects using randomization inference. Using administrative data alongside a city-wide survey, we find that increasing state presence reduces insecurity on targeted streets. There may be increasing returns to state presence and to targeting the least secure places. Overall, greater state presence and security do not increase trust in the state or its legitimacy.
Fecha 20/04/2017
Hora 12:30 a 1:45 pm.

Gilded Bubbles

Lugar W-102
Conferencista David Perez-Reyna, Universidad de los Andes
Coautor Xavier Freixas (Universitat Pompeu Fabra, Barcelona Graduate School of Economics and CEPR)
Abstract Excessive credit growth and high asset prices increase the probability of a crisis. Because these two variables are determined in equilibrium, the analysis of systemic risk and the cost-benefit analysis of macroprudential regulation require a specific framework consistent with the empirical observation. We argue that an overlapping generation model of rational bubbles can explain some of the main features of banking crises and, therefore, provide a microfounded framework for the rigorous analysis of macroprudential policy. We find that credit financed bubbles may have a role as a buffer in reducing excessive investment at the firms' level and, thus, increasing efficiency. Still, when banks have a risk of going bankrupt a trade-off appears between financial stability and efficiency. When this is the case, macroprudential policy has a key role in improving efficiency while preserving financial stability. Still, the optimal macroprudential policy has to take into account wages, liquidity and productivity shocks, which is quite at odds with orthodox macroprudential practices.
Fecha 18/04/2017
Hora 12:30 a 1:45 pm.

An additional fear of floating: media influence on exchange policy

Lugar W-102
Conferencista Leopoldo Fergusson, Universidad de los Andes
Coautores Juan Manuel Caicedo, Twitter. Francisco Eslava, Universidad de los Andes. Marcela Eslava, Universidad de los Andes. Mauricio Villamizar, Banco de la República
Abstract What are the forces that help shape monetary and exchange policy? In this paper, we focus on mass media influence. Though media exposure is a usual suspect, previous explorations have not convincingly dealt with endogeneity concerns. To uncover the causal effect of media content on monetary policy decisions, we use randomly occurring distracting events as an instrument for media attention to exchange rate movements in Colombia, from 2000 to 2008. Our findings reveal a significant and economically meaningful impact of this attention on the Central Bank's decision to intervene in the exchange rate market. Specifically, a one-standard deviation increase in exchange rate appreciation stories increases the probability of an intervention by 19% (close to two-thirds of a standard deviation). The results suggest that mass media can influence even policymakers that are relatively isolated from electoral pressures, like independent monetary authorities, and also provide an additional rationale for the "fear of floating" phenomenon documented in the literature
Fecha 06/04/2017
Hora 12:30 a 1:45 pm.

Identification and Estimation of Electoral Model and Ballot Stuffing

Lugar W-102
Conferencista Anastasia Burkovskaya, University of Sydney
Abstract This paper introduces a model of electoral choice that allows for derivation of joint distribution of turnout and voter share from unobservable joint distribution of costs of voting and preferences over candidates. Under a set of mild assumptions, we show identification and provide non-parametric estimators of joint distribution of costs of voting and preferences over candidates from observable electoral data. In addition, the application of the electoral model offers estimators of ballot stuffing type of electoral fraud. All estimators are consistent and asymptotically normal.
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Fecha 04/04/2017
Hora 12:30 a 1:45 pm.

Motivational Effects of a Nationwide Merit Scholarship Program for Low Income Students: Quasi-Experimental Evidence from Colombia

Lugar W-102
Conferencista Rachid Laajaj, Universidad de los Andes
Coautores Andrés Moya y Fabio Sánchez, Universidad de los Andes
Abstract This paper shows how the apparition of a large scale scholarship based on social criteria and merit, led to substantial improvement in the distribution of grades of eligible students, providing new evidence on the ex-ante effects of scholarships. “Ser Pilo Paga” (SPP) is a nationwide scholarship program for low income students in Colombia, which fully funds university tuitions and additional costs for more than 10,000 new students per year in Colombia. Because eligibility is based on a needs-based stratification index we use a Regressions Discontinuity Design (RDD) to identify the causal effects of the scholarship program on student performance in the national high school exit exam. We find that the opportunity provided by the scholarship leads to a large and significant reduction in the initial gap in the grades of the eligible students compared to the (wealthier) non-eligible students. This effect is largely driven by the performance of eligible students at the top of the performance distribution. A second RDD uses the threshold in the grade that needs to be attained to be granted the fellowship and shows how students’ aspirations and effort are enhanced when a student from their same school received the scholarship in the previous year. The results show that the lack of opportunities discourages low income students from putting effort in their education, which then harms their human capital accumulation and perpetuates the low social mobility.
Fecha 28/03/2017
Hora 12:30 a 1:45 pm.

Public financial support and innovation in Colombian manufacturing firms

Lugar W-102
Conferencista Guillermo Perry, Universidad de los Andes
Coautores Fernando Barrios y Clemente Forero, Universidad de los Andes
Abstract We evaluate the impact of public financial support, both subsidies and credit, on different types of innovation in Colombian industry. We compare it with the effects of financing innovation with own resources and with private loans, and analyze the issue of crowding-out, for different classes of innovation. To control for potential selection bias, we apply Propensity Score Matching (PSM) techniques to a sample of 9173 manufacturing firms for the period 2011-2012, combining data from two available sources (Development and Technological Innovation Survey –EDIT6- and Annual Manufacturing Survey –EAM-). Results show that public financial support has a significant positive effect on products new for the international market and on process innovations. We further find that allocation of own resources of the firm to innovation activities has a positive effect on a wide variety of forms of innovation. Notwithstanding, its impact is substantially smaller than that of public funding in the cases of products new for the international market and on new processes. Commercial loans for innovation activities have no significant effects on either product or process innovations. Finally, we find that public funding increases the probability of allocating own resources to finance innovation activities, but reduces the probability of using private external sources.
Fecha 23/03/2017
Hora 12:30 a 1:45 pm.

The drivers of life-cycle business growth

Lugar W-102
Conferencista Marcela Eslava, Universidad de los Andes
Coautor John Haltiwanger
Abstract We take advantage of rich microdata on Colombian manufacturing establishments to decompose growth over an establishment´s life cycle into that attributable to fundamental sources of growth-- physical productivity, demand shocks, and input prices--and distortions that weaken the link between those fundamentals and actual growth. We rely on a nested CES structure for preferences over products by multiproduct businesses, and data on quantities and prices for individual products for each manufacturing establishment, to decompose profitability shocks into physical pro-ductivity and demand shocks. Pooling all ages, measured fundamentals explain around 67% of the variability of output relative to birth level, with the remaining 33% explained by distortions and other unobserved factors. Demand shocks and TFPQ are equally important in the explained part, while input prices play a more minor role. Distortions explain more than 50% of growth up to age seven, but their contribution falls to less than 25% by around age 20. For the fraction explained by fundamentals, early life growth is explained by TFPQ with demand and input prices playing a minor role. But demand is the crucial factor in long-run growth, with a contribution that surpases that of TFPQ and unobserved factors by around age 15. In the 2000s compared to the 1980s, two decades separated by a wave of deep structural reforms, the contribution of TFPQ to the variance in life cycle growth grows by around 10 p.p , with demand and input prices falling in importance. Interestingly, that of distortions remains basically constant.
Fecha 21/03/2017
Hora 12:30 a 1:45 pm.

Son Malas las Instituciones Extractivas? Los efectos de largo plazo de la Encomienda en Colombia

Lugar W-102
Conferencista Camilo A. Matajira, Ministerio de Salud y Protección Social
Coautores Jean Paul Faguet (LSE) y Fabio Sánchez (Universidad de los Andes)
Abstract Este artículo evalúa el impacto de largo plazo de la Encomienda una institución de trabajo forzado impuesta por los españoles en América Latina durante los siglos XVI, XVII y XVIII  en Colombia. Los resultados indican que los municipios que tuvieron Encomienda en 1560 tienes hoy mejores resultados de desarrollo económico y social. A pesar de ser una institución extractiva, los encomenderos construyeron el Estado local en dichos territorios. Por lo tanto, proveemos evidencia de que el impacto de largo plazo de la encomienda en los municipios colombianos fue por la persistencia de la capacidad Estatal. Finalmente, los resultados no son inducidos ni por la persistencia del Estado precolonial ni por la persistencia de la población.
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Fecha 16/03/2017
Hora 12:30 a 1:45 pm.

"Building Dreams: the Impact of a Conditional Cash Transfer Program on Educational Aspirations in Colombia”

Lugar W-102
Conferencista Arturo Harker, Escuela de Gobierno, Universidad de los Andes
Coautores Sandra García y Jorge Cuartas, Escuela de Gobierno, Universidad de los Andes
Abstract This paper analyzes the impact of a large scale conditional cash transfer (CCT) program on the educational aspirations of parents and children in poor households. The program, in addition to providing cash subsidies to the poorest households, delivered information about the returns to education and encouraged interaction between beneficiaries, social leaders, and professionals. Using data from the quasi-experimental impact evaluation of the program and a difference-in-differences strategy, we find a positive impact for the CCT on educational aspirations for both children and parents. Particularly, parents and children were 10.9 and 20.2 percentage points more likely to aspire to attain post-secondary education due to exposition to the program, respectively. Furthermore, we find that the effect was larger for the most vulnerable households: the poorest, least educated, and most pessimistic. These findings suggest that CCTs and other similar programs could boost long-term educational impacts if other features beyond cash subsidies, such as information, are considered.
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Fecha 14/03/2017
Hora 12:30 a 1:45 pm.

Coca, narcotráfico, seguridad y desarrollo

Lugar W-102
Conferencista Hernando Zuleta, Universidad de los Andes
Abstract El aumento de cultivos ilícitos que ha experimentado Colombia en los últimos años ha generado dudas acerca del éxito de la policía de drogas y ha llevado a muchos analistas y responsables de política a sugerir un cambio de estrategia.
En este documento se analiza el problema desde tres perspectivas: (i) el cultivo de coca como primer eslabón del narcotráfico, (ii) el papel de los cultivos de coca en la puja por control territorial y (iii) el problema de desarrollo en los municipios con cultivos de coca.
Los resultados obtenidos indican que el retorno de la aspersión aérea no es una buena idea desde ninguna de las perspectivas analizadas.
Fecha 07/03/2017
Hora 12:30 a 1:45 pm.

Efectos Globales del Programa SER PILO PAGA en el Sistema de Educación Superior en Colombia

Lugar W-102
Conferencista Juliana Londoño-Velez – University of California en Berkeley
Coautores Catherine Rodríguez y Fabio Sánchez – CEDE-Facultad de Economía- Universidad de los Andes
Abstract La investigación a presentar examina los efectos causales del programa Ser Pilo Paga sobre el sistema de educación superior como un todo en Colombia. En adición, también analiza los efectos del programa en el acceso a educación superior y desempeño académico de los jóvenes legibles y beneficiarios del programa. Para determinar el efecto causal se utiliza la metodología de Regresión Discontinúa con base en la regla de asignación nítida -tanto por SISBEN como por el puntaje de la prueba SABER 11- que tiene el programa para establecer la elegibilidad a este. Se encuentra un efecto significativo y de gran magnitud en el acceso a educación superior tanto en el margen intensivo como extensivo. El acceso a educación superior inmediato se dobla para los jóvenes elegibles, haciendo que la brecha de acceso por estrato socioeconómico para los mejores estudiantes prácticamente desaparezca. También se observan efectos de equilibrio general importantes entre las distintas categorías de instituciones de educación superior y una reasignación de los estudiantes que acceden al sistema entre las distintas categorías de universidades. No obstante se evidencia un aumento global en el acceso a educación superior. El programa también promueve la diversidad en las universidades de alta calidad y aumenta –por la mayor competencia - el nivel académico de los estudiantes que acceden a esas instituciones.
Fecha 28/02/2017
Hora 12:30 a 1:45 pm.

The Impact of Productivity Growth in China on the Brazilian Economy

Lugar W-101
Conferencista Andrés J. Maggi, Princeton University
Coautor Eduardo A. Haddad, University of Sao Paulo
Abstract We study the impact of China’s productivity growth on the Brazilian economy. Brazil provides a  particularly interesting case as it faced an increase in import competition in manufactures as well as a
boost in export demand for commodities. We use a quantitative spatial general equilibrium model that features economies with multiple regions and sectors, labor mobility within countries,  input-output linkages, and interregional and international trade. We find that welfare in Brazil  increased 0.03% due to the change in comparative advantage, and that the predictions of the model  for the reallocation of economic activity across regions and sectors are strongly correlated with  the observed reallocations. We use our calibrated model to assess how the welfare effect would have changed if the government had invested  in transportation infrastructure to take advantage of the new export opportunities. The model suggests  that a transportation infrastructure program similar to the government’s plan for the next decades  would have increased the welfare gain by 13%.
Fecha 27/02/2017
Hora 12:30 a 1:45 pm.

The Rents From Trade and Coercive Institutions: Removing the Sugar Coating

Lugar W-102
Conferencista Dan Trefler, University of Toronto, NBER and “Institutions, Organizations and Growth Program’, Canadian Institute for Advanced Research,Toronto, Ontario
Coautores Christian Dippel (University of California, Los Angeles, and NBER) y Avner Greif (Stanford University and “Institutions, Organizations and Growth Program’, Canadian Institute for Advanced Research, Toronto, Ontario)
Abstract A sustained export price boom may not benefit workers if the resulting rents lead employers to invest in coercive activities that reduce wages. We formalize this idea in a simple model of an agricultural economy with exogenous export price fluctuations and plantation owners who mobilize the power of the state to coerce peasants. Coercion is any action that reduces the value to peasants of working in the non-plantation economy e.g., working as independent smallholders. Using unique data for 14 British West Indies sugar colonies from 1838 to 1913, a period in which sugar prices collapsed, we examine the impact of waning planter elite power on wages, incarceration rates, and peasant-biased taxes. In those colonies where the plantation system declined most, incarceration rates and peasant-biased taxes fell and, remarkably, wages rose.
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Fecha 16/02/2017
Hora 12:30 a 1:45 pm.

When Ignorance is Bliss: Theory and Experiment on Collective Learning

Lugar W-102
Conferencista José Alberto Guerra, Universidad de los Andes
Coautor Boris Ginzburg (Universidad Carlos III de Madrid)
Abstract When do groups and societies choose to be uninformed? We study a committee that needs to vote on a reform which will give every member a private state-dependent payoff. The committee can vote to learn the state at no cost. We show that the committee decides not to learn the state when preferences are more fractionalized on the state-relevant dimension than on the state-irrelevant dimension. Hence, decisions on divisive issues are likely to be made in haste, and heterogeneous societies tend to seek less information. A simple laboratory experiment confirms key results.
Fecha 14/02/2017
Hora 12:30 a 1:45 pm.

Sourcing of Expertise and the Boundaries of the Firm: The Case of Lobbyists

Lugar Por confirmar
Conferencista Miguel Espinosa, LSE
Abstract This paper proposes and tests a theory of vertical integration with knowledge workers. Outsourcing allows firms to solve hard problems at the cost of transmitting firm-specific knowledge. By hiring someone internally, firms save on these communication costs, with the downside of incurring costs of acquiring knowledge. Exploiting the increasing returns to the use of knowledge implies conducting easy and frequent activities in-house and harder and less frequent tasks in the external market. The economy saves communication costs when firms with large firm-specific knowledge conduct activities in-house. I confirm the empirical validity of this theory using data from a knowledge-intensive industry: US Federal Lobbying. First, using information at both the industry and bill levels, I validate the main theoretical predictions using client fixed-effects estimations. Second, I exploit the 2010 BP oil spill as an exogenous increase in the difficulty of the lobbying activities for the oil and gas extracting industry, and I show it led to a disproportionate increase in the use of external lobbyists for the affected industry. Lastly, I argue that the 2007 Open Government Act modified both the distribution of problems that firms faced and the technology to acquire knowledge. Estimating the underlying parameters of the integration decision, I explain how these two changes modified the integration patterns of the industry.
Fecha 10/02/2017
Hora 12:30 a 1:45 pm.

Underemployment and the Business Cycle

Lugar W-102
Conferencista Ana Lariau, Boston College
Abstract I document key empirical properties of involuntary part-time employment in the US and provide a model that explains them. I find that involuntary part-time employment is volatile and strongly countercyclical, and show that wages of involuntary part-time workers are more flexible than those of full-time workers. To understand this evidence, I develop a tractable model featuring search and matching frictions and imperfect substitutability between full-time and part-time workers. The model successfully captures the dynamics of key labor market variables. Relatively high flexibility of part-time wages is key for matching the countercyclicality of involuntary part-time employment because reallocating workers into part-time contracts becomes more profitable during recessions. Using the model, I find that increased substitutability between full-time and part-time workers, explained by innovations in workforce management practices, makes involuntary part-time employment more sensitive to aggregate productivity shocks.
Fecha 09/02/2017
Hora 12:30 a 1:45 pm.

Sectoral Connectivity, Volatility, and Downturns: Lessons From Cross-Country Data

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Conferencista Jorge Miranda-Pinto, University of Virginia
Abstract I show that the number of sectoral connections in the input-output structure -- density of connections -- matters for aggregate volatility and the size of macroeconomic downturns. In a sample of 48 economies for the period 1984-2014, I find that emerging economies with more intermediate input shares above a threshold -- dense connections-- are more volatile and experience sharper macroeconomic downturns. The opposite holds for the group of developed economies, in which denser connections are associated with lower volatility and milder macroeconomic downturns. A multi-sector model with non-unitary elasticity of substitution between labor and intermediate inputs and working capital borrowing constraints can account for these facts. The model implies that in emerging economies, where the elasticity of substitution tends to be small, the density of connections increases volatility and the likelihood of financial cascades where several sectors become constrained due a negative sectoral shock. In developed economies, where the elasticity tends to be large, the density of connections reduces volatility and the likelihood of financial cascades.
Fecha 08/02/2017
Hora 12:30 a 1:45 pm.

Railroads and the Rural to Urban Transition: Evidence from 19th-Century Argentina

Lugar W-102
Conferencista Santiago Pérez, Stanford University
Abstract I study the effects of improvements in transport infrastructure on the economic outcomes of parents and their children. To do so, I exploit the expansion of the railroad network in 19th-century Argentina and new longitudinal data following individuals before and after this expansion took place. To deal with the endogeneity of railroad location, I construct an instrumental variable that takes advantage of the fact that districts along the route of province capitals were more likely to be connected. I find that, once their district got connected to the railroad, adults largely remained farmers or farm workers. By contrast, their children moved out of farming toward more modern and higher paying occupations. The movement out of farming occupations reflected both local changes in employment structure and increased migration out of rural areas, and it was more pronounced among children in districts where the soil was not suitable for agriculture. Consistent with the higher level of skills required for this transition out of farming occupations, children in connected districts were more likely to be literate in adulthood. These results shed light on how improvements in transportation can shape the transition from a mostly rural to a diversified economy.
Fecha 07/02/2017
Hora 12:30 a 1:45 pm.

Regional Business Cycle Accounting and The Great Recession

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Conferencista Juan Ospina, University of Chicago
Abstract I extend the business cycle accounting methodology to a setting of a monetary union. I create a novel dataset on prices, wages, employment, net assets, and consumption that using both aggregate and regional data allows for the application of the methodology at three different levels of geographic aggregation: states, MSAs, and counties. Applied to the Great Recession at the state level, the business cycle accounting exercise provides two main findings. First, for 40 out of 48 states the labor wedge played a primary role in accounting for the differences between employment at the state level and employment at the aggregate level. Second, for 42 states the intertemporal wedge played a prominent role in accounting for the differences between consumption at the state level and consumption at the aggregate level. These results suggest that models using regional variation to study the business cycle of the Great Recession would need mechanisms generating fluctuations in more than one wedge to account for relative fluctuations in employment and consumption of a given region; however, in principle, such mechanisms need not be different for different regions.
Fecha 03/02/2017
Hora 12:30 a 1:45 pm.

How International Reserves Reduce the Probability of Debt Crises

Lugar W-102
Conferencista Juan Hernández, University of Pennsylvania
Abstract This paper provides a model to explain the role of international reserves in reducing the likelihood of sovereign debt crises. The setup features a government making optimal choices of debt and reserves in an environment in which self-fulfilling rollover crises a-là Cole-Kehoe and external default a-là Eaton-Gersovitz coexist. This allows for both fundamental and market-sentiment driven debt crises. Self-fulfilling crises arise because of a lender's coordination problem when multiple equilibria are feasible. Conditional on the country's Net Foreign Asset position, additional reserves make the sovereign more willing to service its debt even when no new borrowing is possible, which enlarges the set of states in which repayment is the government's dominant strategy and this in turn reduces the set of states that admit a self-fulfilling crisis. From an ex-ante perspective, reserves reduce the probability of crises in the future and which lowers current sovereign spreads. The result depends on the existence of roll-over risk and debt not being limited to one period debt. This paper advances existing models by accounting not only for the self-insurance role of reserves against self-fulfilling crises but also for their part in reducing the probability of such events. These findings are in line with the empirical literature on vulnerability measures to sovereign debt crises that shows the connection between international reserves, the probability of debt crises and sovereign spreads. Quantitatively the model can explain 60% of Mexico's international reserves holdings, while accounting for key cyclical facts, showing the relevance of the proposed mechanism.
Fecha 31/01/2017
Hora 12:30 a 1:45 pm.

Confidence and Information Usage: Evidence from Soil Testing in India

Lugar Por confirmar
Conferencista Jared Gars, University of Wisconsin-Madison
Coautor Patrick Ward, International Food Policy Research Institute
Abstract Does confidence influence demand for and responsiveness to information interventions? We add to an emerging literature on behavioral responses to information provision by investigating the role of confidence on willingess to pay for and responsiveness to input recommendations in the context of a soil testing intervention. To motivate our empirical analysis, we interpret confidence within the target-input model as the variance of a farmer's prior beliefs over optimal fertilizer application rates. We extend the model to consider how farmers make decisions about the purchase of and responsiveness to a signal given heterogeneity in their ability, trust, and confidence. The model predictions are tested in the context of a soil testing intervention in the state of Bihar that provided farmers with plot level fertilizer recommendations prior to planting. We elicit farmers' prior beliefs distributions over optimal fertilizer application rates using a visually aided method in the field and combine measures of dispersion with willingness to pay for soil tests and input behavior before and after receipt of soil health cards with plot level nutrient levels and recommendations. We find that farmers with less disperse priors (more confident) have a lower willingness to pay for soil testing ex-ante and lower responsiveness of fertilizer usage to the recommended application rates.
Fecha 30/01/2017
Hora 12:30 a 1:45 pm.

Life-Cycle Patterns of Earnings Shocks

Lugar Por confirmar
Conferencista Martin Lopez-Daneri, The University of Iowa
Abstract This paper addresses the estimation of individual income dynamics. It introduces a novel methodology that detects the presence of patterns in the life cycle and the economic forces in action. I estimate a Bayesian LSTAR(1) model with a rich level of heterogeneity and find that there is a life-cycle pattern in earnings shocks: before age 29, workers experience shocks with higher variance and a positive probability of having a lower persistence than older workers. A comparison with conventional models shows the importance of modelling correctly the level of heterogeneity in the innovations. The results can be used by macroeconomists to calibrate income processes.
Fecha 27/01/2017
Hora 12:30 a 1:45 pm.

Taxing Firms Facing Financial Frictions

Lugar W-102
Conferencista Daniel Wills, University of Pennsylvania
Coautor Gustavo Camilo, Cornerstone Research
Abstract In the U.S. business income is taxed several times at different sources, including corporate income, dividends, capital gains, and interest payments. We investigate how the different rates above affect firm investment and the allocation of capital in the economy. To do so, we construct and calibrate a model with heterogeneous firms, borrowing constraints, costly equity issuance and endogenous entry and exit. Because of the financial frictions, the taxes mentioned are not perfect substitutes and distort different margins. In our model firms enter small and grow over time to reach an optimal size. Firms are borrowing constrained and rely on retained earnings to grow. The corporate income tax reduces net worth and with retained earnings available for investment, delaying capital accumulation. Taxes on dividends, capital gains and interest income do not reduce net worth. We use the model to quantitatively analyze the steady state consequences of a reform that replaces the corporate income tax by a common tax on shareholders. We find that such reform improves the allocation of capital in the economy, increasing total factor productivity by 1.7%.
Fecha 26/01/2017
Hora 12:30 a 1:45 pm.

Coordination as Unintended Benefit: Lab-in-the-Field Evidence from a Conditional Cash Transfer Program

Lugar W-102
Conferencista Sandra Polanía-Reyes, University College London and University of Siena
Abstract This study tests an unintended benefit of a Conditional cash transfer program in Colombia: an improvement in coordination among its beneficiaries. A sample of 714 beneficiaries participate in a minimum effort coordination game. Those enrolled in the program for over a year are not just coordinating; they are more likely to exert the highest level of effort and reach higher earnings. Collected data is sufficiently rich to establish that improvement in coordination is not due to potential confounders such as willingness to cooperate, connectivity or socio-economic characteristics. A structural choice model of the individual decision to coordinate sheds light on the role of beliefs about others' behavior and suggests the presence of a coordination device to avoid the risk dominant equilibrium: the certainty in assessing what others might do. Participants are required to interact with local program officials, community leaders and fellow beneficiaries. We argue that this social component of the CCT, changed the structure of beliefs about others' behavior and established a social norm, which allowed beneficiaries to overcome coordination failures. The findings support nascent initiatives to influence beliefs through policy interventions.
Fecha 24/01/2017
Hora 12:30 a 1:45 pm.

Breaking from Colonial Institutions: Haiti's Idle Land, 1928-1950

Lugar W-102
Conferencista Craig Palsson, Yale University
Abstract Economists and economic historians attribute long-term underdevelopment in former colonies to either persistent, bad institutions or to initial factor endowments that predisposed the colony to inequality. This paper uses a puzzle in Haiti's economic history to show that these frameworks are incomplete. In the early 20th century, large numbers of Haitian workers migrated abroad to work on plantations, even though lots of fertile land sat idle at home. This puzzling fact reflects two land institutions developed after Haiti's independence in 1804. First, lineages had joint claims over the alienation of land; one household could exploit land, but to sell it they needed agreement from a large number of extended kin. Second, the early-nineteenth century Haitian government had distributed land and banned land ownership by foreigners, preventing the creation of large holdings and establishing a checkerboard of landholdings with multiple claimants. To assess how this checkerboard led to idle land, I use data on 5,700 plots adopted over 22 years under a government rental program. A simple model of the optimal allocation of labor (between Haiti and elsewhere) and land (between subsistence holdings and plantations) implies that the checkerboard reduces land adoption and attenuates the extent to which new plantations develop after a migration cost shock. Data from settlement patterns in Haiti and a massacre in the Dominican Republic confirm these predictions. Using the institutional histories of the Dominican Republic and Jamaica as counterfactuals drives this point home: both countries lacked Haiti's checkerboard pattern and developed plantation agriculture. Haiti's experience shows that the conditions created by colonial governments did not necessarily constrain future institutional development. Haiti's post-independence institutional innovations undermined the conditions for development.
Fecha 19/01/2017
Hora 12:30 a 1:45 pm.

Local incentives and national tax evasion: The response of illegal mining to a tax reform in Colombia

Lugar W-204
Conferencista Santiago Saavedra, Stanford University
Coautor Mauricio Romero, University of California
Abstract National governments can only tax the economic activity they either directly observe or that is reported by municipal authorities. In this paper we investigate how illegal mining, a very common phenomenon in Colombia, changed with a tax reform that reduced the share of revenue transferred back to mining municipalities. To overcome the challenge of measuring illegal activity, we construct a novel dataset using machine learning predictions on satellite imagery features. Theoretically we expect illegal mining to increase because the amount required to bribe the local authority is smaller after the reform. Using a difference-in-differences strategy, with Peru as the control, we find that illegal mining increased by 1.41 percentage points as share of the mining area. In addition, we provide suggestive evidence that illegal mines have more harmful health effects on the surrounding population than legal mines. These results illustrate unintended effects of tax revenue redistribution.
Fecha 18/01/2017
Hora 12:30 a 1:45 pm.

Strategic grouping and search for quality journalism, online versus offline

Lugar W-102
Conferencista Tomás Rodríguez, Stanford Universtiy
Coautor Matthew Ellman, Institute for Economic Analysis (CSIC) and BGSE
Abstract This paper investigates how supply-side factors influence the search for quality content in online and offline environments. We show that lower fixed costs of online publishing reduce the incentives to bundle content, as compared to offline journalism. In the presence of asymmetric information over journalistic quality, bundling of content by journalists who publish as a group generates positive informational externalities for users. Journalists group assortatively, better journalists having better partners. Then a consumer who discovers one quality journalist, has found several.
The online environment, by reducing the pressure to group up, can lower welfare in our baseline model. We establish conditions for this result and investigate a number of countervailing forces.
Fecha 17/01/2017
Hora 12:30 a 1:45 pm.

Credit Scoring Meets Agricultural Lending: Exogenous Shocks, Recovery and Access to Formal Credit

Lugar W-506
Conferencista Nicolás de Roux, Columbia University
Abstract Credit scoring has become a widespread tool to assess the creditworthiness of prospective borrowers, and has been found to increase efficiency and welfare in many settings. But this paper identifies a shortcoming in existing credit scoring systems that may lead to a market failure in agricultural lending in developing countries: Farmers' scores - and their access to credit - decline because of exogenous short-term weather shocks that do not reduce their likelihood of future repayment. I use data on the near universe of formal agricultural loans for coffee production in Colombia to show that excess rainfall shocks cause lower concurrent loan repayment, lower credit scores, and more frequent denial of subsequent loan applications. Drawing on the agronomic literature on coffee production and using survey data, I show that productivity, income and repayment behavior recover faster from these shocks than farmers' credit histories. The additional loan denials create costs for both farmers and the lender that could be avoided. The results suggest that incorporating verifiable information on individual level shocks into credit scores would increase the efficiency of credit markets.
Fecha 16/01/2017
Hora 12:30 a 1:45 pm.

end faq