Skip to content
11th edition · Online · July 27 and 28, 2020 ProgramContributed sessionsRegistration
BCDE 2020 Bolivian Conference on Development Economics
Abstracts

Parallel Sessions D1 to D5

Full abstracts for the five contributed sessions of block D. Each session lists three papers with authors and affiliations.

Zoom links were available only on the conference day. Back to the full program.
Block ABlock BBlock CBlock DBlock EBlock FFull program

D1: Public Economics

Beyond the Redistributive Efficiency of Fiscal Policy Instruments and Decentralisation

Ronald Miranda, Universitat Autònoma de Barcelona and Universidad de la República
Leonel Muinelo Gallob, Universidad de la República, Uruguay
Oriol Roca Sagalésc, Universitat Autònoma de Barcelona

In this paper, we empirically analyse redistributive efficiency of fiscal policy instruments and their degree of decentralisation and its determinants for a sample of thirty five developed and developing countries over the 2000–2016 period. To do this, a two stage procedure is followed. First, we estimate the redistributive efficiency of fiscal policy – taking into account size and decentralisation degree of cash transfers and direct taxes by employing a Data Envelopment Analysis (DEA) method. We obtain evidence that efficiency varies across countries and on average has diminished over time. Yet, fiscal decentralisation might not play a role in efficiency. Second, a truncated regression analysis is used to identify the potential factors that might explain redistribution efficiency variation across countries and time. Our results show that efficiency is associated with having a unitary political system, high government effectiveness and democratic accountability, low education inequality and the existence of debt fiscal rules.

Information Disclosure and the Performance of Public Investment

Juan Cruz Vieyra, Inter American Development Bank
Martín A. Rossi, Universidad de San Andrés
Antonia Vazquez, Universidad de San Andrés

We provide experimental evidence about the causal impact of publishing information related to public investment projects on the performance of these projects. In particular, we study the impact of the launch of the website MapaInversiones on the physical and financial progress of public investment projects in Costa Rica. MapaInversiones is an online platform where government agencies are required to upload information about their public investment projects. We find that published projects (treatment group) perform better than unpublished projects (control group). Specifically, three months after the release of MapaInversiones, uploaded public investment projects show an increase of 8 percentage points in physical progress and an increase of 18 percentage points in financial progress compared to unpublished projects. A year after the intervention, we find an increase of almost 1 percentage point in physical progress (non significant) and an increase of 15 percentage points in financial progress for treated projects relative to control projects. Overall, the effect seems to be stronger in the short run compared to the medium run.

Social spending, taxes and income redistribution in Ecuador

M. Christina Llerena, Economica CIC, Ecuador
Freddy Paúl Llerena, AEEP and Economica CIC, Ecuador
M. Andrea Llerena, Economica CIC, Ecuador
Roberto Saá, Economica CIC, Ecuador

An analysis of the redistributive effect of fiscal policy on poverty reduction and income distribution in Ecuador using household survey data is described. Due to the detail and depth of the database, it is possible to single out the effects of direct transfers and taxes, indirect taxes and subsidies, and the use of public education and health services. Standard incidence analysis shows that direct taxes are progressive. Nonetheless, they have a negligible effect on both income distribution and poverty. Indirect taxes are progressive as well, due to several exemptions from the value added tax. Social spending on direct transfers, education, and health is progressive in absolute terms, except for secondary education, where it is neutral. Ecuador ranks first in inequality reduction effectiveness and second in poverty reduction effectiveness when compared to six other Latin American countries. However, it ranks only fourth in overall inequality and poverty reduction.

D2: Culture and Conflict

Those Who Stayed: Selection and Cultural Change during the Age of Mass Migration

Anne Sofie Knudsen, Harvard University

This paper studies the cultural causes and consequences of mass emigration from Scandinavia in the 19th century. I test the hypothesis that people with individualistic traits were more likely to emigrate, because they faced lower costs of leaving established social networks behind. Data from population censuses and passenger lists confirm this hypothesis. Children who grew up in households with nonconformist naming practices, nuclear family structures, and weak ties to parents’ birthplaces were on average more likely to emigrate later in life. Selection was weaker under circumstances that reduced the social costs of emigration. This was the case with larger migration networks abroad, and in situations where people emigrated collectively. Based on these findings, I expect emigration to generate cultural change towards reduced individualism in migrant sending locations, through a combination of initial compositional effects and intergenerational cultural transmission. This is confirmed in a cross district setting with measures of actual cultural change over the medium and long run.

Long Term Economic Consequences of Factious Tensions: Evidence from Lebanon

Thomas Emery, University of Western Australia
Rok Spruk, University of Ljubljana

We examine the effect of political factionalism in the presence of weak state capacity on long term economic growth. To this end, we exploit the 1958 civil uprising between Maronite Christian and Sunni Muslim factions in Lebanon to estimate the impact of factious politics on long term growth. To isolate the impact of the uprising, we use synthetic control estimator and match Lebanon’s pre 1958 growth and development trajectory with the rest of the world where such uprising did not occur, and construct the counterfactual growth trajectory in the hypothetical absence of the political factionalism. Our evidence indicates large and pervasive negative growth effects of factionalism. In the absence of factionalism led uprising, our estimates imply that Lebanon’s per capita income down to the present day is four times higher than the actual level, and does not seem to be driven by pre existing or subsequent trends and shocks. The negative long term growth effect of factionalism is robust to a battery of spatial and temporal placebo checks, covariate selection tests and is not sensitive to the composition of control groups.

Borderline Disorder: (De facto) Historical Ethnic Borders and Contemporary Conflict in Africa

Emilio Depetris Chauvin, Pontificia Universidad Católica De Chile
Ömer Özak, Southern Methodist University and IZA

In developed countries, there is extensive literature on the effect of foreign trade on the informal sector. In developing countries, the analysis requires a different approach due to its structural characteristics and historical significance. In Peru and Bolivia, the recent boom (2006–2014) in the export prices of minerals has led to four phenomena: a) growth in informal and often illegal work in mining; b) increased labour exploitation; c) conflicts among formal and informal miners, and peasants; d) conflicts with international companies and with the state. We show that the recent growth of informal work in the mining industry is different from the one caused by past crisis in the sector. We analyse the economic logic of the export oriented mining activity in order to determine how it has given rise to the informal sector. In a first step, we show how the recent export price boom led to growth in informal labour in the mining industry. Subsequently, we explain the importance of mining and international trade to Bolivia as well as the historical roots of labour informality caused by mining crises. We explain some important characteristics of the informal sector and its political empowerment. We conclude by weighing the importance of labour informality as a shock absorber during crises in the mining sector. To the best of our knowledge, no studies have previously examined labour informality in the mineral trade economy.

D3: Natural Resources

Mineral trading and informal labour in the Andean region

Rolando Morales, CIESS Econometrica

In developed countries, there is extensive literature on the effect of foreign trade on the informal sector. In developing countries, the analysis requires a different approach due to its structural characteristics and historical significance. In Peru and Bolivia, the recent boom (2006–2014) in the export prices of minerals has led to four phenomena: a) growth in informal and often illegal work in mining; b) increased labour exploitation; c) conflicts among formal and informal miners, and peasants; d) conflicts with international companies and with the state. We show that the recent growth of informal work in the mining industry is different from the one caused by past crisis in the sector. We analyse the economic logic of the export oriented mining activity in order to determine how it has given rise to the informal sector. In a first step, we show how the recent export price boom led to growth in informal labour in the mining industry. Subsequently, we explain the importance of mining and international trade to Bolivia as well as the historical roots of labour informality caused by mining crises. We explain some important characteristics of the informal sector and its political empowerment. We conclude by weighing the importance of labour informality as a shock absorber during crises in the mining sector. To the best of our knowledge, no studies have previously examined labour informality in the mineral trade economy.

Scenes from a Monopoly: Renewable Resources and Quickest Detection of Regime Shifts

Neha Deopa, Graduate Institute of International and Development Studies, Geneva
Daniele Rinaldo, Graduate Institute of International and Development Studies, Geneva

We study the stochastic dynamics of a renewable resource harvested by a monopolist facing a downward sloping demand curve. We introduce a framework where harvesting sequentially affects the resource’s potential to regenerate, resulting in an endogenous ecological regime shift. In a multi period setting, the firm’s objective is to find the profit maximizing harvesting policy while simultaneously detecting in the quickest time possible the change in regime. Solving analytically, we show that a negative regime shift induces an aggressive extraction behaviour due to a combination of faster detection, a sense of urgency, and higher markup in prices. Precautionary behaviour can result due to increasing resource rent. We study the probability of extinction and show the emergence of catastrophe risk which can be both reversible and irreversible.”

Valoración del servicio ecosistémico de control de enfermedades: deforestación y malaria

Julio Aguirre Montoya, Universidad del Pacífico
Pedro Rojas, Universidad del Pacífico

Toda vez que la deforestación influye en la dinámica de las enfermedades infecciosas, un servicio ecosistémico de interés en este aspecto es el de control de enfermedades. En la Amazonía peruana, la situación se agudiza debido a que es ahí en donde las personas están más expuestas a la malaria. El objetivo del presente estudio es determinar la influencia de la deforestación sobre la incidencia de la malaria en regiones de la Amazonía. Para esto hemos construido una base de datos de panel balanceado (2001 – 2017), donde la unidad de análisis es el distrito, y que incluye variables, tales como: características físicas y socioeconómicas de todos los distritos a nivel nacional, adicionales a la información sobre la incidencia de malaria y deforestación. Se considera que la razón detrás del impacto de la deforestación sobre la malaria sería una respuesta puramente ecológica (Garg, 2019; Bustíos, 2014): la tala de árboles generaría una migración permanente del mosquito entre la ciudad y las zonas boscosas, que redundan en un incremento en la tasa de picaduras a humanos. Así, los resultados muestran que existe relación positiva y significativa entre la pérdida de bosque y la incidencia de la malaria, que se agudiza cuando se analiza solo a la zona noreste del Perú. En términos de impacto, los resultados sugieren que en aquellos departamentos que tienen gran cobertura de bosque, la pérdida de 100 hectáreas de área boscosa genera entre 5 y 7 casos nuevos de malaria. Estos resultados son robustos a diferentes especificaciones econométricas y al posible problema de variables omitidas. Asimismo, los resultados expuestos no tendrían problemas relacionados a la endogeneidad, debido a la naturaleza del mecanismo de transmisión que tiene una clara naturaleza unidireccional; es decir, la migración de mosquitos y deforestación no forman parte de un sistema de ecuaciones simultáneas, sino que es la segunda la que siempre impacta a la primera. Esta información es de gran utilidad para las políticas públicas de lucha contra la malaria, que debería ser tomada en cuenta para la realización de acciones complementarias a las que actualmente realiza el Estado peruano.

D4: International Trade

Agricultural Tariffs and Coca Crops: The Colombia US Free Trade Agreement Case

Juan Felipe Ladino, Universidad del Rosario

Trade liberalization generates benefits in various aspects of an economy. Nevertheless, sensitive sectors like agriculture usually present difficulties in liberalization, especially for the need of adaptation to the new competition. Consequently, trade policy may affect economic conditions and generate incentives for illegal activities. Using municipal level data for Colombia, this research study the effect of trade liberalization in the agricultural sector on the dynamic of coca crops. The framework considers the Colombia US Free Trade Agreement, where the literature has agreed that agriculture had been at a disadvantaged position. Through a difference in differences strategy, I find that municipalities that depend highly on the cultivation of the most sensitive crops present a differential decrease in coca cultivation after the implementation of the FTA. The effect represents an unexpected benefit from the implementation. Also, evidence an opportunity to decrease coca crops as tariff reduction is not immediate, and present an excuse for agricultural development. Exploring potential mechanisms, I found that credit access drives the decrease in coca crops. Nonetheless, municipalities with more exposure to small farming have a lower impact. I also discuss the need for more robust agricultural improvement mechanisms to avoid policies to be surpassed by incentives from illegal activities.

Do Imports of Intermediate Inputs Generate Higher Productivity?: Evidence from Ecuadorian Manufacturing

Segundo Camino Mogro, Complutense University of Madrid
Kathia Pinzón, Escuela Politécnica Nacional
Paul Carrillo, Inter American Development Bank

International trade has been stated as one of the most important mean of improving firms’ productivity, being the channel behind, the technology transfer from foreign companies to local firms. Focusing on imports, they can positively contribute to local firm’s productivity performance by incorporating better inputs in their production processes. This paper analyzes, by using an augmented Cobb Douglas production function, the effect of imported intermediates on the production level of manufacturing formal firms in Ecuador, and, the causal relationship between the import decision and firm productivity. For this, we make use of a unique administrative data ranging from years 2007 to 2018 and estimate the total factor productivity (TFP) at firm level using a flexible Levinsohn Petrin semiparametric method, which allows us to address the endogeneity and simultaneity problem existing in the inputs selection (inherent to this type of estimations). The results show that (i) a 100% decrease in the share of domestic intermediates in total intermediates increases productivity by 7% in the manufacturing sector, (ii) when we use a measure of import intensity, we find that a 100% increase in the share of imported inputs increases firm productivity by 7%, (iii) foreign and domestic intermediates are substitute inputs, with an elasticity of substitution positive and greater than one (4.43), and (iv) we provide robust evidence in favor of the learning by importing hypothesis. Finally, we find that there is self selection of more productive firms into the import market. The main conclusion is that the decision to import foreign intermediates improves productivity in manufacturing firms. This matters from a policy perspective as increasing productivity levels is crucial for a country’s economic growth.

The Effect of Exports on Labor Informality: Evidence from Argentina

Romina Safojan, Tilburg University

This paper explores the causal impact of exports on the share of informal labor in the Argentinean manufacturing sector. Using an instrumental variable approach to address potential endogeneity concerns, I show that an exogenous 10 percentage points increase in export intensity induces a reduction of the informality rate of 2.2 percentage points. Both sales to high income countries and an increase in the complexity of the performed tasks explain this effect. Overall, the evidence suggests that an increase in the demand for higher quality exports induces an increase in the manufacturing industries’ productivity by reducing their share of informal workers.

D5: Development II

News from a kidnapped society: The elusive prisoner exchange program and FARC kidnappings in Colombia

Michael Jetter, University of Western Australia, IZA and CESifo
Juan Posada Aparicio, University of Western Australia

“This paper hypothesizes that news coverage of a potential prisoner exchange program (the Acuerdo Humanitario or AH) systematically determined the extent of subsequent FARC kidnappings between 2002 and 2008, the time period of ´Ingrid Betancourt’s abduction. To circumvent latent endogeneity concerns from reverse causality and omitted variables, we implement an instrumental variable analysis based on disaster deaths in countries hosting a large number of Colombian immigrants. Everything else equal, AH related news coverage would decrease when there are more such disaster casualties. The corresponding results suggest a strong positive relationship: Every AH related article raised the number of political kidnappings to 2.9 times the daily average in the subsequent ten days. Further, kidnappings conducted for ransom purposes (i.e., unsuitable for a potential prisoner exchange) decrease to 0.67 times the daily average with one extra AH related article. Taken together, these results are consistent with the intuition that a larger perceived likelihood of an AH coming to fruition systematically lead to a shift in FARC resources, away from financial and towards political kidnappings.”

Socio economic and environmental effects of eco tourism

Santiago Saavedra, Universidad del Rosario

Eco tourism is considered a win win strategy that can increase households’ income and preserve forests. However, there are not identified impact evaluations of both variables at the same time. Seventy six municipalities in Colombia were randomly assigned to either a control group or a treatment group that received eco tourism promotion. Subjects on treated municipalities were offered free voluntary enrollment to an online marketplace, tourism offer design, training and marketing content generation. We estimate the socio economic effects of nine months of treatment using an Ancova specification that controls for baseline individual outcomes. In treated municipalities we find an increase in number of tourists and number of workers, however we do not observe statistically significant effects on profits or household income.

The Story of a Hurricane: Local Government, NGOs, and Post Disaster Assistance

Ben Fitch Fleischmann, University of Oregon
Evan Plous Kresch, Oberlin College

After catastrophes, international donors offering assistance must decide whether to channel their resources via the local government or non governmental organizations (NGOs). We examine how these channels differ in the timing, locations, and populations that they assist by combining data on aid received by Nicaraguan households over ten years with municipal election results and an exogenous measure of a catastrophe (Hurricane Mitch). In the short term (0–3 years post), NGOs provided aid according to hurricane severity with no evidence of political influence, while government aid allocations were unrelated to hurricane severity. Instead, the evidence suggests that short term government aid was distributed along political lines, though in a nuanced way. The catastrophe also had long term effects on aid, with households in the disaster area receiving significantly more aid than households in other areas—from both NGOs and the government—in the period 3 to 7 years after the hurricane.