Showing papers by "Francisco J. Buera published in 2013"

Financial Frictions and the Persistence of History: A Quantitative Exploration

Abstract: We quantitatively analyze the role of financial frictions and resource misallocation in explaining development dynamics. Our model economy with financial frictions converges to the new steady state slowly after a reform triggers efficient reallocation of resources; the transition speed is half that of the conventional neoclassical model. Furthermore, in the model economy, investment rates and total factor productivity are initially low and increase over time. We present data from the so-called miracle economies on the evolution of macro aggregates, factor reallocation, and establishment size distribution that support the aggregate and micro-level implications of our theory.

Idea Flows, Economic Growth, and Trade

Abstract: We provide a model where freer trade has persistent, positive eects on productivity, beyond the standard reallocation eciency gains. We add to a traditional Ricardian model a theory of diusion of ideas, which themselves determine productivity. Ideas dif

The Macroeconomics of Microfinance

Abstract: What is the aggregate and distributional impact of microfinance? To answer this question, we develop a quantitative macroeconomic framework of entrepreneurship and financial frictions in which microfinance is modelled as guaranteed small-size loans. We discipline and validate our model using recent empirical evaluations of small-scale microfinance programs. We find that the long-run general equilibrium impact is substantially different from the short-run effect. In the short-run partial equilibrium, output and capital increase with microfinance but total factor productivity (TFP) falls. In the long run, when general equilibrium effects are considered, as should be for economy-wide microfinance interventions, scaling up microfinance has only a small impact on per-capita income, because an increase in TFP is offset by lower capital accumulation. However, the vast majority of the population benefits from microfinance directly and indirectly. The welfare gains are larger for the poor and the marginal entrepreneurs, although higher interest rates in general equilibrium tilt the gains toward the rich.

The macroeconomics of microfinance

Abstract: We provide a quantitative evaluation of the aggregate and distributional impact of microfinance or credit programs targeted toward small businesses We find that the redistributive impact of microfinance is stronger in general equilibrium than in partial equilibrium, but the impact on aggregate output and capital is smaller in general equilibrium Aggregate total factor productivity (TFP) increases with microfinance in general equilibrium but decreases in partial equilibrium When general equilibrium effects are accounted for, scaling up the microfinance program will have only a small impact on per-capita income, because the increase in TFP is counterbalanced by lower capital accumulation resulting from the redistribution of income from high-savers to low-savers Nevertheless, the vast majority of the population will be positively affected by microfinance through the increase in equilibrium wages

The Rise of Services: The Role of Skills, Scale, and Female Labor Supply

Abstract: This paper quantifies the roles of increases in the demand for skill-intensive output, the efficient scale of service production, and female labor supply in the growth of services. We extend the Buera and Kaboski (2012a,b) model to a two-person household, incorporating a joint decision on home and market production, and allow for skill and sectoral biased technology progress. The rising scale of services, the rising demand for skill-intensive output, and skill-biased technical change all play dominant roles. Furthermore, the extended model explains the majority of the increase in female labor supply, which also plays a role in services growth.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Constraints to the Growth of Firms: All in the Family?

Abstract: Individuals are born into families that differ in size and managerial skill endowment. Each member of a family has the option to (i) work as a manager in the family firm; (ii) work as a manger in a non-family firm; or (iii) supply non-managerial labor for a wage. We consider two alternative constraints to the growth of firms. In the first model, individual managers may steal a fraction of the joint output and forgo their managerial remunerations. The fraction that they may steal can be reduced by costly monitoring, which determines the optimal size of the firm. In the second model, a firm's size is limited by credit constraints. In the first model, the advantage of a family firm is that family members can monitor one another at no cost. In the second model, its advantage is that credit contracts are perfectly enforced among family members. On the other hand, the limitation of family firms is, naturally, that the size and the managerial skill endowment of a family are exogenously given and immutable. We show that the two models of firms have distinct implications for the incidence and the characteristics of family firms. We use a rich dataset of family and non-family firms from Ethiopia and Ghana to quantify the role of the two constraints---costly monitoring of theft vs. credit constraint---to the growth of firms.

Quantifying the Growth in Services: the Role of Skills, Scale, and Female Labor Supply

Abstract: This paper quanties the role that increases in the demand for skill intensive goods and services, the ecient scale of production of services, and female labor supply have in explaining the growth of services. We extend the model in Buera and Kaboski (2012a,b) to a two-person household model, incorporating a joint household decision on home and market production into the model, and allow for skill and sectoral biased technology progress. The calibrated analysis shows that the channels emphasized in the theory are quantitatively important. The rising scale of services, the rising demand for skill-intensive output stemming from rising incomes, skill-biased technical change, and rising female labor supply all play important quantitative roles and together account for the majority of the growth of services. The extended model provides a direct link between female labor supply and the growth of service economy, which is shown to be important in the data.

The Rise of Services: the Role of Skills, Scale, and Female Labor Supply

Abstract: This paper quantifies the roles of increases in the demand for skill-intensive output, the efficient scale of service production, and female labor supply in the growth of services. We extend the Buera and Kaboski (2012a,b) model to a two-person household, incorporating a joint decision on home and market production, and allow for skill and sectoral biased technology progress. The rising scale of services, the rising demand for skill-intensive output, and skill-biased technical change all play dominant roles. Furthermore, the extended model explains the majority of the increase in female labor supply, which also plays a role in services growth.