Showing papers in "Economica in 2002"
TL;DR: Engerman et al. as mentioned in this paper argue that the roots of these disparities in the extent of inequality lay indifferences in the initial factor endowments (dating back to the era of European colonization) and that societies that began with more extreme inequality or heterogeneity in the population were more likely to develop institutional structures that greatly benefited members of elite classes by providing them with more political influence and access to economic opportunities.
Abstract: Whereas traditional explanations of differen ces in long-run paths of development acrossthe Americas generally point to the significance of differences in national heritage or religion,we highlight the relevance of stark contrasts in the degree of inequality in wealth, human capital,and political power in accounting for how fundame ntal economic institutions evolved over time.We argue, moreover, that the roots of these disparities in the extent of inequality lay indifferences in the initial factor endowments (dating back to the era of European colonization).We document -- through comparative studies of suffrage, public land, and schooling policies --systematic patterns by which societies in the Am ericas that began with more extreme inequalityor heterogeneity in the population were more likely to develop institutional structures that greatlyadvantaged members of elite classes (and disa dvantaging the bulk of th e population) by providingthem with more political influence and access to economic opportunities. The clear implicationis that institutions should not be presumed to be exogenous; economists need to learn more aboutwhere they come from to understand their relation to economic development. Our findings notonly contribute to our knowledge of why extreme differences in the extent of inequality acrossNew World economies have persisted for centuries, but also to the study of processes of long-runeconomic growth past and present. Stanley L. Engerman Kenneth L. SokoloffDepartment of Economics Department of EconomicsUniversity of Rochester University of California, Los AngelesRochester, NY 14627 Los Angeles, CA 90095and NBER and NBERenge@troi.cc.rochester.edu sokoloff@ucla.edu
1,007 citations
TL;DR: Growth Without Governance as discussed by the authors investigates the relationship between per capita income and the quality of governance in 175 countries for the period 2000/01 and finds that higher per capita incomes do not necessarily lead to better governance.
Abstract: Per capita incomes and the quality of governance are strongly positively correlated across countries. We propose an empirical strategy that allows us to separate this correlation into: i) a strong positive causal effect running from better governance to higher per capita incomes, and ii) a weak and even negative causal effect running in the opposite direction from per capita incomes to governance. The first result confirms existing evidence on the importance of good governance for economic development. The second result is new and suggests the absence of “virtuous circles” in which higher incomes lead to further improvements in governance. This motivates our choice of title, “Growth Without Governance”. We document this evidence using a newly-updated set of worldwide governance indicators covering 175 countries for the period 2000/01, and use the results to interpret the relationship between incomes and governance in the Latin America and the Caribbean region. Finally, we speculate as to the potential importance of elite influence and state capture in accounting for the surprising negative effects of per capita incomes on governance, present some evidence on such capture in some Latin American countries, and suggest priorities for actions to improve governance when such pernicious elite influence shapes public policy.
297 citations
Journal Article•
273 citations
TL;DR: In this article, an analysis of the effect of children and career interruptions on the family gap is based on Danish longitudinal data covering the years 1980 to 1995, and the results show that, when controlling for unobserved heterogeneity, the negative effect on mothers’ wages disappears.
Abstract: An analysis of the effect of children and career interruptions on the family gap is based on Danish longitudinal data covering the years 1980–95. The estimated model controls for unobserved time-constant heterogeneity. The results show that, when controlling for unobserved heterogeneity, the negative effect of children on mothers’ wages disappears. The main effect of children seems to be loss of human capital accumulation during childbirth periods; apart from this, there is no indication that children have long-term effects on the earnings potential of their mothers, holding experience constant.
195 citations
TL;DR: The authors investigated the determinants of perceived racial harassment at the workplace, and its impact on job satisfaction and quitting behavior among ethnic minority nurses, using data from a unique large-scale survey of British NHS nurses.
Abstract: We investigate the determinants of perceived racial harassment at the workplace, and its impact on job satisfaction and quitting behaviour among ethnic minority nurses, using data from a unique large–scale survey of British NHS nurses. Nearly 40% of ethnic minority nurses report experiencing racial harassment from work colleagues, while more than 64% report suffering racial harassment from patients. Such racial harassment is found to lead to a significant reduction in job satisfaction, which, in turn, increases nurses’ intentions to quit their job. These results are found to be robust to endogeneity concerns, and have important policy implications for retaining qualified nursing staff in the NHS.
195 citations
TL;DR: Inflation targeting has been adopted by a growing number of countries and Latin America has been part of this world trend as mentioned in this paper, which has contributed to strengthen credibility: the effect of targets on inflation expectations and on actual inflation, the low influence of inflation shocks on core inflation, and the decline in inflation forecast errors.
Abstract: Inflation targeting (IT) has been adopted by a growing number of countries and Latin America has been part of this world trend. This paper reviews the recent IT experiences of Brazil, Chile, and Mexico, applying a common empirical framework to the three country cases. Inflation performance under IT and its associated output costs are reported and compared favorably to a control group of other countries. The paper analyzes ways by which IT has contributed to strengthen credibility: the effect of targets on inflation expectations and on actual inflation, the low influence of inflation shocks on core inflation, and the decline in inflation forecast errors. Do the three inflation targeters exhibit fear of floating? No, considering their relatively large exchange rate volatility and moderate international reserve holdings. No, considering strongly declining inflation-to-devaluation passthrough coefficients and little evidence for monetary policy reaction to exchange rate shocks. Yes, considering the frequency and intensity of sterilized exchange interventions in comparison to other inflation targeters that float more cleanly.
180 citations
TL;DR: The authors of as discussed by the authors pointed out that deficient learning capacity, arising from low investment in human capital and scientific infrastructure, led to weak ability to innovate or even take advantage of technological advances abroad.
Abstract: Latin America missed opportunities for rapid resource-based growth that similarly endowed countries-Australia, Canada, Scandinavia- were able to take advantage of. Fundamental to this poor performance was deficient technological adoption driven by two factors. First, deficient national "learning" or "innovative" capacity, arising from low investment in human capital and scientific infrastructure, led to weak ability to innovate or even take advantage of technologicaladvances abroad. Second, the period of inward-looking industrialization discouraged innovation and created a sector whose growth depended on artificial monopoly rents rather than the quasi-rents arising from technological adoption, and at the same time undermined resource-intensive sectors that had the potential for dynamic growth.
150 citations
TL;DR: The authors examined the determinants of gender differences in educational attainment using data for all university graduates and found that although women students perform better on average than their male counterparts, they are significantly less likely to obtain a first class degree.
Abstract: This paper examines the determinants of gender differences in educational attainment using data for all university graduates. We find that, although women students perform better on average than their male counterparts, they are significantly less likely to obtain a first class degree. There is no evidence that this is because of differences in the types of subject male and female students study or in the institutions they attend, nor does it reflect differences in personal attributes, such as academic ability. Rather, it is differences in the way these factors affect academic achievement that give rise to gender differences in performance.
144 citations
TL;DR: The authors in this paper put the Latin American experience in the global context and examined the processes that brought the region to this point, and addressed the question of what economists can do now to help the region move in restoring economic growth.
Abstract: "Economists and reform minded policymakers in Latin America are asking themselves, and are being asked, hard questions these days. The broad consensus is that two decades of reform have had too little toshow for it. Sporadic and sputtering economic growth and stagnant real wages (especially for the unskilled) is not what was expected. This paper puts the Latin American experience in the global context and examines the processes that brought the region to this point. We look at the trends in policy advice on economic growth and how they were formed, and we address the question of what economists can do now to help the region move in restoring economic growth."
122 citations
Journal Article•
117 citations
TL;DR: In this paper, a matching model with low- and high-skilled workers and simple and complex jobs is presented, and it is shown that the degree to which low skilled workers are harmed by high skilled workers who are willing to temporarily accept simple jobs depends on the relative productivity of high-and low-trained workers on simple jobs and on the quit rate of high trained workers.
Abstract: This paper presents a matching model with low- and high-skilled workers and simple and complex jobs. I show that the degree to which low-skilled workers are harmed by high-skilled workers who are willing to temporarily accept simple jobs depends on the relative productivity of high- and low-skilled workers on simple jobs and on the quit rate of high-skilled workers. Under certain conditions, low-skilled workers can benefit from job competition with high-skilled workers. Within this framework, some explanations for the high and persistent unemployment rates of lower educated workers in the 1990s are evaluated.
TL;DR: In this paper, the authors focus on capital flow volatility in Emerging Market Economies, EMs capital inflows rose to unprecedented heights in the first part of the 1990s, and collapsed very rapidly in the second half of the century.
Abstract: This paper focuses on capital flow volatility in Emerging Market Economies, EMs Capital inflows rose to unprecedented heights in the first part of the 1990s, and collapsed very rapidly in the second Volatility could partly be explained by financial vulnerability in the EMs themselves, but the global nature of the phenomenon raises the suspicion that there are systemic problems largely independent of each individual country The paper puts forward the conjecture that phenomena like contagion could stem from the way the capital market operates (eg, crises generated by “margin calls”) These systemic phenomena require systemic instruments Unfortunately, few are available The IMF is more a Fire Department than a Central Bank Liquidity is sprayed where fire is found, not on the whole system like a Central Bank does when there is a liquidity crisis
TL;DR: The authors analyzed three additional models featuring increasing returns, firm mobility, and trade costs to assess the robustness of home market effects to alternative modelling assumptions and found strikingly similar results for two of the models that relax assumptions about the nature of demand, competition and trade cost.
Abstract: Paul Krugman’s model of trade predicts that the country with the relatively large number of consumers is the net exporter and hosts a disproportionate share of firms in the increasing returns sector. He terms these results ‘home market effects’. This paper analyses three additional models featuring increasing returns, firm mobility, and trade costs to assess the robustness of home market effects to alternative modelling assumptions. We find strikingly similar results for two of the models that relax assumptions about the nature of demand, competition and trade costs. However, a model that links varieties to nations rather than firms can generate opposite results.
TL;DR: In this article, the authors evaluate empirically the effect of the decentralization of secondary schools on education quality and find that, on average, decentralization improved the performance of public school students in test scores.
Abstract: The decentralization of education services from the federal government to the provincial governments was an important component of the major fiscal and structural reforms undertaken in Argentina in the early 1990’s. The theoretical literature is not conclusive about the absolute superiority of either centralization or decentralization in the provision of public services. In this paper, we evaluate empirically the effect of the decentralization of secondary schools on education quality. Our results suggest that, on average, decentralization improved the performance of public school students in test scores. We also assess whether the effect of decentralization depends on province characteristics. We find that the higher the provincial fiscal deficits, the smaller the positive impact of decentralization.
TL;DR: In this paper, the authors argue that the patent rule is inferior in any industry where the cost of independently inventing a product is not too much less than (no less than) the inventor's cost.
Abstract: Patents differ from other forms of intellectual property in that independent invention is not a defence to infringement. We argue that the patent rule is inferior in any industry where the cost of independently inventing a product is not too much less than (no less than half) the inventor’s cost. First, the threat of entry by independent invention would induce patent holders to license the technology, lowering the market price. Second, a defence of independent invention would reduce the wasteful duplication of R&D effort that occurs in patent races. In either case, the threat of independent invention creates a mechanism that limits patentholders’ profits to levels commensurate with their costs of R&D.
TL;DR: This paper studied the structural breaks and turning points in two series of German bonds, issued in 1924 and 1930, traded on the London Stock Exchange throughout Hitler's 1933-45 regime in Germany.
Abstract: Two series of German bonds, issued in 1924 and 1930, traded on the London Stock Exchange throughout Hitler's 1933-45 regime in Germany. We isolate both structural breaks and turning points in these bond series. Major turning points follow Hider's reintroduction of conscription in 1935, the outbreak of war in 1939 and the D-Day invasion of June 1944. The German bonds' sustained downward trend after 1935 suggests that bondholders recognized the risks posed by Hitler's programme. Bond prices recovered during the war, however, and appear to have anticipated the overthrow of Hitler and the postwar settlement of foreign bondholders' claims. German bonds, even in peace time, were distinctly dubious investments, and the fact of war has entirely justified the distrust with which they have long been regarded.
TL;DR: In this paper, a prototype Europe-wide tax benefit microsimulation model is used to examine the distributional impact of the reform, asking how far such a policy is "targeted" on the poorest pensioners.
Abstract: While policies to eliminate poverty remain the responsibility of member states, the European Union may have a role to play in setting minimum standards. This paper explores the implications of a European Minimum Pension. A prototype Europe–wide tax benefit microsimulation model is used to examine the distributional impact of the reform, asking how far such a policy is ‘targeted’ on the poorest pensioners. We conclude that the formulation of policy for the protection of Europe’s poorest people requires an appreciation not only of the situation of this group, but also of the assumptions that have been used to identify it.
TL;DR: In this article, the authors studied the joint evolution of factor prices, factor shares and the type of technical progress, and concluded that in the long run factor augmentation takes the form of pure labour augmentation.
Abstract: This paper studies the joint evolution of factor prices, factor shares and the type of technical progress. Its main aim is to give a microeconomic foundation to the Hypothesis of Induced Innovation of the earlier literature, which assumes that the type of progress at any moment of time is chosen so as to maximize the current rate of output growth. An important conclusion of the Hypothesis of Induced Innovation is that in the long run factor–augmenting technical progress takes the form of pure labour augmentation.
TL;DR: In this article, the authors compare the two standard forms of international investment in developing countries, debt and foreign direct investment (FDI), from a finance perspective, and show that the sovereign risks associated with debt finance are generally less severe than the ones that come with FDI.
Abstract: The paper compares the two standard forms of international investment in developing countries, debt and foreign direct investment (FDI), from a finance perspective. The sovereign risks associated with debt finance are shown to be generally less severe than the ones that come with FDI. FDI is chosen only if the foreign investor is more efficient in running the project, if the project is risky, and if the foreign investor has a good outside option which deters creeping expropriation. The sovereign risk problem of FDI can be alleviated if the host country and the foreign investor form a joint venture.
TL;DR: In this paper, the authors find that financial liberalization reduces the cost of capital, boosting the relative growth rates of economic sectors that for technological reasons rely heavily on external (to the firm) finance.
Abstract: Financial liberalization is a highly controversial policy. Despite the fact that almost all the regions of the world have undergone liberalization of their financial markets, its effect on the performance of different economic sectors remains a question. In our research, we find that financial liberalization reduces the cost of capital, boosting the relative growth rates of economic sectors that for technological reasons rely heavily on external (to the firm) finance. This result, however, depends on the quality of institutions supporting credit markets. The effects of financial liberalization are more notable in countries that have and enforce regulations to protect property rights. In this sense, the answer to the question in the title of the paper is not clear-cut. The impact of financial liberalization on growth depends on underlying institutional factors.
TL;DR: In this paper, the authors identify the forces for and against legal reform and review the role these forces play in episodes of reform, and seek to further understand what constitutes good laws and regulatory mechanisms, and more importantly how to make them enforceable in different countries.
Abstract: As a result of the emerging market crises of the last decade and a large body of academic research on the influence of investor protection in the development of capital markets and economic growth, there is a growing consensus that reforming the legal infrastructure supporting business should be an important component of reforms in many developing countries. But the consensus is unwieldy, as there are still many forces against reform and little agreement about what constitutes feasible legal reforms. This paper has two parts. In the first, we identify the forces for and against legal reform and review the role these forces play in episodes of reform. In the second, we seek to further our understanding of what constitutes good laws and regulatory mechanisms, and more importantly how to make them enforceable in different countries. If legal reform is to succeed, the commonly advocated principles of corporate governance in the international community must be brought down to the local political and judicial realities. Translating international corporate governance initiatives into clear and enforceable rights for creditors and shareholders that incorporate these constraints will be difficult but necessary. Bankruptcy law and corporate law reform need to be politically feasible and enforceable. Legal reforms should be complemented with carefully drafted judicial reforms, as well as market-based mechanisms that foster a culture of corporate governance.
TL;DR: This article found that individuals with an advanced (A-level) mathematics qualification earn 7%-10% more than similarly educated workers without this qualification, even after controlling for the initial ability of these individuals.
Abstract: What are the essential skills learned at school that are required for the labour market? The issue is particularly policy relevant in the UK, where the 16–19 secondary school curriculum (A levels) is undergoing major reform. This paper uses data from the UK to investigate the impact of different academic subjects in secondary school on pupils' subsequent earning, particularly the impact of studying advanced mathematical curricula. We find that individuals with an advanced (A–level) mathematics qualification earn 7%–10% more than similarly educated workers without this qualification, even after controlling for the initial ability of these individuals.
TL;DR: In this paper, the authors review the stylized facts on regulatory reform in telecommunications and its effects on telecommunications development and Internet penetration in Latin America, and test econometrically the determinants of the differences in Internet penetration rates across Latin America using data from the International Telecommunication Union, the Information for Development Program (InfoDev), and the World Bank for 1990-99.
Abstract: The authors review the stylized facts on regulatory reform in telecommunications and its effects on telecommunications development and Internet penetration in Latin America. Relying on data from the International Telecommunication Union, the Information for Development Program (InfoDev), and the World Bank for 1990-99, the authors then test econometrically the determinants of the differences in Internet penetration rates across Latin America. The results show that effective implementation of the reform agenda in telecommunications regulation could accelerate adoption of the Internet in Latin America-even though it is only part of the solution (income levels, income distribution, and access to primary infrastructure are the main determinants of growth in Internet connections and use). Regulation will work by cutting costs. Cost cutting will require that regulators in the region take a much closer look at the design of interconnection rules and at the tradeoffs that emerge from the complex issues involved. It will also require a commitment to developing analytical instruments, such as cost models, to sort out many of the problems. Appropriate cost models will generate benchmarks that are much more consistent with the local issues and with the local cost of capital than international benchmarks will ever be for countries in unstable macroeconomic situations. Cost cutting will require an equally strong commitment to imposing regulatory accounting systems that reduce the information asymmetrics that incumbents use to reduce the risks of entry. All these changes will ultimately require a stronger commitment by competition agencies, since in many countries a failure to negotiate interconnection agreements will raise competition issues just as often as it will raise regulatory questions.
TL;DR: This paper used the Shin measure to distinguish insider trading from herding behaviour in horse-race betting markets, and found that significant positive betting returns are achieved when shortening odds are accompanied by a rise in the Shin measures; when they are followed by a fall, returns are negative, suggesting herd behaviour.
Abstract: Crafts [N. F. R. Crafts (1985) Economica, 52, 295—304] suggested that a pronounced shortening of bookmaker odds in horse–race betting markets could indicate the presence of insider traders. This paper uses the Shin [H. S. Shin (1993) Economic Journal, 103, 1141—53] measure of the incidence of insider trading at the beginning of the betting period (opening prices) and at the end of it (starting prices) to distinguish the shortening of odds caused by insider trading from that caused by herding behaviour. It turns out that significant positive betting returns are achieved when shortening odds are accompanied by a rise in the Shin measure; when they are accompanied by a fall, returns are negative, suggesting herd behaviour.
TL;DR: In this article, the authors consider a differential game between two players, where one player has the first-mover advantage and compare the equilibrium of this model with the one generated by a conventional symmetric model.
Abstract: We consider a differential game between two players, where one player has the first–mover advantage. We compare the equilibrium of this model with the one generated by a conventional symmetric model. The existence of a first mover results in more conservationist exploitation in the aggregate. We also consider the implication of departures from the equilibrium. If the leader can commit to decrease its fishing effort over a finite interval of time, then the follower may respond by increasing, or decreasing, its catch rate, depending on the length of the commitment period.
TL;DR: In this article, the authors developed a model to examine how mutual funds set fees charged to investors within a context of noncompetitive market structure, and found that the performance, age, size and cash ratio of the fund have statistically significant impacts on the mutual fund fees but, quantitatively, the majority of the fee is explained by mark-ups that funds add to the marginal cost owing to the market power possessed by the funds.
Abstract: This paper develops a model to examine how mutual funds set fees charged to investors within a context of non–competitive market structure. The empirical evidence shows that the performance, age, size and cash ratio of the fund have statistically significant impacts on the mutual fund fees but, quantitatively, the majority of the fee is explained by mark–ups that funds add to the marginal cost owing to the market power possessed by the funds. Front–end load funds have the highest mark–ups, the back–end funds have the second highest, and no–load funds have the lowest mark–up.
TL;DR: In this paper, the authors analyze the use of statistical information about taxpayers' incomes by tax audit authorities and show that the well-known regressive bias of revenue-maximizing audit rules may be reversed into a progressive one when signals are used.
Abstract: This paper is a first step in analysing the use of statistical information about taxpayers' incomes by tax audit authorities. In a very simple model, we consider the design of the audit strategy when the tax authority can commit to it and has free access to a signal correlated with the taxpayer's true income. We discuss the optimal enforcement policy and compare it with the optimal one when only self-reported income is considered. Our main result postulates that the well-known regressive bias of revenue-maximizing audit rules may be reversed into a progressive one when signals are used.
TL;DR: In this article, the authors used a formal general equilibrium framework to analyze how sanctions imposed on the contestants in civil conflict affect the welfare of these contestants and the allocation of resources to conflict, showing that weak sanctions can hurt the contestant they are supposed to help, while strong sanctions augment the expected welfare of their intended beneficiaries.
Abstract: Using a formal general equilibrium framework, this paper analyses how sanctions imposed on the contestants in civil conflict affect the welfare of these contestants and the allocation of resources to conflict. It is shown that weak sanctions can hurt the contestant they are supposed to help, while strong sanctions augment the expected welfare of their intended beneficiaries. Moreover, sanctions are more likely to be successful if the contestant who is subject to sanctions can expect to derive a positive income in case of compliance. The likelihood of success rises as this income increases.
Journal Article•
TL;DR: In this article, the authors review the main issues under discussion in the field of economics of education, with a special focus on Latin America, and analyze the importance of the school in educational outcome and explore the heterogeneous impacts of student and school characteristics on educational achievement.
Abstract: In this paper, we review the main issues under discussion in the field of economics of education, with a special focus on Latin America. We seek to organize the debate about educational policies by showing how these policies respond to different models based on different assumptions and hypotheses about how the educational system functions. Methodological and informational problems make it difficult to test the validity of different policies. This would explain the enormous number of studies in the field that conclude with conflicting policy prescriptions. We also use data from Chile to analyze the importance of the school in educational outcome and to explore the heterogeneous impacts of student and school characteristics on educational achievement. The results obtained allow us to conclude that the school plays a very important role in explaining educational achievement. We also find that low-income students stand to benefit the most from attending a private school. However, this conclusion is valid for a marginal analysis and does not necessarily apply to a massive reallocation of students among schools.