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The Consequences of Non-Tariff Trade Barriers: Theory and Evidence from Import Licenses in Argentina
Get PDFAs WTO regulations limited tariffs, non-tariff barriers, such as import licenses (NAILs), became essential trade policy tools. This paper examines how NAILs impact downstream firms in Argentina. Using a novel dataset and the staggered introduction of NAILs between 2005-2011 for identification, we analyze their causal effects on firms\u27 imports and the subsequent effect on exports and employment. Results indicate that NAILs reduce firms\u27 imports, inducing more exposed firms to reduce exports and employment. A trade model with oligopolistic competition suggests that firms\u27 market power can moderate the impact of NAILs in highly concentrated markets
Fighting for the Best, Losing with the Rest: The Perils of Competition in Entrepreneurial Finance
Get PDFFinanciers in early-stage entrepreneurial finance are known for their “spray-and-pray” approach, where they fund multiple start-ups expecting profits on a few to compensate losses on a lot of failed ones. We develop a theoretical framework in which financiers compete to fund entrepreneurs in an environment featuring risk, adverse selection, and limited liability. Financiers use steep payoff schedules to screen entrepreneurs, but limited liability implies they can only do so by giving more to all entrepreneurs. In equilibrium, competition for the best entrepreneurs forces intermediaries to offer better terms to all customers, there is cross-subsidization among entrepreneurs, and intermediation profits are zero. Competition among financial intermediaries always forces them to fund projects with negative expected returns both from a private and from a social perspective. This is an extensive margin inefficiency, as all projects are funded at their efficient scale. The three main features of our framework (competition, adverse selection, and limited liability) are necessary to get the inefficient laissez-faire outcome and a role for regulation. The inefficiency shrinks, but some part will always persist, when firms can collateralize some portion of the credit as long as there is still an unsecured fraction. Additional imperfect information, like a credit score, may increase inefficiency. Crucially, a small externality on financiers exacerbates the extensive margin inefficiency, yielding a negative social surplus in the entrepreneurial financing market
Water Affordability Measures Under Multiple and Non-Exclusive Sources in Latin America and the Caribbean
Get PDFStandard water affordability measures that only account for expenditure on piped water are unlikely to adequately capture the situation of all consumers in developing countries, who often experience water service quality issues and must rely on coping strategies. We construct and compare a series of water affordability ratios including coping costs, and we also adjust these ratios by normative judgements about the need for coping strategies. We use nationally representative household-level data from 18 countries in Latin America and the Caribbean, providing, for the first time, a regional perspective on water affordability. We show that the share of income devoted to water expenses substantially increases when we consider coping costs, particularly affecting the bottom 20% of the income distribution. These findings should be of interest to policy makers aiming at promoting access to safe and affordable water as we also identify the characteristics associated with water affordability issues
Taxation when Markets are not Competitive: Evidence from a Loan Tax
Get PDFWe study the interaction of market structure and tax-and-subsidy strategies utilizing pass-through estimates from the unexpected introduction of a loan tax in Ecuador, a quantitative model, and a comprehensive commercial-loan dataset. Our model generalizes bank competition theories, including Bertrand-Nash competition, credit rationing, and joint-maximization. While we find the loan tax is distortionary, neglecting the possibility of non-competitive lending inflates estimated tax deadweight loss by 80% because non-competitive banks internalize some of the burden. Conversely, subsidies are less effective in non-competitive settings. If competition were stronger, tax revenue would be 10% lower. The findings suggest that policymakers should consider market structure in tax-and-subsidy strategies
Service Sector: An Opportunity for Productive Diversification
Get PDFThe Andean Region faces the dual challenge of global decarbonization and low productivity among micro and small enterprises, significantly impacting the economy. This reality underscores the urgent need to overcome quality barriers to integrate into modern value chains. In this context, the service sector, as the main employer in the region, emerges as a key piece in economic reconfiguration. Economic diversification and increased aggregate productivity are presented as unavoidable imperatives. The opportunities to increase exports of knowledge-based services become more relevant, positioning the Andean Region as a significant player in the international market. In this process, the tourism sector emerges as an essential component for sustainable development, leveraging the regions rich biodiversity and unique geography. This potential promises both increased visitor attraction and vital income. Additionally, the rise of services based on digital platforms presents new opportunities, although the challenge of social assurance remains a crucial challenge in the transition towards a more digitalized and connected economy. In summary, global decarbonization and low productivity among micro and small enterprises are outlined as central challenges for the economy of the Andean Region. Overcoming these barriers becomes essential for achieving sustainable and resilient economic development, where the service sector plays a fundamental role in the transformation and modernization of the region
OVE\u27s 2023 Annual Report: Contributions from Evaluation toward Improving the Bank’s Development Effectiveness
No full textThe 2023 Annual Report by the Office of Evaluation and Oversight (OVE), Contributions from Evaluation toward Improving the Bank\u27s Development Effectiveness, highlights findings and lessons from the different evaluations and products conducted throughout the year. It also presents work dedicated to evaluation capacity development, knowledge, and dissemination
When Emotion Regulation Matters: The Efficacy of Socio-Emotional Learning to Address School-Based Violence in Central America
Get PDFAfter-school programs (ASP) that keep youth protected while engaging them in socio-emotional learning might address school-based violent behaviors. This paper experimentally studies the socio-emotional-learning component of an ASP targeted to teenagers in public schools in the most violent neighborhoods of El Salvador, Honduras, and Guatemala. Participant schools were randomly assigned to different ASP variations, some of them including psychology-based interventions. Results indicate that including psychology-based activities as part of the ASP increases by 23 percentage points the probability that students are well-behaved at school. The effect is driven by the most at-risk students. Using data gathered from task-based games and AI-powered emotion-detection algorithms, this paper shows that improvement in emotion regulation is likely driving the effect. When comparing a psychology-based curriculum aiming to strengthen participants\u27 character and another based on mindfulness principles, results show that the latter improves violent behaviors while reducing school dropout
Searching for a Safe Harbor: Fiscal Policy Responses in Small Island Developing States
Get PDFOver the last two decades, there has been a growing empirical literature to test whether governments fiscal policies systematically respond to changes in the level of debt-to-GDP. Most research has focused on advanced and emerging economies and has overlooked developing countries, especially small island developing states (SIDS). While Caribbean fiscal reaction functions have been estimated in the literature, this paper fills a gap by broadly including all SIDS in the analysis. We find that weak fiscal sustainability has been maintained, but mostly due to the more recent period of the analysis, and with the exclusion of the outlier of São Tomé and Principe. The magnitudes of the coefficient of the increasing primary balance in response to increasing debt-to-GDP is in line with estimates from the literature including, for example, past work on Caribbean SIDS. Two novel findings are that extreme weather events are indeed associated with deteriorations in the primary fiscal balance, and that primary balances may respond pro-cyclically to economic booms and acyclically or counter-cyclically to economic busts
Nowcasting Poverty in Central America, Panama, and the Dominican Republic: A Micro-simulation Approach
Get PDFAssessing the development of countries relies on poverty rates as a key indicator. However, official poverty rates are derived from household surveys that often have limited frequency, unexpected gaps due to field work constraints, and substantial delays in processing and publication. This paper presents a novel micro-simulation method for estimating poverty, which introduces changes in demographic and labor variables into the surveys, that can be derived from just a few observed or forecasted macroeconomic indicators. We apply this method for the case of Central America, Panama, and the Dominican Republic (CAPDR) and show that it outperforms the fit of other methods that solely rely on direct imputations from GDP to households income. Lastly, our approach can be easily replicated across countries and in different time periods, which is not the case for the majority of other micro-simulation techniques
Toward Enhanced Climate Ambition: Transparency and Digital Governance in Latin America and the Caribbean
Get PDFClimate data governance is a key step in taking advantage of the opportunities offered by innovative financial mechanisms, based on the provision of data and indicators that can attest to the achievement of a country\u27s climate targets and commitments. For example, green bonds require the bond issuer to communicate environmental or climate sustainability objectives to investors in a transparent manner, as well as to undergo external evaluation and review. Therefore, having a robust and clear monitoring and reporting system in place can help governments access new instruments and consolidate the operationalization of their climate action, in alignment with the targets set by their Nationally Determined Contributions (NDCs). The publication consists of four parts. The first part describes the context of the role of transparency and digital governance in the development of climate ambition. The second part analyzes the current state of the ETF on a sample of ten countries in the region. Part three studies the situation of open climate data governance and its digitization based on a sample of six countries in Latin America and the Caribbean. Finally, the fourth part of the report presents its general conclusions and recommendations