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Adapting Monetary Poverty Lines to Reflect the Costs of Disabilities: An Empirical Application to Peru
Full text linkPersons with disabilities incur extra costs of living (e.g., for personal assistance, assistive devices, medical care, transportation), which are not captured in monetary poverty lines. This has several negative consequences. First, governments underestimate the rate of poverty among persons with disabilities. Second, many persons with disabilities are erroneously excluded from social programs. Finally, even for those persons with disabilities who are declared eligible, the value of the benefits set by the governments is likely to be insufficient (for example, to close the poverty gap). These problems can be avoided by assigning them a higher weight when calculating per-capita income, known in the literature as an “equivalence scale.” We estimate a correction to the standard, unadjusted poverty line based on nationally representative survey data from Peru and complement the analysis with information from focus groups and interviews with persons with disabilities, caregivers, and public servants. We estimate that each person with disabilities should be counted as 1.47 persons without disabilities when calculating the household per-capita income: this is equivalent to saying that a person with disabilities requires an income of 1.47 poverty lines to be considered non-poor. This adjustment would imply that an additional 15.1% of individuals living in a household with persons with disabilities would be classified as poor, and hence would be eligible to receive social programs. It also implies that the monetary value of their social programs should be 47% higher than for persons without disabilities. Even though this correction alone is not enough to ensure full participation in society, it is a critical part of addressing the extra costs of living faced by individuals with disabilities
Wage Cuts, Social Distributional Preferences, and Political Corruption: Preliminary Results
Full text linkMany countries are considering cuts to public-sector salaries as a path to fiscal consolidation. Yet, can lowering politicians\u27 pay incentivize corruption? This paper examines how wage reductions affect political corruption and how these effects vary with public administrators\u27 social distributional preferences. We conduct a laboratory experiment in a developing country, simulating a public administration setting in which administrators allocate public funds. After an initial round under stable compensation, a 60% wage cut is introduced for a randomly assigned subset of participants. Holding selection constant, we find that wage cuts significantly increase rent extraction: treated administrators extract, on average, 9% more. Importantly, social distributional preferences strongly predict both baseline corruption and responsiveness to wage cuts. Administrators classified as altruistic extract less than those classified as selfish, yet both groups increase corruption following the wage cut. Beliefs about others\u27 behavior also deteriorate, with the expected extraction by peers rising by 10%, indicating a breakdown in normative expectations. These findings suggest that austerity measures can erode ethical behavior even among intrinsically motivated officials, underscoring the need to align fiscal reforms with incentive structures and anti-corruption strategies to preserve integrity in public governance
Innovating Tomorrow: The Achievements of the Early Childhood Development Innovation Fund in Latin America and the Caribbean
No full textThis publication compiles the experiences and lessons learned from the Early Childhood Development Innovation Fund (ECD Fund), an alliance between the IDB and several donors (Fundación FEMSA, Van Leer Foundation, Maria Cecilia Souto Vidigal Foundation, Porticus, and Open Society Foundations) that supports innovative early childhood development projects in Latin America and the Caribbean. From its creation in 2017 until its closure in 2025, the ECD Fund invested a total of US$10 million in 23 projects across 10 countries, benefiting more than 700,000 children, 300,000 parents, mothers, and caregivers, as well as 5,000 childcare centers
The Potential Distributive Impact of AI-driven Labor Changes in Latin America
Full text linkThis paper investigates the potential distributional consequences of artificial intelligence (AI) adoption in Latin American labor markets. Using harmonized household survey data from 14 countries, we combine four recently developed AI occupational exposure indices---the AI Occupational Exposure Index (AIOE), the Complementarity-Adjusted AIOE (C-AIOE), the Generative AI Exposure Index (GBB), and the AI-Generated Occupational Exposure Index (GENOE)--to analyze patterns across countries and worker groups. We validate these measures by comparing task profiles between Latin America and high-income economies using PIAAC data, and develop a contextual adjustment that incorporates informality, wage structures, and union coverage. Finally, we simulate first order impacts of AI-induced displacement on earnings, poverty, and inequality. The results show substantial heterogeneity, with higher levels of AI- related risk among women, younger, more educated, and formal workers. Indices that account for task complementarities show flatter gradients across the income and education distribution. Simulations suggest that displacement effects may lead to only moderate increases in inequality and poverty in the absence of mitigating policies
Trade and Industrial Policy in Supply Chains: Directed Technological Change in Rare Earths (Discussion Paper)
Full text linkTrade and industrial policies, while primarily intended to support domestic industries, may unintentionally stimulate technological progress abroad. We document this mechanism in the case of rare earth elements (REEs)--critical inputs for manufacturing at the knowledge frontier, with low elasticity of substitution, inelastic supply, and high production and processing concentration. To assess the importance of REEs across industries, we construct an input-output table that includes disaggregated REE inputs. Using REE-related patents categorized by a large language model, sectoral TFP data, trade data, and physical and chemical substitution properties of REEs, we show that the introduction of REE export restrictions by China led to a global surge in innovation and exports in REE-intensive downstream sectors outside of China. To rationalize these findings and quantify the global impact of the adverse REE supply shock, we develop a quantitative general equilibrium model of trade and directed technological change. We also propose a structural method to estimate sectoral input substitution elasticities for REEs from patent data and find REEs to be complementary inputs. Under endogenous technologies and with complementary inputs, input supply restrictions on REEs induce a surge in REE-enhancing innovation and lead to an expansion of REE-intensive downstream sectors
America en el Centro: driving development in Central America, Panama, and the Dominican Republic
Full text linkAmérica en el Centro is a regional development program for the region comprising Central America, Panama, and the Dominican Republic, a program that addresses common challenges among these countries. This report helps to raise awareness of the program and of the progress of its accompanying knowledge agenda. The specific issues discussed in relation to the region are: the benefits of regional trade integration, the impact of climate change on health, and how to support the development of young people in order to harness their potential and contribute to development
Research Insights: What Are the Downstream Consequences of Non-Tariff Barriers in Argentina?
Full text linkNon-Automatic Import Licenses (NAILs) significantly reduce firm imports, leading firms reliant on these imported inputs to decrease exports and employment. In markets where a firm is relatively large, it can respond to NAILs by adjusting its markups while maintaining relatively stable prices and output. The impact of NAILs depends on the sector characteristics and the exports destinations
Fiscal Consolidations in Latin America and the Caribbean: Do Inequality, Informality and Corruption Matter?
No full textWidening income disparities, higher corruption and larger informality in many emerging market and developing economies (EMDE) including Latin America, all with pressing and mounting fiscal problems, have rekindled interest in the empirical analysis of the key factors determining the occurrence of fiscal consolidations. Using discrete choice models, this paper examines the drivers of fiscal consolidation episodes in a sample of 148 EMDE between 1980 and 2019 with a focus on Latin America. Consolidations are more likely during good economic times. Inequality does not seem to drive consolidations in Latin America, while more informality increases the probability of their occurrence, corruption decreases it. In turn, when examining the drivers of successful consolidations, larger income inequality seems to act as a boost for successful consolidations, while informality hinders the likelihood of success. In fact, while the size of the public investment multiplier in Latin America is larger than in other country groups, when informality is high the multiplier effect gets reduced to a much lower and insignificant magnitude. Results are robust to several sensitivity and robustness tests
Case Study. Seeking a Recipe to Support Entrepreneurs in a Fragile Country: Banj\u27s Approach through the Mobilization of the Innovation Ecosystem in Haiti
Full text linkHaiti is a fragile country, with an economy that is largely informal and historically dependent on agriculture. With the majority of the population under 24 years old, an illiteracy rate of around 40% (complicated by multilingualism in French, English and Haitian Creole), and a youth unemployment rate of 37%, the country must innovate to find ways to drive economic development and growth, while inspiring its youth amidst a backdrop of massive emigration. For young people, even those who graduate from college, finding stable employment in Haiti\u27s highly competitive market is a challenge. As in many economies around the world, becoming an entrepreneur and creating your own business can also be the fastest and safest way to generate income and secure employment. In this context, seizing the opportunities offered by the emerging digital economy sector is highly relevant. This is exactly what the Banj organization has been doing for the past six years in Delmas, a suburb of Port-au-Prince. Banj, which means "genius" in Haitian Creole, was born under this auspicious name. This entrepreneurial initiative has combined the concept of a shared workspace with the role of a catalyst for the innovation ecosystem, while embedding a strong social mission into its DNA. It supports young people with their projects by providing them with tools and resources, from idea conception to final project delivery, including funding and launching start-ups. From an economic perspective, Banj is a business that commercializes shared workspaces, organizes events, and acts as a service provider to coordinate innovation programs, including training, mentorship, incubation, and acceleration, with a strong focus on digital technology. This case study explores the strategies that have helped young businesses emerge and enabled hundreds of entrepreneurs to create their own ventures by leveraging digital technology and the strength and richness of a community united under the same roof. Is there a "Banj recipe"? Can it be replicated in other countries? Can it be applied to other sectors? The story began modestly under the leadership of founder Marc Alain Boucicault, a social entrepreneur who considers himself an ecosystem builder. His experience in the international development sector catalyzed the energy of a group of motivated young people driven by the desire to make a difference and provide tools and resources to Haiti\u27s enterprising youth. They started with limited resources, but gradually established a brand, created a space, developed partnerships and built an entire community of members and service providers to deliver multiple programs. Today, Banj boasts modern and connected infrastructure and rents workspaces tailored to project leaders and young entrepreneurs, with a particular focus on digital economy activities. In addition to providing services to these businesses, a series of events, collaboration opportunities, and networking activities are part of what the organization offers to help projects grow under its roof. Most importantly, among partnerships and programs funded by private companies, local and international institutions, and international donors, Banj plays a key role in attracting, supporting, and incubating innovative projects, helping young decision-makers grow their teams. Banj\u27s activities are made possible by partnerships from entities including, but not limited to: Sogebank for its premises, Digicel/Access Haiti for internet access, the Inter- American Development Bank (IDB) for the Creative Tech Lab program, the International Organization of La Francophonie for the D-CLIC program; Google for the Haiti Start initiative; International Republican Institute (IRI) for the Ideathon Community Program (PIC); and, Facebook for training focused on developers and programmers. Nevertheless, the journey has not always been simple, and the young enterprise has faced challenges, including the socio-economic, political, and environmental upheavals of the country. Most notably, in 2019, Banj experienced a partial fire, vandalism, and looting, which shook the organization. It took all the energy and determination of the team to demonstrate resilience and move forward. Furthermore, the COVID-19 crisis also impacted Banjs operational model, and in response to this challenge, new offerings were developed, relying on online services. Banj is now recognized as a central focal point in the country for matters related to entrepreneurship, networking, training, and digital economy events. The organization also has presence in the Caribbean through its programs in Honduras, Jamaica, and Trinidad and Tobago, among others. However, this position was not built overnight, and the concept has evolved since its creation in 2018, always maintaining its DNA focused on young people, ambition, and pragmatism in the service of local energies. Additionally, the pursuit of strong partnerships with powerful and recognized actors (tech giants, development banks, etc.) has helped develop a high-quality, attractive, and impactful service offering for the “Banj community”. Since 2018, Banj has hosted thousands of participants at its activities, organized more than 500 events, trained nearly 3,000 people through over 100 training sessions, attracted more than 36,000 applications for its programs, incubated 122 projects, and managed an innovation fund of nearly half a million dollars to incubate or accelerate initiatives supported by its structure. These are significant numbers for Haiti, having impacted both the development of businesses and the men and women eager to take control of their destinies and achieve their life goals. Banj\u27s events, services, and programs are delivered by mobilizing an ecosystem and partnerships in various ways. For example, the Inter-American Development Bank entrusted the incubator with the execution of entrepreneurial support programs. With operational expenses exceeding 3 million U.S. dollars over the past six years, Banj\u27s activities extend well beyond Port-au-Prince, with programs implemented in other regions of Haiti, as well as online activities accessible through the internet and promoted on social media. These programs are also open to other countries, particularly in the Caribbean
Gaps in Research on Active Labor Market Policies
Full text linkIn the labor market, there are issues that need to be addressed and resolved, such as lack of skills or low productivity, barriers to employment, low wages, mismatch between job vacancies and job seekers, or lack of promotion for small businesses. As a remedy, Active Labor Market Policies (ALMPs) are often implemented, such as training programs, entrepreneurship promotion, job search assistance or guidance, among others. This document analyzes the available evidence in recent literature that evaluates the impact of active labor market policies, with the aim of identifying knowledge gaps and studies that can provide guidelines for future research. To this end, documents on the results of programs implemented worldwide are analyzed, with a special focus on Latin America and the Caribbean. In this regard, the evidence shows that many programs are effective in improving people\u27s employability, generating formal or higher-quality jobs, and increasing labor income. Studies evaluating programs indicate that interventions are particularly effective for young people and women. However, within this evidence, there are still knowledge gaps. After analyzing several meta-analyses and evaluations, it is found that there is a lack of implementation and evaluation of ALMPs focused on groups with additional challenges, such as people with disabilities, indigenous people, Afro-descendants, and LGBTQ individuals. Another gap is related to the lack of consideration of the specific characteristics of the labor market in each region, such as the presence of salaried work or the concentration of informal workers. Additionally, there is a gap in the generation of qualitative knowledge that explains why, in many cases, the programs do not work or do not have significant impacts