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Yuriy Gorodnichenko, Debora Revoltella, Jan Svejnar, and Christoph Weiss
Abstract
Many barriers keep resources from flowing to the most efficient firms in the European Union, with negative consequences for macroeconomic performance. Although a key objective of the EU has been to improve the allocation of resources across member countries, the dispersion of productivity among firms remains relatively large. Using data from a new survey of firms in all 28 EU countries, this column argues that reducing differences in the business environment across countries and industries could increase EU GDP by at least 18 percent. It also shows that reducing the dispersion in the marginal revenue products of EU firms to the level of the United States – a change that would likely require many significant policy reforms – could increase aggregate output in the EU by more than 20 percent. In addition, it finds that the use of firm-level characteristics can help better understand the potential sources of distortions in the allocation of resources across firms.
The joint EIB-ECB-SUERF-Columbia-MIT conference on 28-29 November addressed policy issues related to investment, technological transformation and skills.
Read our conference blog co-authored by CGEG director Jan Svejnar examining the slowdown in EU productivity growth and the wide dispersion in productivity among European firms.
Paul Lagunes and Oscar Pocasangre M.
Abstract
Governments worldwide have implemented Freedom of Information Acts (FOIAs) in an effort to enhance transparency, but there is little evidence that FOIAs actually help secure information for citizens. We probed Mexico’s FOIA system by sending identical information requests to government entities in 2007, 2013, and 2015. Requests were submitted on behalf of a male citizen with a common name. In 2007, we also submitted information requests to a comparable set of entities on behalf of a male citizen who signaled clout. We show that entities are answering more frequently and providing more information in 2015 compared to earlier years, but that they take longer to answer, frequently charge fees in exchange for information, and have not improved the quality of responses. Entities also do not discriminate between the regular and the seemingly influential citizen. We conclude that Mexico’s FOIA system works, though it would benefit from significant and targeted improvements.
Published in Public Administration, Vol. 97, Issue 1, November 2018
On November 8th, Alvin Roth, 2012 Nobel Laureate in Economic Sciences and Craig and Susan McCaw Professor of Economics at Stanford University, delivered the 11th Annual Kenneth J. Arrow lecture titled “Market Design in Large Worlds: The Example of Kidney Exchange.”
Abstract
Zombie firms—indebted firms that are unprofitable and depend on banks or government bailouts for continued operation—are a drag on the economies in which they operate. The existence of zombie firms has been attributed to banks continuing to provide forbearance lending for their own interests. But local political officials may also contribute to keeping zombie firms alive, even in settings without the pressures of electoral cycles. Studying loans in China, I examine how bank lending is influenced by local officials and tracks their appointment cycle. I find that there is significant targeting of firms: lending to zombie firms increases in the last service year of local officials and exhibits an increasing trend across the appointment cycle, while lending to non-zombie firms shrinks in the last service year and decreases across the cycle. I also find that influence is selective: local officials pressure small local banks more to lend to unprofitable firms, but their ability to affect large nationally operated banks appears to be limited.
Ofer Malamud, Andreea Mitrut, and Cristian Pop-Eleches
Abstract
This paper examines a schooling expansion in Romania that increased educational attainment for successive cohorts born between 1945 and 1950. We use a regression discontinuity design at the day level based on school entry cutoff dates to estimate impacts on mortality with 1994-2016 Vital Statistics data and self-reported health with 2011 Census data. We find that the schooling reform led to significant increases in years of schooling, higher employment rates, and reductions in fertility, but did not affect mortality, hospitalizations, or self-reported health. These estimates provide new evidence on the causal relationship between education and mortality outside of high income countries and at lower margins of educational attainment.
Alice Tianbo Zhang
Abstract
Between 1995 and 2010, China’s Three Gorges Dam uprooted more than one million people, resulting in the largest involuntary displacement from dam construction in history. This paper provides the first evidence of the causal impact of dam-induced inundation on migration and labor market outcomes by combining micro-level census and satellite data. Using a novel identification strategy and remote sensing techniques to capture exogenous variations in flooding intensity, I find that inundation has imposed large and enduring costs on the local economy. Rising water levels in the dam’s reservoir displaced between 1.5 and 1.9 million people. Most migrants in partially flooded counties relocated to other towns or villages within the same county. Flooded counties saw a steep and persistent decline of employment by 30 to 50 percent in the manufacturing sector and capital-intensive occupations, and the effects were more harmful to residents that did not move. In the long run, the decline in manufacturing was partly offset by reallocating workers to agriculture. Industrial firms in flooded counties responded by downsizing the workforce and reducing compensation. Overall, these findings highlight the need for policy evaluations to carefully weigh the broad benefits of infrastructure against the concentrated costs to local communities.
Madeleine Albright, the former U.S. secretary of state, discussed Václav Havel’s life and how his legacy continues to play an important role in global politics.
Hein Bogaard and Jan Svejnar
Abstract
We exploit organizational reforms in a foreign-owned bank in Central-East Europe to study the implementation of modern HRM policies in an emerging market context. We have branch-level data and use our knowledge of the process that led to the adoption of the reforms to implement two estimators that address endogeneity bias in a complementary fashion: an IV approach and Generalized Propensity Score estimation. Our results show that some of the reforms had a positive impact on productivity, but they also underscore the risks of quantity-based incentives where quality is important.
Rafael Dix-Carneiro, Rodrigo R Soares, and Gabriel Ulyssea
Abstract
This paper studies the effect of changes in economic conditions on crime. We exploit the 1990s trade liberalization in Brazil as a natural experiment generating exogenous shocks to local economies. We document that regions exposed to larger tariff reductions experienced a temporary increase in crime following liberalization. Next, we investigate through what channels the trade-induced economic shocks may have affected crime. We show that the shocks had significant effects on potential determinants of crime, such as labor market conditions, public goods provision, and income inequality. We propose a novel framework exploiting the distinct dynamic responses of these variables to obtain bounds on the effect of labor market conditions on crime. Our results indicate that this channel accounts for 75 to 93 percent of the effect of the trade-induced shocks on crime.
Published in American Economic Journal: Applied Economics, Vol. 10, No. 4, October 2018
Francisco Gallego, Ofer Malamud, and Cristian Pop-Eleches
Abstract
This paper explores how parental information and control can influence children’s internet use in Chile. We designed and implemented a set of randomized interventions whereby approximately 7700 parents were sent weekly SMSs messages with (i) specific information about their children’s internet use, and/or (ii) encouragement and assistance with the installation of parental control software. We separate the informational content from the cue associated with SMS messages and vary the strength of the cues by randomly assigning whether parents received messages in a predictable or unpredictable fashion. Our analysis yields three main findings. First, we find that messages providing parents with specific information affects parental behavior and reduces children’s internet use by 6-10 percent. Second, we do not find significant impacts from helping parents directly control their children’s internet access with parental control software. Third, the strength of the cue associated with receiving a message has a significant impact on internet use.
On September 26th 2018, the evening of the 2nd One Planet Summit in New York City, the Center on Global Economic Governance at SIPA convened a panel of policymakers and experts engaged in important work on global climate action for a discussion titled “One Planet Commitments: Putting the Paris Agreement into Action."
Sustainability has become a key issue in many fields central to the future development of mankind.
Judith A. Frias, David S. Kaplan, Eric Verhoogen, and David Alfaro-Serrano
Abstract
This paper draws on employer-employee and longitudinal plant data from Mexico to investigate the impact of exports on wage premia, defined as wages above what workers would receive elsewhere in the labor market. We decompose plant-level average wages into a component reflecting skill composition and a component reflecting wage premia. Using the late-1994 peso devaluation interacted with initial plant size as a source of exogenous variation in exports, we find that exports have a significant positive effect on wage premia, and that the effect on wage premia accounts for essentially all of the medium-term effect of exporting on plant-average wages.