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Eduardo Fraga, Gustavo Gonzaga, Rodrigo R. Soares

Abstract

This paper analyzes the effect of selection on ability on the evolution of the gender wage gap during the first years of professional life. We use longitudinal data with 16 years of the early career history of formal sector workers in Brazil. The panel allows us to build a measure of unobserved ability that we use to analyze the dynamics of labor market selection across genders as individuals age. We focus on the cohort born in 1974, for which we have a close to complete history of formal labor market participation. For this cohort, the average ability of formally employed men improved in relation to that of women during the first years of professional life. The selection of men and women into the labor market was similar at age 21, but by age 31 high-ability men (one standard deviation above the mean) had a probability of employment 1.6 percentage point higher than their high-ability female counterparts. This contributed to the increase in the conditional gender wage gap observed in the early career, as the ability distribution of employed women deteriorated in relation to that of employed men. Our estimates suggest that, for the 1974 cohort, this mechanism explains 32% of the cumulative growth in the conditional gender wage gap between ages 21 and 36.

Evan Plous Kresch

Abstract

This paper documents how weak institutions may undermine public goods service when multiple levels of government share responsibility of provision. I examine the Brazilian water and sanitation sector, which presents a natural experiment of shared provision between state and municipal companies. Using a differences-in-differences framework, I study a legal reform that clarified the relationship between municipal and state providers and eliminated any takeover threat by state companies. I find after the reform, municipal companies almost doubled their total system investment.  The increased investment in these municipalities led to significant increases in system access and decreases in child mortality.

Hyuncheol Bryant Kim, Seonghoon Kim, and Thomas T. Kim

Abstract

Different work incentives may affect labor productivity differently. We implement a two-stage field experiment to measure effects of career and wage incentives on labor productivity through self-selection and causal effect channels. First, workers were hired with either career or wage incentives. After employment, a random half of workers with career incentives received wage incentives and a random half of workers with wage incentives received career incentives. We find that career incentives attract higher-performing workers than wage incentives but do not increase productivity conditional on selection. Instead, wage incentives causally increase productivity for existing workers. Observable characteristics are limited in explaining the selection effect. 

Ama Baafra Abeberese and Ritam Chaurey

Abstract

Informal firms account for over half of output and employment in developing countries. To analyze the barriers to formalization, most of the literature has focused on entry costs in the form of registration fees, rather than on the ongoing costs and benefits of being a formal firm. This paper is the first to study the effect of a simultaneous change in ongoing formal sector costs and benefits on formalization. We analyze an Indian scheme that provided tax exemptions and capital subsidies to formal firms, thereby increasing the benefits and reducing the costs of formal firms. Using a complete enumeration of firms and a difference-in-differences approach, we find that the scheme led to an increase in the registration of existing informal firms, in particular, male-owned firms, urban firms and firms with access to external financing. We find some evidence that the increase in registration was primarily driven by the tax exemption rather than the capital subsidy.

Two hundred forty-eight papers and sixty-seven parallel panel sessions. Multidisciplinary topic areas covering Politics and Economic Transition, Organization and Markets, Voting, Politics, and Elections, and many more. Nearly three hundred participants from across the globe. These are just some of the highlights from the 21st Annual Meeting of the Society for Institutional and Organizational Economics (SIOE), held June 23rd through 25th, at Columbia University.

Nancy Birdsall, Liliana Rojas-Suarez, and Anna Diofasi

Abstract

Despite increasing volatility in the global economy, the uptake of the IMF’s two precautionary credit lines, the Flexible Credit Line (FCL) and the Precautionary and Liquidity Line (PLL), has remained limited – currently to just four countries. The two new lending instruments were created in the wake of the global financial crisis of 2008 to enable IMF member states to respond quickly and effectively to temporary balance of payment needs resulting from external shocks. Both credit lines offer immediate access to considerable sums - over ten times a country’s IMF quota in some cases -, with no (FCL) or very limited (PLL) conditionality. This paper addresses four misconceptions (or ‘myths’) that have likely played a role in the limited utilization of the two precautionary credit lines: 1) too stringent qualification criteria that limit country eligibility; 2) insufficient IMF resources; 3) high costs of precautionary borrowing; and 4) the economic stigma associated with IMF assistance. We show, in fact, that the pool of eligible member states is likely to be seven to eight times larger than the number of current users; that with the 2016 quota reform IMF resources are more than adequate to support a larger precautionary portfolio; that the two IMF credit lines are among the least costly and most advantageous instruments for liquidity support countries have; and that there is no evidence of negative market developments for countries now participating in the precautionary lines.

Beatriz Bulla is a journalist and reporter for O Estado de S. Paulo, one of Brazil's most influential and longest-running quality newspapers.

Belinda Archibong and Francis Annan

Abstract

This paper examines whether disease burdens, especially prevalent in the tropics, contribute significantly to widening gender gaps in educational attainments. We estimate the impact of sudden exposure to the 1986 meningitis epidemic in Niger on girls’ education relative to boys. Our results suggest that increases in meningitis cases during epidemic years significantly reduce years of education disproportionately for primary school-aged going girls in areas with higher meningitis exposure. There is no significant effect for boys in the same cohort and no effects of meningitis exposure for non-epidemic years. Our findings have broader implications for climate-induced disease effects on social inequality.

Published: American Economic Review: Papers & Proceedings, May 2017, 107(5); 1-7 

Andreas Dombret, an executive board member of the Deutsche Bundesbank—Germany’s central bank—visited SIPA on April 20 to discuss challenges facing the Euro area from the German perspective.

Fake news and the pursuit of truth in the media is not an issue unique to American jounalists today.

Willem H. Buiter

Abstract

Necessary conditions for valid general equilibrium analysis include: (1) the number of equations equals the number of unknowns; (2) if (1) holds, the resulting solution(s) make sense. The fiscal theory of the price level fails on both counts, both away from and at the ELB. The underlying fallacy is the confusion of the intertemporal budget constraint of the State with a misspecified government bond pricing equilibrium equation. This means overdetermined systems unless (a) the price level is flexible, (b) the interest rate is the monetary policy instrument and (c) there is a non-zero stock of nominal government bonds. Thus, a sticky price level or a nominal money stock rule imply inconsistency. When all three conditions are satisfied, unacceptable anomalies occur: negative price levels; the FTPL can price money when money does not exist; the logic of the FTPL applies equally to the intertemporal budget constraint of any household; when the bond pricing equation is specified correctly, there is no FTPL.

The FTPL has nothing to do with monetary vs. fiscal dominance or active v. passive fiscal policy.

The FTPL implies government debt is never a problem; the price level takes care of it, and not through unanticipated inflation or financial repression. If acted upon by fiscal authorities, the consequences could be severe.

There is a correct fiscal theory of seigniorage. The issuance of return-dominated and/or irredeemable central bank money creates fiscal space and ensures that a combined monetary-fiscal stimulus always boosts nominal aggregate demand.

On March 17, 2017, the international conference of The World Economy and the Role of the State in Economic Growth was successfully held in Beijing.

David Atkin, Azam Chaudhry, Shamyla Chaudry, Amit K. Khandelwal, Eric Verhoogen

Abstract

This paper studies technology adoption in a cluster of soccer-ball producers in Sialkot, Pakistan. We invented a new cutting technology that reduces waste of the primary raw material and gave the technology to a random subset of producers. Despite the arguably unambiguous net benefits of the technology for nearly all firms, after 15 months take-up remained puzzlingly low.  We hypothesize that an important reason for the lack of adoption is a misalignment of incentives within firms: the key employees (cutters and printers) are typically paid piece rates, with nom incentive to reduce waste, and the new technology slows them down, at least initially. Fearing reductions in their effective wage, employees resist adoption in various ways, including by misinforming owners about the value of the technology. To investigate this hypothesis, we implemented a second experiment among the firms that originally received the technology: we offered one cutter and one printer per firm a lump-sum payment, approximately equal to a monthly wage, conditional on them demonstrating competence in using the technology in the presence of the owner. This incentive payment, small from the point of view of the firm, had a significant positive effect on adoption. We interpret the results as supportive of the hypothesis that misalignment of incentives within firms is an important barrier to technology adoption in our setting.

Published in Quarterly Journal of Economics, v. 131 no. 4, November 2016

Jan Svejnar discusses the upside and downside risks of global economic growth, emphasizing the significance of China and the political situation in Europe.  He also raises key questions for policy makers about ahead of future challenges. Download the policy brief here.

Faculty Associate, Marcos Troyjo discusses how the people of Brazil participate in mass street protests to express public sentiment and express themselves politically.