Civil War and Foreign Influence

We study a symmetric information bargaining model of civil war where a third (foreign) party can affect the probabilities of winning the conflict and the size of the post conflict spoils. We show that the possible alliance with a third party makes peaceful agreements difficult to reach and might lead to new commitment problems that trigger war. Also, we argue that the foreign party is likely to induce persistent informational asymmetries which might explain long lasting civil wars. We explore both political and economic incentives for a third party to intervene. The explicit consideration of political incentives leads to two predictions that allow for identifying the influence of foreign intervention on civil war incidence. Both predictions are confirmed for the case of the U.S. as a potential intervening nation: (i) civil wars around the world are more likely under Republican governments and (ii) the probability of civil wars decreases with U.S. presidential approval rates.

Fiscal centralization and the political process

We study the dynamic support for fiscal decentralization in a political agency model from the perspective of a region. We show that corruption opportunities are lower under centralization at each period of time. However, centralization makes more difficult for citizens to detect corrupt incumbents. Thus, corruption is easier under centralization for low levels of political competition. We show that the relative advantage of centralization depends negatively on the quality of the local political class, but it is greater if the center and the region are subject to similar government productivity shocks. When we endogenize the quality of local politicians, we establish a positive link between the development of the private sector and the support for decentralization. Since political support to centralization evolves over time, driven either by economic/political development or by exogenous changes in preferences over public good consumption, it is possible that voters are (rationally) discontent about it. Also, preferences of voters and the politicians about centralization can diverge when political competition is weak.Decentralization, Centralization, Political agency, Quality of politicians, Corruption

Subsidy competition in integrating economies

Regional integration affects location decisions of MNCs and therefore influences each member country's provision of investment incentives, which in turn may trigger relocation. As a consequence, subsidy competition increases as integration proceeds. We analyze the welfare consequences of this phenomenon, modelling subsidization as a game between a MNC facing different location alternatives and governments that may deter or induce relocation by means of subsidies. We show that the combination of integration and subsidy competition may lead to an excess of subsidization. We also discuss how the interest of harmonizing subsidies, the net gains from integration crucially depend on technological differences, ownership and the absorption capacity of MNC profits by countries. Lastly, we find that the gain from supranational subsidy coordination increases with integration.multinational corporations ; regional integration ; FDI ; subsidy competition ; location choice

The Golden Halo and Political Transitions

In this paper we analyze the role of the IMF and the World Bank in triggering changes in the political regime, i.e., democracy and autocracy. We develop a theoretical model which predicts that anticipation of financial flows from international financial institutions may trigger political regime changes which would not take place otherwise. We test the implications of our model empirically and find support both for the role of perfectly foreseen IMF and World Bank programs and of the history of previous World Bank programs. The magnitude of this effects is quite substantial. --political transitions,democracy,autocracy,political instability

Government Information Transparency

This paper studies a model of announcements by a privately informed government about the future state of the economic activity in an economy subject to recurrent shocks and with distortions due to income taxation. Although transparent communication would ex ante be desirable, we find that even a benevolent government may ex-post be non-informative, in an attempt to countervail the tax distortion with a "second best" compensating distortion in information. This result provides a rationale for independent national statistical offices, committed to truthful communication. We also find that whether inequality in income distribution favors or harms government transparency depends on labor supply elasticity.Government announcements, Cheap talk, Asymmetric in- formation, Inequality

Immigration and the School System

Immigration is an important problem in many societies, and it has wide-ranging effects on the educational systems of host countries. There is a now a large empirical literature, but very little theoretical work on this topic. We introduce a model of family immigration in a framework where school quality and student outcomes are determined endogenously. This allows us to explain the selection of immigrants in terms of parental motivation and the policies which favor a positive selection. Also, we can study the effect of immigration on the school system and how school quality may self-reinforce immigrants' and natives' choices.education, immigration, school resources, parental involvement, immigrant sorting.

Incentives, resources and the organization of the school system

We study a model where student effort and talent interact with parental and teachers' investments, as well as with school system resources. The model is rich, yet sufficiently stylized to provide novel implications. We can show, for example, that an improvement in parental outside options will reduce parental and school effort, which are partially compensated through school resources. In this way we provide a rationale for the ambiguous existing empirical evidence on the effect of school resources. We also provide a novel microfoundation for peer effects, with empirical implications on welfare and on preferences for sorting across schools.Education, Incentives, School resources, Parental involvement, School sorting, Peer effects

Subsidy competition in integrating economies

Regional integration affects location decisions of MNCs and therefore influences each member country's provision of investment incentives, which in turn may trigger relocation. As a consequence, subsidy competition increases as integration proceeds. We analyze the welfare consequences of this phenomenon, modelling subsidization as a game between a MNC facing different location alternatives and governments that may deter or induce relocation by means of subsidies. We show that the combination of integration and subsidy competition may lead to an excess of subsidization. We also discuss how the interest of harmonizing subsidies, the net gains from integration crucially depend on technological differences, ownership and the absorption capacity of MNC profits by countries. Lastly, we find that the gain from supranational subsidy coordination increases with integration.L'intégration régionale affecte les choix de localisation des Firmes Multinationales (FMN), ce qui modifie l'offre de subventions à l'investissement par les gouvernements, qui peuvent elles-mêmes provoquer des délocalisations. Ce mécanisme explique l'accroissement de la concurrence entre Etats au fur et à mesure de la libéralisation du commerce intra régional. Nous étudions les conséquences sur le bien-être régional de ce phénomène, en modélisant l'offre de subventions comme un jeu entre une FMN confrontée à différentes localisations possibles et des gouvernements choisissant des niveaux de subventions. Nous montrons d'abord que la conjonction de l'intégration régionale et de la concurrence entre Etats conduit à un excès de subventions. Nous montrons également que tant l'intérêt d'une harmonisation régionale des subventions que les gains nets à l'échange après subventionnement dépendent de manière cruciale des écarts technologiques entre pays, de l'origine du capital de la FMN, ainsi que de la part des profits de la FMN entrant dans le bien-être national. Enfin, nous trouvons que le gain à créer une institution supranationale coordonnant les politiques de subventions croît au fur et à mesure de l'intégration

Income dynamics in Argentina during the 1990's: "mobiles" did change over time

Este artículo investiga la dinámica de ingresos familiares en el corto plazo durante los años 90. La educación universitaria, como forma de protección contra caídas de ingresos, ciertos rangos demográficos asociados con mayores pérdidas y hogares en los que el jefe de hogar es una mujer, con mayores ganancias relativas, son las únicas variables que explican la movilidad económica de manera persistente a través de los años. La relación entre la posición económica inicial y el subsecuente cambio en los ingresos es contingente y especifica al período investigado. Si acaso, la relación entre ingreso inicial y movilidad es positiva.Using panel data from Argentina during the 1990's, this paper concludes that, in Argentina, income 'mobiles' did change over time. Among the household variables with a structural relation with income dynamics, we find university education, protecting from income declines though not necessarily linked to upward movements, certain age ranges of the highest earner positively associated with family income losses and households in which the highest earner is a woman exhibiting larger income gains. Interestingly, once we controlled for other correlates, no clear structural relationship was found between initial economic position and subsequent income change. If any, this relationship is positive.Instituto de Investigaciones Económica

Analyzing Income Mobility and Inequality: The Case of Argentina during the 1990’s

The aim of this work is to analyze income mobility and inequality during different economic shocks in Argentina in the 1990’s, using five one-year panels: 1991/1992, 1993/1994, 1994/1995, 1998/1999, and 1999/2000. In particular, we address two questions. First, what can we say about the relationship between income mobility and the inequality cross-sectional analysis? Second, who got ahead, who fell behind and who kept up economic position during the different economic cycle facts that occurred in the 1990 decade? In other words, were the ‘upwardly mobile’, ‘immobile’ and ‘downwardly mobile’ always the same kind of individuals, or can we establish different group characteristics depending on the type of economic shock?Facultad de Ciencias Económica