Reassessing the Demography Hypothesis: the Great Brazilian Crime Shift

Mimicking the US in 1980 and 1990s, Brazil is a remarkable case of a major shift in homicides. After increasing steadily throughout the 1990s and the beginning of the 2000s, homicides reached a peak in 2003, and then fell. I show a strong time-series co-movement between homicide rates and the percentage of the population in 15-24 age bracket. Using a panel of states, I find a very high elasticity of homicide with respect to changes in the 15-24 year-old population (2.4), after controlling for income, income inequality, and state and year fixed effects. I then focus on the case of São Paulo, the largest state in the country, and whose shift in homicides has been particularly acute. City-level panel elasticities are similar to the state-level estimates. Furthermore, the demographic shift in São Paulo was more pronounced than the national one, explaining the particularly large shift in homicides in São Paulo. The large cohort born from the mid 1970 through the early 1980 is the result of a sharp reduction in infant mortality only belatedly followed by acceleration in the reduction of fertility. In line with the Easterlin Hypothesis (Easterlin [1980]), this large cohort faced tough economic conditions. Educational attainment ceased to improve for this cohort, and unemployment rates upon entering the job market were exceptionally high. Thus, the large homicide shift in Brazil is produced by a particularly large and socially fragile cohort.Age Structure, Demographic Change, Homicides

A relational theory of relationship lending under contractual incompleteness

While the literature has focused on relationships as a technology for solving hidden information problems in credit markets, hidden action has been very little explored as an explanation for the existence of relational lending. In this paper, we propose a theory in which relationships are driven by the problem of contractual incompleteness in instances in which a borrower, by taking ex-ante actions, magnifies the hazards related to ex-post bargaining over returns. A relationship commits the borrower to take actions that minimize the ex-post conflict of interests resulting from contractual incompleteness. We show that a robust feature of an optimally designed lending relationship (i.e., the best Public Perfect Pure Strategy Equilibrium in a repeated lending game) is that a sufficiently patient entrepreneur, upon choosing his actions, ignores his privately observed contingencies. This commitment solves the credit rationing problem that arises in a one-shot (arm’s length) interaction, and reduces, when compared to arm’s length financing, the interest rate that a bank charges for a credit line. Although in a less acute fashion, we also show that the same features just described appear in an optimal lending relationship for the case in which the entrepreneur is impatient.

PUBLIC INVESTMENT, ECONOMIC PERFORMANCE AND BUDGETARY CONSOLIDATION: VAR EVIDENCE FOR THE FIRST 12 EURO COUNTRIES

In a period of heightened concern about fiscal consolidation in the euro area, a politically expedient way of controlling the public budget is to cut public investment. A critical question, however, is whether or not political expediency comes at a cost, in terms of both long-term economic performance and future budgetary contention efforts. First, common wisdom suggests that public investments have positive effects on economic performance although the empirical evidence is less clear. Second, it is conceivable that public investment has such strong effects on output that over time it generates enough additional tax revenues to pay for itself. Obviously, it is equally plausible that the effects on output although positive are not strong enough for the public investment to pay for itself. In this paper, we investigate these issues empirically for the first twelve countries in the euro area using a vector auto-regressive approach. We conclude that the euro countries can be gathered in four groups according to the nature of the economic and budgetary impact of public investment. The first group includes Austria, Belgium, Luxembourg, and Netherlands, where the economic effects are either negative or positive but very small and, therefore, cuts will be harmless for the economy and effective from a budgetary perspective. The second group includes Finland, Portugal, and Spain, where public investment does not pay for itself and, therefore, cuts are an effective tool of budgetary consolidation although they are harmful for the economy. The third group includes France, Greece, and Ireland where public investment just pays for itself and therefore cuts are not an effective way of achieving long-term budgetary consolidation and are harmful for the economy. Finally, the fourth group includes Germany and Italy, where public investment more than pays for itself and, therefore, cuts are not only harmful for the economy but also counterproductive from a budgetary perspective.Public Investment, Economic Performance, Budgetary Consolidation, Euro Area

A Nonsmooth Maximum Principle for Optimal Control Problems with State and Mixed Constraints-Convex Case

Here we derive a nonsmooth maximum principle for optimal control problems with both state and mixed constraints. Crucial to our development is a convexity assumption on the "velocity set". The approach consists of applying known penalization techniques for state constraints together with recent results for mixed constrained problems.Comment: Published in 'Discrete and Continuous Dynamical Systems, Vol. 2011, pp. 174-18

Impact of Public Investment Upon Economic Performance and Budgetary Consolidation Efforts in the European Union

In an period of heightened concern about fiscal consolidation in the Euro zone, a politically expedient way of dealing with the situation is to cut public investment. A critical question, however, is whether or not political expediency comes at a cost, in terms of both long-term economic performance and future budgetary consolidation efforts. In fact, one would expect any type of investment, including public investment, to improve the long-term economic performance. Moreover, to the extent that public investment increases output in the long-term, it also expands the tax base and, therefore, tax revenues in the long term. It is conceivable that public investment has such strong effects on output, that over time it generates enough additional tax revenues to pay for itself. It is equally plausible that the effects on output although positive are not strong enough for the public investment to pay for itself. In the first case, cuts in public investment hurt long-term growth and make the future budgetary situation worse. In the second case, cuts in public investment hurt the long-term economic performance without hurting the future budgetary situation. In this paper we investigate this question empirically in the context of a number of countries in the Euro zone using a vector auto-regressive/error correction mechanism approach to determine the effects of aggregated public investment on output, employment and private investment. Our ultimate objective is to determine in which regime do the different countries seem to fit and determine to what extent cuts in public investment may turn out to be counter-productive in the long-term from a budgetary perspective. JEL Classification: C32, E62, H54, O52

Does crime affect economic decisions? An empirical investigation of savings in a high-crime environment

While most economic studies of crime have focused on its determinants, we study the reverse question: does crime affect economic behavior? Being such an important social phenomenon, one would expect crime to affect economic decisions. Using local data on crime rates and savings per capita in a high-crime environment, we document a striking empirical relationship: crime induces savings. Our paper is one of the first to successfully relate crime to an economic outcome. This result is robust to an extensive sensitivity analysis, which include: 1) controlling to a large set of demographic covariates; 2) accounting for the fact that crime and savings may be determined jointly; 3) measuring savings in different ways; 4) accounting for the presence of possible outliers; 5) weighting the data according to population; 6) accounting for spatial correlation; and, finally, 7) estimating the model for different sub-samples of cities. Our estimates indicate that only property, not violent, crime induces savings, which is consistent with the theoretical explanations on why crime would increase thriftinessCrime, Economic Behavior, Savings

Relationship lending: Is it Incentives or hidden information?

Relationships are a valuable technology to produce loans. (Berger and Udell [1995], Petersen and Rajan [1994], Aoki and Dinç [2002]). While there are convincing theories in which relationships solve hidden action or hidden information problems, there is very little empirical corroboration of either theory. In this paper, we assess the empirically validity of these theories in the small firm credit market. While results suggest that relationships are more valuable for firms with worse incentive misaligment problems, more informationally opaque firms do not seem to extract more value from relationships. Contrary to what most empirical research on the value of relationships has assumed (but not tested), this indicates that relationships are, at very least, as important for aligning incentives as they are for solving hidden information problems.

Age Structure Explaining a Large Shift in Homicides: The Case of the State of São Paulo

After reaching a historic peak by the end of the 1990s, homicides in large cities in the state of São Paulo dropped sharply. Several explanations have been advanced, most prominently improvements in policing, adoption of policies such as dry laws, and increased incarceration. In this paper, we show that demographic changes play a large role in explaining the dynamics of homicide. More specifically, we present evidence of a strong co-movement between the proportion of males on the 15-25 age bracket and homicides at the statewide and at city levels, and argue that the relationship is causal. We estimate that a 1% increase in the proportion of 15-to-24-year-old males causes a 4.5% increase in homicides.Age Structure, Demographic Change, Homicides

Risco de estresse hídrico para o milho cultivado em Chapecó durante eventos de La Ninã Modoki e Canônico

TCC (graduação) - Universidade Federal de Santa Catarina. Centro de Ciências Agrárias. Curso de Agronomia.Com o objetivo de avaliar o risco de estresse hídrico para o milho (Zea mays) cultivado em Chapecó (Santa Catarina) durante eventos da La Niña Modoki e Canônico. Foram utilizados dados climáticos diários de chuva, temperatura máxima e mínima do ar, umidade relativa, velocidade do vento e insolação, de 1983 até 2014. Com exceção da chuva, os demais dados meteorológicos foram utilizados para estimar a evapotranspiração de referência (ET0) com o uso do software Cropwat 8.0. O risco de estresse hídrico por falta de água para o ciclo e período crítico do milho em anos de La Niña Modoki e Canônico foi avaliado pelo Índice de Estresse Hídrico da Cultura (CWSI – Crop Water Stress Index), além do Índice de Precipitação Padronizado (SPI) para avaliar a seca meteorológica. Conclui-se que a condição hídrica para o ciclo e a fase mais crítica do milho é em média de ‘adequada’ a ‘favorável’ durante eventos da La Niña Modoki e Canônica, para cultivos em solos de textura média e argilosa na região de Chapecó. Não houve diferença na condição hídrica do milho em anos de La Niña em relação aos anos neutros.The objective of this study was to evaluate the water stress risk for maize (Zea mays) cultivated in Chapecó (Santa Catarina) during La Niña Modoki and Canônico events. Daily rainfall, maximum and minimum air temperature, relative humidity, wind speed and sunshine were used from 1983 to 2014. With exception of rainfall, other meteorological data were used to estimate the reference evapotranspiration (ET0) with the use of Cropwat 8.0 software. The risk of water stress due to lack of water for the cycle and critical period of maize in La Niña Modoki and Canônico years was evaluated by the Crop Water Stress Index (CWSI), in addition to the Standardized Precipitation Index (SPI) to evaluate the meteorological drought. Concluded that the water condition for the cycle and the most critical phase of maize is on the average from 'adequate' to 'favorable' during La Niña Modoki and Canônica events, for soils with sandy loam and clayey texture in the region of Chapecó. There was no difference in the water condition of maize in years of La Niña in relation to the neutral years

Informational spillovers in the pre-1914 London Sovereign Debt Market

We document a novel type of international financial contagion whose driving force is shared financial intermediation. In the London peripheral sovereign debt market during pre-1914 period financial intermediation played a major informational role to investors, most likely because of the absence of international monitoring agencies and the substantial agency costs. Using two events of financial distress – the Brazilian Funding Loan of 1898 and the Greek Funding Loan of 1893 – as quasi-natural experiments, we document that, following the crises, the bond prices of countries with no meaningful economic links to the distressed countries, but shared the same financial intermediary, suffered a reduction relative to the rest of the market. This result is true for the mean, median and the whole distribution of bond prices, and robust to an extensive sensitivity analysis. We interpret this as evidence that the identity of the financial intermediary was informative, i.e, investors extracted information about the soundness of a debtor based on the performance of her financial intermediary. This spillover, informational in essence, arises as the flip-side of the relational lending coin: contagion arises for the same reason why relational finance (in this case, underwriting) helps alleviate informational and incentive problems,