Essays on Public and Development Economics

In Chapter 1, we study an intervention in which the Peruvian government provided public payphones to 6,509 rural villages that did not have communication services before. We show that the intervention timing was orthogonal to potential outcomes and exploit it using a panel of treated villages. Findings suggest increases of 16 percent in prices received by farmers for their crops, and a 23.7 percent reduction in agricultural costs. This income shock has been translated into a reduction in child market and agricultural work of 13.7 and 9.2 percentage points respectively. Findings are consistent with a dominant income effect in child labor demand. In Chapter 2, we exploit a randomized intervention directed towards enhancing local governments' efficiency in three regions of rural Russia (Adyghea, Penza and Perm) at the onset of a major decentralization reform. We find that satisfaction levels with decentralized services increased only in the region with relatively higher ex-ante experience with decentralized and participatory decision making (Penza). Moreover, we find that settlements with high pre-treatment accountability levels were differentially benefited by the intervention. Our findings suggest that short-term interventions do not translate into higher satisfaction with local public services. Rather, it appears that enhancing local managerial efficiency in delivering public services is a long-term process and that intensive interventions translate into higher satisfaction provided to local governments with relatively longer institutional experience and higher levels of accountability. In Chapter 3, we use the timing of cell phone coverage in Peru as an exogenous shock to investigate the effects of phone coverage on several measures of economic development. We exploit a unique dataset drawn from information of private cell phone operators regarding the location, date of installation and technical characteristics of their towers from 2001 through 2007. We then merge this information with national household surveys spanning the same period. Estimates suggest an increase of 7 percentage points in the likelihood of self reported cell phone ownership after getting coverage, an increase of 7.5 percent in yearly household expenditures after coverage, and a 13.5 percent increase in the value of assets

Methodology and Implementation of Value-at-Risk Measures in Emerging Fixed-Income Markets with Infrequent Trading.

This paper deals with the issue of calculating daily Value-at-Risk (VaR) measures within an environment of thin trading. Our approach focuses on fixed income portfolios with low frequency of transactions in which the missing data problem makes VaR measures difficult to calculate. We propose and implement a methodology to calculate VaR measures with an incomplete panel of prices. The methodology is composed of three phases: Phase I, generates a complete panel of prices, using a term-structure dynamic model of interest rates. Phase II, calculates portfolio VaR measures with several alternative methods using the complete panel data generated in phase I. Phase III, shows how to back-test the VaR measures obtained in phase II using the original incomplete panel of prices. We provide an empirical implementation of the methodology for the Chilean fixed income market. The proposed methodology seems to provide reliable VaR measures for thinly traded markets addressing an important issue for financial risk management in emerging markets.Risk, Value-at-Risk, Fixed Income, Incomplete Panels, Term- Structure Dynamic Models, Extreme Value, GARCH, Kalman Filter.

The Dynamics of the Short-Term Interest Rate in the UK

We estimate and test different continuous-time short-rate models for the UK. The preferred model encompasses both the “level effect” of Chan, Karolyi, Longstaff and Sanders (1992a) and the conditional heteroskedasticity effect of GARCH type models. Our findings suggest that including a GARCH effect in the specification of the conditional variance, almost halves the dependence of volatility on rate levels. We also find weak evidence of mean-reversion and volatility asymmetries in the stochastic behavior of rates. Extensive diagnostic tests suggest that the Constant Elasticity of Variance model of Cox (1975), with an added GARCH effect, provides a reliable description of short-rate dynamics. We demonstrate that the most important feature in short-rate modeling is the correct specification of the conditional variance of changes in rates; suggesting that the conditional mean characterization is of second order.Short-rate, level effect, GARCH effect.

Telecommunications Technologies, Agricultural Profitability, and Child Labor in Rural Peru

This paper provides evidence on the effects of access to telecommunications technologies on agricultural profitability and human capital investment decisions among highly isolated villages in rural Peru. I exploit a quasi-natural experiment, in which the Peruvian government through the Fund for Investments in Telecommunications (FITEL) provided at least one public (satellite) payphone to 6,509 rural villages that did not previously have any kind of communication services (either landlines or cell phones). The intervention provided these phones mainly between years 2001 and 2004. I show that the timing of the intervention was uncorrelated with baseline outcomes and exploit differences in timing using a uniquely constructed (unbalanced) panel of treated villages spanning the years 1997 through 2007. The main findings suggest that phone access generated increases of 16 percent in the value per kilogram received by farmers for their agricultural production, and a 23.7 percent reduction in agricultural costs. Moreover, this income shock translated into a reduction in child (6 – 13 years old) market work of 13.7 percentage points and a reduction in child agricultural work of 9.2 percentage points. Overall, the evidence suggests a dominant income effect in the utilization of child labor.Telecommunications Technologies, Peru, Child Labor

The Effects of Weather Shocks on Early Childhood Development

This study analyzes the effects of exposure to tropical storms and hurricanes during pregnancy on children’s anthropometric measurements taken within the first five years of life. It combines destruction indexes at the district level with 13 yearly rounds of household level surveys from Jamaica. The empirical strategy exploits variation arising from the storms’ timing and intensity across different cohorts within the same district. The findings suggest that when expectant mothers living in coastal-rural areas are affected by at least two hurricanes, their children are 56 percentage points more likely to show low birth weight. Furthermore, these children also experience negative impacts on anthropometric measurements taken within the first five years of life equivalent to 1.88 standard deviations in weight-for-age and 1.4 standard deviations in weight-for-height

Information and Communication Technologies, Agricultural Profitability, and Child Labor in Rural Peru

We estimate the impact of access to information and communication technologies on agricultural profitability and child labor among isolated villages in rural Peru. We exploit an intervention that provided at least one public (satellite) payphone to 6,509 rural villages that did not previously have any kind of communication services (either landlines or cell phones). We show that the timing of the intervention was uncorrelated with baseline outcomes and exploit it using a panel dataset of treated villages. Consistent with theoretical expectations, we find that profitability increased by 19.5 percent. Moreover, this income shock translated into a reduction in the likelihood of child market work of 13.7 percentage points and a reduction in child agricultural work of 9.2 percentage points. Overall, the evidence suggests a dominant income effect in the utilization of child labor.Information technology, rural development, child labor, Peru, Latin America

Activos con baja frecuencia de transacciones y manejo de riesgo

Thinly traded securities exist in both emerging and well developed markets. However, plausible estimations of market risk measures for portfolios with infrequently traded securities have not been explored in the literature. We propose a methodology to calculate market risk measures based on the Kalman filter which can be used on incomplete datasets. We implement our approach in a fixed-income portfolio within a thin trading environment. However, a similar approach may be also applied to other markets with thinly traded securities. Our methodology provides reliable market risk measures in portfolios with infrequent trading.Los activos financieros con baja frecuencia de transacciones existen tanto en mercados emergentes como desarrollados. Sin embargo, no han sido exploradas en la literatura estimaciones robustas de medidas de riesgo de mercado para carteras compuestas por activos, los cuales no son transados frecuentemente. Proponemos una metodología para calcular medidas de riesgo de mercado basada en el filtro de Kalman, el cual puede ser utilizado con paneles de datos incompletos. Asimismo, implementamos nuestra metodología en una cartera de instrumentos de renta fija dentro de un entorno con baja frecuencia de transacciones. No obstante, la metodología es también aplicable a otro tipo de mercados que sufran de baja frecuencia de transacciones. Nuestra metodología provee medidas robustas de riesgo de mercado en carteras con baja frecuencia de transacciones

Thinly traded securities and risk management

Thinly traded securities exist in both emerging and well developed markets. However, plausible estimations of market risk measures for portfolios with infrequently traded securities have not been explored in the literature. We propose a methodology to calculate market risk measures based on the Kalman filter which can be used on incomplete datasets. We implement our approach in a fixed-income portfolio within a thin trading environment. However, a similar approach may be also applied to other markets with thinly traded securities. Our methodology provides reliable market risk measures in portfolios with infrequent trading

Activos con baja frecuencia de transacciones y manejo de riesgo

Thinly traded securities exist in both emerging and well developed markets. However, plausible estimations of market risk measures for portfolios with infrequently traded securities have not been explored in the literature. We propose a methodology to calculate market risk measures based on the Kalman filter which can be used on incomplete datasets. We implement our approach in a fixed-income portfolio within a thin trading environment. However, a similar approach may be also applied to other markets with thinly traded securities. Our methodology provides reliable market risk measures in portfolios with infrequent trading.Los activos financieros con baja frecuencia de transacciones existen tanto en mercados emergentes como desarrollados. Sin embargo, no han sido exploradas en la literatura estimaciones robustas de medidas de riesgo de mercado para carteras compuestas por activos, los cuales no son transados frecuentemente. Proponemos una metodología para calcular medidas de riesgo de mercado basada en el filtro de Kalman, el cual puede ser utilizado con paneles de datos incompletos. Asimismo, implementamos nuestra metodología en una cartera de instrumentos de renta fija dentro de un entorno con baja frecuencia de transacciones. No obstante, la metodología es también aplicable a otro tipo de mercados que sufran de baja frecuencia de transacciones. Nuestra metodología provee medidas robustas de riesgo de mercado en carteras con baja frecuencia de transacciones