Labor demand andtrade reform in Latin America

There are concerns that trade reform and globalization will increase the uncertainty that the average worker, especially the relatively unskilled worker, faces. The increased competitiveness of product markets and greater access to foreign inputs, the argument goes, will lead to more elastic demand for workers. This may have adverse consequences for both labor market volatility and wage dispersion. The authors argue that while the case that trade liberalization should increase own-wage elasticities may be broadly compelling for competitive import-competing industries, it is less so for imperfectly competitive, nontradable, or export industries. They test the hypothesis using establishment-level panel data from three countries with periods of liberalization. The data provide only mixed support for the idea that trade liberalization has an impact on own-wage elasticities. No consistent patterns emerge. If globalization is making the lives of workers more insecure, it is probably working through some other mechanism.Environmental Economics&Policies,Economic Theory&Research,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Inequality,Markets and Market Access

Releasing constraints to growth or pushing on a string ? the impact of credit, training, business associations, and taxes on the performance of Mexican micro-firms

The authors employ propensity score matching and a traditional control function approach to examine the impact of participation in various societal institutions on microfirm performance in Mexico. They find that firms that participate in credit markets, receive training,pay taxes, and belong to business associations exhibit significantly higher profits, even after controlling for the various factors that drive participation in those institutions. They also find that firms that borrow from formal or informal sources and those that pay taxes are significantly more likely to stay in business, but firms that received credit exhibit lower rates of income growth. Overall, the results suggest that even if the best performing micro-firms are more likely to be selected into participating in societal institutions, causality also runs in the opposite direction. In particular, increases in strictly or broadly defined formality have the potential for increasing profits and survival rates, and appear to bring micro-firms closer to their optimal sizes.Economic Theory&Research,Science Education,Scientific Research&Science Parks,Investment and Investment Climate,Educational Sciences

Does Formality Improve Micro-Firm Performance? Quasi-Experimental Evidence from the Brazilian SIMPLES Program

This paper employs regression discontinuity methods to identify the effect of formality on Brazilian micro-firm performance. The SIMPLES program introduced in November 1996 consolidated multiple taxes and social security contributions into a single payment and reduced taxes for eligible small firms. This provides a quasi-natural experiment that allows us to eliminate many of the endogeneity issues surrounding the impact of formality, measured across several dimensions, on firm performance. We find that SIMPLES had a significant effect on the proportion of firms that have a license to operate, are registered as a legal entity, pay taxes and make social security contributions. Moreover, newly created firms that opt for operating formally achieve higher levels of revenue and profits, employ more workers and are more capital intensive (only for those firms that have employees). The channel through which this occurs is not access to credit or contracts with larger firms. Rather, it appears that the lower cost of contracting labor leads to adopting production techniques that involve greater permanence and a larger paid labor force.micro-firms, self-employment, informality

Auctioning Annuities

In this paper, we empirically analyze a market for annuity contracts. To this end, we use multi-stage and multi-attribute auctions, where life insurance companies that have private information about their annuitization costs compete for retirees\u27 savings by offering pensions and bequests, and retirees choose \winners that maximize their expected present discounted utilities. We establish the identification of our model parameters and estimate them using rich administrative data from Chile. Our estimates suggest that (i) retirees with lowest savings quintiles value firms\u27 risk ratings (e.g., AAA, AA) the most, while the high savers do not; (ii) almost half the retirees who choose an annuity do not value bequest, and (iii) firms are more likely to have low annuitization cost for retirees in the top-two savings quintiles. Counterfactuals show that private information about costs harms only these high savers, and simplifying the current mechanism by using English auctions and \shutting-down risk ratings lead to higher pensions in equilibrium, but only for the high savers

An empirical analysis of organized crime, corruption and economic growth

In a companion study, Blackburn et al. (Econ Theory Bull, 2017), we have developed a theoretical framework for studying interactions between organized crime and corruption, with the view of examining the combined effects of these phenomena on economic growth. The analysis therein illustrates that organized crime has a negative effect on growth, but that the magnitude of the effect may be either enhanced or mitigated in the presence of corruption. In this paper we tackle the ambiguity produced by the coexistence of the two illicit activities with an empirical investigation using a panel of Italian regions for the period 1983–2009. We find that organized crime distorts growth less when it coexists with corruption and show our results to be robust to different specifications, measures of organized crime, and estimation techniques

Exporting and labor demand : micro-level evidence from Germany

It is widely believed that globalization affcts the extent of employment and wage responses to economic shocks. To provide evidence for this, we analyze the effect of firms' exporting behavior on the elasticity of labor demand. Using rich, German administrative linked employer-employee panel data from 1996 to 2008, we explicitly control for self-selection into exporting and endogeneity concerns. In line with our theoretical model, we find that exporting at both the intensive and extensive margins significantly increases the (absolute value of the) unconditional own-wage labor demand elasticity. This is not only true for the average worker, but also for different skill groups. For the median firm, the elasticity is three-quarters higher when comparing exporting to nonexporting firms