Essays on Human Capital, Labor and Development Economics

This dissertation contains four essays on human capital, labor and development economics. The first two chapters study how exposure to particular labor markets during childhood determines the formation of industry-specific human capital generating longterm consequences in terms of adult criminal behavior, labor outcomes and state legitimacy. The third chapter explores how criminal capital developed during childhood can be exported to other locations generating spillover effects on human capital accumulation. Finally, the last chapter studies how improving access to justice for women affects children’s outcomes. Chapter 1, “Making a Narco: Childhood Exposure to Illegal Labor Markets and Criminal Life Paths”, shows that exposing children to illegal labor markets makes them more likely to be criminals as adults. I exploit the timing of a large anti-drug policy in Colombia that shifted cocaine production to locations in Peru that were well-suited to growing coca. In these areas, children harvest coca leaves and transport processed cocaine. Using variation across locations, years, and cohorts, combined with administrative data on the universe of individuals in prison in Peru, affected children are 30% more likely to be incarcerated for violent and drug-related crimes as adults. The biggest impacts on adult criminality are seen among children who experienced high coca prices in their early teens, the age when child labor responds the most. No effect is found for individuals that grow up working in places where the coca produced goes primarily to the legal sector, implying that it is the accumulation of human capital specific to the illegal industry that fosters criminal careers. As children involved in the illegal industry learn how to navigate outside the rule of law, they also lose trust in government institutions. However, consistent with a model of parental incentives for human capital investments in children, the rollout of a conditional cash transfer program that encourages schooling mitigates the ef- fects of exposure to illegal industries. Finally, I show how the program can be targeted by taking into account the geographic distribution of coca suitability and spatial spillovers. Overall, this paper takes a first step towards understanding how criminals are formed by unpacking the way in which crime-specific human capital is developed at the expense of formal human capital in “bad locations.” While my first chapter focuses on low-skilled labor and criminal capital, my second chapter studies the expansion of high-skilled labor markets. In Chapter 2, “Long-term Effects of Temporary Labor Demand: Free Trade Zones, Female Education and Marriage Market Outcomes in the Dominican Republic”, I exploit the sudden and massive growth of female factory jobs in free trade zones (FTZs) in the Dominican Republic in the 1990s, and subsequent decline in the 2000s, to provide the first evidence that even relatively brief episodes of preferential trade treatments for export industries may have permanent effects on human capital levels and female empowerment. Focusing on a sample of provinces that established FTZs and exploiting variation in the opening of zones and age of women at the time of opening, I show that the FTZs’ openings led to a large and very robust increase in girls’ education. The effect persists after a decline in FTZs’ jobs in the 2000s following the end of a trade agreement with the U.S. and an increase in competition from Asia. The reason appears to be that the increase in some girls’ education changed marriage markets: girls whose education increased due to the FTZs’ openings married later, had better matches with more stable marriages, gave birth later, and had children who were more likely to survive infancy. In sum, the evidence in this paper indicates that labor markets can improve female outcomes in developing countries through general equilibrium effects in the education and marriage markets. Another question I address in my dissertation is whether criminal capital developed during childhood can be exported to other locations. In the first chapter, I find that individuals take skills related to the illegal drug industry with them when they move to other districts, even when they move to districts without significant illegal industries. Chapter 3, “Exporting Criminal Capital: The Effect of U.S. Deportations on Gang Expansion and Human Capital in Central America”, provides new evidence on how an increase in criminal capital due to deportations from the US affects human capital investments in El Salvador. In 1996, the U.S. Illegal Immigration Responsibility Act drastically increased the number of criminal deportations. In particular, the leaders of large gangs in Los Angeles were sent back to their countries. In addition to having a direct effect, the arrival of individuals bringing criminal skills and connections may have generated important spillover effects. We exploit this policy to look at the impact that deportation policies and the subsequent arrival of criminal capital to El Salvador had on several educational and economic outcomes. Using the 1996 policy and geographical variation in the exact location and delimitation of different gang groups, we find that criminal deportations led to large increase in crime and decrease in human capital accumulation for children living in these areas. Overall, this project helps to understand one of the reasons why El Salvador is among the world’s most violent peacetime countries. Understanding these effects is crucial for public policy to successfully incorporate deported criminals back into society. While my work in the Dominican Republic and the previous literature has shown that increasing the returns to education for women incentivizes schooling, there is little evidence on how domestic violence affects human capital development and whether improving access to institutions for women can address these issues. During my field work in rural areas of Peru, I found that institutions do not usually address the problems facing women or ethnic and religious minorities. For example, the police do very little to stop domestic violence. Moreover, in many cases, women do not even trust these institutions enough to report these issues. Chapter 4, “Inter-Generational Impacts of Improving Access to Justice for Women: Evidence from Peru”, exploits the introduction of women’s justice centers (WJCs) in Peru to provide causal estimates on the effects of improving access to justice for women and children. Our empirical approach uses variation over time in the distance from schools and households to the nearest WJC together with province- by-year fixed effects. After the opening of WJC, we find that primary school enrollment increases at schools that are within a 1km radius of a WJC and the effect decreases with distance. In addition, we also find that primary school second graders have better test scores in reading and mathematics. Moreover, we find that children in primary school living in household’s located near a WJC are more likely to attend school, to pass a grade and they are also less likely to drop out of school. We also provide some evidence that these improvements might be driven by an increase in the bargaining power of women inside the household and decrease in domestic violence. In sum, the evidence in this paper shows that providing access to justice for women can be a powerful tool to reduce domestic violence and increase education of children, suggesting a positive inter-generational benefit

US Criminal Deportations and Human Capital in Central America

In this paper I ask whether peer effects generate changes in education investments in the areas where deported criminals are located in Central America using administrative data in El Salvador. I exploit the increase in criminal deportations from the United States in 1996 to analyze how individuals who grew up in municipalities affected by gangs in 1996 have fewer years of schooling when they are young adults. I find that individuals who were exposed during childhood to gang leaders have less schooling than those who were older than 16 in 1996 when the law was passed

Women Officers, Gender Violence and Human Capital: Evidence from Women's Justice Centers in Peru

Many developing countries have unequal access to justice, especially for women. What are the implications for gender-based violence, intra-household bargaining and investments in children? This paper provides quasi-experimental evidence on all-women's justice centers (WJCs) a community based approach aimed at reducing violence against women in Peru. WJCs are specialized institutions that mostly employ female officers and whose main purpose is to reduce gender-based violence by providing police and legal services. We examine the gradual rollout of these centers and using complaint police data we find that as victims trust women officers more, they increase the reporting of gender-specific crimes by 40%. We also find evidence that this led to the deterrence of gender-based violence: using administrative non-reported data from health providers and district attorney offices, we find a 10% reduction in domestic violence, female deaths due to aggression, femicides and mental health problems with no effects for men and non-gender specific crimes. We argue that these results are driven by an increase in women representation in law and enforcement at the WJCs. Moreover, we find inter-generational effects: WJCs substantially increase human capital investments in children, increasing enrollment, attendance, test scores, while decreasing child labor. These results are consistent with a bargaining model in which the threat point is determined by women representation in law and enforcement. In sum, the evidence in this paper implies that providing access to justice for women is not only important for addressing gender-based violence, but also generates inter-generational benefits

The Impact of Modernization of Justice on Court Efficiency in Costa Rica

Over the last decade, there has been growing awareness regarding the importance of transparent and effective courts to achieve economic development. However, many Latin American countries find that their judicial system have important deficiencies in terms of access and efficiency. This paper studies the effect of court modernization on caseload clearance rates in Costa Rica. The analysis exploits the fact that the modernization occurred at different points in time. This observed variation in the allocation of the program across time and space provides a potential instrument to identify the causal effect of the modernization on courts efficiency. We find that the program is associated with an increase of 5 percent in clearance rates and with a reduction of 75 dollars per case disposed. The results are robust to alternative specifications.Public Policy Evaluation, Justice, Court Efficiency, Difference in Differences, Propensity Score Matching, Costa Rica

The Impact of Improving Access to Justice on Conflict Resolution: Evidence from Peru

During the 1990s Peru greatly expanded access to formal judicial services in underserved districts through the construction and staffing of justice modules—physical structures which housed courts, prosecutors and public defenders. The intervention was designed to improve judicial coverage for populations located far from important urban centers where most of the courts are located. Using a specialized survey and matching techniques, we find that improving access to formal justice significantly shifts the resolution of conflicts away from informal mechanisms and toward the newly provided formal mechanisms; increases the use of complementary services, such as the use of lawyers; improves the perception of residents regarding social mores and the law; and ultimately marginally reduces the incidence of self-reported conflicts. We find evidence that the treatment also improves outcomes for residents in the area of child support conflicts, although in other types of conflicts we find no impact on outcomes.Public Policy Evaluation, Justice, Court Efficiency, Difference in Differences, Propensity Score Matching, Peru