Non-uniform wealth distribution in a simple spatial banking model

This paper uses a static spatial banking model with a non-uniform wealth distribution to provide theoretical assessments for differences in banks’ prices and locations across regions. It assumes imperfect information, where banks know more about individuals if they are “near” the bank and individuals incur in a cost proportional to this distance to show the viability of their projects to the bank. A free entry model is constructed to account for banks’ tendency to concentrate in rich regions and to charge lower prices. Comparative statics exercises show the effect of changes in the monitoring technology and wealth dispersion.spatial banking, location

A note on the variance of average treatment effects estimators

We derive the variance of the Hirano, Imbens and Ridder (Econometrica 66, 315--31, 2003) average treatment effects estimator when the true propensity score is known. This variance is used in the derivation of the variance of a similar two-step estimator, where a M-estimator is used in the first step to estimate the propensity score.Average treatment effects; efficiency bound; two-step estimator;

Quantile Regression with Classical Additive Measurement Errors

This note derives the bias of the quantile regression estimator in the presence of classical additive measurement error, and show its connection to least squares models. The bias structure suggests that the instrumental variables estimator proposed for least squares can be applied to the quantile regression case.Quantile Regression, Measurement Errors, Instrumental Variables

Migration and capital accumulation: Evidence from rural Mexico

This paper studies the link between migration, remittances and productive assets accumulation for a panel of poor rural households in Mexico over the period 1997- 2006. In a context of financial markets imperfections, migration may act as a substitute for imperfect credit and insurance provision (through remittances from migrants) and, thus, exert a positive effect on investment. However, it may well be the case that remittances are channelled towards increasing consumption and leisure goods. Exploiting within family variation and an instrumental variable strategy, we show that migration indeed accelerates productive assets accumulation. Moreover, when we look at the effect of migration on consumption of non-productive assets (durable goods), we find instead a negative effect. Our results then suggest that poor rural families resort to migration as a way to mitigate constraints that prevent them from investing in productive assets.migration ; remittances ; capital accumulation ; rural poverty

Migration, Remittances and Capital Accumulation: Evidence from Rural Mexico

This paper studies the link between migration, remittances and productive assets accumulation for a panel of poor rural households in Mexico over the period 1997-2006. In a context of financial markets imperfections, migration may act as a substitute for imperfect credit and insurance provision (through remittances from migrants) and, thus, exert a positive effect on investment. However, it may well be the case that remittances are channelled towards increasing consumption and leisure goods. Exploiting within family variation and an instrumental variable strategy, we show that migration indeed accelerates productive assets accumulation. Moreover, when we look at the effect of migration on consumption of non-productive assets (durable goods), we find instead a negative effect. Our results then suggest that poor rural families resort to migration as a way to mitigate constraints that prevent them from investing in productive assets.Migration; Remittances; Capital Accumulation; Rural Poverty

Microentrepreneurship and the business cycle: is self-employment a desired outcome?

Should a central bank accommodate energy price shocks? Should the central bank use core inflation or headline inflation with the volatile energy component in its Taylor rule? To answer these questions, we build a dynamic stochastic general equilibrium model with energy use, durable goods, and nominal rigidities to study the effects of an energy price shock and its impact on the macroeconomy when the central bank follows a Taylor rule. We then study how the economy performs under alternative parameterizations of the rule with different weights on headline and core inflation after an increase in the energy price. Our simulation results indicate that a central bank using core inflation in its Taylor rule does better than one using headline inflation because the output drop is less severe. In general, we show that the lower the weight on energy price inflation in the Taylor rule, the impact of an energy price increase on gross domestic product and inflation is also lower.

Reputation, credibility and monetary policy effectiveness

As reputation and credibility are important elements for monetary policy effectiveness, the paper aims at exploring the concepts of both and its importance in a context where central banks policies are not neutral, that is, monetary policy affects real and nominal variables. The paper seeks to contribute with a new analysis of how the sort of reputation developed by the monetary authority affects the state of expectations, and then the economic performance, enabling a particular situation that we call "credibility trap" - which makes monetary policy ineffective to affect real activity when necessary. Although the paper presents some similarities to the orthodox approach regarding both reputation and credibility's importance for central banks and its policies, it is different from the orthodox approach speaking of distinct forms of monetary policy recommendations and the sort of reputation that it recommends to be developed.Como reputação e credibilidade são importantes elementos para a eficácia da política monetária, o trabalho explora os conceitos de ambos e suas importâncias em um contexto em que as políticas dos bancos centrais não são neutras, sendo capazes de afetar variáveis reais e nominais. O trabalho busca contribuir com uma nova análise de como o tipo de reputação desenvolvido pela autoridade monetária afeta o estado de expectativas e, assim, o desempenho econômico, possibilitando um caso particular que chamaremos de "armadilha de credibilidade" - a qual torna a política monetária ineficaz em afetar a atividade econômica real quando necessário. Embora a abordagem proposta pelo trabalho apresente algumas similaridades com a abordagem ortodoxa acerca da importância da reputação e da credibilidade para os bancos centrais e suas políticas, a abordagem distingue-se da ortodoxa em termos de recomendações de política monetária e do tipo de reputação que deve ser desenvolvida

Can foreign lobbying enhance development ? The case of tourism in the Caribbean

There exist legal channels for informational lobbying of U.S. policymakers by foreign principals. Foreign governments and private sector principals frequently and intensively use this institutional channel to lobby on trade and tourism issues. The authors empirically study whether such lobbying effectively achieves its goal of trade promotion in the context of Caribbean tourism and it is the first paper to examine the potential for using foreign lobbying as a vehicle for development. They use panel data to explore and quantify the association between foreign lobbying by Caribbean principals and U.S. tourist arrivals to Caribbean destinations. A variety of sensitivity analyses support the finding of a strong association. The policy implications are obvious and potentially important for developing countries.Tourism and Ecotourism,Economic Theory&Research,Accommodation&Tourism Industry,Political Systems and Analysis,Politics and Government

Who benefits from reducing the cost of formality? Quantile regression discontinuity analysis

This paper studies the effects of increasing formality via tax reduction and simplification schemes on micro-firm performance. It uses the 1997 Brazilian SIMPLES program. We develop a simple theoretical model to show that SIMPLES has an impact only on a segment of the micro-firm population, for which the effect of formality on firm performance can be identified, and that can be analyzed along the single dimensional quantiles of the conditional firm revenues. To estimate the effect of formality, we use an econometric approach that compares eligible and non-eligible firms, born before and after SIMPLES in a local interval about the introduction of SIMPLES. We use an estimator that combines both quantile regression and the regression discontinuity identification strategy. The empirical results corroborate the positive effect of formality on microfirms' performance and produce a clear characterization of who benefits from these programs