Economic reforms and total factor productivity growth in Latin America and the Caribbean (1950-95) - an empirical note

The authors rely on a series of growth accounting exercises to determine whether the growth rate of total factor productivity (TFP) or the unexplained portion of GDP growth (after controlling for the accumulation of capital per worker) in 18 Latin American and Caribbean economies has benefited from economic reform. They use Sachs and Warner (1995) criteria to identify the years of economic reform. They apply growth decomposition analysis and econometric tests to determine whether TFP growth has been significantly higher during periods of economic reform. Although the growth decomposition analysis assumes that the capital share of output is constant across Latin American countries, the economic estimates allow for cross-country differences. In ordinary least squares (OLS) regressions and seemingly unrelated regressions (SUR), two alternative dummy variables are used to control for the effects of business-cycle fluctuations on observed rates of TFP growth. In addition, the SUR regressions consider the possibility that Latin American economies face common shocks. Finally, panel regressions are based on five-year averages of the growth rates of GDP and capital per worker. The authors find that, on average, economic reforms have been associated with a 1.5 percent yearly increase in the rate of TFP growth. But there are important differences across countries and in some cases economic reforms have been associated with lower TFP growth.Public Health Promotion,Health Monitoring&Evaluation,Economic Conditions and Volatility,Economic Theory&Research,Environmental Economics&Policies,Economic Growth,Achieving Shared Growth,Economic Theory&Research,Health Monitoring&Evaluation,Governance Indicators

International economic activities and the demand for skilled labor: evidence from Brazil and China

Increases in international economic integration can lead to greater specialization according to comparative advantage, but also to the diffusion of skill-biased technologies. In developing countries characterized by relative abundance of unskilled labor, these factors can have opposite effects on the relative demand for skilled labor. This paper investigates the impact of the use of imported inputs, exports and foreign direct investment on the demand for skilled workers of Brazilian and Chinese manufacturing plants. We find that while in Brazil increased levels of international integration are associated with an increased demand for skilled labor, the opposite is true in China.Environmental Economics&Policies,Work&Working Conditions,Economic Theory&Research,Public Health Promotion,Health Monitoring&Evaluation,Environmental Economics&Policies,Economic Theory&Research,Health Monitoring&Evaluation,Work&Working Conditions,Labor Standards

The impact of remittances on poverty and human capital : evidence from Latin American household surveys

This paper explores the impact of remittances on poverty, education, and health in 11 Latin American countries using nationally representative household surveys and making an explicit attempt to account for one of the inherent costs associated with migration-the potential income that the migrant may have made at home. The main findings of the study are the following: (1) regardless of the counterfactual used remittances appear to lower poverty levels in most recipient countries; (2) yet despite this general tendency, the estimated impacts tend to be modest; and (3) there is significant country heterogeneity in the poverty reduction impact of remittances'flows. Among the aspects that have been identified in the paper that may leadto varying outcomes across countries are the percentage of households reporting remittances income, the share of remittances of recipient households belonging to the lowest quintiles of the income distribution, and the relative importance of remittances flows with respect to GDP. While remittances tend to have positive effects on education and health, this impact is often restricted to specific groups of the population.Population Policies,Remittances,Poverty Monitoring&Analysis,Achieving Shared Growth,Small Area Estimation Poverty Mapping

International Technology Diffusion and the Demand for Skilled Labor: Evidence from East Asia and Latin America

This paper presents new plant-level evidence on the effects of access to international technology diffusion on the demand for skilled workers using data from Investment Climate Surveys performed by the World Bank in Asia and Latin America. Our findings suggest that in Brazil, China and Malaysia foreign direct investment and technology licensing are associated with greater demand for skilled labor, probably because they act as a channel for the diffusion of skilled biased technology developed in industrialized countries. In contrast, exports are negatively related to the demand for skilled workers in China and Malaysia, and to a lesser extent in Brazil, which is consistent with international sales leading to a greater degree of specialization according to the countries' comparative advantage in unskilled labor intensive goods. Finally, imported inputs lead to greater demand for skilled workers in Brazil and Malaysia but the opposite occurs in China, reinforcing the possibility that the specialization of Chinese plants in the production of goods intensive in the use of unskilled labor has more than countervailed the greater access to foreign technology potentially associated with international sales.skilled labor, technology diffusion, foreign direct investment, exports

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

What is the impact of international remittances on poverty and inequality in Latin America ?

Workers'remittances have become a major source of income for developing countries. However, little is still known about their impact on poverty and inequality. Using a large cross-country panel dataset, the authors find that remittances in Latin American and Caribbean (LAC) countries have increased growth and reduced inequality and poverty. These results are robust to the use of different instruments that attempt to correct for the potential endogeneity of remittances. Household survey-based estimates for 10 LAC countries confirm that remittances have negative albeit relatively small inequality and poverty-reducing effects, even after imputations for the potential home earnings of migrants.Population Policies,Remittances,Inequality,Achieving Shared Growth,Poverty Impact Evaluation

Minimum wage effects throughout the wage distribution: evidence from Brazil’s formal and informal sectors

This paper investigates the effects of minimum wages on the income and employment of individuals, using longitudinal data from Brazil’s Monthly Employment Survey over the 1982-1997 period. We use information on 541,194 individuals, for which we consider data from two interviews performed 12 months apart. Our sample is restricted to workers aged 15 to 65 in the first interview, that were (initially) employed as formal salaried (62%), informal salaried (20%) or self-employed (18%). We provide detailed estimates of minimum wage effects at different points of the complete wage distribution, and calculate both contemporaneous and lagged effects, for formal and informal workers. We also estimate, indirectly, the effect of minimum wages on the probability of transitioning into different sectors of the labor market: salaried formal and informal work, self-employment, unemployment and inactivity. In order to provide some insight into the potential effects of minimum wages on family welfare and poverty, we obtain separate estimates for men and women, for workers under and above age 21, and for household heads and non-heads. We find significant minimum wage effects across the whole wage distribution, and both in the formal and the informal sectors. We also find that the total impact of minimum wages on workers earnings (derived from current and lagged effects) is positive but smaller than the contemporaneous one. As for employment elasticities, our estimates suggest that they are negative for most low-wage workers, being lower in absolute value for formal salaried workers (around -0.1 at the bottom of the wage distribution) than for low-wage informal salaried and self employed (between -0.25 and -0.35). Other results include higher earnings elasticities for men, adults and heads of households than for women, teenagers and non-heads, respectively.minimum wage; Brazil

The Wage Geography of Brazil after the Reforms

What has been the impact of the trade liberalization on the regional and industrial wage structure in Brazil? This paper attempts to shed light on the determinants of the evolution of wages during the period 1986-1999. We approach this question relying on the main insights of the new economic geography of trade and traditional trade theory. The main findings of the paper suggest that there has been significant convergence of wages across regions and industries. Furthermore, we find that wage premia have increased in those regions with higher share of skilled workers or higher average years of schooling. Regarding the role of factor endowments, we find that regions with a higher share of the mining production have increased their wage premia. The impact of the endowment of agricultural land is ambiguous. Finally, we find strong evidence of a decrease in the expected wage-geographical-gradient that should exist towards the economic poles of Mercosur, either Sao Paulo or Buenos Aires. The paper discusses the econometric identification problems faced by the estimation of regression models with fixed effects (by region/industry) with time-invariant regressors, such as the geographic distance of states to Sao Paulo or Buenos AireLederman's Session

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