Income Inequality and Economic Growth: Evidence from the American Data

Cross-country studies have found a negative relationship between income inequality and economic growth. The main problem with the cross-country analyses is the poor quality of the data on income distribution. This paper tests the robustness of the cross-country results to the use of a more accurate cross- state data-set.

The External Debt Contentious Six Years after the Monterrey Consensus

This paper has three objectives. It discusses the main developments and new issues that have arisen after the Monterrey Conference. It critically reviews the Monterrey Consensus on external debt. It provides a set of recommendations for reviewing the implementation of the Monterrey Consensus, to take place in Doha, Qatar, in December 2008. In doing so, the paper discusses the shortcomings of standard debt sustainability exercises; it presents new results on the additionality of debt relief; and discusses the need for developing new financial instruments and institutions aimed at reducing the risks of sovereign and external borrowing. The paper also briefly discusses issues related to the definition of external debt and touches on the odious debt debate.

The Public Sector Premium and the Gender Gap in Latin America: Evidence from the 1980s and 1990s

This paper exploits a rich collection of household surveys to investigate the wage differential between the public and private sectors in 17 Latin American countries during the 1980s and 1990s. The paper also studies how the sector of employment affects the gender wage gap. The paper finds very small premia for male workers and large and significant premia for female workers. The paper also finds that, on average, Latin American women earn 30 percent less than men with similar skills and that approximately one third of this gender gap results from lack of access to formal sector employment.

The Hausmann-Gorky Effect

For over a century, legal scholars have debated the question of what to do about the debts incurred by despotic governments; asking whether successor non-despotic governments should have to pay them. That debate has gone nowhere. This paper examines whether an Op Ed written by Harvard economist, Ricardo Hausmann, in May 2017, may have shown an alternative path to the goal of increasing the cost of borrowing for despotic governments. Hausmann, in his Op Ed, had sought to produce a pricing penalty on the entire Venezuelan debt stock by trying to shame JPMorgan into removing Venezuelan bonds from its emerging market index. JPMorgan did not comply, but there was a pricing penalty. Intriguingly, the penalty hit only one bond; an issue by Venezuela’s state-owned oil company that went on the market two days prior to Hausmann’s piece. That bond then began to carry the name in the market of “Hunger Bond.” Using quantitative data and interviews with investors, we try to understand the causes of the Hunger Bond penalty and ask whether there are lessons for policy maker

Do Sovereign Defaults Hurt Exporters?

This paper uses a difference-in-difference methodology similar to the one originally proposed by Rajan and Zingales (1998) to test whether defaulting hurts the more export-oriented industries. Strong support for this hypothesis was found, but contrary to the findings of previous studies, our estimations suggest that the effect of defaults is short-lived.

Las reformas estructurales en América Latina bajo la lupa

(Obtenga el PDF en español, visitando el WP-471) El futuro de las reformas estructurales en América Latina está en discusión. El objeto de este documento es resumir los hechos y las opiniones subyacentes de este debate. La primera parte muestra que si bien el proceso de reforma no se ha detenido del todo, sí ha sido incompleto y desigual, tanto entre países como entre las diversas áreas de reforma. Los mayores avances se han registrado en la reforma de los sectores del comercio internacional y las finanzas. En términos de reforma tributaria y privatización, los resultados de un país a otro son encontrados. Los avances más pequeños se han registrado en el área de la reforma del código laboral. En la segunda parte se analiza la situación de la opinión pública sobre el proceso de reforma. La desilusión con las reformas ha venido en aumento, especialmente entre la clase media. Más que reflejar inquietudes sobre el estado de la economía o el grado de avance de las reformas, esta crítica tiene que ver con la corrupción que ha empañado el proceso de privatización en algunos países. En la tercera sección se pasa revista a los efectos de las reformas. Sus repercusiones en el crecimiento parecen haber sido positivas, aunque pasajeras, pero sus efectos en el empleo y la distribución del ingreso han variado en diversas áreas de la reforma y según el contexto específico de cada país. En particular, la eficacia de las reformas ha dependido en gran medida de la calidad de las instituciones públicas. En la cuarta parte se presenta una síntesis de las principales propuestas para ampliar o reorientar el programa de reformas en la región. Un conjunto de propuestas sugiere ampliar el Consenso de Washington con políticas más activas, destinadas a acometer la necesidad de mayor estabilidad económica, integración social y una distribución equitativa del ingreso. Otro conjunto de propuestas, guiado por un punto de vista más amplio de los objetivos del desarrollo, hace hincapié en la interacción entre la sociedad civil, el sector privado y el gobierno. Por último, una visión más radical propone una nueva estructura nacional e internacional de las instituciones, a fin de limitar el papel de los mercados y atenuar los efectos de la globalización.

Bank Concentration and Credit Volatility

This paper uses an unbalanced panel covering ninety-three countries over the 1990-2002 period to study the empirical relationship between bank concentration and credit volatility. The paper finds that there is a strong negative relationship between loans concentration and credit sensitivity to external shocks. It also shows that this result is robust to different samples, measures of concentration and econometric techniques, and that this relationship is not driven by crisis episodes. These results are in line with the hypothesis that banks with a larger market share can internalize the countercyclical effects of expanding credit during recessions.

Democracy, education and the quality of government

This paper looks at how the interaction between democracy and education affects the quality of government. It models an economy in which politicians of heterogeneous quality can run for office and shows that education has a positive effect on the quality of selected officials only if democratic institutions are in place. The model also fi…nds that democracy has positive effect on the quality of government in countries with high levels of education but that political institutions are not correlated with the quality of government in countries with low levels of education. Cross-country and panel data regressions confirm that the interaction between democracy and education is positively associated with the quality of government.

Bank Ownership and Lending Behavior

This paper examines whether bank ownership (public versus private, domestic versus foreign) is correlated with bank lending behavior over the business cycle. The paper finds that state-owned banks may play a useful credit-smoothing role because their lending is less responsive to macroeconomic shocks than the lending of private banks. The paper investigates whether this differential behavior is due to an explicit objective of stabilizing credit or to the presence of "lazy" public bank managers; evidence is found in support of the former hypothesis. In the case of foreign-owned banks, the paper finds that the results are less clear-cut and argues that this finding is in line with existing theoretical models.