Entry-exit, learning, and productivity change : evidence from Chile

This paper applies econometric techniques from the efficiency frontiers literature and the panel data literature to construct plant-specific time-variant technical efficiency indices for surviving, exiting, and entering cohorts. These are then used to compare productivity growth rates across plant cohorts and to examine the net effect of plant turnover and learning patterns on manufacturing-wide productivity growth. The analysis is based on plant-level panel data from Chile covering the period 1979-86. For several reasons, these data provide an excellent basis for inference. First, they include all Chilean manufacturing plants with at least 10 workers. Second, from 1974 to 1979 Chile underwent sweeping reform programs to liberalize its trade regime, privatize state firms, and deregulate markets. The author finds the importance of plant turnover and different learning patterns across cohorts in driving the Chilean manufacturing-wide productivity changes. She finds that: the evidence supports the hypothesis that competitive pressures force less efficient producers to fail more often than others; the ratio of skilled labor to unskilled labor is higher and increasing more rapidly among incumbents and entrants than among exiting plants; although the economywide recession affected the productivity of each cohort to different degrees, there are steady increases in productivity over the sample period.Environmental Economics&Policies,Economic Theory&Research,Health Monitoring&Evaluation,Banks&Banking Reform,Industrial Management

Subnational insolvency : cross-country experiences and lessons

Subnational insolvency is a reoccurring event in development, as demonstrated by historical and modern episodes of subnational defaults in both developed and developing countries. Insolvency procedures become more important as countries decentralize expenditure, taxation, and borrowing, and broaden subnational credit markets. As the first cross-country survey of procedures to resolve subnational financial distress, this paper has particular relevance for decentralizing countries. The authors explain central features and variations of subnational insolvency mechanisms across countries. They identify judicial, administrative, and hybrid procedures, and show how entry point and political factors drive their design. Like private insolvency law, subnational insolvency procedures predictably allocate default risk, while providing breathing space for orderly debt restructuring and fiscal adjustment. Policymakers'desire to mitigate the tension between creditor rights and the need to maintain essential public services, to strengthen ex ante fiscal rules, and to harden subnational budget constraints are motivations specific to the public sector.Bankruptcy and Resolution of Financial Distress,Debt Markets,Banks&Banking Reform,Strategic Debt Management

Managing subnational credit and default risks

As a result of worldwide decentralization, subnational debt is rising. Subnational debt crises in major developing countries in the 1990s have led to strengthened regulatory frameworks for subnational borrowing and insolvency. With the fragility of the global recovery and increasing public debt, and the structural trends of decentralization and urbanization, it becomes more important to prudently manage subnational default risks. Although the regulatory frameworks share central features, the historical context and entry points for reform drive variations across countries. Addressing soft budget constraints is integral to the regulatory framework. Ex ante fiscal rules for subnational governments attempt to limit default risks; ex post regulation predictably allocates default risk, while providing breathing space for orderly debt restructuring and fiscal adjustment, as well as the continued delivery of essential public services. The regulatory reforms are inseparable from the reform of broader intergovernmental fiscal systems and financial markets.Bankruptcy and Resolution of Financial Distress,Debt Markets,Access to Finance,Banks&Banking Reform,Subnational Economic Development

Subnational Debt Finance and the Global Financial Crisis

This note focuses on the impact of the global financial crisis on subnational debt financing. We approach the following questions: Why is subnational debt financing important? What are the impacts of the crisis on the fiscal balance and financing cost of subnational governments (SNGs)? What explains the variations across countries in the ability of SNGs to proactively address the threat of fiscal deterioration? And, equally important, what are the long-term structural challenges facing SNGs in sustainable financing of infrastructure and social services?subnational, debt, finance, financial crisis, subnational debt financing, subnational governments, fiscal, sustanable financing, infrastructure, social services

Wedge modules for two-parameter quantum groups

The Yang-Baxterization R(z) of the trigonometric R-matrix is computed for the two-parameter quantum affine algebra of type A. Using the fusion procedure we construct all fundamental representations of the quantum algebra as wedge products of the natural representation.Comment: Updated versio

Laws for fiscal responsibility for subnational discipline : international experience

Fiscal responsibility laws are institutions with which multiple governments in the same economy -- national and subnational --can commit to help avoid irresponsible fiscal behavior that could have short-term advantages to one of them but that would be collectively damaging. Coordination failures with subnational governments in the 1990s contributed to macroeconomic instability and led several countries to adopt fiscal responsibility laws as part of the remedy. The paper analyzes the characteristics and effects of fiscal responsibility laws in seven countries -- Argentina, Australia, Brazil, Canada, Colombia, India, and Peru. Fiscal responsibility laws are designed to address the short time horizons of policymakers, free riders among government units, and principal agent problems between the national and subnational governments. The paper describes how the laws differ in the specificity of quantitative targets, the strength of sanctions, the methods for increasing transparency, and the level of government passing the law. Evidence shows that fiscal responsibility laws can help coordinate and sustain commitments to fiscal prudence, but they are not a substitute for commitment and should not be viewed as ends in themselves. They can make a positive contribution by adding to the collection of other measures to shore up a coalition of states with the central government in support of fiscal prudence. Policymakers contemplating fiscal responsibility laws may benefit from the systematic review of international practice. One common trait of successful fiscal responsibility laws for subnational governments is the commitment of the central government to its own fiscal prudence, which is usually reinforced by the application of the law at the national as well as the subnational level.Debt Markets,Banks&Banking Reform,Subnational Economic Development,Public Sector Economics,Access to Finance

Subnational credit ratings : a comparative review

This paper surveys methodological issues in subnational credit ratings and highlights key challenges for developing countries. Subnational borrowing from capital markets has been on the rise owing to fiscal decentralization and demand for infrastructure investments. A prerequisite for accessing capital markets, subnational credit ratings have also emerged as a part of broader reform for fiscal sustainability. They facilitate a more transparent budgetary and financial management system. The global financial crisis makes subnational credit ratings more relevant, as they contribute to fiscal risk evaluations and fiscal adjustment. In addition to subnationals’ own credit strength, the creditworthiness of the sovereign and the intergovernmental fiscal system are among the most critical rating criteria. Implicit and contingent liabilities are integral to the rating process. Indirect debt instruments including off-balance-sheet financing create fiscal risks. The ongoing financial crisis has reinforced the rating focus on the management of liquidity, debt structure, and off-balance-sheet liabilities.Debt Markets,Banks&Banking Reform,,Bankruptcy and Resolution of Financial Distress,Access to Finance