WORKING PAPERS

 

 

Populism and Civil Society, with Tito Boeri, Prachi Mishra and Antonio Spilimbergo

June 2018. Download PDF file.

 

Populists claim to be the only legitimate representative of the people. Does it mean that there is no space for civil society? The issue is important because since de Tocqueville (1835), associations and civil society have been recognized as a key factor in a healthy liberal democracy. We ask two questions: 1) do individuals who are members of civil associations vote less for populist parties? 2) does membership to associations decrease when populist parties are in power? We answer these questions looking at the experiences of Europe, where there is a rich civil society tradition, as well as of Latin America, which has already a long history of populists in power. The main findings are that individuals belonging to associations are less likely by 2.4 to 4.2 percent to vote for populist parties, which is large considering that the average vote share for populist parties is between 10 and 15 percent. The effect is strong particularly after the global financial crisis, with the important caveat that membership to trade unions has unclear effects.


Private-Public Capital Substitution and Growth, with Zidong An and Alvar Kangur

April 2018. Download PDF file.

 

Most macroeconomic models assume that aggregate output is generated by a specification for the production function with total physical capital as a key input. Implicitly this assumes that private and public capital stocks are perfect substitutes. In this paper we test this assumption by estimating a nested-CES production function whereas the two types of capital are considered separately along with labor as inputs. The estimation is based on our newly developed dataset on public and private capital stocks for 151 countries over a period of 1960-2014 consistent with Penn World Tables. We find evidence against perfect substitutability between public and private capital, especially for emerging and LIDCs, with the point estimate of the elasticity of substitution estimated closely around 3. We discuss the implications of our findings, including in the debate on growth convergence.


When China Sneezes Low-Income Countries Cough (Hard), with Nitya Aasaavari and Peichu Xie

April 2018. Download PDF file.

 

This paper explores how growth in low-income countries (LICs) is associated with growth in their trading partners. The empirical investigation reveals three findings: i) one percent change in China's growth alone accounts for half percent change in LICs' growth; ii) this is a new phenomenon and coincides with a marked diversion in growth comovement of LICs away from advanced economies and towards emerging markets in the mid-90s; iii) the observed growth comovement is generated by China's investment-driven demand for commodities from commodity exporting LICs, especially those in Sub-Saharan Africa. In light of these findings, this paper draws policy implications for LICs in the context of rebalance of economy model in China, broadly economic slowdown in emerging markets, and as a result sharp declines in commodities prices.


Export Diversification: A nonparametric examination, with Christopher Parmeter, Murch2018. Download PDF file.

 

Export diversification has recently been found as a key component of economic development. This has spawned an empirical literature which documents a quadratic relationship in the development-diversification nexus. Using cutting edge nonparametric panel data estimators and inferential tools, we examine the shape of this nexus using several different measures of diversification. We question the robustness of the quadratic shape of the development-diversification nexus that has dominated the applied trade diversification literature. Accounting for time specific heterogeneity reveals that this relationship is tenuous. Additional parametric robustness checks further lend support that taking the quadratic relationship as a stylized fact may not be advisable. Finally, we deploy both nonparametric panel estimators and consistent model specifications tests and present further evidence that the formulation of the development-diversification nexus is not apt to be characterized as quadratic.


Policies in Hard Times: Assessing the Impact of Financial Crises on Structural Reforms, with Gunes Gokmen, Massimiliano Onorato and Tommaso Nannicini, January 2018. Download PDF file.

 

It is argued that crises open up a window of opportunity to implement policies that otherwise would not have the necessary political backing. The argument goes that the political cost of deep reforms declines as crises unravel structural problems that need to be urgently rectified and the public is more willing to bear the pains associated with such reforms. This paper casts doubt on this prevalent view by showing that not only the crises-reforms hypothesis is unfounded in the data, but rather crises are associated with slowing structural reforms depending on the institutional environment. In particular, we look at measures of liberalization in international trade, agriculture, network industries, and financial markets. We find that, after a financial crisis, democracies neither open nor close their economy. On the contrary, autocracies reduce liberalizations in multiple economic sectors, as the fear of regime change might lead non-democratic rulers to please vested economic interests.


Export Quality in Advanced and Developing Economies: Evidence from a New Dataset, with Christian Henn, Jose Romero and Nikola Spatafora, October 2017. Download PDF file | Data.

 

This paper develops new estimates of export quality, based on bilateral data, which are far more extensive than previous efforts. The data cover 166 countries and hundreds of products over 19622014. The analysis finds that quality upgrading is particularly rapid during the early stages of development. There is significant cross-country heterogeneity in the growth rate of quality. Within any given product line, quality converges over time to the world frontier. Institutional quality, liberal trade policies, foreign direct investment inflows, and human capital all promote quality upgrading, although their impacts vary across sectors. The results suggest that reducing barriers to entry into new sectors can allow economies to benefit from rapid quality convergence over time.


Quality Upgrading and the Stages of Diversification, with Fidel Perez-Sebastian and Nikola Spatafora, March 2017. Download PDF file.

 

This paper explores the contribution of product quality upgrading in the process of export diversification. To do this, the paper builds a multisector model following Eaton and Kortum (2002) in which product quality is incorporated as a key feature. The model is then calibrated to generate predictions about the degree of export diversification in a number of East Asian countries. It is shown that quality upgrading is a key factor to understand the changes in the degree of export diversification in the majority of countries in our sample.


World Trade in Services: Evidence from A New Dataset, with Prakash Loungani, Saurabh Mishra and Ke Wang, February 2017. Download PDF file | Data.

 

Using a newly constructed dataset on trade in services for 192 countries from 1970 to 2014, this paper shows that services currently constitute one-fifth of world trade and an increasingly important component of global production. A detailed analysis of patterns and stylized facts reveals that exports of services are not only gaining strong momentum and catching up with exports of goods in many countries, but they could also trigger a new wave of trade globalization. Research applications of the trade in service dataset on structural transformation, resilience, labor reallocation, and income distribution are outlined.


 

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