• New frontiers in privatization

    © Dennis Galante/Corbis

    The dramatic: when it becomes necessary to call on private sector financing to arrange Colombian FARC’s hostages release:

    Former senator and hostage mediator Piedad Cordoba called on Colombian businesses Sunday to finance the logistics of the promised release of six FARC hostages after the government rejected foreign help in the operation.
    Cordoba, speaking on behalf of her peace organization “Colombians for Peace,” told reporters that “we appeal to entrepeneurs and people who can afford the costs to be made to release those regarded heroes of the nation,” the former lawmaker said before a meeting with her group.

    The tragicomic: a proposal to privatize Margaret Thatcher’s funeral already received close to 30,000 signatures.

    Thatcher state funeral to be privatised
    Responsible department: Cabinet Office
    In keeping with the great lady’s legacy, Margaret Thatcher’s state funeral should be funded and managed by the private sector to offer the best value and choice for end users and other stakeholders. The undersigned believe that the legacy of the former PM deserves nothing less and that offering this unique opportunity is an ideal way to cut government expense and further prove the merits of liberalised economics Baroness Thatcher spearheaded.

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  • Corruption revelation and engagement with the political process


    The view that exposing corruption leads to voters sanctioning bad politicians and improves accountability is until now quite uncontroversial. Ferraz and Finan work on Brazil is an example of such results. In this paper, Alberto Chong, Ana De La O, Dean Karlan, and Léonard Wantchékon provide experimental evidence from local elections in Mexico showing that it may also promote disengagement from the political process.

    Does information about rampant political corruption increase electoral participation and the support for challenger parties? Democratic theory assumes that offering more information to voters will enhance electoral accountability. However, if there is consistent evidence suggesting that voters punish corrupt incumbents, it is unclear whether this translates into increased support for challengers and higher political participation. We provide experimental evidence that information about copious corruption not only decreases incumbent support in local elections in Mexico, but also decreases voter turnout, challengers’ votes, and erodes voters’ identification with the party of the corrupt incumbent. Our results suggest that while flows of information are necessary, they may be insufficient to improve political accountability, since voters may respond to information by withdrawing from the political process. We conclude with a discussion of the institutional contexts that could allow increased access to information to promote government accountability.

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  • China and the aid market


    Is China a villain on the international aid market as is often implied? Well, this Vox column by Axel Dreher and Andreas Fuchs, summarizing this paper, says that it is no more so than other major donors.

    Foreign aid from China is often characterized as ‘rogue aid’ that is not guided by recipient need but by China’s national interests alone. However, no econometric study so far confronts this claim with data. We make use of various datasets, covering the 1956-2006 period, to empirically test to which extent political and commercial interests shape China’s aid allocation decisions. We estimate the determinants of China’s allocation of project aid, food aid, medical teams and total aid money to developing countries, comparing its allocation decisions with traditional and other so-called emerging donors. We find that political considerations are an important determinant of China’s allocation of aid. However, in comparison to other donors, China does not pay substantially more attention to politics. In contrast to widespread perceptions, we find no evidence that China’s aid allocation is dominated by natural resource endowments. Moreover, China’s allocation of aid seems to be widely independent of democracy and governance in recipient countries. Overall, denominating aid from China as ‘rogue aid’ seems unjustified.

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  • Long term effect of Peru’s Mita institution


    Melissa Dell’s paper, published in Econometrica in 2010 (Econometrica 78(6), 2010: pp. 1863­-1903), is a rare example of microdata based evidence on the role of historical institutions on contemporary development outcomes (here is some information, in Spanish, on the historical origin of the “Mita”, and here is the Spanish translation of the paper, great contribution for Latin readers).

    This study utilizes regression discontinuity to examine the long-run impacts of the mita, an extensive forced mining labor system in effect in Peru and Bolivia between 1573 and 1812. Results indicate that a mita effect lowers household consumption by around 25% and increases the prevalence of stunted growth in children by around six percentage points in subjected districts today. Using data from the Spanish Empire and Peruvian Republic to trace channels of institutional persistence, I show that the mita’s influence has persisted through its impacts on land tenure and public goods provision. Mita districts historically had fewer large landowners and lower educational attainment. Today, they are less integrated into road networks, and their residents are substantially more likely to be subsistence farmers.

    It also enriches the debate around the Engerman and Sokoloff argument that the institutions resulting from highly inequal colonial societies, especially in terms of land distribution, where a prominent cause of underdevelopment today in Latin America:

    The positive association between historical haciendas and contemporary economic development contrasts with the well known hypothesis that historically high land inequality is the fundamental cause of Latin America’s poor long-run growth performance (Engerman and Sokoloff (1997)). Engerman and Sokoloff argued that high historical inequality lowered subsequent investments in public goods, leading to worse outcomes in areas of the Americas that developed high land inequality during the colonial period. This theory’s implicit counterfactual to large landowners is secure, enfranchised smallholders of the sort that predominated in some parts of North America. This is not an appropriate counterfactual for Peru or many other places in Latin America, because institutional structures largely in place before the formation of the landed elite did not provide secure property rights, protection from exploitation, or a host of other guarantees to potential smallholders. The evidence in this study indicates that large landowners—while they did not aim to promote economic prosperity for the masses—did shield individuals from exploitation by a highly extractive state and ensure public goods. Thus, it is unclear whether the Peruvian masses would have been better off if initial land inequality had been lower, and it is doubtful that initial land inequality is the most useful foundation for a theory of long-run growth.

    Although it does not necesarily seem to invalidate the comparison with North America, this certainly opens avenues for a more nuanced view of different economic performances within the Latin American subcontinent.

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  • The impact of television: a natural experiment


    This is a book from 1979! The study shows a 160% increase in physical agressions by second grade children in the two years following the introduction of television into a previously isolated town.

    The five research papers that comprise this document report on research into the impact of the inception of television reception on residents of a Canadian town, “Notel.” The introductory section tells how Notel and two other similar Canadian towns that already had television reception were studied just before Notel received television reception in 1973, and again two years later; the section also explains the cross-sectional and longitudinal comparisons that were made in the research. The research papers separately outline findings on the impact of television on children’s aggressive behavior, reading skills, cognitive development, and sex role perceptions, as well as on residents’ participation in community activities. The findings presented suggest that television viewing may result in the following: increases in children’s physical and verbal aggression; decreases in reading skills, varying by sex and grade level; decreases in some cognitive skills; formation of more traditional sex role attitudes; and decreases in participation in community activities.

    And here is more recent evidence on the impact of television on life expectancy.

    Background Prolonged television (TV) viewing time is unfavourably associated with mortality outcomes, particularly for cardiovascular disease, but the impact on life expectancy has not been quantified. The authors estimate the extent to which TV viewing time reduces life expectancy in Australia, 2008.

    Methods The authors constructed a life table model that incorporates a previously reported mortality risk associated with TV time. Data were from the Australian Bureau of Statistics and the Australian Diabetes, Obesity and Lifestyle Study, a national population-based observational survey that started in 1999–2000. The authors modelled impacts of changes in population average TV viewing time on life expectancy at birth.

    Results The amount of TV viewed in Australia in 2008 reduced life expectancy at birth by 1.8 years (95% uncertainty interval (UI): 8.4 days to 3.7 years) for men and 1.5 years (95% UI: 6.8 days to 3.1 years) for women. Compared with persons who watch no TV, those who spend a lifetime average of 6 h/day watching TV can expect to live 4.8 years (95% UI: 11 days to 10.4 years) less. On average, every single hour of TV viewed after the age of 25 reduces the viewer’s life expectancy by 21.8 (95% UI: 0.3–44.7) min. This study is limited by the low precision with which the relationship between TV viewing time and mortality is currently known.

    Conclusions TV viewing time may be associated with a loss of life that is comparable to other major chronic disease risk factors such as physical inactivity and obesity.

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  • Proteccionismo y Mercosur: tapar el colador con un dedo


    El resurgimiento del proteccionismo también alcanza al Mercosur. Resulta algo gracioso que de ello resulte tensiones con países terceros como China, pero también tensiones entre los mismos socios. Recuerdo años atrás un funcionario paraguayo diciéndome que oponerse al proteccionismo brasileño era como intentar tapar un colador con un dedo…

    “En la década de los noventa, la palabra apertura estaba de moda en Mercosur, la unión aduanera que forman Brasil, Argentina, Paraguay y Uruguay. En aquellos tiempos, el verbo proteger sonaba retrógrado en el discurso dominante. Ya no. El neoliberalismo está en retroceso, el neodesarrollismo avanza algo, aunque con versiones distintas en Brasil y Argentina. Ambos países han reforzado desde finales de 2011, y ante la amenaza de una nueva recesión mundial, las barreras contra las importaciones, aunque Brasilia usa métodos más convencionales de administración del comercio y no ha generalizado tanto las medidas como Buenos Aires.
    “Con planificación y políticas acertadas estamos logrando proteger nuestra economía, nuestros sectores productivos y, sobre todo, el empleo”, dijo la presidenta de Brasil, Dilma Rousseff, en su discurso de fin de año. En diciembre, su Gobierno comenzó a aplicar un impuesto a la producción industrial del 30% a los coches extranjeros, excluidos los de Mercosur y México, país con el que el bloque mantiene un acuerdo automotor. Ese tributo se suma a un arancel del 35%, el máximo permitido por la Organización Mundial de Comercio (OMC). No es casualidad que la china Chery construya una planta en Brasil o que la alemana BMW analice hacerlo.”

    Y por supuesto, resurgen las denuncias de corrupción.

    “Argentina y Brasil no son los únicos países que están recurriendo a medidas proteccionistas, según Global Trade Alert, una iniciativa del Centro para el Análisis de la Política Económica, con el apoyo del Banco Mundial, para revelar la implantación de nuevas barreras contra el comercio, la inversión o la migración. Argentina ha aplicado recientemente 180 medidas, y Brasil, 80. Rusia suma 134; Estados Unidos, 105; India, 101; China, 94; Reino Unido, 87; Alemania, 83; Francia, 78, y España e Italia, 69. En un mundo en el que cada vez más se cuestiona la liberalización económica, las medidas que restringen el comercio crecieron en el tercer trimestre de 2011 a niveles similares a los de la crisis global de 2009.
    Las barreras comerciales también han despertado denuncias de presunta corrupción. Un fiscal argentino acusó a finales de 2011 a un asesor de la Secretaría de Industria de su país por cobrar supuestamente sobornos para agilizar los trámites de licencias no automáticas.”

    De hecho, en los años 70, la literatura económica clásica sobre corrupción y “rent-seeking” típicamente discutía situaciones relacionadas con licencias para comerciar con el extranjero, como ser por ejemplo el artículo de Ann Krueger, recientemente incluido entre los 20 artículos más influentes de los últimos 100 años del American Economic Review.

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