Welfare-theoretical analyses of the brain drain

The paper reviews and synthesises the theoretical analyses of the brain drain in the earlier literature and in the present symposium in the Journal on the subject. Static analysis and dynamic analysis are distinguished, critical issues are raised relating to how welfare changes should be discussed in the context of migration, and possibilities of fruitful future research are outlined.     

The curse of Moctezuma: American silver and the Dutch disease

This study formalizes and empirically tests the conjecture that the discovery of large silver reserves in its American colonies during the 1540s triggered in Spain a case of Dutch disease, diverting factors of production to non-traded goods industries and undermining the Spanish comparative advantages in the Early Modern Age. I develop an open-economy model to mimic the economic conditions in Imperial Spain. I then present new consumption weights built from primary sources, which I combine with existing price data to produce price indexes for traded and non-traded goods; these are then used to test the implications of the model in a Markov-switching regression framework. I identify a strong and persistent increase in the relative price of non-traded goods coinciding with the silver discoveries, lasting for almost three decades and reversing itself only after the 1575 and 1579 crown bankruptcies.     

The effects on insurance costs of restricting undocumented immigrants' access to driver licenses

Proponents of issuing driver licenses to undocumented immigrants argue that the number of uninsured motorists and car accidents would decrease, thus improving public safety and lowering costs associated with car insurance. This study gives an overview of competing cost reduction and public safety arguments and examines the issues surrounding undocumented immigrants and driver licenses. It empirically assesses the effect on the average cost of auto insurance of restricting undocumented access to legal driving documents. We use a fixed effects model for panel data to test the effects on real average insurance expenditures of restricting undocumented immigrants' access to driver licenses, while controlling for other relevant factors suggested in the literature. Our main finding is that on net such restrictions raise the average annual cost of auto insurance by an estimated $17.22 ($2009) across states that have enacted such restrictions.     

PRODUCTIVITY AND FIRM DYNAMICS: CREATIVE DESTRUCTION IN INDONESIAN MANUFACTURING, 1994–2000

This paper examines the entry and exit, and the labour productivity, of Indonesian manufacturing firms with 20 workers or more, using a firm-level panel dataset constructed for the years 1994–2000. Overall change in manufacturing labour productivity reached 27.2%—an average growth of 3.5% per annum—between 1994 and 2000, a period that includes the 1997–98 Asian financial crisis, which hit Indonesia hard. Vibrant firm dynamics characterised this period, in which about 10% of manufacturing enterprises were renewed in any one year. By 2000, one-third of all enterprises in existence in 1994 had closed, but the number of enterprises that closed was lower than the number that entered and survived up to the year 2000. The replacement of exiting firms with newly entering firms contributed significantly to increases in overall labour productivity. Regulatory reform in support of this process should lead to gains in productive employment for Indonesian workers.     

Targeting agricultural research to benefit poor farmers: Relating poverty mapping to maize environments in Mexico

We explore approaches for targeting agricultural research to benefit poor farmers. Using small area estimation methods and spatial analysis, we generated high-resolution poverty maps and combined them with geo-referenced biophysical data relevant to maize-based agriculture in Mexico. We used multivariate classification and cluster analysis to synthesize biophysical data relevant for crop performance with rural poverty data. Results show that the rural poor are concentrated in particular regions and under particular circumstances. Formal maize germplasm improvement trials were largely outside the core areas of rural poverty and there was little evidence for direct spillover of improved germplasm. Agro-climatic classification used for targeting breeding is useful but often ignores some important factors identified as relevant for the poor. Combining this method with poverty mapping improves stratifying and targeting crop breeding efforts to meet the demands of resource-poor farmers. We believe this integrated approach will help increase benefits from agricultural research to poor rural communities.     

A comparison of corporate versus government bond funds

We examine four separate classifications (high quality corporate, general corporate, government Treasury, and general government) of investment grade bond funds over the 1994–2009 period. We verify that distinct differences exist in investment styles across the classifications. We also document significant differences in performance as corporate funds outperform government funds by a risk adjusted average of 8 to 53 basis points on an annual basis depending on the model used. The performance differences are not strictly a function of expenses and are robust to alternative evaluation metrics. An examination of cash flows to the funds indicates that investment dollars are driven by the differences in risk adjusted performance.     

REGIONAL SHORT-RUN EFFECTS OF TRADE LIBERALIZATION IN BRAZIL

We use a single-country multi-regional computable general equilibrium model to evaluate regional short-run impacts of reduction in import tariffs resulting from recent free trade area agreements, on poverty and distribution of income in Brazil. Results show that trade can reduce inter-regional income inequality, but poor urban households lose with trade liberalization. Trade policy alone is not sufficient for achieving more equitable income distribution goals in Brazil. Without greater investment in human and physical capital, incomes in most regions of Brazil are likely to lag behind incomes in the South/Southeast, the most developed regions in the country.     

Entry and price dynamics in a perfect foresight model

This paper studies firms' entry and price dynamics in a model that combines the assumptions of free entry and perfect foresight with the hypothesis of consumer's loyalty postulated by Phelps and Winter. The analysis of the transition to long-run equilibrium reveals that, in such a model, the entry of firms is related to the difference between current prices and costs. In relation to the growth of the firms' output, it is shown that the model is consistent with Gibrat's Law. Finally, it is shown that the size distribution of firms approaches asymptotically a Pareto distribution.     

Stochastic vs. deterministic frontier distance output function: Evidence from Brazilian higher education institutions

Journal of Productivity Analysis - Using data from the Brazilian Higher Education Census and other public institutions, this study aims to obtain and compare efficiency scores from stochastic...     

A THEORETICAL APPROACH TO STERILIZED FOREIGN EXCHANGE INTERVENTION

In this paper, we survey prominent theories that have shaped the literature on sterilized foreign exchange interventions. We identify three main strands of literature: (1) that which deems interventions futile; (2) that which requires some market friction (i.e. limited arbitrage) in order for interventions to be effective; and (3) that which advocates the use of interventions as long as they convey signals on the stance of future monetary policy. We contribute to the literature in three important ways. First, by reviewing new theoretical models that have surfaced within the last decade. Second, by further penetrating into the theory of interventions in order to analyze the key features that make each model distinct. And third, by only focusing on sterilized operations, which allows us to sidestep the effects induced by changes in the stock of money supply. In addition, the models that we present comprise both a macro and microstructure approach so as to provide a comprehensive view of the theory behind exchange rate intervention.