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This paper aims to identify the major factors that lead to school abandonment in an urban surrounding, namely, the shantytowns of Fortaleza, northeast Brazil. We use an extensive survey addressing risk factors faced by the population in these neighborhoods, which covered both in-school and out-of-school youth of both genders. The role of early parenthood, child labor, and poverty in pushing teenagers out of school is given particular attention. The potential endogeneity of some of the determinants is dealt with in the empirical analysis. We take advantage of the rich set of variables available and apply an instrumental variables approach. Early parent- hood is instrumented with the age declared by the youngsters as the ideal age to start having sexual relations; work is instrumented using the declared reservation wage (minimum salary acceptable to work). Results indicate that early parenthood has a strong impact in driving teenagers out of school. Extreme poverty is another factor lowering school attendance, as children who have suffered hunger at some point in their lives are less likely to attend school. In this particular urban context, working does not necessarily have a detrimental effect on school attendance, something which could be linked to the fact that dropping out of school leads most often to inactivity rather than to work, given the scarcity of job opportunities; also, liquidity constraints may be relaxed for those whose returns from work enable funding school. [ABSTRACT FROM AUTHOR]

This paper analyzes the case of Spain in the period from 1993 to 2005, when intense reforms in several industries took place in the country. We observe an increase in collusion and trust practices in liberalized industries, what requires an increase in the resources dedicated to antitrust policy. An econometric estimation demonstrates the influence that certain regulatory dimensions have on antitrust activity. Deregulation has an additional positive effect on antitrust activity. We also observe a learning effect in industries due to previous sanctions. Finally, we find a complementarity effect of regulatory agencies on the antitrust policy. [ABSTRACT FROM AUTHOR]

This paper examines the behavior of real GDP (levels and growth rates), unemployment, inflation, bank credit, and real estate prices in a twenty one-year window surrounding selected adverse global and country-specific shocks or events. The episodes include the 1929 stock market crash, the 1973 oil shock, the 2007 U.s. subprime collapse and fifteen severe post-World War II financial crises. The focus is not on the immediate antecedents and aftermath of these events but on longer horizons that compare decades rather than years. While evidence of lost decades, as in the depression of the 1930s, 1980s Latin America and 1990s Japan are not ubiquitous, GDP growth and housing prices are significantly lower and unemployment higher in the ten-year window following the crisis when compared to the decade that preceded it. Inflation is lower after 1929 and in the post-financial crisis decade episodes but notoriously higher after the oil shock. We present evidence that the decade of relative prosperity prior to the fall was importantly fueled by an expansion in credit and rising leverage that spans about 10 years; it is followed by a lengthy period of retrenchment that most often only begins after the crisis and lasts almost as long as the credit surge. [ABSTRACT FROM AUTHOR]

Overweight and obesity are increasing throughout the world, spurring a research agenda focused on understanding its causes, consequences, and the most appropriate public policies for addressing these problems. Unfortunately, very little remains known about the relationship between overweight/obesity and intellectual and academic outcomes. This is very problematic, as public policies cannot be successfully tailored to specific situations in the absence of adequate data. This paper helps narrow this research gap by analyzing the relationships between weight and school dropout rates, held back a year and increase in falling behind in school for children aged 12 to 14 and adolescents aged 15 to 18. As such, it is the first study addressing this topic in Mexico. The findings suggest that there is no clear relationship between overweight/obesity and intellectual/academic outcomes, as overweight/obesity has no effects on some variables and negative effects on other variables. [ABSTRACT FROM AUTHOR]

This paper analyzes a mixed oligopoly in which firms may hire managers and delegate their decisions to them for strategic reasons. Unlike previous research, we examine the case in which a public firm competes with a foreign firm and a domestic firm, both of them private. We show that these two private firms behave differently. In equilibrium, only the domestic firm strategically hires a manager that deviates from simple profit maximization. This leads to a social welfare higher than the one obtained when none of the firms hires a manager and that resulting from the competition of a domestic and a foreign firm run by managers. [ABSTRACT FROM AUTHOR]

This paper investigates the determinants of investment decisions on Spanish money market funds. It belongs, therefore, to the growing area of behavioural finance. The study offers a double perspective because it analyses both money and investor flows. The empirical evidence shows that past return is the key factor in fund purchase decisions; whereas risk loses the influence shown in equity funds. Higher fees restrain inflows though their negative impact softens as fees increase. Decision variables such as fund size, management company size or the flow into the category are also included in our analysis. In view of the analysis of different subsamples, we conclude that it is important to distinguish market states and domestic fund industries considering their specific features. [ABSTRACT FROM AUTHOR]

This paper develops, under the framework of a small, open, and monetary economy, a stochastic model of inflation stabilization taking as a nominal anchor the exchange rate when credibility is imperfect. The agents have expectations driven by two processes: a diffusion-jump process for the devaluation rate where the size of a possible devaluation has an extreme value distribution, and a mean-reverting stochastic volatility process (a continuous version of the GARCH (1,1) model). This appropriately models that inflation is substantially more persistent than the devaluation rate; as showed the stylized facts about extreme devaluations registered in Mexico in 1994 and in Argentina in 2001. It is assumed that there is no a derivatives market to hedge against future devaluations, that is, the financial markets are incomplete. Under this framework, interior and corner solutions are examined when a stabilization plan with imperfect credibility is implemented. It is also studied an experiment in which the mean expected inflation takes a greater value from some time in the future and stays there forever, taking into account the probability that this monetary policy occurs. The case of a stochastic horizon of stabilization with the exponential distribution is studied. Moreover, the real option to postpone consumption is valued when a stabilization plan is to be abandoned. Also, exogenous shocks on consumption and economic welfare are assessed. Finally, the proposed model is used to carry out simulations that reproduce the booms of private consumption before the anti-inflationary plans were abandoned in Mexico in 1990-1994 and in Argentine in 2001-2003, when extreme devaluations took place. [ABSTRACT FROM AUTHOR]

This paper evaluates the effects that the decentralization reforms implemented in Colombia during the early nineties had on the quality of public schools. Through panel data techniques at the school level we find that, in the Colombian context, political economy trade-offs such as low ability of local governments, unfunded mandates or local capture are not important factors in the determination of decentralization results. Conversely, accounting for the changes in households' drop-out decisions can significantly alter the interpretation of such results implying the importance for future impact policy evaluation to directly take them into account. Specifically, allowing for households' schooling decisions to change, we find that the total effect of the reforms decreased the quality of public schooling. However, controlling for the significant changes in the drop-out rate of public school students that took place after the reforms were undertaken, we find that the quality of public schools actually improved. [ABSTRACT FROM AUTHOR]

This paper examines the contribution of entrepreneurs to productivity growth with data from Spanish Autonomous Communities (CA). The empirical analysis borrows from the theories that explain the existence and functions of entrepreneur as a result of division of labour when people differ in their entrepreneurial skills. We find a convergence effect in productivity of Spanish CA as quality of entrepreneurs increases overtime due to the fact that those territories with higher entrepreneurial base at the beginning of the period are also those with lower productivity. We also find empirical evidence supporting the hypothesis that entrepreneurial capital affects growth by acting as "knowledge filter". [ABSTRACT FROM AUTHOR]

The vulnerability and financial pressure of financial systems is a critical subject in light of the economic crisis we are currently facing. This pa per defines financial pressure of local governments as the extreme situation characterized by financial imbalances, increasing current expenditure, lack of investment, excessive public debt and debt service. Using multivariate methods this paper develops six indexes that jointly measure the pressure on local public finances in Mexico for the period 2001-2007. The se indexes-which by construction are not correlated with each other-capture more than 80% of the variation of public finance variables and show the ranking of each state in relation to other states in Mexico. Among the results we find a trade-off between public investment and balance surpluses and between savings and current expenditure. The hence-obtained set of indexes can be used by local officials to assess the relative condition of his state public finances in relation to others and by supervisors or regulatory bodies to asses the financial pressure experienced by state governments in Mexico. [ABSTRACT FROM AUTHOR]

This paper applies the methodology of real options for valuing firms that for any reason are subject to a possible expropriation. In the development of this research is added to the valuation by discounted cash flows the value of the premium which shareholders would receive as compensation for the risk of expropriation. This assumes that the returns of companies with a potential threat of expropriation are conducted by a diffusion process mixed with jumps in the event of financial crisis. This research values the real option of expropriation (call option) in which, at the request of the government, the investor must sell the company (the underlying asset) to the government in exchange for compensation (the strike price). Finally, the developed methodology is applied to the case of Banamex. [ABSTRACT FROM AUTHOR]

This paper discusses the major tradeoffs between a transparent antitrust policy and a policy providing less information and more discretion on the part of the authority. A growing phenomenon is the strategic use or misuse of antitrust by firms, and this misuse creates challenges for antitrust enforcement and transparency. [ABSTRACT FROM AUTHOR]

Many analysts argue that the substantial growth in agri-food trade between Mexico and the United States can be attributed to changes in exchange rate, exchange rate volatility and NAFTA. This paper quantifies the effects of the changes in Mexico-United States real exchange rate, its volatility and NAFTA on Mexico-United States flows of milk powder and contributes, with empirical evidence, to the debate on the effects of real exchange rate changes and its volatility on agri-food trade flows. Maximum Likelihood Cointegration Analysis and a Vector Error Correction (VEC) approach are used in estimating an import demand function for milk powder in Mexico. To guide the empirical analysis, an expected utility maximization model is developed in this study and a set of reduced form equations are estimated. The results show that while changes in real exchange rate have a positive effect on milk powder imports in Mexico from the United States, volatility of the real exchange rate has a negative effect on imports, both in the short-run and in the long-run. The NAFTA has no significant effect on milk powder imports in Mexico from the United States [ABSTRACT FROM AUTHOR]

Few ideas and activities have received as hyperbolic praise as that presented by Hernando de Soto on informality. Nobel laureates in economics, presidents of various countries, important magazines, and multilateral organizations have endorsed this author's impulse towards the official registration of the property or the poor, particularly, their homes, as the key to launching a worldwide economic revolution from below. In this paper we present the institutional backing of those ideas, the analytic substance behind the main arguments involved, the descriptive accuracy of the institutions operating in the Third World, and the results of their application. In this way, we evaluate the relationship between the spread and power of an idea and its formal content, and its effectiveness in changing the world of the poor. [ABSTRACT FROM AUTHOR]

This paper considers financial, operational, solvency, and performance ratios in order to detect when there were balance sheets' variations related to the 1994 Mexican currency crisis. Quarterly data for 88 non-financial Mexican companies that survived the crisis are used, and tests for structural change are performed. Results show that generally firms' balance sheets deteriorated between the fourth quarters of 1993 and 1995. Although in most cases firms' balance sheets improved after the crisis, the recovery was partial and gradual, and overall this episode was prejudicial even for surviving companies. [ABSTRACT FROM AUTHOR]

Chile has pioneered the implementation of emission offseting programs pursuing simultaneously economic growth and environmental protection. In this paper, emission trading programs implemented in Santiago of Chile are analyzed and its relevance for developing countries is evaluated. It is argued that emission trading programs can be the best tool to deal with air pollution problems even in cases in which the institutional capacities are not well developed. Moreover, the inclusion of the transport system into the emission trading programs and the possibility of moving towards a system of interpollutant exchange are both nouvelle and relevant elements in the context of air pollution control policies. However, these innovations involve rather more complex elements in the design of emission trading programs. [ABSTRACT FROM AUTHOR]

This paper introduces the concept of "debt intolerance," which manifests itself in the extreme duress many emerging markets experience at debt levels that would seem manageable by advanced country standards. We argue that "safe" external debt-to-GNP thresholds for debt intolerant countries are low, perhaps as low as 15 percent in some cases. These thresholds depend on a country's default and inflation history. Debt intolerance is linked to the phenomenon of serial default that has plagued many countries over the past two centuries. Understanding and measuring debt intolerance is fundamental to assess the problems of debt sustainability, debt restructuring, capital market integration, and the scope for international lending to ameliorate crises. Our goal is to make a first pass at quantifying debt in- tolerance, including delineating debtors' clubs and regions of vulnerability, on the basis on a history of credit events going back to the 1820s for over 100 countries. [ABSTRACT FROM AUTHOR]

This paper analyzes the wage gap between non-indigenous peoples and Mapuches in Chile. This gap is broken down into endowment and discriminatory components. Participation and wage equations are estimated by gender and ethnic group and the results are controlled for sample selection bias. The results show significant differences in endowments that favor the non-indigenous peoples, both male and female. The hypothesis of discrimination against Mapuches cannot be rejected for males, but it can for females. However, male discrimination did not increase between 2000 and 2006. The results suggest that a policy directed at reducing wage differences by increasing human capital among the Mapuches might have ambiguous effects and that the labor market generates incentives for the Mapuches to migrate to the cities. [ABSTRACT FROM AUTHOR]

Should a landlord adopt a wage labor, a crop sharing or a fixed-payment land rental contract with a particular tenant? The emergence of the agency theory to the contract choice in the 1970s and 1980s has generated a substantial body of theoretical and empirical research on why and under what conditions each contract is chosen. This paper reviews the literature on the contractual arrangements in agriculture, focusing on the principal-agent theory. After reviewing the agency theory we provide a synthesis and integration of the main contributions to contract choice in agriculture, highlighting current controversies over results. We find this theory provides a coherent and useful framework to answer sharecropping questions, but we also observe that there is weak empirical support for many of the central tenets of agency theory that need to be addressed. Finally, we discuss the implications of these issues and outlining directions for future theoretical and empirical work. [ABSTRACT FROM AUTHOR]

The main goal of this paper is to analyze the demand for alcoholic beverages among Spanish young males and females. To that end, we develop an empirical model which combines elements from the Theory of Two-Stage Budgeting and the Theory of Addiction in a Quadratic Almost Ideal Demand System. We carry out the estimations with data mainly drawn from the Spanish National Survey on Drug Use in the School Population (2000). As a main result we highlight that lower purchasing power reduces the budget share allocated to buy alcoholic beverages, so fiscal policies will reduce the alcohol demand among teenagers. There is also empirical evidence that wine behaves as ordinary goods for women, whereas beer and spirits are luxury goods for men. [ABSTRACT FROM AUTHOR]

This paper empirically estimates the pass-through of the value-added tax (VAT) on Colombian consumer prices. The identification strategy uses the consumer price index and takes advantage of the relatively frequent tax reforms that have taken place recently in Colombia. The results suggest that the pass-through for the consumer basket is about one at the national level. We also consider a specification where the goods are treated individually (hence not taking into account their weight in the consumer basket), and where we control for unobservable city characteristics. The results in this case show a lower average pass-through and bring to the fore the heterogeneity of the VAT incidence across markets. [ABSTRACT FROM AUTHOR]

This paper reports new experimental evidence on the effect of economics training on two different dimensions of social cooperation: trust and reciprocity, which are measured by means of the Trust Game. We employ sampling and matching procedures joined with recruiting by selective invitation in order to separate the effect of studying economics from the potential effect of self selection of preferences by those who choose economics as their career. Our sample is formed by university students of economics and other disciplines with little or no economic content in Chile. We find that the amounts sent by economists in the first stage of the Trust Game were significantly smaller than those sent by their peers from other disciplines, suggesting that economists trusted others significantly less than their counterparts. We also find that economists are less likely to return the promised amounts, which indicates a reduced tendency to reciprocate the trust shown by others. [ABSTRACT FROM AUTHOR]

This paper presents empirical evidence on the existence of wage discrimination concerning indigenous population in Chile in the period 1996-2006, using data from the Casen survey. The results show that wage discrimination has remained stable during the last ten years (12%). Using bootstrapping techniques it is possible to construct a confidence interval for the wage discrimination measure, which allows to conclude that it is statistically significant. On the other hand, in the same period, the wage gap dropped from 32.5% to 24.9%, this decline is basically explained by the leveling of human capital endowment between the two groups. The estimations are sensitive to the correction for selection bias, which points out the relevance of including this variable in the wage gap decomposition. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to analyze the effects of trade liberalization on firms' merger incentives in a mixed oligopoly model. Concretely, it is proved that mergers, both national and international, are compatible with the processes of trade liberalization and partial privatization of public firms. [ABSTRACT FROM AUTHOR]

Peru has experienced during the last decades a significant increase in educational coverage at all levels, including higher education. However, currently high unemployment and underemployment rates cast doubt about the profitability of investments in education that have been undertaken. This paper estimates the evolution of the returns to education in the last two decades in Peru and finds mixed evidence on the profitability of higher education in the Peruvian labor market. Due to the convexification of returns, university education shows average private and social rates of return estimated between 12% and 15%. On the contrary, non-university higher education shows on average rather low private and social rates of return, even close to zero. Therefore, a thorough evaluation of the effectiveness and relevance of that education level seems warranted. [ABSTRACT FROM AUTHOR]

This paper tests the momentum effect in the Mexican Stock Exchange. We document a strong momentum effect for this stock market during the period 1993-2006. In addition, we also find that neither risk factors nor transaction costs can explain the returns of the momentum strategies in this market. Finally, our results reveal that momentum returns are linked to some variables that proxy slow information diffusion or overconfidence. These results support some behavioural finance models. [ABSTRACT FROM AUTHOR]

The main objective of this paper is to provide empirical evidence regarding per capita income convergence of the states of the Mexican Republic towards the income of Distrito Federal, which is assumed to be the leading economy (Barro and Sala-i-Martin, 1991, 1992). We test such hypothesis by using two different panel unit root tests (Im, Pesaran and Shin, 1997; and Levin-Lin, 1993) and eight panel cointegration tests (Pedroni, 2001; Larsson, 2001). These econometric tools let us overcome the "small sample distortions" often faced by studies based on time series techniques. Our unit root tests do not show evidence of absolute convergence towards the leading economy from 1970 to 2004 and for two shorter samples. However, cointegration tests show evidence in favor of conditional convergence for the same period. Long run estimates of the speed of convergence (Mark and Sul, 2003) show that rich regions converge faster than poor ones. [ABSTRACT FROM AUTHOR]

Housing prices in Spain have increased sharply since 1999, increasing the financial effort households need to make to buy a house. Inflation data, based on the HIPC (Harmonized Index of Consumer Prices), fell to very low values during this period. Since the composition of the HIPC does not include housing prices, a problematic question arises: Are we measuring inflation correctly? In this paper, we offer a methodological strategy to correct inflation measurement bias due to how housing is treated in the HIPC. [ABSTRACT FROM AUTHOR]

Parallel trade is a legal movement (arbitrage) of goods from one country where the product is first sourced and protected by intellectual property rights to another one but without the warranty of the manufacturer. This phenomenon takes place as a result of the coexistence of the principles of the free movement of goods and subsidiarity, which implies the existence of different regulatory and price systems. This paper empirically examines whether parallel trade in drugs in three European Union counties has exerted any effect on prices, and it undertakes a breakdown of the effect of parallel trade on its stakeholders. Our results suggest that the effects of parallel trade on drug prices is only moderate. The main beneficiaries of parallel trade are parallel importers themselves, who generate negligible savings for the health care system which are unlikely to overcome the induced costs of drug innovation. [ABSTRACT FROM AUTHOR]

The main goals of this paper are firstly, to critically examine the ECB's official monetary policy strategy concerning its three fundamental topics: the definition of price stability, the analysis framework, and communication to the public on its decisions and achievements; and secondly, to empirically analyze its decision-making policies for the period 1999-2005, in order to confirm if these decisions taken are in fact sufficiently related to the ECB's official strategy or, on the contrary, if there is a different implicit strategy underlying claims. The empirical work to explain interest rate setting is carried out by means of several approaches: calibrated, intra-temporary, and inter-temporary with the generalized method of moments. The conclusions are clear: The implicit inflation target is around 1.9%, very close to 2%, as stated by the ECB in the evaluation of its monetary policy strategy in 2003. We contend that the approach of this institution is forward-looking on underlying inflation, and backward-looking with regard to the business cycle, showing a certain tendency towards extending the temporary horizon in both cases. The inflation aversion coefficient value follows the Taylor principle and, finally, the consideration given by the ECB to the effect of economic growth on interest rate setting is small. [ABSTRACT FROM AUTHOR]

This paper examines the impact of trade with Japan, North America and the EU on technology diffusion and TFP growth in Jordan, Korea and Mexico. The measures of foreign R&D are constructed on the basis of industry-specific R&D in the North, North-South trade patterns, and input-output relations in the South. We show that technology diffusion and productivity gains tend to be regional: Jordan (Korea) (Mexico) benefits mainly from trade with the EU (Japan) (North America). In other words, the dynamic version of the "natural trading partners" hypothesis seems to hold for these countries. [ABSTRACT FROM AUTHOR]

The conclusions regarding the evolution of inequality in countries or regions are frequently deduced from variations in the point estimations of the usual indicators, without considering the impact of sampling errors on the statistical significance of the changes detected. In this paper, we analyze the influence of different inference methods (asymptotic and bootstrap) on the Gini coefficient in detecting the inter-annual variations of this indicator. With this aim, we first carry out a simulation experiment in order to evaluate the behaviour of different methodologies once we know the real value of the population parameters. Secondly, we present a sensitivity study, applied to data in the Spanish case, in order to analyze the influence of the inference technique on the definition of trends in the behaviour of the Gini coefficient, using data from the European Community Household Panel for the period 1993-2000. [ABSTRACT FROM AUTHOR]

This paper advocates that although an absolute notion of poverty should remain an essential ingredient in the evaluation of the standard of living in developing and transition economies, it is time that relative poverty begins to be systematically estimated for those same economies. This prescription is applied to Mexico for the 1992-2004 period, where the Fox administration had officially determined for the first time an absolute poverty line for 2000. As in the Second European Poverty Programme at the end of the 1980s, the relative poverty line is fixed at 50% of mean equivalent expenditures. Absolute and relative poverty behave in opposite ways during the 1992-2000 business cycle, but both decline significantly during the 2000-2004 stagnation period. Relative poverty is above absolute poverty from 1992 to 1994, below it during 1996-1998, and above it again in 2000-2004. In any case, relative poverty in Mexico is well above relative poverty in developed countries. [ABSTRACT FROM AUTHOR]

This paper presents a research program that links complexity theory with the study of socioeconomic systems. This evolutionary paradigm approach is referred to as sociomatics since it covers different disciplines in the social sciences and makes use of computers to simulate the behavior and interaction of heterogeneous agents. The central body of sociomatics consists of a meta-theory that establishes the premises of human behavior (agency) and the way in which this behavior is conditioned by a process of social embeddedness (structure). Likewise, it is asserted that models based on agents allow the description of different topologies of social interaction which, in turn, make possible the characterization of the co-evolution of endogenous variables in the economic, social and political arenas, and between these superficial arenas and the socio-cultural substratum. [ABSTRACT FROM AUTHOR]

In this paper, we jointly estimate markup values and earnings distribution for the main factors of production in the Chilean manufacturing industry during the nineties. Results show that labor and input providers receive 21% and 16% of the earnings obtained by the firm in imperfect final markets, respectively. The rest is captured by the firm owners. [ABSTRACT FROM AUTHOR]

This paper applies econometric estimation methods to improve the level of precision and detail in the measurement of welfare in Mexico, and specifically to estimate household incomes. As is the case in other countries, Mexico has had, on the one hand, household surveys that provide high precision income measures but with very limited possibilities of geographic desegregation, and on the other, income indicators from Censuses that allow for detailed geographic desegregation but with very low precision levels. We use our estimation method to present the first series of household incomes at the state and municipality levels, as well as the first series of Human Development Indexes at the municipality level. [ABSTRACT FROM AUTHOR]

This paper discusses how to achieve optimal hedging of a cash flow when facing exchange rate risk, price risk of the product the company sells and costs and quantity uncertainty. We present an analytical solution of the optimal hedging strategies when futures on the good produced and on the exchange rate are available. An easy regression-based methodology to obtain the optimal hedging strategies is also proposed. We identify the key parameters affecting this strategy, which are the volatilities of the exchange rate, price, costs and quantity and the correlations among those variables. The methodology developed is applied to the particular case of Chilean cellulose exports. [ABSTRACT FROM AUTHOR]

This paper shows that an economic policy change in 1982 brought about a conspicuous alteration in the relationship between money, prices and the exchange rate in Mexico. Before that year, the long-term demand for currency fit the velocity equation, and inflation was driven mainly by the money gap. After a striking changeover, from 1983 until 2000, the demand for money took a very different form, and inflation was determined by the markup without an explicit currency effect. However, the long-term relationship that links the levels of output, the exchange rate and foreign prices with that of nominal money holds for the whole sample. [ABSTRACT FROM AUTHOR]

By employing a simple mixed international oligopoly model in which countries can set discriminatory tariffs, this paper analyzes the effects on the relevant variables of both, privatization and regional integration processes. It argues that the empirical evidence, which shows that regional liberalization and privatization of public firms are complementary processes, is justified from a theoretical point of view. [ABSTRACT FROM AUTHOR]

Between 1988 and 1998 Chile's average economic growth reached 7.8%. Nonetheless, growth decelerated sharply after the Asian Crisis; since 1998 the average economic expansion was only 3.7%. Along with this deceleration, the volatility of the economy was cut by more than half. Using a formal empirical analysis, this paper investigates the role that the adoption of both a floating exchange rate scheme and the use of the Structural Surplus Rule had in transforming Chile into a less volatile economy. Our results show that the introduction of the fiscal rule allowed for a reduction in the volatility of GDP growth by one third. On the other hand, the introduction of the flexible exchange rate mechanism contributed to reduce the volatility by one quarter. Thus, jointly, both policy reforms diminished the volatility of the Chilean economy by almost 60%. These results are robust to alternative specifications and endogeneity problems in some of the explanatory variables. [ABSTRACT FROM AUTHOR]

This paper explores whether payout ratios of Chilean companies are explained by the extent of potential agency conflicts between controlling and minority shareholders. I use both panel data regression analysis and an event study to test different hypothesis related to the effect of corporate governance on payout policies. The results show that in the context of an emerging economy, such as Chile, that presents high ownership concentration and extensive use of conglomerates and pyramid structures, the rent-seeking theory of the effect of agency problems on payout policies seems to be especially relevant. Companies that present a higher degree of coincidence between cash flow rights and control rights tend to have more generous dividend policies. On the other hand, unexpectedly high dividend announcements made by companies with potentially higher agency conflicts present higher abnormal returns. [ABSTRACT FROM AUTHOR]

Labor markets are important, because most people, especially the poor, derive all or the great bulk of their income from the work they do. This paper approaches labor markets through multisector modeling. The first main substantive section presents the essence of multisector modeling, in particular, the role of labor market dualism. Given that labor markets often consist of quite distinct segments, a useful and insightful analytical approach is to start with just two interrelated segments, formal and informal. Accordingly, the next sections present models of wages and employment in the formal economy, the informal economy, and intersectoral linkages respectively. The final substantive section shows the contributions that these models make to understanding and to policy analysis in labor markets. It would not be expected that the same model would fit East Africa and East Asia or South Africa and South Korea. Surely, the "correct" model is context-specific. Blending empirical observation and analytical modeling has yielded great advances. Sound labor market policies require sound labor market models. [ABSTRACT FROM AUTHOR]

In this paper we address the relationship between trade and endogenous pollution levels with a mechanism where trade policy provides the home government with a credible threat that influence firm's strategic behaviour to adopt cleaner technologies. The government has a greater incentive to protect a clean industry than to protect a very polluting one. In that sense a locally polluted open economy with an imperfectly competitive market structure is likely to reduce pollution emissions more than under an autarky regime. A commitment to free trade would be counter-productive: it would remove the government's ability to credibly threaten lower levels of protection. We show that any trade liberalisation could decrease the home country's welfare. [ABSTRACT FROM AUTHOR]

This paper quantifies the impact on firms of having excessive short-term debt when they face an unanticipated increase in the cost of refunding. Using a panel data set of Chilean firms, for the period 1994-2003, we find that when firms face liquidity shocks, either domestic or foreign, those firms with a higher maturity mismatch invest relatively less. This effect is significant and it is equivalent to a drop of 6% of the average investment of the firms in the sample. Additionally, we find that this effect is offset in those firms that have access to international markets, through either the issuance of ADR or foreign ownership. [ABSTRACT FROM AUTHOR]

This paper studies the effects on insurance premiums and consumer welfare when commissions to insurance agencies exist and are used strategically to sell insurance policies. The opportunistic behavior of agency insurers that sell the policy paying the highest commission is considered. Different market structures are considered, namely: a duopoly of insurers that compete in commissions (insurer competition), collusion among insurers with agency insurers remaining independent (horizontal collusion or insurer monopoly) and collusion between insurers and agency insurers (vertical integration or exclusive agents). We find that insurer competition and vertical integration trigger higher premiums than horizontal collusion with independent agencies. Furthermore, we argue that the optimal commission from the consumer viewpoint may be greater than the commission offered under any of the above three market structures. [ABSTRACT FROM AUTHOR]

This paper identifies the origins and types of price rigidities that are present in Mexican manufacturing industries. The results were obtained through a survey carried out during the second semester of 2005 with 398 participating firms. The main findings may be summarized as follows: First, on average, firms maintain their prices unchanged for a period close to six months. Second, the majority of firms review their price schedules on a predetermined period of time; however, when significant shocks occur, more than half switch to a pricing strategy contingent on the evolution of the variables that affect their balance sheet. Third, price stickiness is mainly associated to production costs and to the existence of explicit and implicit contracts. Finally, prices react to the type and direction of the shocks that impact each firm. [ABSTRACT FROM AUTHOR]

In this paper we give matrix version of the deferred-acceptance algorithm for the matching model one to one. The new algorithm modifies the matrix of the agents preference. When the algorithm stops, it is shown that it coincides with the agents' optimal-stable matching. [ABSTRACT FROM AUTHOR]

In this paper we define a particular dynamic solution (Shenoy, 1980) for abstract games related to games with transferable utilities (TU-games). We show that this solution must contain some cycles of pre-imputations, maximal U-cycles (pro- vided this cycles exist). The existence of such cycles is strongly connected to the non-balancedness of the TU-game under study. Besides, the dynamic solution coincides with the core of the game in the case of balanced lu-games. Thus, it pro- vides an unifying solution concept for games with transferable utilities. [ABSTRACT FROM AUTHOR]

By using a Cournot competition model, this paper aims at determining prices, quantities and market power of the largest intermediaries in Mexico's masterpieces paintings market. The main hypothesis is that those variables critically depend on the intermediaries' strategies of product differentiation, costs and conjectural variations. Results from simulation show that the model performs very well when explaining the behavior of intermediaries, especially when a parameter of product differentiation is introduced. In particular the model identifies two market niches; the one which is controlled by auction houses (the market for unique or highly differentiated pieces) and the other one which is monopolized by art galleries and art dealers (the market for common or lowly differentiated pieces). This distinction grounds the whole body of this research. [ABSTRACT FROM AUTHOR]

This paper analyzes the relationship between the dividend and debt policies, firm risk and the directors' ownership. Firstly, results show that the payment of dividends reduces the risk and the leverage, and increases the ownership. Secondly, the firm risk presents a negative effect on the debt ratio and on the payment of dividends and a positive repercussion on the ownership. Thirdly, we can see that the most indebted companies distribute an inferior quantity of dividends, they show a lower risk level and they present a bigger ownership. Finally, it is observed that the mentioned ownership increases the risk, dividend payments and the indebtedness. [ABSTRACT FROM AUTHOR]