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This paper studies the potential association between two geographic indicators, distance and altitude, with the Multidimensional Poverty Index (MPI) for 1,874 district in Peru by using the National Census of 2017. We investigate whether higher altitude or longer distance is associated with higher MPI values. For this purpose, we use the distance of each district to three different potential spaces of reference. First, we use the shortest distance to the metropolitan area of Lima; second, the shortest distance to the capitals of coastal departments; third, and finally, the shortest distance to the sea. We obtain three relevant results. First, we find evidence that altitude is statistically significant and positive associated with variation of MPI among districts. Second, the distance with respect to the sea appears to be more relevant to explaining differences in MPI than the distance to the Metropolitan area or coastal departmental capitals. Finally, we find evidence of spatial externalities of MPI across districts which also seem to be stronger than the direct effect of altitude and distance. [ABSTRACT FROM AUTHOR]

This is the background paper for the productivity extension of the World Bank's Long-Term Growth Model (LTGM). Based on an extensive literature review, the paper identifies the main determinants of economic productivity as innovation, education, market efficiency, infrastructure, and institutions. Based on underlying proxies, the paper constructs indexes representing each of the main categories of productivity determinants and, combining them through principal component analysis, obtains an overall determinant index. This is done for every year in the three decades spanning 1985-2015 and for more than 100 countries. In parallel, the paper presents a measure of total factor productivity (TFP), largely obtained from the Penn World Table, and assesses the pattern of productivity growth across regions and income groups over the same sample. The paper then examines the relationship between the measures of TFP and its determinants. The variance of productivity growth is decomposed into the share explained by each of its main determinants, and the relationship between productivity growth and the overall determinant index is identified. The variance decomposition results show that the highest contributor among the determinants to the variance in TFP growth is market efficiency for Organisation for Economic Co-operation and Development countries and education for developing countries in the most recent decade. The regression results indicate that, controlling for country- and time-specific effects, TFP growth has a positive and significant relationship with the proposed TFP determinant index and a negative relationship with initial TFP. This relationship is then used to provide a set of simulations on the potential path of TFP growth if certain improvements on TFP determinants are achieved. The paper presents and discusses some of these simulations for groups of countries by geographic region and income level. In addition, as a country-specific illustration, the paper presents simulations on the potential path of TFP growth for Peru under various scenarios. An accompanying Excelbased toolkit, linked to the LTGM, provides a larger set of simulations and scenario analysis at the country level for the next few decades. [ABSTRACT FROM AUTHOR]

This paper studies the impact of import competition from China on labor outcomes in the Peruvian manufacturing sector in 2001-2010. Using data from the Peruvian Household Survey, we use a two-step procedure to evaluate the impact of the surge in imports from China on the likelihood of having an informal job and on wages in both the formal and informal sectors. On the first step, the results suggest that greater import competition increased--albeit weakly--the likelihood of having an informal job for workers with elementary education. On the second step, we find that the surge in imports from China was detrimental to wages of the least educated individuals with informal jobs--with no education and elementary education--, although we also find that this result is mostly driven by the presence of self-employed among informal workers. We also observe a wage increase among workers with formal jobs and elementary and high school education. These results are robust to the inclusion of different exclusion restrictions and even after accounting for industry-level growth which was strong during the period studied. [ABSTRACT FROM AUTHOR]

This paper is oriented to quantify the trade creation and diversion effects in the Free Trade Agreement (FTA) between Peru and the United States. For that purpose, using a disaggregated database at the 10-digit level for Peruvian goods with intervals of 3-years between 2002 and 2018, this article adopts a three-dummy variable methodology that allows the identification of intrabloc and extra-bloc effects. Besides, a theoretically-founded gravity equation is employed with the incorporation of country-time and time-invariant fixed effects to solve common econometric specification problems, such as lack of multilateral resistance terms in modelling, heteroscedasticity of trade data, the inclusion of zero trade flows, and endogeneity of trade policy. Estimating with the PPML method for the complete sample and among types of goods (group 1: raw materials and intermediate goods, and group 2: consumer and capital goods), the main results show that the Peru-US FTA generates intra-bloc trade creation for the entire sample and two groups of goods separately. Also, the FTA produces export trade diversion for the complete sample and group 2, while import trade creation for both groups. Overall, the Peru-USA FTA is an "intra-bloc trade creation agreement" that boosted bilateral trade flows. These effects are considered to formulate some policy recommendations for improving the results of this Peruvian FTA. [ABSTRACT FROM AUTHOR]

Around half of Peru's public investment is made by local governments. Through the estimation of a dynamic panel data model for 1796 local governments between 2010 and 2018, we find that the most important drivers for local public investment are: (i) availability of funding sources, especially those associated to non-renewable natural resource revenues; (ii) variables associated with each local government's capacity to plan, budget and execute public investment; and (iii) political budget cycle effects, especially during the year following local elections. Furthermore, we extend our analysis by differentiating between local governments with reelected and non-reelected authorities, and by grouping local governments according to their economic size. Most of our results are shown to be robust across different specifications. Results from this paper can be used as a starting point to design mechanisms that make public investment more stable and predictable in a context where reelection banning can further deepen public investment's fall. [ABSTRACT FROM AUTHOR]

This paper analyzes and distinguishes the role and importance of the shocks related to the ag- gregate demand and aggregate supply on the behavior of the Peruvian inlation during the period 1997:1-2009:2. We use the methodology based on structural vector autoregressive (SVAR) mod- els using a long-run identiication based on Blanchard and Quah (1989) which allows to obtain the historical decomposition of the annual inlation. Unlike Salas (2009), this paper uses a more simple model of aggregate demand and aggregate supply, and a larger sample. he results show that the behavior of inlation was largely explained for shocks related to the aggregate demand side in comparison with aggregate supply shocks. Furthermore, the results of the variance decom- position of the prediction error show that in the short and long term, the shocks of the demand side explain around 70% and 60% of the movements of the inlation. he results are robust to the inclusion of diferent variables in the set of information. [ABSTRACT FROM AUTHOR]

This paper highlights the amplifier mechanism that has the evolution of exchange rate on the credit cycle in an economy with high financial dollarization, one mechanism that has been called «the exchange rate accelerator». In this scenario, the natural procyclicality between the business cycle and credit cycle goes into the background, but perhaps not fade. The paper develops the theoretical framework underlying the transmission mechanism and shows some stylized facts of Peruvian credit system. The following presents an econometric model with panel data to estimate the effect of exchange rate accelerator on the evolution of credit default in the credit system institutions. From these empirical results, and under Basel II philosophy, the paper discusses how to implement, in banks and other credit institutions, prudential regulation that requires the allocation of provisions and capital for credit risk arising from exchange rate risk caused by foreign currency loans. The basic idea of these measures would help the system to internalize the externalities produced by this non-diversifiable risk factor. [ABSTRACT FROM AUTHOR]

This paper estimates the zero coupon yield curve for the Peruvian government bond market. We employ two methods of estimation proposed by Nelson y Siegel (1987) and Svensson (1994). Model performance is evaluated based on criteria of goodness of fit, flexibility and parameter stability, by using alternative objective functions for parameter estimation. The Svensson model shows on average a better adjustment; however, parameter estimates are more unstable when data availability is limited -for example when there is a small number of transactions in the secondary market- in which case is better to use the Nelson y Siegel estimates. At the end of the paper, yield curve estimates are used to derive market expectations of future short term interest rates, that are valuable sources of information for central bank's monetary policy. [ABSTRACT FROM AUTHOR]

Since its beginnings, and more clearly since the mid 1800, Economics has been resting on the assumption that economic agents make rational decisions, maximizing their utility or well-being according to their own preferences and interests. The economic order resulting from that plurality of rational decisions is regarded as an efficient and Pareto-optimum one. Several authors have questioned the validity of those assumptions, and this has entailed a gradual transformation of the assumptions. This paper discusses the problems faced by the idea of a fully rational Homo economicus, the adjustments and defensive measures adopted by various tendencies within Economics to overcome those problems and counter various related theoretical and methodological criticisms. The paper also discusses more recent conceptions of economic reality that are at variance with the traditional view, especially those linked to behavioural, institutional and evolutionary Economics. [ABSTRACT FROM AUTHOR]

Under what circumstances does collective action arise? What contributes to the likelihood that a particular collective initiative will succeed? To what extent are poor communities capable of organizing themselves to improve their quality of life? These questions are not new, and economic researchers have studied a number of models in rural settings. Yet the research on collective action in urban areas seems to be more in the political sciences, and an economic model is still lacking. The fundamental question remains: How are public goods produced and maintained by poor urban communities? This paper presents a set of hypotheses on collective action determinants. Collective action in poor neighborhoods faces three key barriers to success: the Olsonian free-rider problem, the Maslowian problem, and the exclusion problem. The empirical portion of this paper uses data collected in poor urban and peri-urban areas of Lima, Peru, in six types of community organizations. [ABSTRACT FROM AUTHOR]

This paper analyzes the experience of economic growth in Peru during the last five decades. It describes its principal characteristics, explains the changes along the period and predicts its future path. The methodological approach consists in a combination of accounting and econometric techniques, both based in comparisons between countries and periods of time. The study discovers that the most important turning points of the economic growth were caused by changes in the productivity of all inputs, instead of the simple accumulation of capital. Specifically, the paper finds out that the recover of the economic growth in Peru during the 1990's was caused by the process of structural reforms and stabilization and lasts until now. The future growth of the economy depends on the continuation and deepness of this process. [ABSTRACT FROM AUTHOR]

In this paper we use the conditional Value at Risk (CoVaR) and CoVaR variation (ΔCoVaR) proposed by Adrian and Brunnermeier (2008, 2011, 2016) to estimate the Peruvian stock market risk (through the IGBVL) conditioned on the international financial market (given that the S&P500) and conditioned on three of the main commodities exported by Peru: copper, silver and gold. Moreover, the CoVaR measures are compared with the VaR of the IGBVL to understand the differences using conditional and unconditional risk measure estimators. The results show that both CoVaR and ΔCoVaR are useful indicators to measure the Peruvian stock market risk. [ABSTRACT FROM AUTHOR]

In this paper we estimate total factor productivity (TFP) growth for the Peruvian economy using the primal and dual methods for the period 2003-2012. According to the primal method, a procedure that uses the Solow residual as an indicator of productivity, TFP grew at an average annual rate of 1.6%, adjusted for the quality and usage of the factors of production. According to the dual method, a procedure that considers estimations of the marginal productivities of the factors of production, TFP grew at an annual rate of 1.7%. [ABSTRACT FROM AUTHOR]

The instrumental variables (IV) method has recently become widely popular in applied econometrics. However, recent work in the literature has shown that if instruments do not hold the relevance and exogeneity conditions at least in a «strong» way, the estimation results could be quite different from the population parameters, and an interpretation of the results would be meaningless. This paper presents this problem and shows some recent tests to verify the validity of the instruments employed. Additionally, I apply those tests to the estimation of the effects of child labor and household work on school attainment, by using a sample of 913 children from the Peruvian Living Standard Measurement Survey (LSMS) of 1997 and 2000. In this estimation, the instruments selected passed all the tests of exogeneity and relevance, so we can trust the consistency of these results. They show that household work performed by children has a positive impact on the children's observed educational performance three years later. In addition, the impact of child labor is negative, but it is not significantly different from zero. [ABSTRACT FROM AUTHOR]

Using a straightforward and diverse methodology, this paper assesses and estimates the trade barriers impact on exports from the Peruvian economy. The results of the analysis indicate that Most Favored Nation (MFN) and Generalized System of Preferences (GSP) tariffs rates imposed by developed countries to Peruvian exports are relatively low and close to zero. Conversely, the number of Non-Tariff Barriers (NTB) and the average number of NTBs per export tariff line, specially the Technical Barriers to Trade (TBT), are relatively high. This difference produces a higher estimation of the export impact of the NTBs. An implication of these results is that the new wave of regional preferential trade agreements among developed and developing countries (which face similar trade barriers structure as the Peruvian case) may not have meaningful effects on trade flows unless it is accompanied by substantial reductions in the number of NTBs per export tariff line. [ABSTRACT FROM AUTHOR]

This paper illustrates the process of program evaluation for ProJoven, the Peruvian youth labor training program. The program provides beneficiaries with basic three-month training in low-skill occupations and with internship opportunities. ProJoven's design promotes gender equality by encouraging female participation in training for traditionally male-dominated occupations and by providing subsidies so mothers with children can participate. Complementing detailed fieldwork in search of the appropriate control group, the econometric work implements a two-stage matching procedure that includes propensity scores (on the first stage), and gender and labor income (on the second one). The matching on gender allows identification of differentiated program impacts on men and women. The matching on income attacks the problem of Ashenfelter's Dips. The evaluation shows substantial differences in ProJoven's impact for men and women. Eighteen months after participation in the program, employment rates for women improved by about 15% (while employment for men reduced by 11%), gender occupational segregation reduced by 30% and women's labor income improved by 93% (while men's earnings increased by 11%). On the other hand, the cost of the promotion of gender equality represented only 1.5% of ProJoven's total budget. These results suggest that labor training programs that promote equal gender participation have disproportionately positive effects on outcomes for women trainees in a labor market with substantial gender differences. [ABSTRACT FROM AUTHOR]

According to the 2003 National Household Survey, mean labour income for an indigenous worker is only 56% of that for a non-indigenous worker. Studies of ethnic discrimination in Peru's labour markets generally find that discrimination is too low to explain inequalities of this magnitude. However, Sigma Theory (Figueroa 2003) predicts that social exclusion is a source of inter-ethnic inequality, and that has not been empirically tested. The primary aim of this paper is to fill this gap by estimating the extent to which exclusion and discrimination contribute to income inequality. Hurdle models are used to tackle down econometric endogeneity of years of schooling and truncation-at-zero of incomes. The results imply that exclusion plays a stronger role on inequality than discrimination: without exclusion, the Gini of labour income would decrease from 0.64 to 0.45, and without discrimination it would be reduced to 0.50. [ABSTRACT FROM AUTHOR]

This paper deals with Viceroy Toledo's governing plan and the modern concepts of development. It is a review of Viceroy Toledo's plan genesis from 1568's Junta Magna, the Toledo's trip over the Andes and the final establishment of his two main economic policy pillars: the mita and the technological process --using mercury for extracting silver from the ore--. [ABSTRACT FROM AUTHOR]