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The increased occurrence of extreme weather conditions leading to drought is a key development challenge. This paper studies how these extreme events interact with the political process at the local level using rich administrative data for drought declarations and mayoral elections in Brazil. While accounting for current and historical rainfall patterns, the paper finds that that: i) municipalities led by a mayor affiliated with the President’s party are more likely to receive formal drought declarations prior to the municipal election; and ii) receiving a drought declaration reinforces the electoral advantage of incumbent mayors running for reelection. These results are robust to the inclusion of a rich set of controls for municipal attributes.

We examine long term eects of drought on local labor markets. Using rainfall data going back over a century, we build contemporaneous and historical drought in- dices for more than 3000 local areas in Brazil, and examine them in conjunction with 5 waves of population census data spanning the 1970-2010 period. Results from a dierence-in-dierences design reveal that a greater incidence of drought in the previ- ous decade reduces local value added, employment and wages in the agricultural sector; leads to job losses and pay cuts in the local manufacturing and services sectors; and induces out-migration, especially among younger cohorts, leading to relative popula- tion decline. These …ndings are well in line with standard general-equilibrium theory featuring imperfect labor mobility across space.

This paper examines whether an expansion in the supply of public preschool crowds out private enrollment. The paper uses rich data for municipalities in Brazil from 2000 to 2006, where federal transfers to local governments change discontinuously with given population thresholds. The results from a regression-discontinuity design reveal that larger federal transfers lead to a significant expansion of local public preschool services, but show no evidence of crowding out of private enrollment. This finding is consistent with a theory in which households differ in their willingness to pay for preschool services, and private suppliers optimally adjust prices in response to an expansion of lower-quality, free-of-charge public supply.

Evidence on the impacts of a large-scale expansion in public preprimary education is limited and mostly circumscribed to high and middle-income countries. This paper estimates the effects of such an expansion on progression in primary school in rural communities of Guatemala. Combining administrative and population census data in a difference-in-difference framework, the paper examines a large-scale construction program that increased the number of preprimaries from around 5,300 to 11,500 between 1998 and 2005. The results indicate that the program increased by 2. 1 percentage points the fraction of students that progress adequately and attend sixth grade by age 12. These positive effects are heavily concentrated among girls.

Many developing countries have adopted the market approach for expanding the supply of child care, but little is known about the economic behavior of independent providers. This paper draws on uniquely rich administrative data on child care centers and their inputs from Sao Paulo to examine the role of local household income in shaping the entry and quality choices of private suppliers. It documents three main facts: (1) entry rates are considerably higher in high-income districts; (2) the quality of provision as measured by teachers’ schooling, group size and equipment is highly heterogeneous across space and increases systematically with local household income; and (3) a considerable share of centers operates below recommended (but not regulated) quality standards, especially in low-income districts. These findings accord with a model in which heterogeneous providers optimally adjust the quality of care to the willingness to pay for quality of local consumers. Market-driven heterogeneity in the quality of provision across space is a key consideration for understanding the effect of regulations on the supply of child care.

We investigate the impact of exchange rate movements on wage determination in unionised labour markets. Using a simple model of international oligopoly, we show that organised labour has a rational incentive to accept lower wages in the face of a currency appreciation. This proposition is examined empirically using a matched worker-firm dataset for Portugal. We find results consistent with the predictions of the model, though the impact varies considerably with both worker characteristics and the regional unemployment rate.

It is well known that cultural links between countries increase bilateral trade. In this paper we exploit Portuguese firm-level data on exports to 199 destinations to investigate the questions: How? Do cultural links increase the number of exporters, or the shipments per exporter? What is the role of firm heterogeneity? The results reveal that cultural links, measured by common language/colonial ties and emigrant communities, are significantly associated with a lower incidence of within-firm export zeros and with larger shipments per exporter. Furthermore, they show that the former of these relationships tends to be magnified by firm size, suggesting that firm heterogeneity is key in shaping the interplay between cultural links and the extensive margin of international trade.

We develop a two-country, multi-sector model of oligopoly in which unionised and non-unionised sectors interact in general equilibrium. The model is used to study the impact of trade liberalisation, deunionisation and firm entry on wages in unionised and non-unionised sectors, and on welfare. We find that a shift from autarky to free trade increases non-union wages and welfare, whereas the effect on union wages is ambiguous. We also show that partial deunionisation leads to higher wages in both unionised and non-unionised sectors, but only increases welfare when the proportion of unionised sectors is sufficiently low. Finally, wages in non-unionised sectors necessarily increase with firm entry, while the response of union wages and welfare depends on the trade regime.

What drives export quality? Using firm-level data from Portugal on exports by product and destination market, we find that free-on-board unit values increase systematically with distance, and tend to be higher in shipments to richer nations. These relationships reflect not only the selection of firms across markets, but also the within-firm selection of product varieties across destinations. Furthermore, they prevail irrespective of the size of the exporter and the value of the export flow.

In an international oligopoly model, we investigate how trade liberalisation impacts on collective bargaining outcomes when workers are represented by open shop unions. We find that, with intermediate levels of union density, trade liberalisation may lead to higher negotiated wages even if no trade occurs in equilibrium. In addition, we show that union wages may be higher with free trade than in autarky.

This paper introduces new dynamic measures for examining changes in international trade patterns. Using data for 20 OECD countries over the 1980-2000 period, we show that inter-industry trade changes contrary to countries' previous specialisation are frequently the dominant form of trade expansion. The econometric analysis indicates that the observed changes in trade patterns were explained by initial endowments of human-capital and industry-specific changes in labour productivity and labour costs. The results also suggest that trade liberalisation induced an increase in the previous specialisation of larger OECD economies in industries with increasing returns to scale.

In this paper we analyse the impact of changes in product market competition on wage outcomes in the presence of an open shop union. With less than full union membership, product market competition is shown to affect not only a unionised firm's profits but also its payoff in the event of a dispute. In contrast to the prediction of the standard model, increases in product market competition may now increase wage levels. The model is therefore able to accommodate the mixed empirical findings regarding the impact of product market competition on union wages.

This paper extends the international oligopoly model to the situation of bargaining with an open shop union. Within this setting, we are able to investigate the implications of different levels of union density for both the equilibrium trade regime and wages. We then use this model to examine the response of wages to product market integration in the presence of different levels of union density. We find that, with intermediate levels of union density, wages need neither to fall monotonically as trade liberalisation occurs, nor indeed to fall in absolute terms as an economy moves from autarky to free trade.