Search

The pandemic has affected people’s lives and emotions in profound ways, which governments ignore at their peril. Among the often disregarded consequences of the pandemic, especially in developing countries, are its toll on subjective well-being and its implications for health policymaking. This paper uses a battery of surveys with over 1800 observations collected in 2019 and 2020, which inform on many aspects of subjective well-being before and during the pandemic in Cali, Colombia. The results show a dramatic and widespread reduction in life satisfaction in several dimensions of well-being beyond health, and not just among those directly affected by COVID-19. This analysis focuses on differences in well-being by gender and health status, providing information about gender variances and differences in subjective well-being between those who experienced and those who did not experience physical illness (including the COVID-19 infection) during the pandemic. This analysis aims at contributing to the body of research that studies the consequences of the pandemic for life satisfaction and well-being, in the context of a city experiencing profound social unrest during the pandemic.

Labour mobility within a large city or metropolitan area is a necessary condition for the optimal exploitation of agglomeration economies. We propose a method to establish which municipalities should be considered part of a metropolitan area based on labour market integration. In order to aggregate geographically proximate urban municipalities, we develop a network-based model that makes industry productivity (manifesting in formal employment creation) dependent on firms’ ability to find, within city limits, the diversity of skills they need to move to new complex industries. In this way, we uncover the natural city scale at which firms optimally exploit the range of skills available to them within a broad catchment area. Considering Colombian cities, we find that commuting times between 45 and 75 min, corresponding to between 43 and 62 distinct cities or integrated labour markets, allow firms to maximise formal employment creation (between 2008 and 2013). This result supports the development of passenger transport limiting commuting times within cities, connecting small- and mid-size cities to nearby large cities, and coordinating transportation investments across traditional administrative boundaries.

People changing residence within their own country is the most common type of migration and is one of the main driving forces of a country's demography. Yet, due to a lack of data and tools, some key characteristics of internal migration such as the propensity to remain in the same city or to return to previous locations are frequently ignored. Here, a network-based model of city-to-city migration is constructed, where the movement of individuals is modelled using the frequency of distinct network motifs. We fit this model to longitudinal data on 3.3 million workers in Colombia, including 1.4 million migrations, and compare the motif frequency based on migration and return rates between men and women, and between distinct age and income groups. Results show that the majority of people do not move in general, but that there is a small group which exhibits frequent migration, particularly the young and male. Nearly three out of four times that a person moves, they are going back to a previous city, although women and mature people are less likely to move and more likely to return if they actually move. At a city level, different onward and return migration patterns are observed, whereby people from small secondary towns are more likely to leave and not return than people from large metropolitan areas like Bogotá or Medellín.

This paper presents a model of electricity generator that integrates a dual fluidized bed gasifier and a 200 kW gas microturbine; the main objective of this research is to analyze the feasibility of using solid biomass as a fuel in the proposed assemblage. At the beginning, the latest advances in dual fluidized bed gasifier are presented, then the prime mover - gas microturbine - is addressed and after, both technologies operate jointly. The methodology implemented throughout this research is described in order to present and validate the model, which delivered an electrical power of 44.85 kW and showed an overall efficiency of 13.42%. A mathematical expression to determine the generated electrical power by system was developed. Finally, the results are discussed from the perspective of feasibility of implementing this technology.

Para llevar a cabo este estudio la Gerencia Tecnica del Banco de la Republica y la Oficina del Banco Interamericano de Desarrollo en Bogota promovieron un concurso entre centros de investigacion colombianos e investigadores del Banco de la Republica, sobre “Desempleo estructural femenino y heterogeneidad regional del mercado laboral colombiano”. Las ocho propuestas seleccionadas forman el cuerpo de este libro, aparte del capitulo introductorio elaborado por Eduardo Lora. Los capitulos son: “Diferencias por sexo en los flujos de trabajadores entre estados laborales y el futuro laboral de las colombianas”, por Hugo Lopez Castano y Francisco Lasso Valderrama, del Banco de la Republica; “Diferencias en las tasas de desempleo por genero”, a cargo de Jaime Tenjo Galarza, Oriana Alvarez Vos y Maria Camila Jimenez, de la Universidad de Bogota Jorge Tadeo Lozano; “Heterogeneidad regional en las diferencias por genero de las tasas de desempleo”, desarrollado por Juan C. Duque Universidad Eafit), Gustavo Garcia (Universidad de los Andes), Paula Herrera Idarraga (Pontificia Universidad Javeriana) y Enrique Lopez-Bazo (AQR-IREA, Universidad de Barcelona); “Duracion del desempleo en Colombia: genero, intensidad de busqueda y anuncios de vacantes”, por Luis Eduardo Arango del Banco de la Republica y Ana Maria Rios de la Pontificia Universidad Javeriana, “Calidad de los vecindarios y oferta laboral femenina en un contexto urbano: un caso aplicado a la ciudad de Medellin”, a cargo de Leonardo Fabio Morales y Lina Cardona Sosa, del Banco de la Republica; “Efectos laborales de los servicios de cuidado infantil: evidencia del Programa Buen Comienzo”, por Lina Cardona Sosa y Leonardo Fabio Morales; “Acceso a fuentes de empleo de las mujeres en Bogota”, por Ana Maria Diaz Escobar, de la Pontificia Universidad Javeriana, y “Maternidad y mercado laboral: el impacto de la legislacion”, por Natalia Ramirez de la Universidad de Los Andes y Ana Maria Tribin y Carmina O. Vargas, del Banco de la Republica. Los capitulos se derivan de los trabajos de investigacion publicados en las series de Documentos de Trabajo del BID y Borradores de Economia del Banco de la Republica. Los procesos de investigacion y edicion del libro, coordinados por Francesca Castellani y Luis Eduardo Arango, contaron con la asesoria de Eduardo Lora. Las investigaciones se beneficiaron de las sugerencias de Jorge Hugo Barrientos, Raquel Bernal, Gustavo Canavire, Wendy Cunningham, Dolores de la Mata, Marcela Eslava, Luz Adriana Florez, Edwin Goni, Carlos Medina, Hugo Nopo, Nataly Obando, Mauricio Ospina, Ximena Pena y Andres Ramirez, asi como de los dictamenes de evaluadores anonimos. Su esfuerzo, colaboracion y aporte es gratamente valorado.

This chapter provides an overview of the psychological biases behind the striking gaps between perception and reality in four social domains—health, employment, the perception of security, and social ranking. Biases associated with cultural values are very relevant with respect to health and job satisfaction. Affect and availability heuristics are the dominant sources of bias in perceptions of security. The formation of subjective social rankings appears to be less culturally dependent and more dependent on the level of socioeconomic development of each country. Understanding the gaps between objective and subjective indicators may help clarify public debate on social policy.

Se utiliza un panel desbalanceado de medio centenar de países para el período 1985-2003 con el objeto de evaluar la vulnerabilidad del gasto público social (en educación y salud) frente a las variables fiscales corrientes y la deuda pública en América Latina en comparación con el resto del mundo en desarrollo. El gasto social es significativamente más bajo en América Latina (aunque absorbe una proporción mayor del gasto primario) y es más vulnerable frente a mayores pagos de intereses de la deuda, pero más insensible a las variaciones del resto del gasto público. Como en otras regiones del mundo en desarrollo, el gasto social en América Latina se contrae con los aumentos de deuda pública, y aún más si se trata de deudas con la banca multilateral. A diferencia del resto del mundo, en América Latina los incumplimientos de deuda llevan a reducir la participación del gasto social en el gasto público.

This paper assesses the effects of total public debt (external and domestic) on social expenditure worldwide and in Latin America using an unbalanced panel of around 50 countries for the period 1985-2003. The most robust and important finding is that higher debt ratios do reduce social expenditures, as popular opinion holds. This effect comes mostly from the stock of debt and not from debt service payments, indicating that debt displaces social expenditures not so much because it raises the debt burden, but because it reduces the room (or the appetite) for further indebtedness. Loans from multilateral organizations like the World Bank or the Inter-American Development Bank do not seem to ameliorate the adverse consequences of debt on social expenditures. In accordance with popular wisdom, our results indicate that defaulting on debt obligations does help to increase social expenditures. Nonetheless, Latin America is different in some respects. The adverse effects of debt and debt-interest payments are significantly stronger in the region, which makes defaults more beneficial to social expenditures. While many of these conclusions are very heterodox, their main policy implication is not; there is no better way to protect social expenditures than to avoid overindebtedness, especially in Latin America.

The purpose of this paper is to test the main hypotheses of the recent theoretical literature on the political economy of reform for the case of the Latin American countries between 1985 and 1995. The paper first reviews the literature and extracts the main testable hypotheses. Then, a system of indices that measure the extent of reform in five policy areas is presented. These indices are used as the dependent variables in panel regressions where the main explanatory variables are indicators of crisis, political variables and indicators of channels of contagion. We find very strong support for the well-known hypothesis that crises make reform viable and also for the (less theoretically sound) hypotheses that reforms are more likely at the beginning of government periods. None of the hypotheses on the role of political and distributional variables, the importance of compensation schemes or contagion, finds support in our results. Rather disappointingly, however, most of the reforms seem to have responded to a process of convergence.

Este artículo compara las condiciones de crecimiento económico de China y de la América Latina con el fin de evaluar los temores de que la economía china desplace a la latinoamericana en los próximos decenios. Las fortalezas de China se basan en el tamaño de su economía, su estabilidad macroeconómica, la abundante mano de obra barata, la rápida expansión de la infraestructura física y la capacidad para innovar. Las debilidades de China tienen su origen en la poca separación que existe entre el mercado y el Estado e incluyen la débil gobernabilidad corporativa, un sistema financiero frágil y una mala asignación del ahorro. La América Latina y China comparten debilidades importantes: el imperio de la ley es débil, la corrupción endémica y la escolaridad es baja y mal distribuida. Aunque los temores de desplazamiento de los sectores industriales y de la inversión extranjera son exagerados, China puede ser una fuente de inestabilidad financiera internacional con efectos potencialmente muy dañinos para la América Latina.

This book looks at the potential and the limits of policies to promote entrepreneurship as an important vehicle for social mobility in Latin America and the Caribbean, as well as steps to remove the constrains that hamper entrepreneurship.

Entrepreneurship is a critical process in a dynamic capitalist economy. It generates new productive capacities, processes, and goods; promotes innovation; and fosters employment creation, growth, and development. It cuts across many disciplines, including psychology, the theory of production, labor economics, talent economics, risk theory, and public policy. Public policies in Latin America and elsewhere that seeks to promote entrepreneurship should aim to engage the middle class and the lower parts of the income distribution. This book looks at the potential but also the limits of policies to promote entrepreneurship as a main vehicle for social mobility across broad social segments of society as well as steps to remove the resource constraints that hamper entrepreneurship in areas such as credit markets and education. This volume assesses the relevant literature on entrepreneurship and connects it with new developments in the analysis of the middle class and social mobility. The first chapter gives overview and policy implications. Chapter two undertakes a review of the economic literature on entrepreneurship and relates it to the economic and sociological literature on middle class and social mobility. Chapter three describes Latin American middle-class entrepreneurs and their firms. The role played by entrepreneurship in fostering intergenerational social and economic mobility is the topic of chapter four. The role of values in shaping the choice of becoming an entrepreneur is further pursued in chapter five. Chapter six explores the role that social capital plays in the dynamism of firms in Ecuador.

The distance between perception and reality with respect to the social domains of life is often striking. Using survey data collected on Latin American countries, this paper provides an overview of the main empirical findings on the gaps between perception and reality in four social domains--health, employment, the perception of security, and social ranking. The overview emphasizes the psychological biases that may explain the gaps. Biases associated with cultural values are very relevant with respect to health and job satisfaction. Cultural differences across countries are pronounced in perceptions of health, while cultural differences across socioeconomic groups are more apparent with respect to job satisfaction. Affect and availability heuristics are the dominant sources of bias in the case of perceptions of security. The formation of subjective social rankings appears to be less culturally dependent but more dependent on the socioeconomic development in the country. The gaps between objective and subjective indicators in the social domains of life are a rich source of data to help understand how perceptions are formed, identify important aspects of people's lives that do not appear in official indicators, inform public debate on social policy, and shed light on public attitudes on key social issues.

Este documento es una actualización del trabajo original "Las reformas estructurales en América Latina: Qué se ha reformado y cómo medirlo" publicado en Diciembre de 2001. Este documento analiza los grandes cambios en las principales áreas de política económica estructural en América Latina entre 1985 y 2009 y presenta un conjunto de índices que intentan medir qué tan favorables son para el libre funcionamiento de los mercados las políticas comercial, financiera, tributaria, de privatizaciones y laboral. En una escala que va de 0 a 1, el índice promedio para todos los países y todas las áreas de política estructural se elevó de 0,39 en 1985 a 0,6 al terminar la década de los noventa y a 0,65 a fines de la década del 2000. Las reformas estructurales han sido profundas, especialmente en las áreas comercial, financiera, y en menor medida en las áreas de tributación y de privatización de los sectores de infraestructura. Los índices permiten comparaciones a través del tiempo, entre áreas y entre países. Sin embargo, son inadecuados para medir las políticas estructurales en Argentina y Venezuela durante la década del 2000, pues algunas de las políticas heterodoxas que han adoptado estos países no están cubiertas por los índices.

Los impuestos a la nómina junto con los salarios mínimos han producido un notable encarecimiento de los costos laborales en América Latina desde los noventa. Puesto que, simultáneamente, las tasas de tributación de las empresas se han reducido, esta nota analiza si, como resultado, hay un sesgo anti-laboral de los impuestos en los países latinoamericanos. Se utiliza una metodología contable que permite calcular las tasas efectivas de tributación del trabajo y del capital y comparar ambas entre sí. Como en los países desarrollados, en América Latina las cargas tributarias están sesgadas en contra de los ingresos laborales, en el sentido de que las tasas efectivas de los impuestos al trabajo (directos y a la nómina) son mayores que las tasas efectivas de los impuestos al capital. Entre los países analizados, Venezuela, Guatemala, Colombia y Brasil tienen los mayores sesgos anti-laborales.

This study evaluates the major changes in the main sectors of structural economy policy in Latin America between 1985 and 2009, and proposes a set of indices intended to measure the extent to which commercial, financial, tax, privatization and labor policies are favorable for the free operation of the various markets. In a scale that ranges from 0 to 1, the average index for all the countries and all the areas of structural policy rose from 0. 39 in 1985 to 0. 6 by the end of the 90s and to 0. 65 by the end of the decade of 2000. The structural reforms have been deep, particularly in the commercial and financial sectors and, to a lesser extent, in the areas of taxation and privatization of the infrastructure sectors. These indices allow comparisons through time, between areas and countries. However, they are inadequate in measuring structural policies in Argentina and Venezuela during the decade of 2000 because some of the heterodox policies adopted by these countries are not covered by the indices.

This paper empirically explores the effects of payroll taxes, value-added taxes and corporate income taxes on a variety of labor market outcomes such as participation, employment, informality, and wages. The results are based on nationallevel data of labor variables for 15 Latin American countries, and indicate that the effects of each tax are markedly different and may depend on several aspects of labor and tax institutions. Payroll taxes reduce employment and increase labor costs when their benefits are not valued by workers, but otherwise may increase labor participation and not raise labor costs. Value-added taxes increase informality and reduce skilled labor demand. In contrast, corporate income taxes may help reduce informality, especially among low education workers, but when tax enforcement capabilities are strong they may reduce labor participation and employment of medium- and high-education workers.

Using information obtained with uniform methodologies from recent Gallup World Polls, this paper assesses individual health perceptions in Latin America and the Caribbean, comparing them with perceptions in other regions. As suggested by previous literature, cross-national comparisons of health satisfaction may be at odds with objective health indicators, with large differences among countries, even though perceptions follow socioeconomic gradients within countries; particularly important in this regard are income and relative income position. It is also found that lower-income groups do not show higher tolerance of their health limitations than other groups. Other factors influencing perceptions include gender, age and the frequency of health problems. The paper concludes with a summary of the main results and their implications for several health policy discussions and health research.

This paper proposes a methodology to resolve the problems that result from using a combination of objective and subjective information in evaluating urban quality of life. The paper further suggests techniques to identify and rank issues of potential importance for urban dwellers. In order to combine objective and subjective information in a coherent manner and focus on the most relevant dimensions of the quality of life in a city or neighborhood, the paper attempts to exploit the complementary nature of two approaches: the “hedonic” approach, which employs market prices for housing, and the “life satisfaction” approach, which addresses subjective well-being. Results using both approaches in selected Latin American cities are discussed and compared. The paper concludes with a discussion of potential uses of the two-pronged methodology for policy analysis.

There is widespread concern that recent increases in international food prices may have significant effects on domestic food prices and inflation. This note assesses the impact of the recent food price shock on food, non-food and consumer inflation in the countries of Latin American and the Caribbean (LAC). Vector Autoregressive Regressions (VARs) are estimated for each country to trace the effect of international food prices, the price of oil and the value of the US dollar on domestic prices. The results are then used to calculate the potential impact of higher food prices and to project the expected rise in domestic prices to the end of 2011 and beyond, given the actual increase in food prices until February 2011. It is concluded that, due to the food price surge, increases in inflation could exceed 5 percentage points in Bolivia, Dominican Republic, Guatemala and Honduras unless additional policy actions are taken. In some countries with flexible exchange rate systems, such as Brazil, Colombia and Mexico, currencies tend to appreciate as a response to higher food prices and as a result the impact on domestic prices is muted. However, there is no simple pattern of differences between floaters and fixers; the speed and extent of pass-through is quite heterogeneous and dependent on factors such as the importance of food in the overall inflation index and local policy measures.

The main contribution of this paper with respect to previous work is the use of data on subjective perceptions to identify the Latin American middle classes. This paper provides a set of comparisons between objective and subjective definitions of middle-class using data from the 2007 World Gallup Poll. Seven objective income-based definitions of social class are contrasted with a self-perceived social status measure. Mismatches between the objective and the subjective classification of social class are the largest when the objective definition is based on median incomes. Mismatches result from the fact that self-perceived social status is associated not just with income, but also with personal capabilities, interpersonal relations, financial and material assets, and perceptions of economic insecurity. Objective definitions of the middle class based on absolute incomes provide the lowest mismatches and the most accurate differentiation of the middle class from other classes.

This book suggests how that exploration should be undertaken, and how a monitoring system that has a solid conceptual basis and is both easy to operate and reasonable in cost can then be put into practice. Long the ideal of many scholars and observers of urban problems, such a system may now be close to realization. In this book, examples of Latin American cities are used as case studies. As argued in the first chapter, there are good reasons to concentrate on Latin America: it is the world region with the most rapid urban development and is the most urbanized region in the developing world. In contrast to residents of cities in poorer regions, Latin Americans have managed to democratize homeownership and to extend basic services to the majority of households. That means that improving the Quality of Life (QoL) in Latin American cities is no longer primarily a matter of bricks and mortar. But the challenges are as large as they are diverse. Chapter two introduces the reader to the hedonic price and the life satisfaction approaches and presents a comparative summary of the conclusions of the six case studies. This chapter, like the first, is essential for the policy maker or activist in urban affairs who wants to understand the possibilities of the new systems for monitoring the quality of urban life. Chapter three is a concise and self-contained introduction to the economic theory on which the hedonic pricing and life satisfaction approaches are based and which forms the backbone of this book. Chapters four-eight then summarize the most notable findings of the case studies, each emphasizing a different topic and focus.

En este articulo se presenta una vision comparada de la formacion de economistas en cinco paises de America Latina. Para tal fin, se analizan la curricula, los libros de texto comunmente utilizados, la dedicacion de los profesores, los metodos de ensenanza, y el uso de tecnologias y herramientas computacionales. Asi mismo, siguiendo el enfoque de Colander (2005), se aplica una encuesta a estudiantes de esta carrera para disenar un perfil socioeconomico de los mismos e indagar acerca de sus actitudes y opiniones. Dentro de las regularidades encontradas para los cinco paises, es de resaltar la falta de conexion entre las expectativas de los estudiantes sobre las demandas de los mercados de trabajo y las demandas efectivas de economistas por sectores de empleo.

This paper assesses the effects of different health conditions on happiness. Based on a large data set for Latin America, the effects of different conditions are examined across age, gender, and income cohorts. Anxiety and pain have stronger effects than physical problems, likely because people can adapt better to one-time shocks than to constant uncertainty. The negative effects of health conditions are very large when compared to the effects of income on happiness. While higher peer income typically elicits envy, better peer health provides positive signals for life and health satisfaction. Nonetheless, health norms vary widely across countries. The results suggest that the life satisfaction approach applied to surveys of health may contribute to better health expenditure and policy decisions.

Este capitulo compara las condiciones de crecimiento en China y America Latina para valorar si es cierto el temor de que el pais asiatico supondra una amenaza para las economias latinoamericanas en las decadas venideras. Las fortalezas de China radican en el tamano de su economia, su estabilidad macroeconomica, la abundante mano de obra de bajo costo, la rapida expansion de la infraestructura y su capacidad de innovacion. Sus debilidades se derivan de una separacion insuficiente entre el mercado y el Estado, y redundan en un pobre gobierno corporativo, un sistema financiero fragil y una erratica asignacion de ahorros. Ahora bien, America Latina y China comparten debilidades importantes: la aplicacion de la ley resulta insuficiente, la corrupcion es endemica y la educacion, ademas de ser pobre, esta mal distribuida entre los diferentes segmentos de la sociedad.

El éxito de un pacto fiscal se mide por el grado en que incorpore a los diversos grupos sociales en las discusiones, el cumplimiento y la vigilancia de ciertos acuerdos sobre la forma como se financia el Estado y se utilizan los recursos públicos. Partiendo de los factores políticos que pueden explicar las estructuras fiscales de América Latina, este artículo muestra la necesidad de alcanzar pactos fiscales, discute los incentivos que influyen en su viabilidad y propone prioridades de política fiscal y de reforma institucional para mejorar sus posibilidades de éxito.

La estabilización de las economías y una transformación profunda pero silenciosa de las instituciones ocurrieron en forma paralela en América Latina en las últimas décadas. Este artículo analiza los canales de influencia de los cambios de las instituciones fiscales y de los sistemas políticos en los resultados fiscales, en la inflación y en la probabilidad de ocurrencia y costos de las crisis bancarias. Aunque la fragmentación del poder político tendió a debilitar la disciplina fiscal, las reformas de las instituciones fiscales corrigieron esa tendencia. La mayor competencia política y las restricciones al poder del Ejecutivo hicieron posible el éxito de los bancos centrales independientes, mitigaron algunos canales de riesgo de crisis bancarias y redujeron los costos de largo plazo de dichas crisis. Por consiguiente, los sistemas políticos merecen buena parte del mérito de la estabilización.

Este trabajo hace uso de la Encuesta Mundial de Gallup de 2006, que contiene opiniones sobre satisfacción con diversos aspectos de la vida en 130 países. Aunque la relación entre satisfacción e ingreso que se encuentra es muy sólida (tanto entre países como entre individuos en los países), arrojando dudas sobre la conocida paradoja de Easterlin, surge una nueva paradoja: la del “crecimiento infeliz”, según la cual hay menos satisfacción en los países que crecen más rápido. Las pérdidas de satisfacción asociadas al crecimiento son más pronunciadas en los dominios materiales de la vida de las personas, y tienden a ser más fuertes en sociedades más ricas y más urbanas. A nivel individual, aunque ingresos más altos tienden a reflejarse en mayor satisfacción, el aumento del ingreso del grupo social al que pertenece el individuo produce el efecto contrario en las dimensiones materiales del bienestar. La conflictiva relación entre la satisfacción y el ingreso documentada en este estudio tiene implicaciones de economía política. En particular, sugiere un mecanismo sencillo para explicar diversos rasgos característicos del populismo económico y social.

This paper makes use of the 2006 Gallup World Survey, which includes opinions on satisfaction with various aspects of life in 130 countries. Although a very solid relationship is found between satisfaction and income (both across and within countries), raising doubts regarding the well-known Easterlin Paradox, a new paradox arises: “unhappy growth,” where faster growth rates are accompanied by lower levels of satisfaction. The losses of satisfaction associated with growth are more pronounced in the material domains of life and are greater in richer and more urban societies. At the individual level, although higher incomes tend to be reflected in greater satisfaction, an increase in the income of the social group to which an individual belongs has the opposite effect. The conflictive relationship between satisfaction and income has implications for political economy. In particular, it suggests a simple mechanism for explaining various characteristic traits of economic and social populism.

"El proposito de este articulo es presentar los resultados de algunas estimaciones que buscan probar la posible existencia de este tipo de efectos de riqueza. Adicionalmente, este trabajo tambien busca arrojar luces sobre la estructura dinamica de los parametros relativos a las demas variables explicativas de la demanda de dinero."

This chapter compares growth conditions in China and Latin America to assess fears that China will displace Latin America in the coming decades. China’s strengths include the size of the economy, macroeconomic stability, abundant low-cost labour, the rapid expansion of physical infrastructure and the ability to innovate. Its weaknesses stem from insufficient separation between market and state. They involve poor corporate governance, a fragile financial system and misallocation of savings. Both regions also share important weaknesses. The rule of law is weak, corruption is endemic and education is both poor and very poorly distributed.

Panel data for seven Latin American countries are used to assess the influence of public indebtedness on public investment in infrastructure in the period 1987-2001. Debt increases are associated with higher public infrastructure investment, an effect that is robust to the inclusion of many other fiscal and macroeconomic variables. This paper also finds some evidence of complementarity between public and private investment and of the negative effect of IMF adjustment loans on infrastructure expenditures. No evidence is found that debt defaults affect public investment in infrastructure

This paper uses a panel of 50 countries for the period 1985-2003 to evaluate the vulnerability of public social spending (on education and health) to fiscal variables and public debt in Latin America as compared with the rest of the developing world. Social spending is significantly lower in Latin America (although it absorbs a larger proportion of primary spending) and is more vulnerable to higher debt interest payments but less affected by variations in other public spending. As in other developing countries, social spending declines as public debt increases, and more so if the debt is with multilateral banks. Unlike the rest of the world, when Latin American fails to meet its debt payments, social spending declines as a share of total public spending.

Se usaron datos de panel para siete países de América Latina para evaluar la influencia del endeudamiento público de la inversión pública en infraestructura durante el período 1987-2001. Los aumentos de deuda se asocian con inversión alta de infraestructura pública, un efecto que es resistente a la inclusión de muchas otras variables fiscales y macroeconómicas. Este trabajo también encuentra alguna evidencia de complementariedad entre la inversión pública y privada y en el efecto negativo de los préstamos de ajuste del FMI en gastos de infraestructura. No se encuentra evidencia que los incumplimientos de la deuda afectan la inversión pública en infraestructura.

Déficits fiscales que en promedio son apenas 1,4% del PIB, coeficientes de endeudamiento a la baja, cancelaciones anticipadas de las deudas con el Fondo Monetario Internacional y recompras masivas de los títulos Brady, que hace quince años fueron la última tabla de salvación para los gobiernos endeudados en exceso. Esto no parece América Latina, la región del mundo con la mayor tradición de inestabilidad macroeconómica y la historia más larga de incumplimientos de deuda pública. Sin embargo, estos son algunos de los eventos fiscales que están ocurriendo hacia comienzos de 2006, en un momento especialmente favorable para la región.

(Document Available in Spanish) Fiscal deficits on average only 1. 4% of GDP; debt coefficients on the decline; early debt repayments to the International Monetary Fund and massive repurchases of Brady bonds that 15 years ago were the last salvation for overly endebted governments. This doesn`t look like Latin America, the region with the strongest tradition of macroeconomic instability in the world and the longest history of noncompliance with its public debt commitments. However, these are some of the fiscal events that have been occurring since the beginning of 2006, a particularly favorable time for the region.

This paper assesses the effects of total public debt (external and domestic) on social expenditure worldwide and in Latin America using an unbalanced panel of around 50 countries for the period 1985-2003. The most robust and important finding is that higher debt ratios do reduce social expenditures, as popular opinion holds. This effect comes mostly from the stock of debt and not from debt service payments, indicating that debt displaces social expenditures not so much because it raises the debt burden, but because it reduces the room (or the appetite) for further indebtedness. Loans from multilateral organizations like the World Bank or the Inter-American Development Bank do not seem to ameliorate the adverse consequences of debt on social expenditures. In accordance with popular wisdom, our results indicate that defaulting on debt obligations does help to increase social expenditures. Nonetheless, Latin America is different in some respects. The adverse effects of debt and debt-interest payments are significantly stronger in the region, which makes defaults more beneficial to social expenditures. While many of these conclusions are very heterodox, their main policy implication is not; there is no better way to protect social expenditures than to avoid overindebtedness, especially in Latin America.

This paper assesses how electoral outcomes in both presidential and legislative elections in Latin America have been affected by the adoption of economic policies that seek to improve macroeconomic stability and facilitate the functioning of markets. The database includes 17 Latin American countries for the period 1985-2002, and a total of 66 presidential and 81 legislative elections. The set of testable hypotheses is derived from a review of the literature and is structured around the hypothesis of economic voting. It is found that (i) the incumbent’s party is rewarded for reductions in the rate of inflation and, to a lesser extent, for increases in the rate of growth; (ii) the more fragmented or ideologically polarized the party system, the higher the electoral rewards of reducing the inflation rate or raising the economic growth rate; (iii) voters care not only about economic outcomes, but also about some of the policies adopted: while the electorate seems blind to macroeconomic policies such as fiscal or exchange-rate policies, it is averse to pro-market policies, irrespective of their effects on growth or inflation; and (iv) the electorate is more tolerant of pro-market reforms when the incumbent’s party has a more market-oriented ideology. These results suggest that reforming parties have paid a hefty price for the adoption of pro-market reforms, except when such reforms have been undertaken in conjunction with stabilization policies in high-inflation economies.

(PDF disponible en Español en WP-536) Este artículo compara las condiciones de crecimiento económico de China y de América Latina con el fin de evaluar los temores de que la economía china desplace a la latinoamericana en las próximas décadas. Las fortalezas de China se basan en el tamaño de su economía, su estabilidad macroeconómica, la abundante mano de obra barata, la rápida expansión de la infraestructura física y la capacidad para innovar. Las debilidades de China tienen su origen en la poca separación que existe entre el mercado y el Estado e incluyen la débil gobernabilidad corporativa, un sistema financiero frágil y una mala asignación del ahorro. América Latina y China comparten debilidades importantes: el imperio de la ley es débil, la corrupción endémica y la educación es baja y está mal distribuida. Aunque los temores de desplazamiento de los sectores industriales y de la inversión extranjera son exagerados, China puede ser una fuente de inestabilidad financiera internacional con efectos potencialmente muy dañinos para América Latina.

(Disponible en idioma inglés únicamente) En este trabajo se evalúa la manera en que los resultados electorales tanto en comicios presidenciales como legislativos en América Latina se han visto afectados por la adopción de políticas económicas concebidas para mejorar la estabilidad macroeconómica y facilitar el funcionamiento de los mercados. La base de datos incluye 17 países latinoamericanos durante el período 1985-2002, y un total de 66 elecciones presidenciales y 81 legislativas. El conjunto de hipótesis que se pueden poner a prueba proviene de un repaso de la obra publicada y se estructura alrededor de la hipótesis de la economía del voto. Se descubre que (i) se recompensa al partido oficialista si se produce una baja de la inflación y, en menor medida, si aumenta la tasa de crecimiento; (ii) mientras más fragmentado o ideológicamente polarizado sea el sistema partidista, mayores serán las recompensas electorales que genere una reducción de la inflación o un aumento del crecimiento económico, (iii) los electores se interesan no sólo por los resultados económicos, sino también por algunas de las políticas adoptadas: aunque el electorado parece no tomar en cuenta cuestiones macroeconómicas tales como las políticas fiscales o cambiarias, es contrario a las políticas favorables al mercado, independientemente de los efectos que éstas puedan tener en el crecimiento o la inflación, y (iv) el electorado es más tolerante de las reformas a favor del mercado cuando el partido oficialista tiene una ideología más orientada al mercado. Estos resultados sugieren que a los partidos reformistas les ha salido caro adoptar reformas de mercado, salvo en aquellos casos en que las mismas se hayan acometido conjuntamente con políticas de estabilización en economías altamente inflacionarias.

(PDF file in English available WP-531) This paper compares growth conditions in China and Latin America to assess fears that China will displace Latin America in the coming decades. China`s strengths include the size of the economy, macroeconomic stability, abundant low-cost labor, the rapid expansion of physical infrastructure, and the ability to innovate. China`s weaknesses, stemming from insufficient separation between market and state, include poor corporate governance, a fragile financial system and misallocation of savings. Both regions share important weaknesses: the rule of law is weak, corruption endemic, and education is poor and very poorly distributed.

This paper compares growth conditions in China and Latin America to assess fears that China will displace Latin America in the coming decades. China's strengths include the size of the economy, macroeconomic stability, abundant low-cost labor, the rapid expansion of physical infrastructure, and the ability to innovate. China's weaknesses, stemming from insufficient separation between market and state, include poor corporate governance, a fragile financial system and misallocation of savings. Both regions share important weaknesses: the rule of law is weak, corruption endemic, and education is poor and very poorly distributed.Abstract: This paper compares growth conditions in China and Latin America to assess fears that China will displace Latin America in the coming decades. China's strengths include the size of the economy, macroeconomic stability, abundant low-cost labor, the rapid expansion of physical infrastructure, and the ability to innovate. China's weaknesses, stemming from insufficient separation between market and state, include poor corporate governance, a fragile financial system and misallocation of savings. Both regions share important weaknesses: the rule of law is weak, corruption endemic, and education is poor and very poorly distributed.