how do households cope with aggregate shocks evidence from the mexican peso crisis abstract household surveys are used to examine the micro impact of a large aggregate shock the 1995 mexican peso crisis this paper examines how the impact of the crisis differed across households and the adjustment mechanisms used by households to cope with this shock the coping strategies examined include changes in household structure fertility household labor supply child schooling and interhousehold transfers many of the mechanisms households use to adapt to idiosyncratic shocks are found not to work with an aggregate shock

the two freedoms economic growth and development an empirical study log linear methods are applied to categorical data containing economic freedom political freedom the level of income and the rate of economic growth for a panel of about 100 countries from 1975 to 1992 the main results are given economic freedom the rate of economic growth is independent of political freedom and the level of income given the level of income political freedom is independent of economic freedom and the growth rate the analysis suggests the fundamental effects of economic freedom in fostering economic growth and a high level of income as the condition of a high degree of political freedom

unemployment assistance and transition to employment in argentina abstractin 2001 2 argentina experienced a wrenching economic crisis plan jefes implemented in may 2002 was argentina s institutional response to the increase in unemployment and poverty triggered by the crisis the program provided a safety net and appears to have protected some families against indigence despite this success the continued existence of the program which provides benefits to eligible unemployed individuals for an unlimited duration may have unappealing consequences reliance on the plan may reduce the incentive to search for work and in the long run may damage individual employability and perpetuate poverty motivated by these concerns this article examines the effect of participating in plan jefes on the probability of exiting unemployment regardless of the data set the specification and the empirical approach the article shows that plan enrollees are at least 14 percentage points less likely to transit to employment as compared to individuals who applied but did not join the

do crises catalyze creative destruction firm level evidence from indonesia using indonesian manufacturing census data 1991 2001 this paper rejects the hypothesis that the east asian crisis unequivocally improved the reallocative process the correlation between productivity and employment growth did not strengthen and the crisis induced the exit of relatively productive firms the attenuation of the relationship between productivity and survival was stronger in provinces with comparatively lower reductions in minimum wages but not due to reduced entry changing loan conditions or firms connected to the suharto regime suffering disproportionately on the bright side firms that entered during the crisis were relatively more productive which helped mitigate the reduction in aggregate productivity

how late to pay understanding wage arrears in russia we organize an empirical analysis of russian wage arrears around hypotheses concerning incentives for firms to pay late and for workers to tolerate late payment nationally representative household panel data matched with employer data show that arrears are positively related to firm age size state ownership and declining performance constrained multinomial logit estimates reveal intrafirm variation related to job tenure and small shareholdings in the firm wage arrears unlike wage cuts have a theoretically ambiguous effect on workers quit behavior and we show empirically that the effect varies negatively with the extent of the practice in the local labor market

cooperation in international environmental negotiations due to a preference for equity this paper demonstrates that cooperation in international environmental negotiations can be explained by preferences for equity within a n country prisoner s dilemma in which agents can either cooperate or defect in addition to the standard non cooperative equilibrium cooperation of a large fraction or even of all countries can establish a nash equilibrium in an emission game however where countries can choose their abatement level continuously equity preferences cannot improve upon the standard inefficient nash equilibrium finally in a two stage game on coalition formation the presence of equity interested countries increases the coalition size and leads to efficiency gains here even a stable agreement with full cooperation can be reached

buying less but shopping more the use of nonmarket labor during a crisis households allocating time between market and non market uses should respond to income variations by adjusting the time devoted to shopping search and other home production activities in this paper we exploit high frequency household expenditure data to examine the use of changes in shopping intensity as a method of mitigating the effects of the 2002 argentine economic crisis although the total quantity and real value of goods purchased fell during the crisis consumers are found to be doing more shopping search this increase in shopping is shown to enable households to seek out lower prices and locate substitutes allowing a given level of expenditure to buy more goods the magnitude and prevalence of these effects suggest that this non market use of labor can be an important coping strategy for households during a recession

ex ante and ex post labor supply response to risk in a low income area abstract this paper tests for ex ante and ex post labor supply responses to weather risk for rural indian farm households the analysis uses panel data on 2115 households spanning 13 states in rural india merged with a 22 year series of district level rainfall data ex ante households facing riskier distributions of rainfall are more likely to participate in the labor market ex post unexpectedly bad weather and low rainfall increase labor force participation

public goods and minimum provision levels does the institutional formation affect cooperation we investigate experimentally the role of institutional formation on the implementation of a binding minimum contribution level to a public good groups either face the minimum level exogenously im

macroinsurance for microenterprises a randomized experiment in post revolution egypt firms in many developing countries cite macroeconomic instability and political uncertainty as major constraints to their growth economic theory suggests uncertainty can cause firms to delay investments until uncertainty is resolved a randomized experiment was conducted in post revolution egypt to measure the impact of insuring microenterprises against macroeconomic and political uncertainty demand for macroeconomic shock insurance was high 36 7 percent of microentrepreneurs in the treatment group purchased insurance however purchasing insurance does not change the likelihood that a business takes a new loan the size of the loan or how the loan is invested this lack of effect is attributed to microenterprises largely investing in inventories and raw materials rather than irreversible investments like equipment these results suggest that contrary to what some firms profess macroeconomic and political risk is not inhibiting the investment behavior of microenterprises however insurance may still be of value to help firms cope with shocks when they do occur but the paper is unable to examine this dimension because the insurance product did not pay out over the course of the pilot

the impact of burden sharing rules on the voluntary provision of public goods abstract we investigate how burden sharing rules impact the voluntary provision of a public good which generates heterogeneous benefits to agents we compare different rule based contribution schemes where agents can first suggest a minimum provision level of the public good before the smallest common denominator is implemented we find that rule based contribution schemes significantly increase payoff levels relative to the vcm while significant differences exist between the rules importantly the equal payoff rule maximizes payoffs for all player types this also holds relative to a scheme where different types of players separately can determine their minimum contribution levels our results lend insights into the efficient institutional design for voluntary private provision of public goods and how burden sharing rules interact with efficiency when agents are heterogeneous

the perils of democracy abstract in this work we examine a common social dilemma in experimental economics the public goods game to determine how voting impacts pro social behavior as noted in markussen et al 2014 a democratic dividend exists couching the public goods game in a phenomenon that is playing out in much of the world drastic income inequality we examine the decision of groups to share local public goods with groups that have effectively no endowment to contribute toward public nor private consumption our results show the perils of democracy in that subjects in the position to vote use their advantageous situation to reward the ingroups at the expense of the less endowed outgroup members

equity during an economic crisis financing of the argentine health system this article analyses the redistributive effect caused by health financing and the distribution of healthcare utilization in argentina before and during the severe 2001 2002 economic crisis both dramatically changed during this period the redistributive effect became much more positive and utilization shifted from pro poor to pro rich this clearly demonstrates that when utilization is contingent on financing changes can occur rapidly and that an integrated approach is required when monitoring equity from a policy perspective the argentine health system appears vulnerable to economic downturns mainly due to high reliance on out of pocket payments and the strong link between health insurance and employment

crises and the poor socially responsible macroeconomics this paper presents evidence on the impact of economic crisis on poverty and inequality in latin america crises not only result in higher poverty rates but also may cause irreversible damage to the human capital of the poor in light of this evidence the author concludes that crisis avoidance and a pro poor response to crisis should be a major component of a poverty reduction strategy as a result the paper analyses the role of exchange rate policy capital controls and countercyclical fiscal policy in generating or avoiding crisis responses to macroeconomic crisis are assessed by considering the effects of different policy combinations the use of safety nets and the composition of fiscal adjustment to protect the income of the poor in the face of macroeconomic adjustment the main lesson is that socially responsible macroeconomic policy can protect the poor during times of crisis and simultaneously contribute to lower chronic poverty

are political freedoms converging this article tests for convergence o f freedom using freedom house s 2002 indices of political rights and civil liberties in 136 countries from 1972 to 2001 time series tests using structural breaks are employed to test for stochastic and beta convergence cross section tests are performed to examine the impact of legal systems education natural resources economic freedom and other variables we find that political freedoms are converging for one half of the countries additionally we find that the level of freedom is significantly related to the legal system education economic freedom and natural resources

the many faces of poverty quantifying the deprivation costs of the 2001 2002 crisis in argentina this paper presents empirical evidence on the deprivation costs of the 20012002 argentinean crisis the selected approach is multidimensional and focuses on four aspects of quality of life labor assets education and income these dimensions are constructed by multivariate data reduction techniques and then aggregated using the bourguignon and chakravarty s axiomatic multidimensional poverty measure the main findings indicate that the crisis had larger costs on well being dimensions which are tied to the economic cycle such as income and labor costs were mild on structural aspects of wellbeing such as assets and education a sensitivity analysis shows that these results are robust to different deprivation lines

jump starting self employment evidence among welfare participants in argentina one important concern of governments in developing countries is how to phase out large safety net programs the authors evaluate the short run effects of one possible exit strategy programs that promote self employment in argentina they provide evidence that a small fraction of beneficiaries were attracted by this program overall potential participants to self employment are more likely to be female household heads and more educated beneficiaries relative to the average jefes beneficiaries using nonexperimental methods the authors show that participation in the program does affect the labor supply of participants by reducing the probability of having an outside job especially for males and increasing the total number of hours worked but the intervention fails to produce on average income gains to participating individuals and households in the short run the fact that a small subset of former welfare beneficiaries are attracted to the program coupled with the fact that only a subset of participants younger and more educated beneficiaries and with previous self employment experience benefited from participation has important implications for this intervention to represent a viable exit strategy from welfare

endogenous group formation in experimental contests abstract we experimentally study endogenous alliance formation and contest effort choices in a generic three player contest differences in intrinsic or extrinsic incentives to expend effort cause self selection weakly motivated players have an incentive to enter into an alliance and to free ride on strongly motivated players hence strong players prefer to stand alone self selection has direct consequences for effort in endogenously formed alliances but we also find evidence of an effort stimulating effect if players endogenously form an alliance which is in line with theories of in group favoritism the experimental evidence on self selection is in conformity with a theory analysis of the game

conditional cooperation and voluntary contributions to public goods we compare a partners condition where the same small group of subjects plays a repeated publi c good game to a strangers condition where subjects play this game in changing group formations subjects in the partners conditi on contribute from t he first period on significantly more to the publi c good than subjects in the strangers conditi on in the strangers conditi on contributions show a continual decay whil e in the partners conditi on contributions fluctuate on a high level until t hey decrease in the final periods we interpret subjects behavior in terms of conditional cooperation which is characterized by both future oriented and reactive behavior

beyond baseline and follow up the case for more t in experiments the vast majority of randomized experiments in economics rely on a single baseline and single follow up survey if multiple follow ups are conducted the reason is typically to examine the trajectory of impact effects so that in effect only one follow up round is being used to estimate each treatment effect of interest while such a design is suitable for study of highly autocorrelated and relatively precisely measured outcomes in the health and education domains this paper makes the case that it is unlikely to be optimal for measuring noisy and relatively less autocorrelated outcomes such as business profits household incomes and expenditures and episodic health outcomes taking multiple measurements of such outcomes at relatively short intervals allows the researcher to average out noise increasing power when the outcomes have low autocorrelation it can make sense to do no baseline at all moreover the author shows how for such outcomes more power can be achieved with multiple follow ups than allocating the same total sample size over a single follow up and baseline the analysis highlights the large gains in power from ancova rather than difference in differences when autocorrelations are low and a baseline is taken the paper discusses the issues involved in multiple measurements and makes recommendations for the design of experiments and related non experimental impact evaluations

earnings mobility in times of growth and decline argentina from 1996 to 2003 summary in recent years argentina s economy has experienced both rapid growth and severe decline in this paper we use a series of one year long panels to study who gained the most in pesos when the economy grew and who lost the most in pesos when the economy contracted various considerations led us to expect that mobility would be divergent that is that the individuals who started with the highest initial earnings would enjoy the largest earnings gains in pesos contrary to expectations and for a wide range of specifications mobility is found to be mostly convergent sometimes neutral and never divergent

the impact of equity preferences on the stability of international environmental agreements this paper uses a coalition formation model to explore how equity considerations affect countries cooperation on global environmental issues e g on climate change when developing countries are exempted from obligations to reduce their emissions i find that opening them for abatement projects financed by industrialized countries changes the incentives to cooperate in a way which can increase emissions and decrease welfare equity concerns in industrialized countries regarding the difference between their per capita emission levels and those of developing countries lead to increased abatement but do not qualitatively change the incentives to cooperate inequality aversion with respect to differences to abatement targets across industrialized countries generally induces larger coalition sizes and stricter abatement here the inclusion of developing countries improves upon the prospects of cooperation

smoothing consumption by smoothing income hours of work responses to idiosyncratic agricultural shocks in rural india while research has demonstrated that farm households in developing economies are able to protect consumption from idiosyncratic crop shocks little evidence shows how this is achieved this paper examines the extent to which labor markets allow households to shift labor from farm to off farm employment and the extent to which such a shift explains the observed lack of correlation between consumption and idiosyncratic crop shocks the empirical analysis uses a novel measure of the idiosyncratic crop income shock which utilizes information on start of season cropping choices to more accurately estimate household expectations of weather

contagion in latin america definitions measurement and policy implications this paper analyzes bond and stock markets in latin america and uses these patterns to investigate whether contagion occurred in the 1990 s it defines shift contagion as a significant increase in cross market linkages after a shock to one country or region several coin toss examples and a simple model show that the standard tests for contagion are biased due to the presence of heteroscedasticity endogeneity and omitted variable bias recent empirical work which addresses these problems finds little evidence of shift contagion during a range of crisis periods instead this work argues that many countries are highly interdependent in all states of the world and the strong cross country linkages which exist after a crisis are not significantly different than those during more stable periods these findings have a number of implications for latin america

is democracy a normal good evidence from democratic movements 1 introduction is democracy a normal good in other words do people desire higher levels of democracy more participation in government as their incomes increase this paper uses the existence of a democratic movement to solve a missing variable problem in the current literature works such as barro 1996 huntington 1991 and lipset 1959 provide evidence of a strong positive correlation between levels of democracy and income this is frequently interpreted as evidence that higher incomes lead people to demand more democracy i address this issue in a more literal sense specifically if our goal is to infer what causes people to demand democracy we cannot ignore the persuasive evidence that citizens of countries like south africa under apartheid burma or china countries with low levels of democracy that have experienced widespread movements for democracy demand democracy instead of democracy levels i use the existence of a democratic movement as evidence of countries demand for democracy in this paper i define democratic movements as widespread public demonstrations that are explicitly pro democracy i e participants demands must include either democracy or direct elections and in which participants express these views physically some of the wellknown democratic movements that are included are the chinese student demonstrators in tiananmen square in 1989 the work of the african national congress and others in south africa to end the nondemocratic system of apartheid and the 1986 people power demonstrations in the philippines that forced ferdinand marcos to concede victory to corazon aquino the main goal of the paper is to use a new data set on democratic movements to estimate the relationship between income and democracy testing more directly than has previously been done whether democracy is a normal good a secondary goal is to investigate the conditions under which democratic movements are most likely to occur in an authoritarian country footnote 1 this excludes boycotts of elections and voting against a proposed authoritarian constitution unless those events are accompanied by physical demonstrations protests or strikes

crises and confidence systemic banking crises and depositor behavior abstract we show that individuals who have experienced a systemic banking crisis are 11 percentage points less likely to use banks in the u s than otherwise similar individuals who emigrated from the same country but did not live through a crisis this finding is robust to controlling for exposure to other macroeconomic events and to various methods for addressing potential bias due to migrant self selection consistent with the view that personal experience plays an important role in decision making the effects are larger for individuals who were older and more likely to have had wealth entrusted to the banking system at the time of the crisis and for people who experienced crises in countries without deposit insurance

participation and commitment in voluntary coalitions to provide public goods this paper reports experimental evidence on the voluntary formation of coalitions to provide a public good participation and commitment in a coalition are either exogenously imposed or endogenously determined by the players themselves we find larger voluntary participation rates when commitments in the coalition are endogenously determined using a minimum contribution rule rather than exogenously determined however due to a trade off between participation and commitment coalitions with voluntary participation are less effective in facilitating cooperation compared to when all players are forced to participate this paper therefore confirms the rather pessimistic conclusions from coalition formation theories

central bank independence economic freedom and inflation rates william a luksetich measures of central bank independence combine many attributes that may or may not affect inflation central bank attributes are chosen as a result of political calculations over the distribution of resources between competing interest groups simultaneity bias results from regressions of central bank independence or of economic and political freedom on inflation or growth our estimates demonstrate the connections between economic and political freedom and central bank attributes that lead to inflation countries showing high degrees of economic freedom adopt structures that lead to lower inflation those that show high degrees of political freedom do not adopt inflation reducing institutional structures jel e0 e5 i introduction the relationship between inflation rates and central bank independence from political control has been the subject of a number of recent studies generally these studies provide evidence that greater central bank cb independence is associated with lower inflation rates banaian et al 1983 1995 1997 burdekin and willett 1991 masciandaro and spinelli 1993 alesina and summers 1993 this relationship appears to be weaker when developing countries are included in the analysis cukierman 1992 all of these draw rather strong conclusions about the importance of cb independence as a force constraining the political system from using the monetary system to achieve political goals that are likely to be hostile to price stability supporting evidence is not strong however and the indices used to measure cb independence are far from perfect moreover even if the cb independence measures were accurate they may simply be proxies for political and economic freedoms that are the more important checks on political manipulations of the economic system others question the evidence and draw different conclusions lohmann 1994 1997 and posen 1993 1995 1997 argue that the correlation between inflation and central bank independence is spurious lohmann argues that the federalist nature of the german government and its frequent use of coalitions in forming governments limit the number of threats to bundesbank independence posen 1995 finds that political support for independence comes from the financial sector if they effectively lobby for price stability an independent central bank tends to accompany that lobbying miller 1998 provides a framework for understanding the behavior of various interest groups in controlling the rate at which governments inflate their currencies cukierman s 1992 gb independence indices have been widely used in empirical studies to assess the effects of cb independence on inflation rates 1 the term of office of the head of a cb which we will call the central banker is one measure of bank independence he assigns a ranking of 1 if the term of office too is greater than eight years 0 75 if the too is great than or equal to six years and less than or equal to eight years 0 50 if the too is equal to five years 0 25 if it equals four years and 0 if it is less than four years he does this for numerous measure of bank independence since the publication of cukierman s index nearly all the aforementioned researchers have either used these individual rankings or a weighted average of these rankings in their efforts to determine the importance of cb independence on inflation rates in this article we extend the research in this area in three ways first the use of a multipoint ranking of central bank attributes imposes restrictions on the marginal impact of changing structures or attributes of the cb law that have no a priori basis moreover the weights within the aggregate cukierman index are quite arbitrary and do not hold up under any reasonable degree of scrutiny see banaian et al 1998 hereafter referred to as bbw constructing dummy variables for each of the classifications would be more appropriate than using the classification scheme cukierman devised as a continuous variable