rafmacalaba/datause-encoder-data huggingface dataset:
14 heavily discriminated against in the EU market where former colonies and least developed countries enjoy preferential duty-free access).

Bearing in mind that three-quarters of the world’s poorest people depend directly or indirectly on agriculture for their main income, and that farm sizes are far larger in highincome than in developing countries, the LINKAGE study also looks at the extent to which agricultural and trade policies in place as of 2004 reduced rewards from farming in developing countries and thereby added to international inequality in farm incomes. It finds that net farm incomes in developing countries would rise by 5.6 percent, compared with 1.9 percent for non-agricultural value added, if those policies were eliminated (bottom of final two columns of Table 2). This suggests that inequality between farm and nonfarm households in developing countries would fall from such reform, notwithstanding the notable exception of India. The large reduction in agricultural GDP in India, as in higher-income countries, reflects in part the fact that import-competing farmers in India currently enjoy considerable protection at the border. In high-income countries net farm incomes would fall by 15 percent on average, compared with a slight rise for real non-farm value added. These results suggest inequality between farm and nonfarm households _within_ high-income countries, as also in India, would increase if no compensating domestic measures were taken. They also suggest inequality _between_ farm households in developing countries and those in high-income countries would reduce substantially. These inequality results would not be very different if only agricultural policies were to be removed (compare columns 2 and 3 of Table 2), underscoring the large magnitude of the distortions from agricultural, as compared with nonagricultural, trade policies.

This study also reports that unskilled workers in developing countries – the majority of whom work on farms – would benefit most from reform (followed by skilled workers and then capital owners), with the average change in the unskilled wage over all developing
**Figure 11 – Portfolio Allocation**

<!-- Start of picture text --> CB Liquidity Trache<br>27%<br>73%<br>US 3M US 3-5 year<br><!-- End of picture text --> In the optimization of investment tranche, the tool implements foreign exchange hedge and multiple asset return enhancement transactions at the same time. The portfolio construction can be analyzed and compared under the following two scenarios: (i) hedge foreign exchange exposure of debt portfolio together with the foreign exchange reserve portfolio optimization; and (ii) hedge a portion of the foreign currency debt exposure together with the foreign exchange reserve portfolio optimization and hedge another portion of the foreign currency debt exposure using foreign exchange contracts in the derivative markets. Since the tool allows for the RM desk to hedge only a portion of a subject’s external debt exposure, it may be used for countries that allocate a substantial amount of their reserve assets to low or even negative return financial instruments, such as those denominated in euros.

In the standard approach, foreign currency debt exposure may be hedged by debt management offices under different scenarios and through different approaches. On the other hand, the FX reserve management unit constructs its reserve management base and executes the process independently. Hedging the debt and reserve portfolio’s foreign currency exposure separately will increase the hedging costs and may create additional credit risk and other operational costs. On the other hand, as illustrated in Table 16, a joint ALM framework tends to generate higher expected returns on reserves by comparing the outcomes of two strategies: (i) separately managing assets and liabilities, which requires managing foreign exchange reserves according to a capital preservation mandate; and (ii) a joint approach that allows for managing excess reserves under a portfolio optimized to maximize investment returns for a given level of risk.<sup>11</sup>

> 11 Taking net external debt composition into consideration reduces the currency mismatch between assets and liabilities on the sovereign balance sheet, mitigating foreign currency risk for the consolidated balance sheet. As a result, the joint approach allows the central bank to optimize the investment of excess reserves with assets that are more diverse and risky compared to the assets used when managing the balance sheets separately.

27
# **1 Introduction**

Since the mid 1990s, due to a growing trend across countries towards globalization and financial integration, banking sectors in many developing countries have experienced some important transformations. Key among them has been a rapid increase in the degree of foreign bank participation. Between 1995 and 2002, the average share of banking sector assets held by foreign banks in 104 developing countries rose from 18 percent to 33 percent.<sup>1</sup> Many studies have examined the causes and implications of foreign bank participation.<sup>2</sup> The contribution of this paper is to describe the recent trends in foreign bank ownership in developing countries, summarize the existing evidence on the causes and implications of foreign bank presence and re-examine the link between banking crises and foreign bank participation. Using data on the share of banking sector assets owned by foreign banks in over 100 developing countries, we document a strong rise in foreign bank participation in two regions of the world: Eastern Europe and Central Asia and Latin America. Foreign bank presence has increased in Africa as well, but at a generally slower pace than in the other two regions. By contrast, foreign bank participation has remained stagnant or even declined in East and South Asia and in the Middle East and North Africa.

Our empirical analysis shows that countries that experienced a banking crisis from 1995 to 2002 tended to have higher levels of foreign bank participation than those that did not. Furthermore, panel regressions indicate that foreign bank participation increased as a result of crises rather than prior to them. However, post-crisis increases in foreign bank participation did not coincide with increased credit to the private sector. We speculate that this is due to the fact that in most countries foreign entrants acquired distressed banks with a high share of loans that needed to be written off. By contrast, in countries where the level of foreign bank participation was relatively high and stable, private credit levels were significantly higher than in other countries before, during, and after crises.

The paper is organized as follows. Section 2 examines the recent trends in foreign bank participation among developing countries. Section 3 reviews the existing literature on the causes

> 1 These data come from Micco, Panizza, and Yañez (2006). We exclude developed countries and off-shore centers. If we take the average over the 72 countries for which information exists for each year between 1995 and 2002, the average participation in developing countries is not substantially different. It rose from 17 to 31 percent. 2 See the literature review in Section 3.

2
Figure 4. Work stoppages in Mongolia and Myanmar <!-- Start of picture text --> Mongolia<br>Myanmar<br><!-- End of picture text --> Note: 95% confidence intervals for difference from Q1 are shown (rather than from zero). Including controls for respondent characteristics do not qualitatively change results. See Appendix Table 2 for regression tables with controls. Source: HFPS Lao PDR, PNG, and Vietnam – After a short decline in mobility in March to April 2020, Lao PDR, PNG, and Vietnam experienced relatively normal mobility throughout the rest of the year and into 2021. Yet, in Lao PDR and PNG, poorer workers found it harder to resume work in 2020 and thus were more likely to be out of work compared to their wealthier counterparts: In 2020, the poorest quintile in Lao PDR was twice as likely as the wealthiest quintile to stop working, while in PNG, the poorest quintile was 2.3 to 2.9 times more likely to be out of work that the top quintile (Figure 5). While the prevalence of work stoppages was generally very low in Vietnam, a different gradient is evident, with wealthier workers marginally more likely to have stopped working. This result, however, is explained by two factors: 1) differences in sectoral participation across welfare quintiles; and 2) differences in residential area areas across quintiles. As with many other middle-income EAP countries, agriculture was one of the least affected sectors in Vietnam in terms of work stoppages. However, among the sample of countries, participation among bottom 20 workers in agriculture is relatively high<sup>19</sup> in Vietnam (74 percent), and differences across quintiles in agricultural employment are among the largest. Nevertheless, data on work stoppages is also available over a longer reference period in Vietnam (not only the week prior to the survey), which shows a clear regressive gradient, with households in the poorer quintiles being significantly more likely to have been affected by job losses relative to those in wealthier ones (World Bank 2021b).

> 19 Vietnam is the second highest after PNG, in which 88 percent of bottom 20 workers were employed in agriculture prepandemic according to the HFPS. In PNG, however, agriculture was one of the most severely affected sectors.

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- 30-

frequency tags, the smart transponder possesses a microprocessor which has both read and write capability -- functioning much like a simple miniature computer. Hence, the smart transponder is able to maintain a transactions balance independent of a central computer and can perform simple arithmetic operations when activated, acquiring the function of an electronic purse -- similar to a phone card or a stored value card available on metro systems.<sup>2</sup> ' Whenever a vehicle passes a charging point, the on-board unit can be programmed to emit a bleep or a tone to signal the completion of a valid transaction (Dutch Ministry of Transport and Public Works, 1989). The smart card can be revalued at designated machines located at certain fuel stations after the decrements reach a threshold level, whereupon a warning yellow light emitting diode (LED) on the in-vehicle unit to which the card is attached is automaticaly turned on. (This is the modern hands-off version of operating a mechanical on-vehicle meter by hand as envisioned in the Smeed Report, so I caU its electronic equivalent 'on-vehicle metering'.) Other functions include the capability of monitoring - with the use of designated machines - a previous history of the record of the transactions made (up to 200, say), possibly for the purpose of contesting any alleged discrepancies. The prme advantage of smart card-type AVI technology relative to microwave AVI alone technology is that there is no paper trail, and that anonymity/privacy is assured. A second aedF antage of smart card system is that it obviates the need to maintain a costly central charging system capable of handling aU the separate user accounts. The latter featurw is a requirement - and shortcoming - of one-way AVI systems. A third advantage is that a charge that is deducted instantaneously would presumably have a greater impact by making of information) with electronic toll collection (Skryckci, 1991). (A 'contctless' card means tbat it involves no metal-to-metal contact or movable meco nsm when it is read by an in-vehicle smat _cad_ reader.) AT&T's traponder is said to be priced arud $100 with smart card atachment (Ramirez, 1992).

The PAMELA project, developed as pert of the Cambrdge road pricing scheme, envisions at least two versions of smart card technology: one which coains al the microwave communications circuits in a single credit-card sized unit and another which splits the on-board unit into a small card reader which contais the circuits and a separate smart card which acts only as a value card (Hills and Blythe, 1991). Here we consider the latter, more basic version.

I Tn computerjargon, a phone card is a chip card without intelligenc and is of the read-only memory (ROM) type. On the other hand, a smart cad (as used on a larg scale in swvenl bankig applications in France) is a chip card with both a microproc_sr and a nwmory, of the electrically emsable, progsammable and rmd-only memory (EMPROM) type.
# **1. Introduction**

Cash transfer programs have become increasingly popular in developing countries. This paper analyzes the effect of a cash transfer program in rural areas in Ecuador, the _Bono de Desarrollo Humano_ (BDH), on the food Engel curve. The BDH makes US $15 monthly cash transfers to poor women. During the roll-out of the BDH program, a group of eligible households was randomly assigned into a “treatment” group eligible for transfers and a “control” group that was ineligible for the study period. Data on both groups were collected at baseline, before households started receiving transfers, and at follow-up, approximately 18 months later. This experimental design allows us to analyze whether transfers made by the BDH are spent like other sources of income.

In the textbook example, all household members maximize a join utility function (Becker 1981). A cash transfer shifts out the household budget constraint. The composition of expenditures then changes as households move along the Engel curve that relates expenditures on a particular item or group of items to total expenditures. Neither the source of the additional income nor who within the household receives the transfer matters.

In practice, there are a variety of reasons why cash transfers like those made by the BDH may be used differently from other sources of income. If transfer income is seen as more temporary or uncertain than other sources of income, a higher fraction of it might be saved or invested—for example, by purchasing productive assets. Indeed, the permanent income hypothesis suggests that _all_ of the additional “windfall” income would be saved.

Even though transfers made by the BDH came with no strings attached, it was marketed as a “social program”. During the roll-out of the program, a brief advertising campaign was launched, including informational spots on national television and in local radio stations. These spots stressed that the BDH was a program that was meant to benefit poor children. The advertising campaign may have led households to spend transfers in a way that took account of the goals of the program. Recent research in psychology and economics shows that considerations such as “fairness” and “reciprocity” may be important determinants of decision-making, and that individuals keep “mental accounts” in their expenditures (see, in particular Thaler 1999, as well as the review papers by Fehr and Gachter 2000, Fehr and Schmidt 2007, and the edited volume by Kahneman and Tversky 2000). In the United States, studies of food stamp “cashouts” show that families spend more of their food stamp income on food than is the case for other sources of income (Fraker, Martini, and Ohls 1995; Currie 1998). Kooreman (2000) finds that spending on children’s clothing out of child benefit income in the Netherlands is much larger than out of other income. Jacoby (2002) argues that there are also “flypaper effects” associated with a school feeding program in the Philippines. On the other hand, Edmonds (2002) fails to reject the null that child benefit income is used like other income in 1
Fund’s annual report, Trade and Exchange Restrictions. This is a composite index constructed by taking into account five types of control restrictions on international transactions. Thus, this measure is reflective of the openness of a country’s economy. The standard errors and p-values are adjusted for clustering on companies to allow for dependence of errors concerning the same company.

Table IX shows that the variables that have the greatest impact on a control change occurring are size of the company and leverage. A unit increase in leverage decreases the relative hazard of a control change by 83.2 % and a unit increase in size increases the probability of a control change by 19.5% respectively. This suggests that larger companies and companies with less debt are more likely to undergo a control change. This could be because investors are reluctant to buy control blocks in highly levered companies and it is the larger companies who are able to cross list outside the home market and take advantage of increased visibility to facilitate a control change.

An increase in Tobin’s Q ratio decreases the probability of a control change by just 1.4% (significant at 0.001 level). This seems surprising at first because one would expect investors wanting to buy control blocks in companies with high market valuation. But a high market valuation also implies that the concentrated shareholder is more reluctant to sell his control block and hence there are a lesser number of control changes in these companies. I also find that foreign income growth enters significantly into the regression. An increase in foreign income growth results in an increase in the probability of a control change by 6.7%. This table however doesn’t reveal if the foreign income growth predicts a control change to domestic or to foreign shareholders. This issue is addressed in Table X.

Among the country-level characteristics, I find that the economic size and liquidity of the home country’s economy have a large positive and significant effect. This suggests that it is easier to sell control blocks if the home country’s economy is big and the stock exchange is very liquid. Further, control change is less likely in English common law countries, which is to be 29
IBRD 23328 22 FIGURE 3 <!-- Start of picture text --> TOTAL FERTILITY RATES 1990<br>RATES 1990<br>TOTAL FERTIUlY a _..t<br>Udr3%to>45<br>4.5% to >6% VP D<br>U 6% or More<br>WNo Data > &-.<br>OCTOBER 1991<br><!-- End of picture text --> FIGURE 4 IBRD 23327 CONTRACEPTIVE PREVALENCE RATE 1980's <!-- Start of picture text --> CONTRACEPWVE<br>PREVALENCE RATE 1980's<br>[e Under 20%<br>- 20% to ' 40%<br>U 40% to >60% r<br>U 60% or More<br>W No Datc<br><!-- End of picture text --> OCTMBER 1991
result in higher elasticities of savings (or the response from these sectors). Assuming a higher price elasticity of savings supply, from 0.30 to 0.60, would tend to lower the EOCK by 0.6 percent, as the last row and middle columns of Table 8.1 and Table 8.2 show. The possible changes with plausible ranges for the price elasticity of domestic investment do not have a significant effect on the EOCK.

**Table 8.1 Sensitivity analysis of the EOCK for investment and domestic savings price** **<u>elasticities</u>**

||||Investment elasticity<br> <br>|
|---|---|---|---|
||0.10|−0.8<br>10.8%|−1<br>−1.2<br>11.0%<br>11.0%|
|Domestic savings<br>elasticity|0.30|10.2%|**10.4%**<br>10.5%|
||0.60|9.6%|9.8%<br>10.0%|

**Table 8.2 Sensitivity analysis of the EOCK for foreign savings and domestic savings** **<u>price elasticities</u>**

||||Foreign savings supplyelasti<br>|city<br>|
|---|---|---|---|---|
|||1<br>|3<br>|5<br>|
||0.10|11.2%|11.0%|10.7%|
|Domestic savings<br>elasticity|0.30|10.6%|**10.4%**|10.2%|
||0.60|9.9%|9.8%|9.7%|

**An estimation of the impacts of foreign savings price elasticities shows that these are not as critical as the price elasticities of domestic savings.** In part, this is embedded in the formula for the marginal economic cost of foreign saving (MCFS), as the elasticity in the second term is also in the denominator. The other important reason in the context of Mexico is the relatively small share of net foreign savings in the economy in recent years.

- **4 Supply price approach to Mexico’s EOCK for government, state-owned enterprises, and regulated investment projects**

# **4.1 Using the supply price approach to estimate the EOCK**

**This section estimates Mexico’s EOCK by adopting an approach that considers the minimum supply price of capital plus the economic externalities of the use of capital.** As discussed in section 2.3 above, this “bottom-up” methodology considers the tax externalities per unit of capital and uses the same weights as the traditional “top-down” weights from the national

22
Policy Research Working Paper 5524

# **Abstract**

This paper studies how portfolios with a global investment scope are allocated internationally using a unique micro dataset on U.S. equity mutual funds. While mutual funds have great flexibility to invest globally, they invest in a surprisingly limited number of stocks, around 100. The number of holdings in stocks and countries from a given region declines as the investment scope of funds broadens. This restrictive investment practice has costs. A mean-variance strategy shows unexploited gains from further international diversification. Mutual funds investing globally could achieve better risk-adjusted returns by broadening their asset allocation, including stocks held by more specialized funds within the same mutual fund family (company). This investment pattern is not explained by lack of information or instruments, transaction costs, or a better ability of global funds to minimize negative outcomes. Instead, industry practices related to organizational factors seem to play an important role.

This paper is a product of the Macroeconomics and Growth Team, Development Research Group; and Chief Economist Office, Latin America and the Caribbean Region. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at tdidier@worldbank. org and sschmukler@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team