rafmacalaba/datause-encoder-data huggingface dataset:
### **2.2.3 Limited-Horizon Spectral Identification**

One criticism that can be leveled against the spectral identification approach is that the long-run VAR representation used to calculate the spectrum of the endogenous variables may be biased when estimated on a short sample of data. In practice, a ‘windowed’ selection of autocorrelations is often used to estimate the spectrum of a series. The same principle can be used in the spectral VAR identification process. For example, the infinite-MA representation, _D_ ( _e_<sup>_iω_</sup> ) can be replaced with a limited horizon series of impulse response coefficients.

One proposal is to use coefficients extending to 10 years of data, as in the original Max-Share approach:

# **3 Model Evaluation**

Traditionally, SVARs seeking to extract an unobservable shock, such as technology, have been evaluated on their performance using simulated data from a DSGE model (Barsky and Sims (2011), Francis et al. (2014), Chari et al. (2009), Erceg et al. (2005)). This is an intuitive evaluation, given the true underlying shock is known by construction. In this section, we argue that many of these tests have been performed using DSGE models which fail to test for the influence of material confounding shocks needed to replicate key features of US macroeconomic data. We later show that existing methodologies perform poorly when these features are included in simulated data from a simple 2-variable model that provides greater transparency over the data-generating process compared to a DSGE model.

## **3.1 DSGE Monte Carlo simulations**

Each VAR specification is tested on a standard medium-scale New Keynesian model, of the type proposed by Christiano et al. (2005), and used by Francis et al. (2014) and Barsky and Sims (2011) to evaluate their respective implementations of the Max-Share identifications.<sup>9</sup> This model contains features such as persistent consumption habits, investment adjustment costs, capital utilization, and partial price and wage indexation.

The model can be written as the following planner’s problem (full specification available in Appendix Section 9.2):

> 9In the Barsky and Sims (2011) ‘news’ implementation of the Max-Share identification, an additional ‘news’ shock is added to the standard medium-scale NK model, which affects technology with a lag of one period.

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Table 1: Definition of Variables

|Variable|Definition|Source|
|---|---|---|
|Bond Variables|||
|Fixed Yield-to-Maturity|Rate of return on security assuming it is held until maturity at<br>time of issuance, weighted by deal volume.|Dealogic|
|Maturity of Bond issued|Duration (Years) of bonds weighted by deal volume|Dealogic|
|Log of Size of Bond Issued|Log of total proceeds of bond deal (U.S. Dollars)|Dealogic|
|Currency|Denotes the currency in which the bond issue is priced, either:<br>U.S. Dollar, Euro, British Pound Sterling, Japanese Yen,<br>Australian Dollar, Canadian Dollar, or Other|Dealogic|
|Investment Grade|Indicator value with value 1 if a bond tranche is investment<br>grade rated and 0 otherwise (credit rating is BBB- or higher<br>according to S&P or Baa3 or higher according to Moody's)|Dealogic|
|Borrower Industry|Type of industry: Consumer, Finance, Metals, Professional<br>Services, Transportation, Utilities, and Other|Dealogic|
|Borrower Type|Type of the borrowing entity, either: Local or State/Provincial<br>Authority, Central Government, Non-Public|Dealogic|
|Deal Type|Type of security offered, either of the following product<br>types: Asset Backed Securities, Corporate Bond-High Yield,<br>Corporate Bond-Investment-Grade, Covered Bond, Medium-<br>Term Note, Money Market, Mortgage-Backed Security, Non-<br>U.S. Agency, Preferred Share, Short-term Debt, Sovereign,<br>Local Authority|Dealogic|
|UST10Y|6 month trailing average of 10Y U.S. Treasury Constant<br>Maturity Rate|Bloomberg|
|Global Push Factors|||
|VIX|Log of 6 month trailing average of VIX index. VIX captures<br>the implied 30-day ahead market volatility derived from S&P<br>500 index options.|Bloomberg|
|RISK|Log of 6 month trailing average of U.S. Corporate BBB<br>Option Adjusted Spread.|Bloomberg|
|FED|Log of 6 month trailing average of Fed Balance Sheet (Sum<br>of Mortgage Backed Securities and U.S. treasuries)|Bloomberg|
|LIBOR|Log of 6 month trailing average of 3 Month Libor-OIS Spread<br>(3 Month Libor less 3 Month USD Overnight Indexed Swap)|Bloomberg|
|MOVE|Log of 6 month trailing average of the MOVE index. The<br>Merrill lynch Option Volatility Estimate (MOVE) Index is a<br>yield curve weighted index of the normalized implied<br>volatility on 1-month Treasury options which are weighted on<br>the 2, 5, 10, and 30 year contracts.|Bloomberg|

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firms spend most of the issuance proceeds to fund corporate investment suggests that capital inflows reduce equity financing costs. The result provides evidence against alternative explanations for equity issuance, such as market timing (Baker and Wurgler, 2000).

Overall, our results indicate that equity issuance is an important channel through which capital inflows can affect real economic activity. In the aggregate analysis, we documented that one million U.S. dollars of equity inflows was associated with an increase of 160,000 U.S. dollars of country-level seasoned equity issuances. On the other hand, in this section we have shown that large firms invest on average 700,000 U.S. dollars of each million raised in an equity offering. Combining both results, a back-of-the-envelope calculation indicates that for every million U.S. dollars of equity capital received from foreign investors, emerging market firms use the proceeds of seasoned equity offerings to increase corporate investment by at least 110,000 U.S. dollars (=0.16x0.7 for every million U.S. dollar received).

# **VII. Conclusions**

There is a growing literature documenting that greater capital inflows are associated with important increases in aggregate investment and higher economic growth. A separate large literature studies the issuance activity of firms. This paper is the first study to use issuancelevel data to document a new channel, firm-level equity issuance, through which capital inflows affect real economic activity. We seek to determine whether increases in equity capital inflows into emerging market countries are associated with increases in equity issuance and corporate investment by publicly traded firms, and whether any observed association can be attributed to supply-side influences from exogenous changes in international investors’ interest in investing in particular countries.

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The data from the Tanzanian Labor Force survey, taken in the same year, used screening questions and confirmed that the actual LFPR of female heads was indeed much higher than was reported in the HBS.

Screening questions for economic activity and unemployment are therefore important to specify clearly to the respondent and the enumerator what constitutes an economic activity or inactivity, and to ensure that all economic activities undertaken by a respondent are captured properly in the survey. Indeed, it is quite surprising that questionnaires are still developed and fielded in low-income countries which do not use this approach. For the analyst, the use of data collected with poorly worded questionnaires will produce errors and biases in the results estimated - both in the dependent and independent variables, with errors likely to be correlated. Equally important, if the perception of the meaning of the word “work” changes over time, for example, as tasks performed by women are increasingly recognized as having an economic value, then the errors and biases would not be stable over time, and trends would be misidentified. The same problem can occur when the wording of an employment module changes over time, possibly reflecting changing perceptions.

An additional challenge in low-income countries is measuring non-wage earnings. In this area, there is less completed survey research. One key recommendation that does emerge from experience is that this type of income needs its own module (Glewwe and Grosh, 2000). This implies separate farm income and non-farm enterprise income modules to be completed at the household level. The measurement of farm income is a particular challenge (Carletto et al, 2011). Research is ongoing under the LSMS-ISA project to test alternative approaches and offer recommendations for survey design and implementation.<sup>10</sup> In sum, although the task of getting consistent measurement of the SNA concept of employment in low-income countries is not easy, techniques exist. Table 1 summarizes the established good practice recommendations from literature covering key issues to be considered in designing a questionnaire to measure employment outcomes in a low-income setting. However, each country context is unique. Therefore a universal recommendation is that questions should be carefully tested in the variety of contexts within the country (Grosh and Glewwe, 2000). This means not just a “field test” of a questionnaire just before fielding a full survey, but actual survey research, testing alternatives with a rigorous methodology.

> 10 see: http://web.worldbank.org/ wbsite/external/extdec/extresearch/extlsms

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11 investments are important channels via which developing countries are able to gain access to foreign technologies. As such, we also look to the import and FDI shares out of GDP as indicators of the strength of the innovation pillar, as will be seen when we discuss the various indicators that are used in this paper.

# **An Adequate Information Infrastructure**

Information and communications technologies (ICTs) are the backbone of the knowledge economy and in recent years have been recognized as an effective tool for promoting economic growth and sustainable development. With relatively low usage costs and the ability to overcome distance, ICTs have revolutionized the transfer of information and knowledge around the world.

ICT infrastructure in an economy refers to the accessibility, reliability and efficiency of computers, phones, television and radio sets, and the various networks that link them. The World Bank Group defines ICT to consist of hardware, software, networks, and media for collection, storage, processing transmission, and presentation of information in the form of voice, data, text, and images. They range from the telephone, radio and television to the Internet (World Bank, 2003a and 2003b). On the other hand, the OECD defines ICT sectors as a combination of manufacturing and service industries that capture, transmit and display data and information electronically. Table 1 lists the ICT producing sectors under the OECD definition.

Over the past decade, there has been a series of studies that show that both ICT production and ICT usage have contributed to economic growth<sup>14</sup> . ICT producing sectors have experienced major technological advancements, which have showed up as large gains in total factor productivity at the level of the economy. As for the non-ICT producing sectors, investment in ICT has resulted in capital deepening, and hence increases in labor productivity. More importantly, various studies have produced empirical evidence suggesting that substantial productivity gains have been experienced from ICT usage<sup>15</sup> .

14 See Pilat and Lee (2001), Jorgenson and Stiroh (2000), Oliner and Sichel (2000), Whelan (2000), and Schreyer (2000).

15 Some national studies point to the use of ICT as an important factor in improved TFP growth. For the United States, the Economic Report of the President (Council of Economic Advisors, 2000, 2001), Whelan (2000), Oliner and Sichel (2000) and Jorgenson and Stiroh (2000) attribute a considerable part of the increase in TFP growth to ICT-using sectors of the economy that do not produce ICT. For Australia, there is evidence that increased productivity has been accompanied by greater technology use, which includes use of ICT (Productivity Commission, 1999). There are also sectoral and firm studies that suggest that ICT investment has had positive impact on TFP. For examples in the distribution sector, see Readon et al. (1996), and Broersma and McGuckin (1999), while Brynjolfsson and Kemerer (1996) and Gandal et al. (1999) indicate the existence of spillover benefits from ICT capital at the firm level.
subjective perceptions across countries, as there may be systematic reporting biases, including significant cross-country cultural differences in reporting an impact. Within countries, at the household level, we find that richer households felt a decline in their relative income position, which is consistent with evidence from household surveys that the crisis reduced mostly the incomes and consumption of middle- and upper-income groups. But we also find that poorer households report being (subjectively) affected by the crisis more. Differences in the feasibility of coping strategies can help explain variations in the subjective perceptions of crisis impact: the poorest third were forced to reduce their consumption of staple foods and health spending, and tended to depend on public safety nets. By contrast, richer households had more options to cope, pursuing so-called "active strategies" (such as increasing their labor supply), borrowing from friends and family or banks, and cutting spending on non-essentials. Transition countries also differed significantly from the western European comparator countries in that a large proportion of their populations resorted to reducing the consumption of basic necessities during the crisis. Private safety nets and informal insurance mechanisms could not meet the shortfall in income and, in some cases, the reduction of informal transfers reinforced the impact of the crisis.

We find subjective perceptions of the impact of the crisis to be relevant to socio-political outcomes. The severity of the impact influenced life satisfaction and perceptions of government performance: the harder the impact, the lower the satisfaction level and the more negative the assessment of government performance. However, reflecting the complexity of the relationship between economic growth and happiness, satisfaction with life in 2010 was lower in 15 countries (and especially so in Latvia, Lithuania and Romania) and higher in 13 countries compared to 2006 levels. Looking ahead, households are optimistic. Despite the shocks, they expect an improvement in their social position over the next four years. Their experiences during the crisis suggest that more efficient and better-targeted safety nets and social insurance mechanisms could help sustain and spread the gains from anticipated future growth.

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of rural spouses determines who is earning income from cash crop agriculture through increased control over household land, with women’s outcomes being more sensitive to self-esteem levels (Botea et al., 2021).

# **3. Sample Data and Empirical Strategy**

# **3.1 Data set construction**

We started by compiling data from all baseline surveys conducted by the World Bank’s Africa Gender Innovation Lab (GIL) which included any measures of socio-emotional skills and economic outcomes for both men and women. This approach yielded a database of 10 studies in 8 countries (Benin, the Republic of Congo, Côte d’Ivoire, Ghana, Kenya, Mozambique, Nigeria, and Togo) conducted between 2013 and 2020. To broaden the scope of our analysis, we added data for the two African countries included in the World Bank’s STEP Skills Measurement Program – Ghana and Kenya, as well as data from the Future of Business Survey, which was a co-product of Facebook, OECD and World Bank (which includes respondents from Angola, Benin, Botswana, Côte d’Ivoire, Cameroon, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, Senegal, Tanzania, Uganda, South Africa, and Zambia). Appendix Table A2 summarizes the database of studies included in our sample.

Since each study used different scales and measures of skills, it was necessary to align the data under a common framework. We utilized a framework developed by GIL as part of its larger research agenda to examine the importance of socio-emotional skills for women’s economic outcomes in Sub Saharan Africa. To establish this framework, GIL worked with psychologists and used existing literature to develop a list of skills that are malleable, span the range of socio-emotional skills while mapping to existing frameworks<sup>5</sup> , can be used to examine gender differences, and include higher-order categories that allow for separate treatment arms to rigorously unpack the causal influence of particular socio-emotional skills. We appended the data and mapped each of the survey items to one of these 14 socio-emotional skills. This categorization process was independently conducted prior to the analysis by a psychologist wellversed in the definitions of the skills, in close collaboration with our research team. The resulting dataset includes measures for 10 of the 14 skills. The remaining four skills were not included because of their absence from the 13 studies in our sample: emotional awareness, listening, interpersonal influence, and

> 5 Several groups and organizations have developed frameworks to classify and organize socio-emotional skills and overlapping concepts. Three commonly used frameworks are CASEL, USAID Youth Power, and Big 5 Personality, and Harvard’s EASEL Lab documents many others.

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<u>1</u> An n-factor CES production function, _F_ = _A_ (<sup>�</sup><sup>_n_</sup> _j_ =1<sup>_θjX_</sup> _j_<sup>_ρ_)</sup> _ρ_ , with factors _Xj_ , share parameters _θj_ , scale parameter _A_ , and elasticity of substitution _σ_ = 1 _−_ <u>1</u> _ρ_<sup>, can</sup> be rewritten in calibrated form as where a bar over a variable indicates the observed benchmark level. The benchmark factor demands, factor prices and product outputs, combined with the elasticities of substitution fully specify the three production functions. The same methodology can be used for the CES utility function, where the _Xi_ s represent goods consumed, the _pi_ s are goods prices, and the benchmark utility level is normalized to unity.

The calibration process is completed with the selection of substitution elasticities for production and utility functions. In the absence of reliable evidence on the magnitude of these elasticities for Africa we chose a base case of _σ_ = 1 for all four functions, and then ran sensitivity checks with different values for _σ_ .

# **References**

- Ahmad, E. & Stern, N. (1987), Alternative sources of government revenue: Illustrations from India, 1979-80, _in_ D. M. Newbery & N. H. Stern, eds, ‘The Theory of Taxation for Developing Countries’, Oxford University Press, New York.

- Ahmed, S. & Croushore, D. (1994), The marginal cost of funds with nonseparable public spending, Working Paper 94-5, Federal Reserve Bank of Philadelphia.

- Auriol, E. & Warlters, M. (2005), ‘Taxation base in developing countries’, _Journal of Public Economics_ **89** , 625–646.

- Ballard, C. L. & Fullerton, D. (1992), ‘Distortionary taxes and the provision of public goods’, _Journal of Economic Perspectives_ **6** (3), 117–131.

- Ballard, C. L., Shoven, J. B. & Whalley, J. (1985), ‘General equilibrium computations of the marginal welfare costs of taxes in the United States’, _American Economic Review_ **75** (1), 128–138.

- Benge, M. (1999), Marginal excess burdens of taxes on capital and on labour income in a small open economy, Working Paper 364, Department of Economics, Faculty of Economics & Commerce, Australian National University, Canberra ACT 2600 Australia.

- Browning, E. K. (1976), ‘The marginal cost of public funds’, _Journal of Political Economy_ **84** (2), 283–298.

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# 5.3.3 Payroll tax reform

The evidence of reducing payroll taxes on labor market outcomes is quite mixed. A few studies nd that the incidence of such costs is fully on wages with no signicant eects on employment for the U.S. and Latin American countries. Other papers show that only part of the increase in the payroll tax burden was passed onto wages. More recent work nds a sizable impact on employment in Sweden and Colombia.<sup>35</sup> A few studies reviewed in Bank (2017b) nd that a large reduction in payroll taxes for selected sectors in Brazil had very limited eects on formal employment creation. However, a recent paper found dierent results. Baumgartner et al. (2021) study the eects of Plano Brasil Maior (PBM). Such tax reform altered the tax base upon which payroll taxes are calculated for selected sectors in Brazil. Instead of paying a payroll tax of 20 percent on wages, rms were required to contribute to social security with tax rates between 1 percent and 2 percent on gross revenue. This amounted to a de facto average reduction in the total tax burden associated with payroll of more than 50 percent. The authors exploit the gradual implementation of the PBM payroll tax reform across 65 sectors from 2011 to 2014. Their empirical ndings show a sizable positive eect on total employment due to both rm entry and rm growth in treated sectors, but no impact on wages. Moreover, the eects are driven by labor markets with relatively low levels of concentration, which is consistent with predictions of an oligopsony model. They also perform a cost-benet analysis of the PBM payroll tax reform. They nd that each created job was around 2.1 times more costly than estimates from a major federal program that transfers funds to municipalities to nance local public spending in Brazil. Hence, despite having achieved a signicant impact on employment in treated sectors, the costs of the program in terms of foregone tax income were substantial. The authors also argue that this cost-benet analysis does not take into account other consequences of this kind of reform, such as the likely welfare consequences related to lower social security tax revenues and the deterioration of government ́s scal position. They conclude that a more complete and quantitative general equilibrium would be needed to assess such tradeos. Other researchers have used structural models in order to assess the general equilibrium impact of payroll tax reductions. In a recent review of the literature, Ulyssea (2020b)argues that the counterfactual results from both macro and structural models indicate that reductions in payroll tax seem to generate some formalization but with a low elasticity. If one dierentiates the eects on the intensive and extensive margins of informality, the eects are stronger on labor informality (intensive margin) and weaker on rm informality (extensive margin). Consistent with the limited eects on informality, the results from dierent papers

> 35See Baumgartner et al. (2021) for a review of the literature.

33