rafmacalaba/datause-encoder-data huggingface dataset:
Policy Research Working Paper 5880

# **Abstract**

This paper combines firm-level data from 89 countries with updated country-level data on financial structure, and uses two estimation approaches. It finds that in lowincome countries, labor growth is swifter in countries with a higher level of private credit/gross domestic product; the positive effect of bank credit is especially pronounced in industries that depend heavily on external finance; and banking development is positively associated with more physical and human capital investment. These findings are consistent with predictions from new structural economics. In high-income countries, labor growth rates are increasing in the level of stock market capitalization, which is also consistent with predictions from new structural economics, although the analysis is unable to provide evidence that the association is causal. It finds no evidence that small-scale firms in low-income countries benefit most from private credit market development. Rather, the labor growth rates of larger, capital-intensive firms increase more with the level of private credit market development, a finding consistent with the history-based political economy view that banking systems in low-income countries serve the interests of the elite, rather than providing broad-based access to financial services.

This paper is a product of the Finance and Private Sector Development Team, Development Research Group. 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 author may be contacted at rcull@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
suggesting that a higher degree of income security is among the advantages that some informal business owners associate with wage jobs<sup>13</sup> .

Finally, the results in Table 6 indicate that informal business owners from the formal business owner species are more likely to remain informal business owners and less likely to be not employed at all (unemployed or out of the labor force). This could be due to increased demand for the products and services that these businesses sell. Bruhn (2008 and 2011) shows that SARE led to more wage employment and higher incomes for individuals who were previously not employed, which may increase demand. It could also mean that some informal business owners are choosing not to close their business since they aim to register the business through SARE at a later date.

# **6. Conclusion**

This paper uses discriminant analysis to separate informal business owners into a species that has characteristics similar to formal business owners and another species that has characteristics similar to wage workers. The analysis classifies about half of the sample into each group. I then examine the impact of a business registration reform in Mexico on these two species. The results show that informal business owners from the formal business owner species are 14.3 percent more likely to register their business after the implementation of the reform. In contrast, informal business owners from the wage worker species are less likely to become formal business owners after the reform, but they are 20.4 percent more likely to become wage workers. This is consistent with the finding in Bruhn (2008 and 2011) that the reform led to job creation and it explains why the effect of the reform is zero for the group of all informal business owners taken together.

The results in this paper support the argument that the informal sector consists of different types of business owners. Some operate informally due to stringent regulation and simplifying regulation can entice them to register their business. Others run informal businesses while they are looking for a job and they switch to being wage earners when more job opportunities arise. This heterogeneity among informal firms may be one reason why a randomized control trial from Peru that tries to encourage informal firm registration through

> 13 Based on ten case studies of informal business owners conducted for the author in Puebla, Mexico, in 2009.

12
measure of exposure, but statistically significant for our second measure of exposure. However, the estimated impact is negative, suggesting that children residing in DRV-controlled provinces had lower nutritional status. This indicates that our estimates are likely conservative.<sup>26</sup> Another concern is that school-age children residing in DRV-controlled areas may have migrated out of the country in the intervening 50 years or so between the Indochina War and the VLSS implementation in 1997-1998. In this case, our estimation sample can provide biased estimates.<sup>27</sup> To check on this hypothesis, we provide estimates on whether individuals are more likely to receive remittances from their relatives living overseas more than 50 years later (i.e., in 1997-1998). Estimation results provided in Table 1.6, Columns 2 and 4 suggest that this is not the case.

Another more technical concern is that, the 1997-98 VLSS may not capture well those that should be in our estimation sample. For example, people who were born in 1924-1935 could be between more than 60 and 70 years old in 1997-1998, and some of them may have died and were thus not surveyed. To address this concern, we provide estimation results for the same female individuals that were surveyed in the 1992-1993 VLSS. However, since this survey collected data on fewer households, one trade-off with doing so is that the sample size is smaller, which can result in weaker estimates. Still, estimation results (Table 1.10, Panel A) are highly statistically significant for several indicators such as completing at least primary education and years of

> 26 Notably, the treatment effect for height is not stably statistically significant for all cohorts; for example, it is statistically insignificant when we compare the treatment group with the first control group. Furthermore, since French-controlled provinces were generally better off economically than Vietminh-controlled provinces (Marr, 1984), any such difference in wealth between Vietminh-controlled provinces and French-controlled provinces would generally render our estimation results conservative. But any such difference would need to equally hold for North Vietnam and South Vietnam and/ or different birth cohorts (i.e., have effects beyond our preceding robustness checks) in order to bias our results downward toward zero. Given the fast-changing historical circumstances in Vietnam from the start of the Indochina war, this assumption would be unlikely to hold.

> 27 If migrants were more educated individuals, our estimates would be conservative (i.e., biased downward).

27
De Nederlandsche Bank. September 1992. Quarterly Bulletin 1992. N.2.

Department of National Health and Population Development. Annual Report, 1987. South Africa. Table: Financial position of pension and provident funds 1985, 1986 and 1987.

Department of Social Security. 1993. United Kingdom. The growth of social security. United Kingdom.

Dixon, John. 1989. "National Provident Funds: The Enfant Terrible of Social Security." International Fellowship for Social and Economic Development Inc.

Eekelaar, John and David Pearl editors. 1989. _An Aging World. Dilemmas and Challenges for Law and Social Policy._ Oxford, United Kingdom: Clarendon Press.

Eisenbach, Zvi and Etan Sabatello. 1991. "Demographic and Socioeconomic Aspects of Population Aging in Israel." Malta: International Institute on Aging.

Employees Provident Fund Organization. 1990. Annual Report 37, 1989-1990. New Delhi: EPFO.

Esping-Andersen, Gosta. 1990. _The Three Worlds of Welfare Capitalism._ Cambridge, Mass.: Polity.

Eurostat. 1992. _Digest of Statistics on Social Protection in Europe._ Vol 1, Old Age. Luxembourg: Eurostat. European Economic Community.

- *. 1993. _Digest of Statistics on Social Protection in Europe._ Vol 2, Invalidity. Luxembourg: Eurostat. European Economic Community.

Falkingham, Jane and Paul Johnson. 1993. "Life-Cycle Distributional Consequences of Pay-as-You-Go and Funded Pension Systems." Policy Research Working Paper 1200. World Bank, Policy Research Department, Washington, D.C.

Fernandez Riva, Javier. 1992. "La Regresividad del Sistema Pensional." _Carta Financiera_ (October) :29-39.

Forster, Michael F. 1993. "Comparing Poverty in Thirteen OECD Countries- Traditional and Synthetic Approaches." Luxembourg Income Study Working Paper Series No. 100. Luxembourg. (August).

Fox, Louise. 1993. "Bulgaria: Social Insurance and Social Assistance". World Bank, Europe and Central Asia. Country Department I, Washington, D.C.

Gruat, Jean Victor. 1990. "Social Security Schemes in Africa: Current Trends and Problems." _International Labour Review_ 129(4):405-42 1.

Gsanger, Hans. 1994 January. Social Security and Safety Nets in Kenya. A Contribution to the Poverty Assessment. German Development Institute: Berlin.

129
_6_ Table 1 presents summary information on 15 major. Asian countries' commodity imports in 1990. The reported data are aggregates of all 48 individual commodity processing chains (see Appendix 1) that have been classified under four broad headings (agricultural materials, foods and feeds, ores and metals, and energy products). The first five columns of the table show -acih country's imports of a" pnmary and processeJ stages of the chains while the next fivo show the share of primary (unprocessed) stage products in total imports. Finally, the individual country results are aggregated into an overall average for Asia (see the meme~ item) and thbs information is compared with similar statistics on EC imports.' Overall, Table 1 shows the Asian countries' imports are considerably more biased against processed commodities than those of the EC. This is surprsing given that the EC has often been criticized in UNCTAD and GATT for its (purported) bias against processed commodity imports. Approximate'4 36 percent (by value) of EC commodity imports are composed of primary (unprocessed) stage commodities while the corresponding share in all Asian countries is 16 percentage points higher (52.3 porcent). Relatively higher Asian import concentration in unprocessed commodities occurs for all four product groups, but is especially pronounced in ores and metals and agricultural materials where the Asian share is, respectively, two and threa times that of the EC. A key related point is that the overall import bias reflected in Table 1 also shows up in Asian intra-tade. Asian countries now export a considerably greater share of processed commodities to non-regional markets than to Asian markets (see Box 2).

Table 1 also reveals considerable variation in individual country results. Japan records the second highest (behind India) overall degree of prmary commodity import concentration (62.7 percent of Japan's total MThesw overall averages can be affected by an Asian country's natural resource endowments. If, for example, a country has abundant natural resources it might tend to have relatively lower processed good imports, _ceter* paribus,_ than countries not so well endowed if resource availability stimulates domestic processing. International transport costs could work toward this end since many bulky low value prmary commodities often have relatively high nominal freight costs which may decline significantly with further processing, although this is not always the case (see Yeats 1977). For some commodities like metal ores, stowage factors decline sharply with processing which makes the fabricated product easier to transport. For these reasons there may be a tendency for processing activity to be located close to available supplies of some natural resoures. Of course, escalating rade barriers in major international markets would be an offsetting factor. There are some products, however, like wood manufactures th4A become more fragile or subject to pilferage after processing than the primay commodity input (wood). For such items transport costs may have an insignificant effect on the location of processing **activity.**
contrast to their previous study, the negative impact of women in reserved GPs on poorer targeting to SC and ST households is lessened in GPs with higher land inequality. Ban and Rao (2008) and Beaman et al. (2010) find lower job-related knowledge among women GP presidents. However, the disparity between men and women presidents in Beaman et al. (2010) disappears two years into their term in office. Clearly, the empirical findings on the impact of women’s GP reservations are mixed.

In this paper, we investigate public goods provision by male and female GP presidents in Tamil Nadu. Although the methodology of this paper is similar to that of Chattopadhyay and Duflo (2004) and Ban and Rao (2008), we contribute to the literature on the effectiveness of women in India’s village governments by building on previous work<sup>5</sup> in the following ways. (1) We analyze the results of a knowledge test of GP rules and regulations, given to GP presidents in the fourth year of their presidency.<sup>6</sup> (2) We incorporate data on the frequency of interaction between GP presidents and key individuals in other tiers of sub-state governance in Tamil Nadu to understand the extent of women GP presidents’ activity and connections while holding office.<sup>7</sup> (3) We discuss important differences in the history of local governance in India’s states, which may explain why our findings differ from some previous findings, particularly in West Bengal. Context is extremely important in examining women’s reservations, and findings in one area cannot be assumed to hold in other areas. (4) We develop a detailed village-level dataset for two time periods using village-level government records instead of recall data on public goods, as in some previous studies. This allows for a more precise difference-in-differences (DID) analysis.

> 5 We focus on the literature examining decentralized governance in India. There are numerous analyses of decentralization and public goods provision in other countries. See, for example, Zhang and Zhou (1998), Faguet (2004), and Zhang et al. (2004).

> 6 Our knowledge test questions focus on GP functioning and panchayat rules and thus differ from the knowledge assessments in Ban and Rao (2008) and Beaman et al. (2010).

> 7 In assessing interaction with higher-level officials, Ban and Rao (2008) use only a binary measure of whether a GP president has met with any higher panchayat official.

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# Table of Contents

||Page No.|
|---|---|
|1. Introduction|1|
|2. Trade and Growth in Latin America: A Comparative Perspective|3|
|3. Recent Trade Liberalization Episodes|10|
|4. Regionalism and Trade Liberalization|34|
|_5._Conclusions|37|
|References|39|
|List of Tables||
|Table 1: Macroeconomic Indicators<br>|11|
|Table 2: Reforms in Argentina<br>|13|
|Table 3: Reforms in Bolivia<br>|21|
|Table 4: Reforms in Chile<br>|24|
|Table 5: Reforms in Mexico<br>|28|
|Table 6: Reforms in Uruguay|31|
|List of Boxes||
|Box 1: Sources of Inefficiency in Highly Regulated Economies<br>|_5_|
|Box 2: Experiences with Exchange Rate-Based Stabilization<br>|15|
|Box 3: The Economics of Regional Integration|35|
|List of Flgures||
|Figure 1: East Asia and Latin America Growth Rates: GDP,<br>||
|Exports, Imports<br>|6|
|Figure 2: Relationship Between Total Factor Productivity<br>||
|Growth and Total Factor Input Growth<br>|9<br>|
|Figure 3: Openness and GDP Indicators<br>|12|
|Figure 4: Real Interest Rate, Exchange Rate, Growth of GDP|16|
interaction (Couttenier et al. 2022), trust (Korovkin and Makarin 2023), and, as a consequence, economic <mark>returns of specific investments</mark> (de Roux and Martinez 2021). We find locally persistent effects of conflict and in our context, relative price changes emerge as a channel through which conflict affects outcomes well beyond the areas of active fighting.

The remainder of the paper is organized as follows. Section 2 provides context by briefly describing the nature of Ukraine’s agriculture sector and recent reforms and the economic effects associated with the Russian invasion of Ukraine in February 2022. Section 3 discusses data on conflict, crop cover, and climate, together with the methodology used to estimate the effects of the conflict on area cultivated with the major crops at the VC level and key results. Section 4 complements this with 2021–23 output and input prices as well as revenue, input use, “profits,” and output market participation, for a panel of approximately 1,200 small and medium-scale farmers, to provide suggestive evidence on how the war has affected the relative profitability of different farm size groups. Section 5 concludes.

# **2. Background and the impact of the war**

To set the scene, we highlight key characteristics of Ukraine’s agriculture sector, and how, together with the country’s broader economy, it has been affected by the war and what this implies for farmers’ behavior. We argue that the measures traditionally used as a proxy for conflict may not fully capture the nature and extent of the damage to agriculture. This provides a basis for discussing how remotely sensed imagery can be used to quantify conflict-induced crop damage at a high level of spatial and temporal resolution and how, linked to crop vegetation cycles, this can potentially improve on commonly used conflict indicators.

# **2.1 Ukraine’s agriculture sector and aggregate impacts of the conflict**

With more than 40 million hectares (ha) of some of the most fertile agricultural land globally, Ukraine has traditionally been a key global supplier of agricultural commodities, especially sunflower oil, maize, and wheat. Before the war, agriculture contributed about 10% to gross domestic product and 42% of the country’s exports. The sector’s structure was shaped by de-collectivization in the early 2000s when some 7 million landowners were provided with land shares of about 4 ha each. Approximately 20 million ha of Ukraine’s agricultural land is farmed by large farms in the formal sector, often firms with links to foreign capital markets (Deininger et al. 2018) that lease land from the owners. About 12 million ha are estimated to be cultivated by small and household farms, many of which remain informal. In 2002, about 9.2 million ha were state or communal land, and an unknown share of this land was “privatized,” often in nontransparent ways that imposed significant losses to the public (Nivievskyi 2020). With one growing season per year, winter crops, including wheat, rye, barley, and rapeseed, are sown in the fall, and summer crops, such as barley, maize, sunflower, and soybean, are sown in the spring.

4
growth of 2.7 percent per annum. Similar evidence of capital biases in development can be found in Indonesia (World Bank, 1985, pp. 86-87). Until 1983, Indonesia subsidized interest rates. The preferential treatment of capital was preserved in a 1984 tax law allowing accelerated cost recovery for capital investments. While encouraging capital-intensive development, Indonesia is faced with a labor force growing at the rate of 2.3 percent per annum and the need for significant labor absorption in he commodityproducing sectors.

39. Subsidized public sector financing of capital-intensive development in the Philippines has also been blamed for the country's low rate of employment growth (World Bank, 1987, pp. i-iii). Other examples of capital market distortions **are** found in a study of seven developing countries, including Hong Kong, Pakistan, Korea, Ghana, Sierra Leone, Tunisia, and Brazil. The study shows that when adjustments are made for administrative and risk differentials, the cost of capital for small non-agricultural enterprises is as much as 30 percent higher than that for large-scale enterprises (Haggblade, et.al., 1986, p.23). The latter tend to be more capital-intensive than the former. Capital subsidies are seen in these examples as lowering the rate of labor absorption and distorting the mix of skills required. Factor market distortions like these are expected to be closely connected with distortions in product markets, given the nature of the derived demand for capital and labor.

# ECONOMIC POLICIES INVOLVING PRODUCT MARKETS

40. Balassa (1987, pp. 1-3) refers to the interaction of product and factor markets. Inward focused trade and development strategies, he 25
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28. When the annual volumes of seatrade declined and there was hardly any reduction in the combined carrying capacity of the world merchant fleet, severe tonnage overhangs developed. In 1983, almost one-third of the fleet was unemployed. Tonnage utilization in the bulk shipping sector was much more affected by the cyclical swings in the international seatrade markets than the liner trades with <!-- Start of picture text --> Owners' Attitudes<br>in Times of Uncertainty<br><!-- End of picture text --> <!-- Start of picture text --> Dry Bulk Vessels<br>16 l<br>14 .<br>12 '<br>10 \ :sector,<br>lO / \ , z<br>8-I k .<br>6- / . -\< :percent<br>4 - -- \ 't.<br>2 - , , , a-<br>0<br>80 81 82 83 84 S5 86 87 88 89 90 91<br>- LAY - UP ---- DEMOLITION<br>Source: Lloyd's Shipping Economist end Feernieys<br>Tankers<br>million dwt<br>80<br>70-<br>60-<br>50-<br>40 \<br>30<br>20- /'<br>10-<br>o8 82 8 8 8<br>80 81 82 83 84 85 86 87 88 89 90 91<br>- LAY - UP ---- DEMOLITION<br>Figure 3<br><!-- End of picture text --> general cargo. The tanker sector suffered the most pronounced effects (42 percent of the fleet unemployed in 1983), followed by the dry bulk fleet (26 percent), and the general cargo fleet (ten percent). Thanks to the revival of the seatrade markets during the second half of the 1980s, the supply overhang came down a id has, since 1989, stabilized around ten percent of the world merchant fleet's capacity, as a whole. But there are differences. In the tanker excess tonnage represented ~~~~~~~~~~16 percent of the fleet during the final weeks of 1992. It was 12 in the case of the dry bulk fleet, but only 4.7 percent for the general cargo segment. The container fleet continued to be almost fully employed.

29. Most shipowners appeared unable to accept the fact that during the 1980s trends had started which were leading to fundamental changes in the structure of the international seatrade markets and in annual volume growth rates of the different cargo categories. Thus they were hesitant to eliminate underutilized assets in the hope that a renewed market uptum would generate increasing demand for ocean transport, and hence provide for improved capacity utilization for their fleets. As a result, a majority of owners opted for temporary withdrawal of their ships from the market by laying them up. This behavior was most pronounced in the tanker sector (see Figure 3). Statistics relating to changes in fleet