rafmacalaba/datause-encoder-data huggingface dataset:
the data. Our within-week models place less weight on periodicities, and more weight on the fraction of duration spoken during the workday or late at night, the distance traveled, variation in usage, and correlations between calls and SMS. The OLS fixed effect model is also simpler than the logistic model, suggesting the fixed effect approach penalizes model complexity more.

# **_Performance_**

# _Within Time_

We measure how the method performs out of sample using cross validation. Following common practice in supervised machine learning, the sample is divided into _R_ randomly selected folds. The algorithm cycles through each fold, estimating (training) the model on _R-1_ folds, and reporting predictive performance on the _R_ th omitted fold (testing). The results are averaged across each fold, and over multiple fold draws. Larger values of _R_ exploit more of the sample for training, which tends to improve predictive performance, but increase the computational burden because the model must be estimated _R_ times. The main results report _R_ =5, which is commonly used in the machine learning literature (Table S2 reports results for R=10).

As a first check, consider how well models separate low and high risk borrowers. Results are reported from the most conservative model using our method, the random forest weekly ensemble, and the least conservative bureau model. These models generate continuous scores, so performance can be assessed by comparing a few example acceptance thresholds. In our most conservative model, individuals with the highest quintile of risk scores are 2.8 times more likely to default than those with the lowest quintile. Among those with credit histories, if credit were extended to the 50% lowest risk prospects according to the credit bureau score the default rate would be 9.7%, whereas it would be only 8.3% based on our scoring using phone records. Moreover, if credit were extended to those without credit histories whose predicted risk of default would place them in the top 50% of risk-prospects for those with credit records, the default rate would be only 6.6%. That is, our method using phone records can identify a group of good credit prospects from among those with no credit history.

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Figure 3.11 Trend of total enrollment at senior secondary <!-- Start of picture text --> 3000<br>2500<br>2000<br>1500<br>1000<br>500<br>0<br>2007 2008 2009 2010 2011 2012 2013 2014 2015 2016<br>Tertiary Upper secondary (academic track) Upper secondary (vocational track)<br>10,000 people<br><!-- End of picture text --> _Source:_ National Bureau of Statistics of China, 2016b.

Figure 3.12 Percentage of upper secondary vocational enrollment in China, 2005–2016 <!-- Start of picture text --> 50.0<br>48.0 47.1 47.9 47.1<br>46.0 46.0<br>45.2<br>44.0 43.9 44.0<br>42.0 41.7 42.1<br>40.0 39.7 41.040.3<br>38.0<br>36.0<br>34.0<br>32.0<br>30.0<br>2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016<br><!-- End of picture text --> _Source:_ <u>http://www.moe.edu.cn/s78/A03/moe_560/jytjsj_2016/2016_qg/201708/t20170822_311608.html</u> Among those who stay in upper secondary education, which track they took also determined their likelihood to pursue tertiary education. The likelihood of a senior secondary graduate continuing to tertiary education has increased significantly. In theory, vocational school graduates are not excluded from participating in the university entry examination and continue to participate in tertiary education. However, in practice, the chance is slim. National Bureau of Statistics of China reports the promotion rate of general secondary graduates, together with the number of graduates, and the total number of university entrants each year. Using these data, the number of vocational graduates entering university can be extrapolated. The results show that nearly 100 percent of the university entrants are from the general education track (Figure 3.13 and Figure 3.14).

32
Policy Research Working Paper 8950

# **Abstract**

This paper explores the sovereign-bank nexus in emerging markets and developing economies: the interconnectedness between the health of the sovereign and the banking system. Data from 140 emerging markets and developing economies suggest that this nexus is rising. First, banks have increased their exposure to their sovereigns in the past decade. Second, government debt has grown, and fiscal positions have deteriorated, raising the specter of sovereign stress. Third, banking system assets and bank credit to the private sector have steadily increased, which may restrict the sovereign’s capacity to contain a banking crisis. Fourth, empirical evidence from 36 emerging markets and developing economies documents the existence of the nexus and suggests that it has increased recently. However, deeper country analysis is required for a better understanding of the sovereign-bank nexus, given country idiosyncrasies, including the structure of sovereign debt and the composition of the investor base, and data lags and opacities. To minimize the adverse effects of the sovereign-bank nexus, efforts should be focused on maintaining fiscal and bank buffers, strengthening surveillance and supervision of the banking system, improving transparency and data quality of bank-sovereign linkages, better addressing the regulatory treatment of the sovereign exposures and government support of the banking sector, and carefully evaluating the policy trade-offs in the sovereign-bank nexus.

This paper is a product of the Finance, Competitiveness and Innovation Global Practice. 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://www.worldbank.org/prwp. The authors may be contacted at efeijen@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
# **Figure 4: Variation in Management Practices Across Bureaucracies**

## **A. CS-Autonomy Score**

<!-- Start of picture text --> 0 10 20 30<br>Autonomy ranking of organisation<br>2<br>1<br>0<br>Raw management score<br>-1<br>-2<br><!-- End of picture text -->

## **B. CS-Incentives/Monitoring Score**

<!-- Start of picture text --> 0 10 20 30<br>Incentives ranking of organisation<br>2<br>1<br>0<br>Raw management score<br>-1<br>-2<br><!-- End of picture text -->

**Notes:** CS-Autonomy (CS-Incentives) is an aggregate index of management questions relating to roles and flexibility (monitoring and incentives). Responses by senior bureaucrats are averaged across all sub-topics and converted into z-scores before averaged into a single index of management.
the liberalization of trade on demand elasticities.<sup>Using monthly Brazilian manufacturing</sup> survey data and broadly following Slaughter,<sup>Paes de Barros, Corseuil and Gonzaga.</sup> (1999) regress a series of sequentially generated<sup>coefficients on both the own wage and</sup> lagged employment on aggregate total trade<sup>(exports + imports) over GDP. They find no</sup> impact of trade openness on either. Using aggregate<sup>manufacturing data from Uruguay at</sup> the two digit level, Cassoni, Allen and Labadie<sup>(1999) find a negative impact of sectoral</sup> total trade/GDP on the lagged employment<sup>coefficient. While implying more rapid</sup> adjustment, it also leads to a lower total own<sup>wage elasticity, the opposite of that</sup> predicted.

This paper first asks whether, theoretically,<sup>it is obvious that increased trade</sup> should increase own wage elasticities. Though<sup>a complete model of all the predicted</sup> effects is intractable, we do point out where<sup>the link between the two may not be tight.</sup> The paper then uses establishment level data<sup>to provide consistent dynamic estimates of</sup> labor demand functions for three Latin American<sup>countries across trade policy regimes.</sup> Estimation is done following Arellano and Bond's<sup>GMM in differences approach. 2</sup>

# II. **Labor Demand and Trade Liberalization**

Trade reform might affect own wage elasticities<sup>through at least three channels:</sup> substitutability of inputs, product demand elasticities,<sup>and the degree of collusion in the</sup>

> 2 Micro- panel data offer more precise estimates<sup>of demand functions, allow factor prices to be taken as</sup> exogenous, permit compensation for unobserved<sup>heterogeneity, and permit distinguishing changes in</sup> parameters arising from firm behavior versus<sup>the entry end exit of firms into the industry. Despite those</sup> benefits, and probably due to the larger efforts<sup>associated with generating micro data sets, only a small</sup> fraction of the nearly two hundred empirical studies<sup>of labor demand functions reviewed by Hamermesh</sup> (1993) are based on establishment-level microeconomic<sup>data.</sup>

2
# **III. Issues in Selected Sectors**

# _A. Manufacturing_

India has an unambiguous interest in actively seeking negotiations to bring down tariffs on industrial products.<sup>7</sup> The interest is fourfold. First, India's tariffs today, even after significant reform, remain exceptionally high and almost the highest in the world (Chart 2). Further liberalization is desirable but difficult for internal reasons and this domestic situation could yield negotiating coinage in the next round.

**Chart 2:** Cross-Country Comparison of Average Tariff Rates (1998)

<!-- Start of picture text --> (%)40_ ___. ____ _________________<br>35<br>30 - -<br>2 5-<br>2 0<br>1 5<br>1 5 - _ _ _ _.__.<br>5-<br>0<br>1-<br><!-- End of picture text --> _Sourrce:_ World Bank (forthcoming) Second, even if the pace of further liberalization is divorced from external bargaining imperatives, India has a strong interest in reducing the level of its Uruguay Round bound tariffs. The wedge between the applied and bound remains high and creates uncertainty and lack of predictabilty about trade policy (Table 2). According to a recent survey domestic investors appear not to have confidence in the stability of government policies (Table 3). Bringing bound levels closer to current and future applied levels can engender confidence in the predictability of policies. Recent tariff policy increases - the special additional duty of 4 percentage points imposed in 1998-99 and the surcharge equivalent to 10 percent of the basic customs duty levied in 1999-2000 - illustrate the costs of not having tighter external discipline on trade policies. Had such discipline existed in the form of bindings that "bit", the government would have been forced to raise revenues through alterative, trade-neutral and hence less costly measures.

> 7 See Hertel and Martin (1999) for a quantification of the benefits from further global liberalization of inanufacturing tariffs.

> _A,_ Pthough this measure was intended to rectify negative protection by imposing a tax on imnported goods whose domestic counterparts already faced a 4 percent sales duty, the manner in which it was levied resulted in affording some extra protection to domestically produced goods.

I10
inequality estimates, especially if income underreporting is taken into account. Studies in other countries have shown that income inequality may also rise significantly due to tax evasion, as highincome households tend to evade taxes proportionately more than low-income households (Alstadsæter et al., 2019; Guyton et al., 2021; Leenders et al., 2023). This means that the burden of taxes falls disproportionately on lower-income households, leading to greater income inequality. Reducing tax evasion requires not only improving tax administration and compliance mechanisms, but also addressing underlying social and economic factors that contribute to tax evasion. By doing so, policy makers can promote greater equity and social welfare, improve fiscal sustainability, and ensure that the tax system serves its redistributive function effectively.

**Furthermore, tax evasion has important links with social policy, as it may reduce the tax system's progressivity, making it less effective in redistributing income from higher-income to lower-income individuals** . The assessment of benefits for some programs may rely on a person's tax return. In Romania, child benefits are universal, granting the same amount regardless of the number of children, but other social benefits are means-tested. The list of means-tested benefits includes family allowance, child-care benefits, and social aid for guaranteed minimum income. Over a half million people receive means-tested social benefits (Adăscăliţei et al., 2020). Tax evasion renders targeting social benefits less effective, as there may be "leakages" to ineligible recipients who underreport their incomes. This can result in benefit fraud and lead to fiscal losses for the government and reduced social welfare for eligible recipients. Ignoring tax evasion can be misleading regarding the distributive and fiscal effects of social benefits and the tax system. It can reduce the tax system's progressivity as high-income payers may not pay their share. This exercise contributes to another analytical study currently being conducted by the World Bank for Romania: a fiscal incidence analysis (CEQ) that evaluates the distributive impacts of the overall fiscal system. The main results of the CEQ will be featured in the upcoming World Bank Public Expenditure Review.

**In particular, understanding the interaction between labor tax evasion and the minimum wage policy is crucial for optimal policy making** . Payroll tax evaders may be overrepresented among minimum wage earners, meaning that a large share of those people who reported a minimum wage may be

4
prices, potential buyers, and product standards or requirements in other countries. The absence of these middlemen probably discouraged potential exporters, both by increasing the information costs they faced, and by increasing the degree of uncertainty concerning foreign market conditions. Apparently, however, the lack of a well-developed trading services sector did not affect all producers equally. Exporters able to deal in large volumes or to ship to large markets were relatively less constrained by the absence of trading intermediaries because they were able to sell directly to final buyers. This finding suggests that sunk costs rose less than proportionately with export volume.

Export market entry was also inhibited by institutional factors that affected expected profits. Notably, a survey of Colombian fnancial institutions revealed that none were willing to lend money against export orders or letters of credit from purchasers' banks. Lenders attributed this unusually conservative practice to their inability to judge whether the potential borrowers could seriously compete abroad. It mainly hurt first-time exporters and existing one-product, one-country exporters attempting to enter new country or product markets.

Finally, as emphasized by Dixit (1989a), regime uncertainty may have induced producers to delay entry into the export market, even after substantial devaluation. In the World Bank survey, producers cited uncertainty about the permanence of the change in trade and exchange rate regimes as incentives to delay or forego entry into the export market. Their main concern was apparently that lobbyists in favor of protecting domestic industries would be able to reverse the trend toward trade liberalization.

In summary, during the sample period many Colombian nufacturs viewed the export market as more risky and less profitable than the domestic market. The lack of a trading services sector, access to financing, and low product quality all appear to have constrained export marL:t participation by raising the costs of entry or increasing the uncertainty of the profitability of exporting.

10
6 capital accumulation – and thus on _female relative income_ .<sup>12</sup> We achieve this by estimating the returns to education and experience separately for women and men. Nonetheless, the impact of the COVID-19 pandemic on men and women turns out to be similar. We note that, to our knowledge, these returns have not been globally estimated using a consistent methodology before, so these stylized facts were not previously available in the literature. Finally, we implement a series of robustness checks, including accounting for cohort effects, the impact of motherhood, selection into the workforce, and measurement error due to self-employment varying by gender.

More generally, our findings challenge some of the ongoing narratives in policy circles, which highlights the methodological contributions of this study.<sup>13</sup> Section 1 describes our development accounting framework. Section 2 explains the calibration, and Section 3 explains how we model the pandemic shock. Section 4 describes the impact of pandemic shocks on different countries under different scenarios that affect countries symmetrically, and Section 5 discusses scenarios that might be relevant for specific groups of countries over the COVID-19 pandemic specifically. Section 6 provides estimates of the return to schooling and experience for men and women, and applies our framework to study the differences in the impact of the COVID-19 shock across male and female workers. Section 7 provides robustness checks. Section 8 concludes.

# **1. Development Accounting Framework**

For our analysis, we require an accounting framework that tracks the accumulation of human capital and aggregates its returns across individuals. We build on the framework in Jedwab et al. (2021c), as it allows us to match a variety of statistics required for our exercise, including the distribution of schooling and the rate at which different forms of human capital are accumulated over the life cycle. First, we describe how our framework works in the steady state: this scenario will serve both as the initial condition before the

> 12 There are studies on the impact of relative income on the bargaining power and socio-economic outcomes of women (Duflo, 2003; Qian, 2008; Jensen, 2012; Majlesi, 2016). See Duflo (2012) for a survey.

> 13In our framework the only determinant of income is human capital. Gollin (2002) shows that labor shares vary from 0.65 to 0.80 around the world. To the extent that other resources do contribute to output, one might want to lessen the impact of pandemic shocks accordingly. On the other hand, idle machinery does not produce goods, and to the extent that output disruptions affect the production of capital goods, these resources would also diminish in quantity as a by-product of the shocks to human capital. As a result, it is not clear that such an adjustment is necessary, nor is it likely to be significant.
**Table 3. Determinants of Extreme Demands for the Medicine**

||**Equation for No Demand**<br>**(Probit: 1=no demand even at**<br>**price of zero; 0= normal**<br>**demand)**<br>|**Equation for Extremely High**<br>**Demand**<br>**(Probit Model: 1=yes at the**<br>**highest price; 0=normal demand)**<br>|
|---|---|---|
||-0.000|-0.023|
|**Age**|(0.03)|(1.59)|
||0.220|0.068|
|**Male**|(1.32)|(0.21)|
||-0.198|0.285|
|**Worker**|(1.47)|(1.08)|
||0.367|-0.149|
|**Married**|(1.79)*|(0.40)|
||0.075|-0.275|
|**Smoking**|(0.49)|(0.91)|
||-0.171|1.898|
|**Income**|(1.67)*|(6.70)***|
||0.066|0.207|
|**Education**|(0.23)|(0.27)|
||-0.413|0.521|
|**Rcancer**|(1.50)|(1.57)|
||0.485|-0.173|
|**Yuncertain**|(2.93)***|(0.37)|
||0.058|-0.068|
|**Healthcheck**|(0.41)|(0.26)|
||0.278|0.208|
|**Religion**|(1.24)<br>|(0.48)<br>|
||-0.386|0.613|
|**Trust**|(3.41)***|(2.47)**|
||-0.423|0.082|
|**Need**|(4.55)***|(0.51)|
|**Tianjin**|1.353|-0.714|
||(6.54)***|(2.43)**|
|**Guizhou**|1.370|-1.713|
||(6.50)***|(3.79)***|
|**Constant**|0.394|-20.948|
||(0.37)|(7.01)***|
|**Observations**|1380|913|

Absolute value of z statistics in parentheses.* significant at 10%, ** significant at 5%; *** significant at 1% 25
to climate change in order to protect human and physical capital (Kuwait, Oman, Saudi Arabia, United Arab Emirates), including integrated water management actions, sustainable agriculture practices, reduced desertification, and early warning systems for natural disasters (IMF 2021c).

Country-specific reform agendas are essential to improve potential growth in the region. In Saudi Arabia, implementing the codification of legal practices is an important step in strengthening the legal system. Rationalizing state involvement in the economy, for instance by privatizing poorly performing state assets, could improve the allocation of capital and empower the private sector. This is particularly important in diversifying its economy away from fossil fuels. Labor market reforms should be considered to further increase the participation of women in the labor force. A law requiring the disclosure of assets, an effective anti-corruption strategy, and the efficient implementation of Vision 2030 reforms could all improve governance.<sup>26</sup> Effective implementation of the UAE 2050 Strategy, with appropriately sequenced and timed reforms, and the UAE Green Agenda 2030 could help reverse declines in potential growth. Reforms include commercializing nonstrategic government-related entities, investing in education and training in emerging fields that assist in diversifying the economy, and further aligning national and expatriate labor laws and public and private wages.

In Egypt, maintaining the gains from previous structural and macroeconomic reforms is not assured, with further reforms are needed to address persistent fiscal and external vulnerabilities, as well as structural impediments to growth. To further promote macroeconomic stabilization, reforms could focus on improving the transparency of fiscal reporting and debt management, rationalizing the central bank’s subsidized lending schemes, and improving liquidity management to enhance monetary policy transmission. On structural policies, reforms are needed to further strengthen revenue mobilization (including through limiting tax exemptions and reforming real estate taxes), increasing the role of the private sector by rationalizing state ownership, reducing tariffs and nontariff barriers, and enhancing the independence of regulatory authorities.

In the Islamic Republic of Iran, structural reforms are urgently needed to address widespread inefficiencies, the lack of fiscal sustainability, and price distortions. Further measures to raise government revenue—eliminating tax exemptions and improving tax compliance—and stabilize government expenditures are needed with a particular focus on subsidy reform. This would also assist in bringing down the high intensity of energy usage. Reforms to the monetary policy framework—a price stability mandate, greater central bank independence, rationalized lending operations, and stronger supervisory and resolution powers—could improve macroeconomic and financial sector stability.

26 See Government of Saudi Arabia (2022) for more details on Vision 2030.