rafmacalaba/datause-encoder-data huggingface dataset:
Policy Research Working Paper 10970

# **Abstract**

In Paraguay, poverty reduction has stalled since 2014 due to a deceleration in economic growth, which has been argued to be partly due to a series of climate-related events. Nevertheless, little is known about the impacts of climate-related shocks on the poor. This study analyzes the extent to which short-term weather shocks have affected incomes and poverty in Paraguay. It combines data from the yearly household survey series, the Permanent Continuous Household Survey; the fifth generation European Centre for Medium-Range Weather Forecasts atmospheric reanalysis of the global climate temperature data; and Climate Hazards Group InfraRed Precipitation with Station data from 2004 to 2019. The research design exploits variation in weather shocks across districts and time, using ordinary least squares pooled regression analysis. The results show that heat shocks led to significant household income reductions: 5 percent in urban areas and up to 8.8 percent in rural areas, on average. Heat shocks also increased poverty by 1.7 and 4.2 percentage points in urban and rural areas, respectively. Floods primarily affected urban areas, increasing poverty by 1.9 percentage points. The impacts vary substantially across regions and household characteristics: female-headed households in rural areas are particularly vulnerable to heat shocks, while households that are active in the primary sector suffer most from both heat and drought shocks. These findings evidence the disproportional impacts of short-term weather shocks on income and poverty across regions and household characteristics. The results highlight the need to consider actions to promote adaptation and climate risk strategies tailored to subpopulations that are vulnerable to climate, to enhance overall resilience in the country.

This paper is a product of the Poverty and Equity 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 lgayoso@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
_34_ _Famdly Planning Success Stories in Bangladesh and India_ organizational system developed for active participation of community members in government's family planning and other development programs. Cost-effectiveness of the strategies adopted by the Matlab and Kundam Project cannot be compared because of the lack of adequate data.

The lessons so far learnt from the Matlab and Kundam Projects should be useful in implementing the national and regional family planning programs. The feasibility of replicating the strategies adopted in the two Projects should be tested in experimental projects of different scales in various regions of Bangladesh and India. Since the Kundam Project is more realistic in the sense that it focuses on activities which are supplemental to the program rather than substitutional as in the Matlab Project, perhaps the feasibility of its replication is greater than the Matlab Project. A further justification of testing the feasibility of projects similar to Kundam Project in other areas is that examples of effective community participation in family planning and other development programs are still rare although it is commonly recognized as a requisite for program success.

# References

- Arthur, Brian, and Geoffrey McNicoll. 1978. 'An analytical survey of population and development in Bangladesh.' _Popuion and Development Review_ 4(1):23-80.

- Askew, Jan. 1989. 'Organizing community participation in family planning projects in South Asia.' _Studies In Fanly Planning_ 20(4):185-202.

- Askew, Ian, M. MacDonald, and C. Lenton. 1986. _The Conuwnity Participation Approach in Family Planning Programs: Some Suggessionsfor Project Development._ London: International Planned Parenthood Federation.

- Balk, Deborah. 1986. Background notes for the cost-effectiveness analysis of the Madab Maternal-Child Health and Family Planning Progamme. _Documentaton Note Series,_ Nos. 54-54K. Dhaka: MCH-FP Extension Project, ICDDR,B. International Centre for Diarrhoeal Disease Research, Bangladesh.

- Balk, Deborah, Khodezatul K. Faiz, Ubaidur Rob, J. Chalraborty, and George Simmons. 1988.An _Analysis of Costs and Cost-effectiveness of the Fnily Planing-Health Services Project in Madab, Bangladesh._ Dhakal International Centre for Diarrhoeal Disease Reseach, Bangladesh.

- Banu, HEsina, James F. Phillips, Deborrah S. Degraft, and Michael A. Koenig. 1987. _Baseline Socal, Economic and Denographic Dierendals in Contraceptive Behavior in Intervention and Comparison Areas of the MCH-FP Exenion Project._ Dhaka: International Centre for Diarrhoeal Disease Research, Bangladesh.

- Becker, S., and M. A. Sardar. 1980. 'Seasonal p£terns of vital events in Madab Thana.' In R. Chezbers, R. Loanghurst, and A. Pacey (eds.), _Seasonal Dimensions to Rural Poverty._ Landen: Frances Pinter Publishers Ltd.

- Bhatia, Shusbum. 1981. 'Training of community health workers in rural Bangladesh.' _World Health Forun_ 2(4):491-494.

- Bhatia, Shushum. 1983. 'Contraceptive users in rural Bangladesh: A time trend analysis.' _Studies in Famdly Planning_ 13(1):24-31.
by US multinationals in Mexico in recent years, particularly in the automobile and electronics sectors. However, these studies only provide anecdotal evidence of reshoring.

The recent Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) have also increased the incentives to relocate production to the US through a combination of tax credits and grants requiring domestic or North American content. For instance, the IRA Section 45X MPTC Advanced Manufacturing Tax Credit applies to components for wind, solar, and battery projects manufactured in the US. To be eligible for the domestic content bonus credit, energy projects and facilities are subject to a domestic content requirement of 40 percent until 2025, which increases to 55 for facilities for which construction begins after 2026.<sup>3</sup> According to Secretary of Energy Jennifer M. Granholm, the rationale for these local content requirements is driven by the aim of “[...] strengthening American manufacturing and enhancing our national security with products stamped ‘Made in the USA.’”<sup>4</sup> To our knowledge, this is the first paper to formally analyze the extent of reshoring by US multinationals, complementing the recent trade literature on the consequences of supply chain disruptions. The paper offers novel insights about the future of US supply chains using information on announcements of greenfield investment projects from the Financial Times fDi Markets database, including projects within the US. The database provides realtime information on cross-border greenfield investments gathered from various sources, including the Financial Times newswire, industry organizations, investment agencies, and company reports. As a result, unlike other data on investments, this information is forwardlooking as it captures announcements about new projects and expansions. Furthermore, unlike other studies, the data allow us to leverage information on domestic investment projects between US states to assess reshoring activities.

> 3 <u>https://www.irs.gov/pub/irs-drop/n-23-38.pdf</u>

> 4 - <u>https://home.treasury.gov/news/press releases/jy1477</u>

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how political cycles could affect economic outcomes. The literature tends to find weak effects in developed countries, with the US being a notable exception (see Alesina and Rosenthal, 1995 and Alesina et al., 1997). The effects are stronger in more immature democracies. For example, Russia’s regional public expenditure rises shortly before regional elections (Akhmedov and Zhuravskaya, 2004). This lends support to the argument that the strengths of a democracy – such as press freedom, checks and balances, or accountability – can help mitigate opportunistic political cycles (Akhmedov and Zhuravskaya, 2004 and Aidt et al., 2011).

The remainder of the paper is as follows. Section 2 presents the data. Section 3 shows the main results. Section 4 presents several robustness checks. Section 5 concludes.

# **2 Data**

Our analysis draws on two main datasets. The first covers election polls and outcomes for 207 elections across 50 countries worldwide over the period 1980-2020. Only elections with available polling data are included. On average, each country has four elections. There are 149 parliamentary and 58 presidential elections. The list of countries and the number of elections in each are country by year presented in Figure 1 and Table A1. The polling data originate from multiple polling agencies for each country. Official election results are available from multiple sources. For each election, voting intentions by political party (i.e. polls) are gathered, alongside election outcomes<sup>5</sup> . It is important to consider the incumbent changes at the political level rather than for individual since term limits could create me- party politicians, chanical turnover of individuals. Countries for which polling data are unavailable are not included in our dataset. In total, the dataset has over 13,333 polling observations, which are aggregated into 2,552 election-month polling observations for the incumbent party. Hence, on average, each election has about 12 election-month polling observations.

In addition to voter intentions, we include data on several additional election characteristics. First, an indicator variable is created to denote elections where the incumbent party remains in power following the election. This variable is at the party-

> 5In some polls, respondents are allowed to answer election questions with “Don’t Know” or “Not Sure”. This will mechanically make voting intentions incompatible with the final election outcomes. In such cases, we drop the extraneous responses, and rescale the polls, considering only respondents who have selected a political party.

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# WPS3389

## Why Do Emerging Economies Borrow Short Term?

Fernando A. Broner Guido Lorenzoni Sergio L. Schmukler<sup>∗</sup>

#### Abstract

We argue that emerging economies borrow short term due to the high risk premium charged by international capital markets on long-term debt. First, we present a model where the debt maturity structure is the outcome of a risk-sharing problem between the government and bondholders. By issuing long-term debt, the government lowers the probability of a liquidity crisis, transferring risk to bondholders. In equilibrium, this risk is re fl ected in a higher risk premium and borrowing cost. Therefore, the government faces a trade-off between safer long-term borrowing and cheaper short-term debt. Second, we construct a new database of sovereign bond prices and issuance. We show that emerging economies pay a positive term premium (a higher risk premium on long-term bonds than on short-term bonds). During crises, the term premium increases, with issuance shifting toward shorter maturities. This suggests that changes in bondholders’ risk aversion are important to understand emerging market crises.

### JEL Classi fi cation Codes: E43; F30; F32; F34; F36; G15

Keywords: emerging market debt; maturity structure; sovereign spreads; risk premium; term premium; fi nancial crises

> ∗Affiliations: CREI - Universitat Pompeu Fabra and University of Maryland, Princeton University, World Bank. E-mail addresses: broner@econ.umd.edu, guido@princeton.edu, sschmukler@worldbank.org. We are grateful to Galina Barakova, Tatiana Didier, Lishan Shi, and, particularly, Marina Halac for superb research assistance. For valuable comments, we thank Mark Aguiar, Ricardo Caballero, Eduardo Levy Yeyati, Roberto Rigobon, Jaume Ventura, and participants at presentations held at the AEA Annual Meetings (Washington, DC), the Conference on Sovereign Debt at the Dallas Fed, CREI - Universitat Pompeu Fabra, George Washington University, the Inter-American Development Bank, the International Monetary Fund, the LACEA Annual Meetings (Madrid and Puebla), and the NBER Summer Institute. We thank the World Bank Latin American and Caribbean Research Studies Program and Research Support Budget for fi nancial support.
# **1. Introduction**

The growth and prosperity of small businesses is vital for poverty reduction and for generating jobs for a young and rapidly growing labor force in emerging market economies (World Bank, 2013; de Mel, McKenzie, and Woodruff 2010). With self-employment rates of 40% on average and in some countries as high as 75% (compared to only 7% in the United States),<sup>1</sup> the economic policies surrounding small business promotion take on vital significance. Further, as multinational organizations look to emerging markets for new sources of growth, they discover that their fates are in many ways intertwined with the fates of millions of small firms and business owners on whom they have to rely as customers, suppliers, and distributors (Viswanathan, Rosa, and Ruth 2010; Prahalad 2005).

In search of policies that foster small business growth, the literature has long emphasized the importance of alleviating constraints on access to physical capital and external finance (Banerjee et al. 2015; Bruhn and Love 2014; de Mel, McKenzie, and Woodruff 2008). A growing body of work additionally stresses the significance of business skills and entrepreneurship training as key drivers of small firm growth and productivity (Bloom et al. 2010; Bruhn, Karlan, and Schoar 2010). However, attempts to identify the causal impact of business training programs among small firms in emerging markets have yielded disappointingly weak results (see McKenzie and Woodruff (2014) for a literature review). Even less understood are the mechanisms by which business trainings can succeed or fail to improve firm outcomes (Fischer and Karlan 2015). A better appreciation for which types of business practices can be affected by these trainings, and which outcomes these practices influence, can provide important insight on how to improve business performance.

In this paper, we study the causal links between business training, practices, and outcomes, and identify two separate pathways to profits through a randomized control study of 852 small firms in South Africa. We distinguish between two types of training programs, marketing and finance, in order to understand the process by which training influences business practices and, thus, has an impact on firm performance. Importantly, we find that certain outcomes of interest to policy

> 1 See: http://data.worldbank.org/indicator/SL.EMP.SELF.ZS

2
bias) <u>(Nickell 1981).</u><sup>22</sup> The standard approach to address such a bias is an estimating model (equation 9) using a dynamic panel data approach by a system <mark>generalized method of moments (G</mark> MM) estimator that uses lagged regressors as instruments <u>(Arellano and Bover 1995; Blundell and Bond 1998). However, the properties of the system GMM estimator on small</u> samples, like the one we use here ( _T_ = 17 on average with a minimum of 10 and a maximum of 20) are not well understood (Soto 2009). In particular, the standard errors and auto-correlation tests may be unreliable. Because of these limitations, we present the estimation results of model (9) only to test the sensitivity of our main results to this change in the specification.

<u>Table 5</u> presents the results of the system GMM estimation of model (9). We use all available lags of the log per capita income ( _> t –2_ ) and limit the number of instruments by collapsing the instrument set, as recommended by Roodman (2009). The estimates show that the value of α is below one, so the requirement of conditional convergence is satisfied. The Hansen overidentification test is not significant, suggesting that the instrument set is valid. However, the transformed model is not stationary, as the Arellano-Bond AR (2) test is significant. Therefore, the estimations are not fully robust, and we abstain from making further conclusions, other than pointing out the coincidence in the sign of the point estimates between our baseline specification and this estimation for all mobility indicators and regions except the upward mobility gap.

There could be multiple reasons for the endogeneity of mobility to country income levels. For example, richer countries may spend more on public education and targeted transfers to the poor, which, all else equal, may increase intergenerational mobility. While, theoretically, such endogeneity could be addressed through convincing instrumental variable estimates, in practice, finding valid instruments for growth regressions at a country level is notoriously difficult (e.g., <u>Durlauf et al. 2005). So, despite the battery of tests and estimations of alternative specifications,</u> we cannot claim to have estimated the causal effect of intergenerational educational mobility on economic development.

> 22 The dynamic panel bias (Nickell 1981) is especially acute in situations when the time dimension of the panel dataset is small and the number of cross-sectional units is large. The dynamic panel bias typically caused underestimation of the coefficients on the lagged dependent variables.

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_Potential problems associated with free entry_ _Section 4_

- incumbent utility had had and enforced exclusive rights, this could not have happened;<sup>49</sup>

- similarly, the Indian city of Ahmedebad is developing successful 'slum networking' projects. These bring low cost network services into slum areas, supported by local businesses and community groups. Again, they would not be possible unless entry was permitted; and

- in Maputo, Mozambique, wealthy residents with (subsidised) piped water supply run informal plastic-pipe systems to supply water from their connection into low income areas. They sell the water for much more than it costs them, and at prices which can cause real hardship to their low income customers. These informal systems are illegal, and the price-gouging of the poor by the well-off, using subsidised water, is generally regarded as inequitable. On the other hand, at least this system provides the poor areas with a piped supply. Enforcing the prohibition on such systems would remove a valuable service. Conversely, removing the prohibition would help to bring the systems out from the underworld. Since the pipe-systems are cheap to install, it could even open the way for competition between suppliers to the slums.

A similar example can be found in the electricity sector in the Yemen where the public utility meets urban electricity demand, but does not supply rural towns and villages. There is little prospect of significantly improving the proportion of rural grid-connected households in the next two decades, but small scale private sector operators have demonstrated a willingness and innovative approaches to meeting the demand. These small-scale providers range from individual households generating for their own use and supplying neighbours, to larger operators supplying up to 200 households and operating sophisticated billing systems. The result is that rural household electricity use in the Yemen is remarkably high compared to other middle income countries. 50

# **4.2.2 Policy implications**

The key policy implications of this discussion are that:

- subsidised universal service is often a poor policy objective. Where governments do not have such an objective, there is no need to restrict entry on this account;

- in many places, attempts to provide universal service through crosssubsidies supported by exclusivity have failed to achieve their

- 49 Solo and Snell (1997).

- _50_ ESMAP (1991).

_46_
����� ����� on �′����� using the same lagged levels and differences of the explanatory variables as instruments as in the SYS‐GMM estimates. I then construct weak instrument‐consistent confidence sets for the coefficients on the remaining inequality variables in the same way as before.

In the empirical results below, I report confidence sets based on three different statistics. The first is the Anderson‐Rubin statistic, for which the intuition has already been discussed above. The literature has, however, noted that a shortcoming of this test is that it can lose power as the number of instruments becomes large relative to the number of endogenous regressors. This is particularly a concern in this application where the SYS‐GMM estimator generates a large number of internal instruments. I therefore also present confidence sets constructed using two alternative techniques proposed to remedy this problem. Kleibergen (2005) proposes an orthogonal decomposition of the Anderson‐Rubin statistic into (a) a K‐statistic due to Kleibergen (2002) that tests only the null hypothesis that the parameters are equal to their hypothesized values, conditional on the orthogonality conditions being true, and (b) a J‐statistic analogous to the standard test of the orthogonality conditions, but evaluated at the hypothesized parameter values. Kleibergen (2005) demonstrates that the power of the Anderson‐Rubin test can be improved by separately testing these two null hypotheses at lower‐than‐5 percent significance levels at each point in the parameter space, and then constructing a confidence set consisting of those grid points that are not rejected by both tests. This yields 95 percent confidence sets with superior power properties to those based on the Anderson Rubin statistic alone. I also report confidence sets based on a conditional likelihood ratio statistic developed by Moreira (2003) for the i.i.d. case, and generalized by Kleibergen (2005), which tests only the null hypothesis about the slope coefficients of interest, conditional on the assumption that the orthogonality conditions are true. Moreira (2003) shows that this test also has better power properties than the one based on the Anderson‐Rubin statistic when the number of instruments is large. As noted in the introduction, all of these confidence sets can readily be calculated using the `weakiv` module available in Stata, as described in Finlay, Magnusson and Schaffer (2013).

# **3. Empirical Results**

# **3.1  Instrument Strength in the Baseline Specifications of OBT, HOZ, and CC**

11