rafmacalaba/datause-encoder-data huggingface dataset:
convex innovation costs and stochastic innovation returns, which translate into a hump-shaped behavior of the investment rate without any friction in the accumulation of physical capital.

Our work is also close to the study of growth accelerations in Buera and Shin (2013). The authors develop a theory of transitions featuring heterogeneous entrepreneurs, entry and exit to production, and credit market imperfections. Motivated by the experience of seven Asian economies, the authors show that in the presence of nancial frictions that delay capital reallocation, transition paths triggered by the removal of idiosyncratic distortions are characterized by paths of investment and interest rates that resemble the data. The model also yields an endogenous path for _TFP,_ although on this front the model's convergence is substantially faster than in the data. Our relationship to this paper is twofold. Firstly, we update and extend the characterization of growth acceleration episodes, highlighting the divergent patterns between average rm size dynamics in post-communist transitions and the remaining cases. This distinction plays a critical role in motivating our consideration of entry and idiosyncratic distortions. Secondly, our model provides a complementary mechanism through which macroeconomic dynamics can depart from those of the standard neoclassical model. Rather than emphasizing barriers to factor reallocation, we show that the interaction between the economy's incentives to accumulate tangible capital, through household's investment decisions, and intangible capital, from rms' innovation eorts, can generate transition paths for output, investment, and _TFP_ similar to those in the data in a frictionless setup.

The consideration of tangible and intangible forms of capital relates our paper to the work of Atkeson and Kehoe (2007). The authors develop a theory of development in which life-cycle dynamics are driven by age-dependent, exogenous stochastic accumulation of organizational capital and in which entering rms embody the best available technology. The trigger of development in their model stems from a sudden permanent improvement in the technologies embodied in new plants. Despite the resemblance of our model to theirs, there are several points of departure. First, as in the data, the life-cycle dynamics of rms in the frictionless steady state of our model are dierent from those of the distorted equilibrium. In turn, these dierences are generated endogenously, from a theory of innovation that connects rm growth to allocative frictions. Secondly, the predictions about entry along the transition path in our model dier from those in Atkeson and Kehoe (2007). In the case of idiosyncratic distortions, entry is ineciently encouraged by subsidies in the pre-reform 6
in column (4) of Table 15. The outcome is quite unlike the previous models, since all estimated coefficients with the exception of openness inflation are significantly different from zero and are correctly signed. The elasticities of the extended market variable and the average distance to PTA partners are somewhat larger than the reference specification (column (1) of Table 7), which shows that joining larger (and closer) markets through conclusion of various PTAs is an important mechanism of attracting additional FDI in this region.

The final set of regions to be examined include Middle Eastern and African countries. This is the largest group we have considered yet, with 24 countries and 428 observations. The estimated coefficients are shown in column (5) of Table 15. Only three variables are significantly different from zero: GDP, openness, and world FDI. While the coefficient on market size (GDP) is close to the estimate in the reference specification, trade openness is more than double its full sample estimate, suggesting that this is a particularly important determinant of FDI for these countries. However, neither the size of the extended common market nor the distance to PTA partners have significant influence on net FDI inflows. We get different results when we limit our sample to countries in the Middle East and North Africa, many of which have signed or are in the process of negotiating preferential agreements with the EU as a part of the future Euro-Mediterranean Free Trade Area. These estimates are shown in column (6), and cover 7 countries for a total of 123 observations. Given the very small sample size for this specification, we must be particularly careful with interpretation and inference—therefore the following comments should be taken with a special degree of caution. Despite the relatively low value of the Wald _χ_<sup>2</sup> statistic, the model coefficients are significant as a group at the one percent level. Only two variables are significantly different from zero, and the REER variable is incorrectly signed. The latter could be due to the fact that most of the sample countries are major oil exporters (including Iran, Kuwait, Tunisia, and Algeria), which have experienced significant REER appreciation through the Dutch disease channel but have still attracted large quantities of FDI aimed at taking advantage of their natural resources. Shifting our focus to the PTA-related variables, neither the extended common market variable nor the average distance to PTA partners are significantly different from zero. Therefore, preferential liberalization does not appear to affect net FDI inflows for countries in the Middle East and North Africa, although these results must be heavily qualified due to the extremely small size of the sample.

59
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Demand for trucks in a route depends on the trade flow itself, making trip costs endogenous. Consider a negative trade shock for a route. It reduces trade flow along the route, shifting truck demand downward and reducing trip costs. The shock thus produces a positive correlation between trade flow and transport cost and biases the OLS estimate of β1 downward. To identify the coefficient of interest β1 _;_ we need to find an exogenous source of variations that affect trip cost but not trade flow in route ( _ij_ ) directly.

# 4.2 **Instrumenting the Freight Rate**

To instrument the trip cost, we rely on key insights from recent papers on transport costs across routes (Brancaccio et al, 2020; Wong, 2019; Hummels, Lugovskyy and Skiba, 2009; Behren and Picard, 2011; Behren and Brown, 2018). A truck going to a destination needs to catch its next trip be it back to its origin or some other destination. This means that _Tij_ depends not only on its demand along route _ij_ but also on the probability of catching the next trip from destination _j:_ This probability in turn is determined by trade flows and transport costs originating at _j_ to other destinations leading to network effects. In other words, a shock to transport cost along a route originating at _j_ affects _Tij_ directly and _Xij_ indirectly through _Tij_ . We utilize this key insight to derive an instrument for _Tij_ focusing particularly on cost shock for the transport sector itself.

In India, gasoline is exempt from its common Goods and Services Tax (GST) umbrella. The GST reform enacted in 2017 eliminated tax differential across states, particularly for inter-state sales of most goods and services. The indirect tax on petroleum is an important contributor to both central and state tax revenue and remains under the old regime of central taxes, state-level Value Added Tax (VAT), and other taxes. India imports much of its crude oil at international prices and has refining capacity under different ownership arrangements. The refined gasoline is marketed through dealers with a fixed commission rate and subject to central excise and customs tariffs which vary by product but not by location. The major variations in petrol and diesel prices across locations come from variations in the state-level VAT which vary from 6 percent in Andaman and Nicobar Island to 28 percent in Odisha. In addition, many states also impose additional cess per liter. The differential rates of VAT across states along with variations in the 15
In order to analyze our econometric results with some structural interpretation, we use a dynamic general equilibrium model of exchange rate dynamics as a theoretical background. This model follows in spirit the ones formulated by Obstfeld and Rogoff (1995, 1996) and Hau (2000, 2002). Spefically, we follow a modified version of the _redux_ model that includes the government sector (Calderon, 2004). We should point out that we do not test the model directly, but we use econometric techniques to test some of the implications of the model.

The goal of this paper is two-fold. First, test the relationship between RER volatility and openness for a panel data of countries. We evaluate whether the data confirms the implications on the relationship between: (a) RER volatility and trade openness as implied by Obstfeld and Rogoff (1996), Hau (2002) and Calderon (2004); and, (b) RER volatility and financial openness as derived by Sutherland (1996). We simply assess whether RER volatility declines if the country is more integrated to international markets of goods and capital. Second, we test whether the composition of trade flows as well as capital flows may play a role in explaining the smoothing properties of trade and financial openness. Does trade openness help to smooth shocks to the RER in countries with concentrated output structures? Does financial openness help to smooth or to amplify shocks to the RER in countries with different structures of capital flows and external liabilities? Accounting for the composition of flows would be crucial, especially in the case of financial openness when the ability to mitigate or to magnify the volatility of RER depends on the nature of the shocks facing the economy. This conjecture is consistent with Sutherland (1996), who shows that financial openness would mitigate (magnify) the volatility of RER fluctuations in the presence of unanticipated real (nominal) shocks.

To perform this task, we collect information on exchange rates, labor productivity in the Home and Foreign country, terms of trade, government spending, monetary aggregates, exchange rate regimes, as well as trade and financial openness for a sample of 82 countries (of which 22 are industrial countries) for the period 1975-2005. We will use both least squares and instrumental methods for panel data model. To instrument for trade openness, we follow the strategy developed by Frankel and Romer (1999) of calculating the geographic component of trade openness from the gravity model of bilateral trade. On the other hand, we select the appropriate instrument for financial openness and the structure of external capital following Faria and Mauro (2004) and Faria, Mauro, Lane and MilesiFerretti (2006).

3
11

# Questior.naire Design

Questionnaire design involves choosing questions that will generate reliable and usable information for policymakers, understanding the important elements of the questionnaire format, and avoiding common mistakes in structuring questior. Considerable savings in data gathering and analysis can be achieved if questionnaire is set up according to the objectives of the survey. This can be done in several ways.

To get the right answers, those who need them should be consulted prior to survey design. Key policymakers can be interviewed and informational needs of practitioners can be assessed. Then, outlines of working papers that would be generated from survey results or even a draft questionnaire can be presented to these individuals and their institutions for review. This will result in broader participation in the exercise, a more useful questionnaire and will give them a feeling of having a stake in the outcome. Some examples of data requirements that different policymakers might have are presented in Tablc 3.1.

TALLE 3.1: ANALYTICAL & STATISTICAL ISSU9ES FOR THE **POLICYMAKER**

|Questions for the Policymaker|Data Requirements|
|---|---|
|1) What % of the population use biomass<br>as their only fuel or primary fuel?|Total population: rural, urban<br>Type of biomass energy used<br>Type of use and user<br>Frequency/quantity of use|
|2) Do consumers get enough biomass to meet<br>their needs? Where are there deficits?|Minimum requirements per cap./yr.<br>Actual consumption of biomass<br>Regional disaggregation|
|3) Why are people not using or using very<br>little of a particular fuel?|Socio-economic characteristics<br>Prices, costs & accessibility<br>Distribution system<br>Fuel preferences & end-uses|
|4) Do people earn enough money to buy<br>their fuel and end-use equipment?|Income classes<br>Expenditure on energy & other<br>Price & consumption levels<br>Frequency of payment (daily,<br>weekly, monthly)|

SOURCE: Adapted from Commonwealth Scientific Council, Biomass Handbook, 1988 To translate policy concerns into concrete outputs, comprehensive, detailed tables can then be prepared and anticipated answers can be pre-coded prior to actual fieldwork. For example, tables can be set up for fuel enduse such as cooking, heating and lighting, occasional activities (beer brewing, crop drying, pharmacy product preparation, etc.), and other uses. Data on these occasional fuels and their uses can then be obtained through specially-designed questions in a dedicated portion of the survey questionnaire and pilot survey.

Important Elements in Ouestionnaire Design. Some important considerations in the design of the survey instrument are presented below: (a) The order and wording of questions are very important; these should be assessed in a pilot test of the survey to minimize redundancy and enhance clarity.
Cowell, Frank A. (1990), _Cheating the Government,_ Cambridge, Massachusetts: MIT Press.

Davis, Steven J., John Haltiwanger, and Scott Schuh (1994), "Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts," in Lewis C. Solmon and Alec R. Levenson, eds., _Labor Markets, Employment Policy, and Job Creation,_ Boulder, Colorado: Westview Press.

Dunne, Timothy, Mark J. Roberts, and Larry Samuelson (1989), "The Growth and Failure of U.S. Manufacturing Plants," _Quarterly Journal of Economics,_ 104:4, 671-698.

The Economist (1996), "Not-so-wondrous pensions," December 14, p. 46.

Esfahani, Hadi S. and Djavad Salehi-Isfahani (1989), "Effort Observability and Worker Productivity: Towards an Explanation of Economic Dualism," _The Economic Journal,_ 99, 818836.

Evans, David S. and Linda S. Leighton (1989), "Some Empirical Aspects of Entrepreneurship," _American Economic Review,_ 79:3, 519-535.

Fenn, P. and C. G. Veljanovski (1988), "A Positive Economic Theory of Regulatory Enforcement," _The Economic Journal,_ 98, 1055-1070.

Fishback, Price V. and Shawn Everett Kantor (1996), "The Adoption of Workers' Compensation in the UJnited States, 1900-1930," National Bureau of Economic Research Working Paper 5840.

Gruber, Jonathan (1994), "The Incidence of Mandated Maternity Benefits," _American Economic Review.,_ 84:3, 622-641.

Harris, John R. and Michael P. Todaro (1970), "Migration, Unemployment, and Development: A Two-Sector Analysis," _American Economic Review,_ 60:1, 126-142.

Hart, Kieth (1 972), _Employment, Income and Inequality: A Strategy for Increasing Productive Employment in Kenya,_ Geneva: ILO.

Jovanovic, Boyan (1982), "Selection and Evolution of Industry," _Econometrica, 649-670._ Lewis, W.A. (1954), "Economic Development with Unlimited Supplies of Labour," _Manchester School of Economics and Social Studies,_ 20, 139-191.

Lin, Justin Yifu and Jeffrey B. Nugent, "Institutions and Economic Development," in J. Behrnan and T.N. Srinivasan, eds., _Handbook of Development Economics,_ Volume III, Amsterdam: Elsevier.

Lippmtn, S.A. and R.P. Rumelt (1992), "Uncertain Imitability: An Analysis of Interfirm 21
reported data. Details on this exercise can be found in a companion paper, Depetris and Kraay (2005). In that paper we develop estimates of the change in the present value of future external debt service obligations due to debt relief, annually for a sample of 62 low-income countries since 1988.

Data on debt relief that appear in the main publications of the World Bank and the OECD Development Assistance Committee suffer from two major shortcomings. In the case of outright debt forgiveness, published data contain no information on the degree of concessionality of the amount of debt forgiven. This degree of concessionality, and thus the reduction in the present value of future obligations due to debt forgiveness, can vary widely. A standard measure of concessionality is the ratio of the present value of future repayments associated with a stock of debt to its face value. In the sample of low-income countries we will consider, this ratio varies from a highly concessional 47 percent to a virtually non-concessional 95 percent. A further complication is that published data do not distinguish between forgiveness of (i) flows of maturities falling due during a specified period, (ii) stocks of debt outstanding, and (iii) arrears. Rather, the nominal value of the amounts forgiven is typically reported. Thus for example a debt relief operation that forgives $100 million in principal and interest payments falling due in the current year would be indistinguishable from a debt relief operation that forgives a stock of debt outstanding of $100 million, despite the fact that the latter involves the forgiveness of future debt service obligations with a present value that is likely to be substantially less than the $100 million in maturities falling due in the current period. The valuation of a forgiveness of $100 million in arrears is even more complicated, as it requires us to take a stand on whether the debtor country had any intention of paying these arrears in the first place. Yet all three transactions would be recorded identically.

The second difficulty has to do with the reporting of net effects of concessional reschedulings. Typically in such agreements interest and principal payments falling due during a period of a few years are rescheduled on more favorable terms for the debtor, resulting in a new stream of future debt service obligations with a present value that is lower than the original payments that were rescheduled. Standard data sources such as the World Bank's Global Development Finance publication report the gross reduction in 4
discount rate of 5 percent (corresponding to r-n) for GDP, a debt/GDP ratio of 0.6 (see Table 2), and a secondary market price of 40 cents on the dollar, yields a representative potential "debt overhang tax" on domestic residents amounting to less than 2 percent of the present value of GDP.

Detailed estimates of this tax for alternative values of r-n are presented in Table 7 for all the HICs with available data. The;se estimates are based on end-1988 values of the secondary market price s, and of the external debt to GDP ratio. The effective tax rate increases with the real interest rate, which reduces the present value of future domestic resources, and it decreases with the growth rate of GDP. Even with the relatively high value of 7 percent for r-n, however, the tax rate reaches maximum values amounting to about 6 1/2 percent of GDP only for the extreme cases of small countries (Bolivia and Cote d'Ivoire) where the debt to GDP ratio is extremely high and debt is considered to be almost worthless on the secondary market. For the largest debtors (Brazil and Mexico) the maximum "debt overhang" tax rate is in the range of 1-2 percent of GDP.

The extent to which a maximum additional loss of this magnitude could provide a serious disincentive for the adoption of otherwise desirable policies is certainly open to question. However, the fact that the maximum additional tax is small by no means rules out disincentive effects on policymakers. Among other things, what ultimately matters is the marginal tax that creditors are able to impose on potential in-reases in domestic income. While the maximum additional tax may amount to a small fraction of the present value of GDP, it may represent a large fraction of any additions to GDP that could be secured through improved policies.

The existence of a potential additional debt overhang tax may affect not just the incentives facing policyrnakers, but also those facing private individuals. Would the marginal tax that creditors may impose on the economy in the aggregate -- and thus the marginal tax rate that may confront policymakers -- discourage the undertaking of new income-producing activities by private individuals ? The answer to this question is probably not. New activities are unlikely to be taxed differentially from old ones at the margin, and thus can be expected to face the economywide average tax rate. While creditors may extract a high proportion of the economy's increase in income, resulting in a high marginal tax rate as perceived by policymakers, this burden would be borne by new and old private activities alike through an increase in the average tax rate applicable to both. Even with a high marginal tax rate extracted by creditors on increases in domestic income, the change in the economywide average tax rate associated with any single domestic project is likely to prove infinitesimal, and thus would not be internalized by private agents contemplating new activities. It follows that the "additional debt overhang tax" is 17