rafmacalaba/datause-encoder-data huggingface dataset:
30 with industry in market economies at a similar level of development.1" Collusion was actually encouraged in Yugoslavia, as all producers of a certain product were obligated to form associations with each other, and traders of that product were required to conclude self-management agreements with 1 producers.1 Traders were also encouraged to form sector-specific trade monopolies. Although they were not formally supposed to collude in pricesetting or m-rket sharing behavior, once brought together they were able to collude and also to exert a powerful force in lobbying for protection from international competition. The resulting hierarchy of power in the economy put producers first, traders second, and consumers--who remained unorganized and unrepresented--last.

Clearly these old ideas and practices must radically change as Slovenia moves to a private market economy. Antimonopoly law is needed to break up monopolies and end collusive behavior among producers and/or traders, and unfair competition legislation is needed to prevent deceptive trading practices. The existing legal framework is inadequate in both areas. The only relevant law now in force in Slovenia is the Yugoslav federal Law on Trade (1990),11! which remains applicable in Slovenia after independence. It replaced the federal Law on Unfair Competition of 1974.116 Although it provides a beginning framework for limiting anticompetitive behavior, this law applies only to trading activities, whether retail or wholesale. Similar behavior in production or services is not covered by the law. Furthermore, the law has hardly been applied in practice and thus has little relevance in practice, although the previous 1974 law is generally thought to have had some positive effect on business practices.

**113** Some CEE countries with more classically-socialist systems than Yugoslavia's specifically followed a one product-one firm principle. Although highly inefficient in a capitalist system, such organization was more efficient in a socialist one because it minimized transaction costs and thus facilitated top-down administrative control.

114 Zakon o obveznem -dru±evanju dela in sredstev OZD, ki se ukvarjajo a prometom blaga in storitev, s proizvajalnimi OZD [Law on Obligatory Association of Work and Assets of OALs, which Deal with Transfer of Goods and Services, with Production OALs], Yugoslav Official Gazette, No 66 (1980), most recent amendment Yugoslav Official Gazette, No 70 (1985). Traders were in practice in a subordinate relationship to producers. This result concurred with Marxist doctrine, which considered only material production to be valueenhancing and essentially branded trading as "unproductive exploitation".

**1'5** Zakon o trgovini [Law on Trade], Yugoslav Official Gazette, No 46 (1990).

116 Zakon o zatiranju nelojalne konkurence in monopolnih sporazumov (Law on Oppression of Unloyal Competition and Monopoly Contracts], Yugoslav Official Gazette, No 24 (1974), most recent amendment Yugoslav Official Gazette, No 58 (1989).
15 CARs in emerging economies. Considering the direct impact of increased bank CARs and the additional institutional feature that emerging economies' banks would need to tap less developed financial markets to raise the needed capital, the new Basel proposal could considerably worsen the availability and cost of credit to these countries' private sector.

In turn, even a temporary worsening in their access to bank credit could have a negative impact on corporate sectors in emerging economies-e.g. amplifying corporate bankruptcies and holding corporate production constrained below potential. This would provoke a depletion of orgaiiizational capacity in emerging economies' corporate sectors with potential long-lasting (letrimental consequences for these economies' recovery Greenwald and Stiglitz (1993).

# 7. **Conclusions**

In this paper historical data on sovereigns and individual borrowers ratings are used to examine what would be the effect on less developed countries of the introduction of a link between bank Capital Asset Requirements and external ratings, as contemplated in the new Basel proposal.

We find that the Base.l proposal would increase the volatility of capital needs of banks in NHICs versus high-income countries' banks. In fact, bank and corporate ratings in NHICs appear to be strongly related and in an asymmetric way to changes in sovereign ratings. A sovereign downgrading would, for instance, imply larger changes in capital allocations than an upgrading and would call for larger capital requirements at the very time in which access to capital markets is more difficult. In addition, the lack of a widespread use of ratings for banks and corporations in NHICs would not provide an effective incentive to adopt nmore sound risk assessments on the part of banks. In fact, while good banks in HICs would see their capital requirements reduced as a consequence of a prudent lending behavior, their peers in NHICs would not draw an equivalent benefit from an analogous attitude.

As a result of these empirical findings, especially in the case of NHICs, we encourage the adoption of an integrated approach, in which the use of rating agencies' assessments for the definition of capital requirements is supplemented by a larger set of regulatory tools.

_Ferri, Liu, and Majnoni, "The Role of Rating Agency Assessments in Less Developed Countries: Impact_<sup>_of the Proposed Basel Guidelines"_</sup>
# **3. The Data**

We study corporate diversification in nine countries: Hong Kong, Indonesia, South Korea, Japan, Malaysia, Philippines, Singapore, Taiwan and Thailand.<sup>6</sup> Our primary data source is the Worldscope database. Worldscope contains financial and segment informnation on companies from 49 countries. The database has been used in several international studies of corporate diversification (Lins and Servaes (1997) and Fauver, Houston, and Naranjo (1998)).

We initially selected all companies from the nine countries covered by the June 1991-1998 CD-Rom version of annual Worldscope database. In each of the annual database, Worldscope provides historical financial data. We are able to assemble several years of financial data for most of the companies. Historical segment data for many of the companies are missing, however, since Worldscope reports only the latest available segment data. To increase sample size, we collected additional segment data for Worldscope companies from the autumn edition of the 1994-1998 _Asian Company Handbook_ and _Japan Company Handbook._ All financial data were converted to US dollars using fiscal year end foreign exchange rate for each firm.

In order to determine the types of the companies' businesses, we group the companies' segments according to the two-digit Standard Industry Classification (SIC) system. This procedure involves two steps. In the first step, we assign the four-digit SIC codes reported by Worldscope to appropriate segments. In many cases we are able to obtain one-to-one matches between SIC codes and segments. For some companies, the number of reported SIC codes is not the same as the number of reported segments. If a segment can not be associated with a reported SIC code, we determine the segment's SIC code according to its business description. If a segment is associated with multiple SIC codes, it is broken down equally so that each segment is associated with one SIC code. In the second step, we redefine segments at the two-digit SIC level and aggregate segment sales to that level.

We classify firms as single-segment if at least 90 percent of their total sales are derived from one two-digit SIC segment. Firms are classified as multi-segment if they

> **6** Although China is also an interesting case, we can locate only a handful public firms from Worldscope. The dominant corporate units in China are state-owned enterprises. The few publicly traded firms are far from representative of the census of firms in China.

6
# **2. Latvia’s Stabilization Program: An Interim Balance Sheet**

Like all strong reformers from the former Soviet Union, Latvia quickly embraced the twopronged macroeconomic strategy of stabilization and liberalization (see Mitra and Selowsky 2002 and World Bank 1996). Stabilization involved designing macroeconomic policies aimed at reducing inflation and containing domestic and external imbalances. Liberalization meant freeing prices, trade, and privatizing the large state enterprise apparatus.

## **2.1 Rationale and Main Features**

The stabilization effort in Latvia drew from the lessons learned in historical waves of stabilization including Europe in the 1920s, and Latin America and Africa in the 1980s. Shortly after independence, policymakers in Latvia designed a very ambitious yet feasible stabilization package. Although the issue was not to repair the damage suffered by an existing market economy but rather to start one from scratch, they applied the same logic to conceiving the economic strategy that the country then followed rigorously over 10 years. This was achieved despite the fact that Latvia averaged one new government per year during this period. In addition to the traditional stabilization package, some features reflecting the specificities of the country’s political and social context were added to the strategy— sometimes in defiance of policy recommendations from international financial institutions.

At the origins of the process were the collapse in trade and output observed in Latvia (and in most transition economies) in the early 1990s following the disintegration of the Soviet Union. In 1992, the first year after independence, gross domestic product fell by 32 percent (see Table 1). At the same time, the price of imported goods—especially energy—increased dramatically to international levels, causing a decline in the terms of trade of 53 percent during that year. The following year, GDP continued to fall by over 11 percent and stood at about half its 1990 level.

**<u>Table 1: Indicators of Latvia’s Macroeconomic “Big-Bang”</u>**

|**Indicator**|**1991**|**1992**|**1993**|
|---|---|---|---|
|GDPgrowth|-12.6|-32.1|-11.4|
|Inflation(consumerprice index,inpercent)|262|958|35|
|Real wage change|-16.3|-15.7|0.5|
|Unemployment|0.1|2.3|5.8|
|Terms of trade change|1.0|-53|8|
|Fiscal balance/GDP|6.4|-0.8|0.6|
|Current account balance/GDP|n.a|1.8|6.8|

Source: World Bank and Latvian authorities Inflation was facilitated by two fiscal factors. First, the shock directly affected government revenues. These decreased sharply from 37.4 percent of GDP in 1991 to 28.2 percent of GDP in 1992. While the Latvian authorities managed to cut public expenditure, the fiscal balance went from a surplus of 6.4 percent of GDP in 1991 to a deficit of 4.0 percent in 1994 (a swing of over 10 percentage points). Second, under heavy political pressure to reject the economic contraction, the first government after independence tried to reconcile income claims from various social groups and accommodated wage and price increases through 4
15 obligations with suppliers, workers, or other creditors, and must be accounted for at face value as part of the subnational debt stock when computing the total subnational debt-to-GDP ratio. A strong incentive for subnational governments not to incur arrears would result from including the full amount of arrears originated in any given year as part of the debt service falling due the next year, when computing the debt service-to-own revenue ratio.

Guarantees should be also monitored and included into the subnational debt definition, with the associated fiscal risk quantified. Guarantees can play a useful role in bridging financing for projects that have public policy justifications or whose underlying economic values are not fully recognized by markets. There are incentives for risky borrowers to seek guarantees and for interrelated public entities to support one another obfuscating the financial risks being assumed, but these do not warrant prohibiting guarantees altogether. Indeed, the fiscal risks of guarantees can be mitigated and managed as any other risk: e.g. private companies may be prohibited from getting guarantees; guarantees extended by subnational governments to SPVs’ borrowing contracts should be treated as contingent liabilities and fully disclosed to the public in financial statements.<sup>23</sup> In addition, the expected losses from guarantees being called must be quantified (possibly using analytical models) and incorporated, partially or totally, into the subnational debt stock. International practices reported in Box 2 can be useful in this regard.

# **Box 2: International practice on guarantees**

**France** sets a number of prudential rules regulating guarantees and contingent liabilities. For subnational governments, annual debt service including those paid on loans guaranteed cannot exceed 50 percent of operating revenue; no single borrower may benefit from a guarantee exceeding 5 percent of operating revenue; and guarantees cannot exceed 50 percent of the debt of the entity receiving the guarantee. If extending guarantees, subnational governments are required to deposit cash with the central government, which carries out all payments subject to a legality control.

**Poland** imposes on local governments that the debt service including that related to guarantees extended to their public enterprises (regardless of whether they are called or not) cannot exceed 15 percent of revenue.

**India** ’s states have differentiated regulations for guarantees, but the most common ones are capital guarantees offered by the state as a share of revenue or GSDP.

_<u>Source: Liu (2010)</u>_

> 23 International experience indicates, although implicit guarantees may not be recognized by legislation as contingent liabilities for subnationals, the private lenders do and with a reason: in the event of several subnational SOEs experiencing large-scale financial problems, some form of public intervention could be triggered by political and social considerations and thus the general budget would be absorbing losses (i.e. ‘too-big-to-fail’ and ‘toomany-to-fail’ phenomena).
and, therefore, about their own risk than do lenders. As a result, bad risks will drive good risks out of the market. The relevance of this mechanism increases with the heterogeneity of the student population. Since enrollment in post-secondary education has increased in most countries over recent decades, the student population may indeed be quite diverse. The important message from this is that the government has to be very careful when determining the default premium included in the interest rate. Moreover, adverse selection may become a serious problem. If the lender is unable to shift the risk of default to the borrowers, it is reasonable that the lender should screen students for eligibility. Academic records are likely to be a good indicator of the student's future default probability.

Chapman (2006) summarizes the experience with the practical implementation of income contingent loan schemes in various countries. This includes descriptions from the Yale Plan (in the United States), Sweden, Australia, New Zealand, South Africa, the United Kingdom, United States and Chile. According to Chapman (2006), the (more) successful adoptions of income contingent loan schemes took place in Australia, New Zealand, South Africa and the United Kingdom. He identifies two critical aspects of the schemes in these countries relative to others. The first is that these countries all have a taxation system in place that could be used to collect repayments effectively. The second is that in these countries the vast majority of universities are public sector institutions, so that the collection (tax) authority and the education providers operate under the same system and the same terms.

Chapman (2006) also provides a summary of application issues for income contingent loans in developing countries. He discusses experiences in countries such as Ethiopia, Namibia, 20
<!-- Start of picture text --> Policy Research<br>Transition and Macro-Adjustment<br>WPS 1038<br><!-- End of picture text -->

- This paper a product of the Transition and Macro-Ae ustment Division, Country Economics Department, and the Trade and Finance Division, Technical EDepartment, Europe and Central Asia and Middle - East and North Africa regions is part of a larger project funded by the two departments, "The Determinants of Expatriate Workers' Remittances." Copies of this paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Lanha Ly, room H9-071, extension 37352 or Anna Marafion, room NI 1-025, extension 31450 (November 1992, 56 pages).

Elbadawi and Rocha review the theoretical literature on the determinants of international workers' remittances and then posit an empirical model that accounts for demographic, portfolio, and macroeconomic factors that - together with special incentive policies - determine official remittances.

They estimated the model using data from five major labor-exporting countries of North Africa and Europe: Morocco, Portugal, Tunisia, Turkey, and the former Yugoslavia. The econometric results strongly corroborate the model's predictions and reveal interesting policy implications.

In planning for the future growth of remittances, labor-exporting countries should explicitly take into consideration the history of migration, since an aging labor force abroad will be less inclined to remit. Labor-exporting countries should also account for the economic prospects of the major labor-receiving countries and for the geographical distribution of their migrant labor.

Elbadawi and Rocha's results show that remittances are significantly affected by economic policies in the home Oabor-exporting) countries. Special incentive schemes cannot substitute for a stable, credible macroeconomic policy.

The Policy Research Working Paper Series disseminate the fndings of work under way in the Bank. An objective of the series is to get these fndings out quickly, even if presentations are less than fully polished. The findings, interpretations, and conclusions in these papers do not nec.-ssarily represent official Bank policy.

Produced by the Policy Research Dissemination Center
deflators (1990=100). Cumulative R&D stocks are derived from the deflated R&D flows using the perpetual inventory method with a 10% depreciation rate.

The country specific, time-invariant input-output matrices for the twenty-five developing countries are derived from GTAP. For each country-industry-year, the weights (bilateral openness shares—imports/value added) are derived from the World Bank database “Trade and Production” (Nicita and Olarreaga, 2001). Trade data were collected at the 4-digit level and input-output data at the 3-digit level for the period 19762005, and both were aggregated to 2- and 3-digit levels for consistency with the R&D data (16 industries).

The measure of education used is the share of the population aged twenty-five and above that completed secondary education. These data are obtained from the Barro and Lee (2005) dataset which provides five-year averages for 1960-2005.

As for governance, we use an average of six measures.<sup>6</sup> These were aggregated from a data base consisting of hundreds of variables, and range from – 2.5 to + 2.5 (Kaufmann, Kraay and Zoido-Lobaton, 1999, 2009). The range is smaller in our sample because it excludes industrial countries and a large number of developing countries.

# **4. Estimation Results**

Table 1 presents overall estimation results as well as for LAC. Column (i) shows that the elasticity of TFP with respect to foreign R&D for low R&D-intensity industries is

> 6 The first measure is “voice and accountability”, a measure of the openness of the political process, civil liberties and political rights; the second one measures “political instability and violence”; the third one measures “government effectiveness,” and includes the independence of the civil service from political pressures and the credibility of governments’ policy commitment; the fourth one is the “regulatory burden,” and includes the incidence of price controls and perceptions of burdens from excessive trade and business regulations; the fifth one is the “rule of law,” including enforceability of contracts, crime incidence, and effectiveness of the judiciary; and the sixth is “graft” and measures perceptions of corruption.

7
An Assessment Of Reform Options For The Public Service Pension Fund In Uganda claimed by the cohort at the time of retirement. After the number of new retirees is adjusted, the stock is recalculated using the “Flow” method.

The user can also choose how the benefit of new beneficiaries is specified - via benefit formula or via age and gender specific replacement rates.

As mentioned above, output produced by PROST is organized in five **output modules** . Each of the modules contains a number of Excel worksheets and a graphical summary on key output indicators: _Population Projection_ Population projections and pyramids, life tables, life expectancy changes, population dependency rates, etc.

_Demographic Structure_ Labor force and employment projections, projections of contributors and beneficiaries, demographic structure of the pension system, and system dependency rates.

_Finances of Monopillar PAYG_

- Macroeconomic trends, wage projections, pension  benefit projections for the existing and new pensioners, revenue and expenditure of the pension system, required adjustments to contribution rates and replacement rates for zero current balance, and the implicit pension debt.

_Finances of Multipillar System_

- Pension benefit projections for new and existing pensioners under each of the three pillars (conventional PAYG, notional PAYG, and funded DC), revenues and expenditure of both PAYG and funded pillars, implicit pension debt of the PAYG system after the reform, and results of the reform (compares benefit projections and financial standing under the monopillar PAYG and multipillar scenarios).

_Individual accounts_ Lifetime contributions and benefits and individual related summary statistics for up to six different individuals specified in the “Profiles” input sheet under PAYG system (statutory, with adjusted contribution rates and with adjusted benefits) and multipillar system (for those who switched to the multipillar system and those who remained in the PAYG system).

- 99 -
31

# **Table A2-1:Results** **<u>of the production function estimation</u>**

||Log (cro<br>|pincome)<br>|Log(maize r<br>|ice income)<br>|
|---|---|---|---|---|
||OLS|FE|OLS|FE|
|Whether plant beans|0.235**|0.255**|0.275**|0.258**|
||(0.074)|(0.087)|(0.092)|(0.102)|
|Whether plant coffee|0.081|-0.180|-0.368***|-0.548***|
||(0.089)|(0.127)|(0.097)|(0.136)|
|Whether plant banana|0.706***|0.599***|0.048|0.018|
||(0.108)|(0.151)|(0.114)|(0.142)|
|Belong to SACCO|0.120|0.167|-0.040|0.030|
||(0.103)|(0.122)|(0.116)|(0.138)|
|Has a bank account|0.121|-0.029|0.125|-0.060|
||(0.104)|(0.141)|(0.117)|(0.154)|
|Constant|2.324***|2.069***|0.524|1.035**|
||(0.366)|(0.456)|(0.352)|(0.452)|
|Time-varyingvillage dummies included|||||
|R-squared|0.418|0.342|0.502|0.413|
|F-statistic|9.493|5.845|23.104|12.955|
|N. of Obs.|2,592|2,271|2,618|2,296|
21

# A. The Potential for Tariffs to Divert Trade

Table 2 provides rtlevant information using summary statistics on the US tariffs that 12 East Asian economies currently face. The rates reported here are post-Tokyo Round "applied" rates that reflect the weighted average of the MFk or Generalized System of Preference (GSP) rates actually applied to each tariff line level product. Aside from totals, the tariff rates have also been computed for broad one- and two-digit SITC categories (see Appendix r, Table A2 for 1990 East Asian exports of each group). The United States was chosen as the focus for this analysis given its overwhelming importance widtin NAFTA.<sup>5</sup> '5 In 1990 for example, 93 percet of East Asia's exports to North America went to the United Smtes, 6 percent went to Canada, and only I percent went to Mexico.