rafmacalaba/datause-encoder-data huggingface dataset:
Walking up the down escalator :
            public investment and fiscal stability
Fiscal adjustment becomes like walking
            up the down escalator when growth-promoting spending is cut
            so much as to lower growth and thus the present value of
            future tax revenues to a degree that more than offsets the
            improvement in the cash deficit. Although short-term cash
            flows matter, a preponderant focus on them encourages
            governments to invest too little. Cash flow targets also
            encourage governments to shift investment spending off
            budget, by seeking private investment in public
            projects-irrespective of its real fiscal or economic
            benefits. To evade the action of cash flow targets, some
            have suggested excluding from their scope certain
            investments (such as those undertaken by public enterprises
            deemed commercial or financed by multilaterals). These
            stopgap remedies might sometimes help protect investment,
            but they do not provide a satisfactory solution to the
            underlying problem. Governments can more effectively reduce
            the biases created by the focus on short-term cash flows by
            developing indicators of the long-term fiscal effects of
            their decisions, including accounting and economic measures
            of net worth, and where appropriate including such measures
            in fiscal targets or even fiscal rules, replacing the
            exclusive focus on liquidity and debt.
The use of derivatives to hedge
            embedded options : the case of pension institutions in Denmark
The main purpose of this paper is to
            examine the growing use of derivatives by Danish pension
            institutions as a risk management tool to hedge embedded
            options on their balance sheets. Throughout the 1980s and
            1990s it was a widespread practice for Danish pension
            institutions to guarantee a minimum interest rate on new
            pension policies. With the new millennium global interest
            rates declined steeply and equity markets came crashing
            down. Suddenly the guarantees on pension contracts were in
            the money. The policies already written could not be
            changed, leaving liabilities and assets mismatched, profits
            in the red, and capital reserves drained. Out of necessity,
            and in some cases virtue, Danish pension institutions turned
            in scale to derivatives, allowing for a more active approach
            to hedging, asset and liability management, and even profit
            generation. Through the use of derivatives, pension
            institutions have avoided the need to renegotiate their
            guaranteed contracts with policy holders. They have
            succeeded as an industry in transforming their pay-off
            curves and have emerged with better matched asset/liability
            positions and lower exposure to interest rate risk. But the
            expanded use of derivatives also raises some risk management
            and regulatory issues, such as operational and counterparty
            risks as well as effective internal control systems and
            regulatory oversight.
The use of derivatives to hedge
            embedded options : the case of pension institutions in Denmark
WPS4159

# The Use of Derivatives to Hedge Embedded Options: The Case of Pension Institutions in Denmark

Jeppe Ladekarl, Regitze Ladekarl, Erik Brink Andersen and Dimitri Vittas<sup>∗</sup> The World Bank

**Abstract:** The main purpose of this paper is to examine the growing use of derivatives by Danish pension institutions as a risk management tool to hedge embedded options on their balance sheets. Throughout the 1980s and 1990s it was a widespread practice for Danish pension institutions to guarantee a minimum interest rate on new pension policies. With the new millennium global interest rates declined steeply and equity markets came crashing down. Suddenly the guarantees on pension contracts were in the money. The policies already written could not be changed, leaving liabilities and assets mismatched, profits in the red, and capital reserves drained. Out of necessity, and in some cases virtue, Danish pension institutions turned in scale to derivatives, allowing for a more active approach to hedging, asset and liability management, and even profit generation. Through the use of derivatives, pension institutions have avoided the need to renegotiate their guaranteed contracts with policy holders. They have succeeded as an industry in transforming their pay-off curves and have emerged with better matched asset/liability positions and lower exposure to interest rate risk. But the expanded use of derivatives also raises some risk management and regulatory issues, such as operational and counterparty risks as well as effective internal control systems and regulatory oversight.

**JEL Classification Code:** G11, G15, G22, G23, G28, G31

**Keywords:** Defined Benefit, Defined Contribution, Risk Management, Swaps, Hedging, Dynamic Capital Projection, Asset and Liability Management, Liability Driven Investment

## World Bank Policy Research Working Paper 4159, March 2007

_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 view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org._

> ∗ Jeppe Ladekarl (jladekarl@worldbank.org) is from the World Bank’s Treasury Department , Regitze Ladekarl and Erik Brink Andersen are independent consultants, and Dimitri Vittas is a consultant formerly with the World Bank. The authors are grateful to Messrs. Glaessner, Jonasson, Lybek, and numerous regulators, pension managers and investment bankers in London and Copenhagen who shared their insights and experiences and provided comments and suggestions.
Trade integration in East Asia : the
            Role of China and production networks
Production networks have been at the
            heart of the recent growth in trade among East Asian
            countries. Fragmentation trade, reflected mainly in the
            trade in parts and components, is expanding more rapidly
            than the conventional trade in final goods. This is mainly
            due to the relatively more favorable policy setting for
            international production, agglomeration benefits arising
            from the early entry into this new form of specialization,
            considerable intercountry wage differentials in the region,
            lower trade and transport costs, and specialization in
            products exhibiting increasing returns to scale. The
            economic integration of China has deepened production
            fragmentation in East Asia, countering fears of crowding out
            other countries for international specialization.
            International production fragmentation in East Asia has
            intensified intraregional trade but has depended heavily on
            extraregional trade in final goods. While production
            networks centered on China have contributed significantly to
            growth in East Asia, they also breed vulnerabilities. They
            have not automatically led to technology spillovers and have
            led to an extreme interdependence across East Asian countries.
Trade integration in East Asia : the
            Role of China and production networks
WPS4160

# **TRADE INTEGRATION IN EAST ASIA: THE ROLE OF CHINA AND PRODUCTION NETWORKS**

# **MONA HADDAD EASPR**

## **Abstract:**

Production networks have been at the heart of the recent growth in trade among East Asian countries. Fragmentation trade, reflected mainly in the trade in parts and components, is expanding more rapidly than the conventional trade in final goods. This is mainly due to the relatively more favorable policy setting for international production, agglomeration benefits arising from the early entry into this new form of specialization, considerable intercountry wage differentials in the region, lower trade and transport costs, and specialization in products exhibiting increasing returns to scale. The economic integration of China has deepened production fragmentation in East Asia, countering fears of crowding out other countries for international specialization. International production fragmentation in East Asia has intensified intraregional trade but has depended heavily on extraregional trade in final goods. While production networks centered on China have contributed significantly to growth in East Asia, they also breed vulnerabilities. They have not automatically led to technology spillovers and have led to an extreme interdependence across East Asian countries.

World Bank Policy Research Working Paper 4160, March 2007 _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 view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org._ This paper is a contribution to the trade chapter of the East Asia flagship for the 2006 Annual Meetings in Singapore: _An East Asian Renaissance, Ideas for Economic Growth_ . The main author is Mona Haddad. Background papers were provided by Shujiro Urata, Gordon Hanson, Caroline Freund, Françoise Lemoine, Daniel Lederman, and Sjamsu Rahardja.
Changing farm types and irrigation
            as an adaptation to climate change in Latin American agriculture
This paper estimates a model of a farm
            that treats the choice of crops, livestock, and irrigation
            as endogenous.  The model is composed of a multinomial
            choice of farm type, a binomial choice of irrigation, and a
            set of conditional land value functions. The model is
            estimated across over 2,000 farmers in seven Latin America
            countries. The results quantify how farmers adapt their
            choice of farm type and irrigation to their local climate.
            The results should help governments develop effective
            adaptation policies in response to climate change and
            improve the forecasting of climate effects. The paper
            compares the predicted effects of climate change using both
            endogenous and exogenous models of farm choice.
An analysis of livestock choice :
            adapting to climate change in Latin American farms
The authors explore how Latin American
            livestock farmers adapt to climate by switching species.
            They develop a multinomial choice model of farmer's
            choice of livestock species. Estimating the models across
            over 1,200 livestock farmers in seven countries, they find
            that both temperature and precipitation affect the species
            Latin American farmers choose. The authors then use this
            model to predict how future climate scenarios would affect
            species choice. Global warming will cause farmers to switch
            to beef cattle at the expense of dairy cattle.
An analysis of livestock choice :
            adapting to climate change in Latin American farms
WPS4164

# **An Analysis of Livestock Choice:**

# **Adapting to Climate Change in Latin American Farms**<sup>**1**</sup>

S. Niggol Seo University of Aberdeen Business School, UK and Robert Mendelsohn School of Forestry and Environmental Studies, Yale University, USA

## **Abstract**

This paper explores how Latin American livestock farmers adapt to climate by switching species. We develop a multinomial choice model of farmer’s choice of livestock species. Estimating the models across over 1200 livestock farmers in seven countries, we find that both temperature and precipitation affects the species Latin American farmers choose. We then use this model to predict how future climate scenarios would affect species choice. Global warming will cause farmers to switch to beef cattle at the expense of dairy cattle.

World Bank Policy Research Working Paper 4164, March 2007 _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 view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org._

> 1 This project was funded by the World Bank.  We thank Emilio Ruz, Flavio Avila, Jorge Lozanoff, Luis José María Irias, Magda Aparecida de Lima, César Teherán, Jorge González, Flavio Játiva, Alfredo Albin, Liubka Valentina Trujillo, Luisa Caraballo Silva, and Ariel Dinar for their contributions to this effort.  This project was funded by the Research Committee of the World Bank under the study 'Climate Change and Rural Development' that was tasked managed by Ariel Dinar.

1
Quantifying international migration
            : a database of bilateral migrant stocks
This paper introduces four versions of
            an international bilateral migration stock database for 226
            by 226 countries and territories. The first three versions
            each consist of two matrices, the first containing migrants
            defined by country of birth, that is, the foreign-born
            population; the second, by nationality, that is, the foreign
            population. Wherever possible, the information is collected
            from the 2000 round of censuses, though older data are
            included where this information was unavailable. The first
            version of the matrices contains as much data as could be
            collated at the time of writing but also contains gaps. The
            later versions progressively use a variety of techniques to
            estimate the missing data. The final matrix, comprising only
            the foreign-born, attempts to reconcile all of the available
            information to provide the researcher with a single and
            complete matrix of international bilateral migrant stocks.
            The final section of the paper describes some of the
            patterns evident in the database. For example, immigration
            to the United States is dominated by Latin America, whereas
            Western European immigration draws heavily on Eastern
            Europe, Central Asia, and the Mediterranean region. Over
            one-third of world migration is from developing to
            industrial countries and about a quarter between developing
            countries. Intra-developed country and intra-FSU (former
            Soviet Union) flows each account for about 15 percent of the
            total. Over half of migration is between countries with
            linguistic ties. Africa accounts for 8 percent of Western
            Europe's immigration and much less of that to other
            rich regions.
Estimating real production and
            expenditures across nations : a proposal for improving the
            Penn World Tables
From its inception, the Penn World
            Tables (PWT), building on the International Comparisons
            Program (ICP) of the United Nations, has sought to compare
            the standard of living of individuals in different
            countries. That is, the term "real GDP per capita"
            as reported in the PWT is intended to represent the ability
            to purchase goods and services by a representative agent in
            the economy. The same is true of benchmark comparisons as
            published by the United Nations, Eurostat, or OECD. But this
            expenditure-side interpretation of real GDP is quite
            different from the uses to which benchmark ICP and PWT data
            are frequently applied, such as in growth regressions, where
            "real GDP" is intended to reflect the production
            side of the economy. In this paper the authors propose a new
            approach to international comparisons of real GDP measured
            from the output side. They modify the traditional
            Gary-Khamis system, which measures real GDP from the
            expenditure side using real domestic expenditure, to include
            differences in the terms of trade between countries. The
            analysis shows that this system has a strictly positive
            solution under mild assumptions. On the basis of a set of
            domestic final output, import, and export prices and values
            for 151 countries in 1996, differences between real GDP
            measured from the expenditure and output side can be
            substantial, especially for small open economies.
Mobility and earnings in
            Ethiopia's urban labor markets, 1994-2004
An analysis of panel data on individuals
            in a random selection of urban households in Ethiopia
            reveals large, sustained, and unexplained earnings gaps
            between public and private, and formal and informal sectors
            over the period 1994-2004. The authors have no formal
            evidence whether these gaps reflect segmentation of the
            labor market along either of these divides. In other words,
            they cannot show whether they are at least in part due to
            impediments to entry in the higher wage sector. But they do
            have evidence that, if segmentation explains any part of the
            observed earnings gaps, then it could only have weakened
            over the survey decade. The authors find, first, that the
            rate of mobility increased between the two pairs of sectors.
            Sample transition rates grew across survey waves, while
            state dependence in sector choice decreased. Second, the
            sensitivity of sector choice to earnings gaps increased over
            the same period. In particular, the role of comparative
            earnings in selection into the informal sector was evident
            throughout the survey decade and increased in magnitude over
            the second half of the period.
The "how to" of fiscal
            sustainability : a technical manual for using the fiscal
            sustainability tool
Fiscal sustainability analysis (FSA) is
            an important component of macroeconomic analysis for many
            developing countries. To further enhance understanding of
            fiscal policy and the constraints faced by policymakers, the
            authors develop a toolkit for FSA in middle-income countries
            which builds on previous  work in this area and on new
            developments in dealing with uncertainty. The FSA toolkit
            includes an Excel-based FSA tool and a technical manual
            accompanying it. The FSA tool is standardized and simple,
            but at the same time flexible enough to allow for
            user-defined country-specifics. This manual provides
            step-by-step technical instructions for running the FSA tool
            and includes mathematical appendices and a glossary.
Specification of investment
            functions in Sub-Saharan Africa
It is a well-known fact that one of the
            most important determinants of growth is private investment.
            But in the developing country context of widespread poverty,
            the effects of initial conditions on the process of capital
            accumulation have seldom been investigated. This paper
            highlights heterogeneity in the process of capital
            accumulation across different countries in Sub-Saharan
            Africa, and derives a formal specification of investment
            functions in the primary, industry, and service sectors in
            the region using a variation of the combined Tobin's Q
            Theory and the neoclassical models of investment. The
            results highlight a more rapid accumulation of capital in
            the relatively high income subpanel and a widening
            public-private capital accumulation gap. A functional
            specification points to the significance of aggregate
            profitability shocks, the financing cost of investment, and
            public capital stock in estimating the growth rate of
            private capital accumulation. These results are supported
            empirically, as highlighted by the relatively small absolute
            deviation between actual and predicted value distributions.
Quantitative approaches to fiscal
            sustainability analysis : a new World Bank tool applied to Turkey
Fiscal sustainability analysis (FSA) is
            an important component of macroeconomic analysis. The
            authors review various quantitative approaches to FSA with a
            major objective to bring these approaches together and to
            present a user-friendly tool for FSA that reflects modern
            developments. They combine a dynamic simulations approach
            with a simplified version of the steady-state consistency
            approach. They also incorporate two different methods to
            deal with uncertainty: user-defined stress tests and
            stochastic simulations. The tool goes further by evaluating
            the required fiscal adjustment as a consequence of the
            stochastic realizations of the exogenous variables.
            Furthermore, the fiscal sustainability tool incorporates an
            endogenous debt feedback rule for the primary surplus, a
            fiscal policy reaction function. Besides outlining the
            theoretical framework, the authors also present a case study
            for Turkey.