rafmacalaba/datause-encoder-data huggingface dataset:
Panels (a) through (e) of Figure 2 display the evolution of the main infrastructure indicators<sup>18</sup> : the length of total roads per square root of the country’s 1,000 workers multiplied by its mean arable land (in km), paved road (the ratio to total road length), the number of main phone lines per 1,000 workers, and EGC per 1,000 workers (in megawatts), and power loss (percentage of total output), respectively. In each case, the group median for each decade is shown.

# _Transport:_

Panel (a) presents road networks as a measure of transport stock and the ratio of paved roads to total road length as a proxy of transport quality, respectively. We normalize the measure of transport stock, dividing it by the square root of the country’s 1,000 labor force times its mean arable land. Although Egypt has lagged behind the other two groups in terms of total road length since the 1970s through the 1990s, the growth in total road length drastically picked up in the 1990s onwards, while that in the other two groups has stagnated. As Panel (b) shows, Egypt has far exceeded the typical country in the two comparator groups regarding the ratio of paved roads to total road length.<sup>19</sup>

# _Telecommunications:_

Egypt experienced rapid growth in its quantity indicator of telecommunications over time. As for the number of main lines in Panel (c), the gap between Egypt and World has significantly narrowed in the latest period.

> 18 The balanced data is used for all five indicators.

> 19 We also normalized total road length by 1,000 workers and obtained very similar results to those in Panel (a).

18
problematic since a failure of a country to repay may trigger a contagion effect if the other countries do not have enough resources to absorb the troubled debt.<sup>2</sup> On the other hand, the introduction of joint liability bonds like Eurobonds could provide better access to financial markets especially to those countries under stress. Moreover, it could decrease the incentives for some member countries to abandon the Euro or default, by promoting stability and setting the basis for a prospective fiscal integration, European Commission (2014).

I consider two economies with exogenous incomplete markets. In the benchmark case countries can issue only individual sovereign bonds, following Arellano (2008). Then, I study the interactions between two countries that can issue bonds with full joint liability. Following the literature, I study an endowment economy and I abstract from production and input decisions. The endowments follow a stochastic process taken from data on the performance of Core and Periphery countries in the Eurozone.<sup>3</sup> For my measurement I use two groups of countries, the first group is wealthier with less income volatility than the other group and represents the Core member states of the Eurozone (Germany, France, Netherlands), while the other group represent the Periphery member states of Eurozone (Portugal, Italy, Greece, Ireland, Spain). In the analysis, the prices of the bonds are endogenously determined and depend on both countries choices, generating a strategic interaction between the two countries. In particular, there exist a two-stage Nash equilibrium. In the first stage countries make their repayment decisions and, conditional on this, they make their borrowing decisions on the second stage. I do not allow for partial default, and the penalty of default is a permanent output loss and exclusion from markets.

This paper is related to the novel literature that studies the effects of Eurobonds. Delpla & von Weizsacker (2010) discusses the ‘blue and red bond’ proposal, in which they propose pooling debt up to 60% of GDP (blue bonds) and using individual bonds issued by each country separately (red bonds) beyond that threshold. Hellwig & Philippon (2011) foresees a mutualization of 10% of GDP for the short term debt. Claessens _et al._ (2012) discusses in depth various proposals of Eurobonds and analyze potential effects in the Eurozone, and Beetsma & Mavromatis (2014) and Tirole (2015) analyze stylized finite-period models of the strategic interactions between two countries that can issue joint liability bonds. They find that Eurobonds might be beneficial under some circumstances. This paper complements that literature by providing

> 2 The European Commission (2011) has tried to asses the feasibility of common issuance of sovereign bonds among Member States of the Eurozone, while it highlights the “moral hazard” as a potential problem. As a solution to this problem, all the proposals suggest borrowing limits in order to mitigate this potential problem.

> 3The distinction between Core and Periphery countries in Eurozone follows the description of the related literature.

2
2 This paper summarizes the recent evidence on global poverty and inequality, including both developed and developing countries. It draws on two main compilations of distributional data created at the World Bank, both of which are built up from country-specific nationally representative household surveys, generally fielded by national statistical offices. First is the _PovcalNet_ data set, which comprises some 560 surveys for 100 low and middle-income countries, representing some 93% of the developing world’s population.<sup>2</sup> Where necessary, the _PovcalNet_ data set is complemented with information from the _World Development Report_ 2006 household survey database, which has a somewhat broader geographical coverage (including many developed countries), but a more limited time-span.

In the first part of the paper we discuss our poverty and inequality data and present evidence on levels and recent trends in poverty and inequality around the world. Global and regional poverty aggregates are also discussed here. Section 2 turns to the issues involved in aggregating inequality indices across countries, in order to construct a meaningful measure of global inequality. It reviews the main results from the literature that has sought to measure global income inequality, and briefly summarizes some of the evidence on global inequalities in health and education. Section 3 discusses the empirical relationship between economic growth, poverty and inequality dynamics. Here we present what we see as the three key stylized facts to emerge from these data: the absence of a correlation between growth rates and changes in inequality among developing countries; the strong (positive) correlation between growth rates and rates of poverty reduction, and the importance of inequality to that relationship. In Section 4, in a more speculative mode, we turn to the likely economic determinants of poverty and inequality changes. Section 5 offers some conclusions, and points to some promising research themes within this general topic.

# **1. Poverty and inequality around the world: A bird’s eye view**

There has been a remarkable expansion in the availability of household surveys in developing countries over the last 25 years. These surveys, which are typically designed and fielded by national statistical agencies, have the measurement of living standards in the population as one of their key objectives. Although clearly there are measurement errors in such 2 See http://iresearch.worldbank.org/PovcalNet/jsp/index.jsp .
- 25 -

**Table** **<u>3. Instrumental variable estimation with interest rates</u>**

||(1)|(2)|(3)|(4)|(5)|(6)|
|---|---|---|---|---|---|---|
|ln_CONN_1|-0.563|-0.664|||||
||(0.527)|(0.475)|||||
|ln_CONN_1ln_CONN_1||-0.057<br>(0.518)|||||
|ln_CONN_2|||1.572|-0.657|||
||||(2.813)|(1.751)|||
|ln_CONN_2ln_CONN_2||||0.106<br>(0.157)|||
|ln_CONN_3|||||0.839|60.004|
||||||(0.787)|(74.747)|
|ln_CONN_3ln_CONN_3||||||-5.861<br>(7.479)|
|ln_POP_|0.170|0.182 *|0.942|0.217|0.050|0.125 *|
||(0.190)|(0.103)|(1.777)|(0.157)|(0.087)|(0.073)|
|ln_SALE_|0.103 ***|0.106 ***|0.094|0.100 ***|0.095 ***|<br>0.117 ***|
||(0.037)|(0.033)|(0.067)|(0.039)|(0.033)|(0.039)|
|_RATE_|-0.018|-0.019|-0.060|-0.025|-0.017|-0.029|
||(0.014)|(0.014)|(0.086)|(0.018)|(0.013)|(0.021)|
|ln_AGE_|0.245 **|0.249 ***|0.248|0.205 **|0.205 **|0.241 **|
||(0.106)|(0.092)|(0.219)|(0.093)|(0.090)|(0.108)|
|_DIM_|0.648 ***|0.631 ***|1.215|0.812 ***|0.770 ***|<br>0.805 ***|
||(0.200)|(0.151)|(0.830)|(0.246)|(0.148)|(0.196)|
|_DEX_|0.169|0.179|0.440|0.151|0.116|0.310|
||(0.182)|(0.148)|(0.758)|(0.162)|(0.154)|(0.268)|
|cons|-1.681|-1.878|-21.126|-2.116|-3.730|-153.791|
||(3.185)|(1.755)|(41.189)|(6.091)|(5.034)|(186.562)|
|Obs|554|554|554|554|554|554|
|Wald chi2|172.62|180.87|31.68|157.26|172.15|122.95|
|R squared|0.182|0.171||0.080|0.195||
|<br>No. of industry dummy<br>variables|4|4|4|4|4|4|
|Exogeneity test statistics|1.551|18.927 ***|1.286|32.405 ***|4.041 **|24.846 ***|
|Elasticity at means:|||||||
|∂ln_S_/∂ln_CONN_|-0.563|-0.643 **|1.572|0.756 *|0.839|2.030 **|
||(0.527)|(0.306)|(2.813)|(0.392)|(0.787)|(0.909)|
Thus our study of entrepreneurship falls between two more common types of studies, thereby hitting on a key element of South Asia‘s future. On one hand, we purposely steer clear of self-employment measures. Even for the United States, self-employment is a second-best link for measuring entrepreneurship for job creation. These methodological challenges for low return or subsistence efforts are compounded in South Asia where the informal sector employs 90% of workers (e.g., Schoar 2009, Ardagna and Lusardi 2008). To realize long-term employment growth, it is necessary to distinguish transformative entrepreneurship from subsistence entrepreneurship, and Ghani et al. (2011) show the strong job growth linkage to entry into the formal sector. We thus focus our efforts on describing the spatial distribution of these entrepreneurs. This also accords with the emphasis of van Stel et al. (2007) to measure determinants separately across different types of entrepreneurs.

On the other hand, we also do not study the development of very high-growth entrepreneurship or venture capital markets in South Asia (except to the extent that they are part of our official statistics). This is not because these entrepreneurs are not important for South Asia; quite the opposite. Many recent studies focus on software‘s emergence, returnee entrepreneurs, diaspora, and similar exciting developments (e.g., Arora and Gambardella 2005, Kerr 2008, Nanda and Khanna 2010, Agrawal et al. 2011). Yet these specialized sectors are still an extremely small part of the Indian economy, and we focus more on identifying measures of entrepreneurship like young businesses that apply to the entire manufacturing and services sectors.<sup>4</sup>

# _Indian Entrepreneurship Data in Manufacturing and Services_

We employ cross-sectional establishment-level surveys of manufacturing and service enterprises carried out by the Government of India. Our primary manufacturing data are taken from surveys conducted in fiscal years 2005-06; the services sector data come from 2001-02. Even though these surveys were undertaken over two fiscal years, for simplicity we refer below to the initial year only. This section describes some key features of these data for our study, and our unpublished data appendix (available upon request) provides greater details. Appendix Table 1 provides a complete list of data sources and years employed. Nataraj (2009), Kathuria et al. (2010), Hasan and Jandoc (2010), Dehejia and Panagariya (2010), and Fernandes and Pakes (2010) provide detailed overviews of similarly constructed databases.

It is important to first define and characterize the distinction between the organized and unorganized sectors in the Indian economy, which our estimations consider separately. These

> 4 Our definition of entrepreneurship places this study in a well-established literature examining the locational decisions of plants, primarily studied in developed countries. Examples include Due (1961), Oakland (1978), Schmenner (1982), Carlton (1983), Bartik (1995), and McConnell and Schwab (1990).

8
dealing with them), and the degree of market dominance and competition among transporters. The costs and viability of high volume mechanized transport improve when roads are built. So does access to markets through other more traditional means of transport. Which mode of transport is eventually used will depend upon costs and prices.

Following this results chain, rural roads development can therefore enhance market access and welfare for rural communities; and these gains can increase as road conditions and market integration improves. But it does not necessarily follow that building rural roads will always and everywhere generate these feasible results. It depends upon the assumptions, prices and market conditions along the results chain. Whether these hold is an empirical question which is all too often glossed over by development practitioners in determining the appropriate levels and locations of public investments in rural roads, and indeed in appraising their viability _ex ante_ .

This empirical paper investigates the assumed link between rural roads and incomes in rural Uganda. It then assesses the criteria currently used in Uganda to decide on how to prioritize public funds in the rural roads sector. It presents the results of an alternative methodology that could help maximize the economic growth gains from rural roads investments. Finally the paper offers policy recommendations to the Government of Uganda (GOU) on how to get the most out of the existing stock of rural roads, which also cover transport logistics and marketing reforms.

# **_A brief literature survey_**

The empirical literature on the economic costs of isolation and the benefits of access in LIC is growing. For Madagascar, Stifel and Minten (2008) find that isolation (defined as travel time during the dry season from the commune center to the nearest urban center) implies lower agricultural productivity, increased transport and transaction costs and increased insecurity. The authors found a major jump of per capita consumption from the least remote quintile to the second quintile and therefore a negative relationship between isolation and poverty. Distance from the plot to an all-weather road and the cost 4
components in its exports; the domestic value added in China’s exports has risen by about 30 percent since 2000.

As the case study on Indonesia shows, ambivalence toward trade is one reason why Indonesia has not grown faster. Continued problems with customs bureaucracy as well as poor infrastructure have led to Indonesia slipping steadily down from 43<sup>rd</sup> to 53<sup>rd</sup> in the World Bank’s Logistics Performance Index. Malaysia, meanwhile, has improved its ranking, now standing at 25<sup>th</sup> globally.

2. _Ideas and innovation_ . We highlighted the role of competition, especially through openness to foreign markets and investments in creating an environment for innovation, following Aghion and Howitt (1996). The empirical literature since then seems to bear out the importance of this. We also highlighted the role played by new capital investments, and R&D as a means of diffusing technology domestically. Comin (2013) has recently documented the links between R&D intensity and technological adoption. And if the focus on science and technology in the negotiations for the new Sustainable Development Goals is any guide, there has been a steady increase in the interest from middle-income countries on access to and diffusion of new technologies.

Indonesia is an example of a country that perhaps underinvests in R&D. It spends only 0.1% of GDP on R&D and only 0.3 percent of GDP on higher education. Meanwhile, Korea, a country that has escaped a middle-income trap, spends about 4.4% of its GDP on R&D, ranking first among OECD countries in R&D intensity. Of course, spending is no guarantee that innovation will follow: Japan also has a comparatively high share of R&D spending (over 3%), but with little innovation to show for it. Japan has low entry and exit of firms, as well as low levels of entrepreneurship.

3. _Finance and risk_ . Many middle-income country governments had based policy on the belief that deep involvement in global supply chains required fixed exchange rates. But they discovered that international finance followed supply chains, creating two sources of vulnerability: currency risk and balance sheet risk associated with plentiful external liquidity being made available for investments throughout the economy, including nontradeable activities such as real estate. Our recommendation was to move toward more flexible exchange rates, while developing local financial markets to permit firms more opportunities to hedge the forex risk. Indeed, middle-income countries have been moving steadily in this direction, recovering monetary policy as an instrument of macroeconomic management.

According to the IMF,<sup>14</sup> many countries have revised prudential requirements to improve the liquidity, solvency and risk management of the financial sector. At the same time, despite bouts of capital flow volatility stemming from the tapering of quantitative easing

> 14 IMF, Annual Report on Exchange Arrangements, 2014

15
traditional fossil fuel based supply (Bowen, 2012). In addition, energy efficiency improvements, a direct result of higher energy prices, may also generate demand for labor intensive environmental services, such as building retrofitting and weatherization. An UNEP (2011) study suggests that there were more than 2.3 million jobs in the renewable energy sector around the world in 2006, and more in providing improved energy efficiency in buildings, in low-carbon transport and in other environmental activities.

Many ECA countries have already adopted or committed to renewable incentive programs, such as feedin tariffs or renewable energy portfolio to support renewable energy development. Table 9 summarizes the current share of renewable energy in the fuel mix, the targets of renewable energy programs, and existing renewable energy policies in ECA. For ECA countries, the main employment opportunities of domestic renewable energy programs are likely to be related to construction, installation, and maintenance of renewable energy facilities.

**Table 9 - Renewable energy in ECA**

Share, Target and Policies

|**ECA country**|**Renewable**<br>**share 2005**|**EU**<br>**Directive**<br>**2020**<br>**Target**|**Year FIT**<br>**enacted (years**<br>**updated)**|**Renewable sources covered**|
|---|---|---|---|---|
|Armenia|||2001 (2009)|All|
|Azerbaijan|||Proposed 2009||
|Belarus|||1994|All|
|Bosnia &<br>Herzegovina|||2010|All|
|Bulgaria|9.4%|16.0%|2008 (2009)|PV, wind, small biomass, small hydro|
|Croatia|||2007 (2009)|PV, wind, hydro, geothermal, biomass,<br>biogas|
|Czech<br>Republic|6.1%|13.0%|2005 (2006,<br>2010)|PV, wind, small hydro, geothermal,<br>biomass,biogas|
|Estonia|18.0%|25.0%|2003 (2004,<br>2007)|Wind, biomass, hydro, others|
|FYR<br>Macedonia|||2007 (2009)|PV, wind, hydro, biomass|
|Georgia|||--||
|Hungary|||2003 (2005,<br>2007)|All (separate biomass rates)|
|Kazakhstan|||2009|All?|
|Kosovo*|||-- (may exist?)||
|Kyrgyz<br>Republic|||--||
|Latvia|32.6%|40.0%|c. 1996 (2003,<br>2007)|Wind, small hydro, biomass, biogas|
|Lithuania|15.0%|23.0%|2002 (2008)|PV, wind, small hydro, biomass|
|Moldova|||2007|All|
|Montenegro*|||--||
|Poland|7.2%|15.0%|-- (uses quota syste|m)|
|Romania|17.8%|24.0%|-- (uses quota syste|m)|

37
3274

# **Avoiding Customer and Taxpayer Bailouts in Private Infrastructure Projects**

**Policy toward Leverage, Risk Allocation, and Bankruptcy**

David Ehrhardt and Timothy Irwin<sup>1</sup> World Bank Policy Research Working Paper 3274, April 2004 _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 David Ehrhardt is at Castalia (david.ehrhardt@castalia.fr) and Timothy Irwin is at the World Bank (tirwin@worldbank.org). The paper has benefited from comments and assistance from Ian Alexander, Doug Andrew, Glenn Boyle, Ken Burns, Ben Esty, Alfonso Guzman, Clive Harris, Luiz Maurer, Anna McKinlay, Apurva Sanghi, Michael Schur, Jordan Schwartz, Tomas Serebrisky, Sophie Sirtaine, Warrick Smith, Dirk Sommer, Rob Taylor, Alan Townsend, and Stephan van Klaudy.
<!-- Start of picture text --> Election turnout Share of votes for left<br>Year Year<br>Share of votes for center Share of votes for right<br>Year Year<br>Electoral competition<br>Year<br>Figure 2. Parallel Trend Assumption – Mayoral Elections<br>Continuous Treatment Variable<br>2000 2003 2007 2011 2015 2019 2000 2003 2007 2011 2015 2019<br>2000 2003 2007 2011 2015 2019 2000 2003 2007 2011 2015 2019<br>2000 2003 2007 2011 2015 2019<br>.15 .15<br>.1 .1<br>.05 .05<br> (95% CI) (95% CI)<br>β β<br>0 0<br>-.05 -.05<br>.15 .15<br>.1<br>.1<br>.05<br>.05<br> (95% CI) (95% CI) 0<br>β β<br>0 -.05<br>-.05<br>.15<br>.1<br>β (95% CI) .050<br>-.05<br><!-- End of picture text --> _Notes:_ The figure illustrates the results of an event study estimation. We interacted the standardized values of the variable PEP holders with mayoral electoral years excluding the 2015 election, the last one before 2018, when the PEP program was implemented. The estimates include municipality, electoral year, and department electoral-year fixed effects, and they control for the interaction between electoral year dummies and a set of predetermined municipal characteristics, measured before the beginning of our period and listed in Table C.2. Standard errors were clustered at the municipality level and bars represent a 95% 21