rafmacalaba/datause-encoder-data huggingface dataset:
different for that treatment. Given that consulting is twice as expensive as insourcing and outsourcing, and the impacts on firm growth outcomes are similar, it may take twice as long to recoup the value of these services. But overall, all three business services appear to have returns that could pass a cost-benefit test, but with a large degree of uncertainty still.

Revealed preference then offers another view of whether firms benefited enough from these services to pay for them themselves after the program is over. Table 9 shows that firms which received training are not more likely to subsequently go and hire expertise than the control group. By contrast, firms in the insourcing, outsourcing and consulting treatments are more likely to be using business service providers relative to control firms. This continues to be true in the second follow-up survey, so that well over a year after the program has stopped subsidizing these services, firms which received treatment are 14 to 19 percentage points more likely to be paying for outside HR, accounting, marketing or consulting services on their own. This remains significant after multiple testing corrections (Appendix Table 9.2).

We also asked firms directly in the second follow-up survey (over a year after subsidies ended) whether they still had the worker or professional hired through the GEM project. Insourcing firms report still keeping 37 to 48 percent of the workers hired through the program.<sup>13</sup> Moreover, 84 percent of those who left quit, rather than were fired. And unlike wage subsidy programs for young workers (Groh et al. 2016) or for microenterprises to hire non-specialist workers (de Mel et al. 2019), data on when workers left show no spike when the subsidy ended but rather steady churn throughout the year. Outsourcing firms report still retaining the original service provider in 29 to 36 percent of cases. Here there is more of a spike in dissolution rates at the time the subsidy ended, with 46 percent of the churn occurring in the three months after the subsidies ended. The main reason firms gave for stopping the use of an outsourced professional was that firms had completed all the tasks they had for them. Even in these cases, the outsourced professionals helped set up systems and transfer knowledge that could continue adding value to the firm, so that the original support may have passed a cost-benefit test (even if firms do not think further usage was needed).

> 13 These data have some inconsistencies, with some firms confusing workers, accounting or marketing service providers, and consultancies. The lower number codes firms as not retaining the worker if they claim not to have hired the worker, while the higher number conditions on firms that report hiring a worker.

29
Policy ReseaRch WoRking PaPeR 4812

# **Abstract**

Based on analysis of reading performance data from 475 third-graders in Peru, this study makes recommendations on improving reading tests, choice of reading standards, and how to present the results at the school and individual levels. The paper reviews the literature on using reading skills measurement in the early grades to guide policymaking, strengthen accountability, and improve education quality. It uses data generated from the same students using two common approaches to measuring reading skills: an individually-administered oral fluency test, and a group-administered written comprehension test designed by the Ministry of Education for the 2006 universal standard test of second grade reading comprehension. These two approaches have sometimes been presented as competing alternatives, but the paper shows that it is better if they are used together, as complements. Based on psychometric analysis, the paper shows that both the oral and written tests adequately measured students’ reading abilities. The results show that reading fluency and comprehension are correlated: fluent readers are more likely to understand what they read than non-fluent readers. The strength of the fluency-comprehension relationship depends on the level of fluency, the difficulty of the questions, and social characteristics of the school. The paper recommends using improved versions of both tests to evaluate early grade reading skills, as a central element of a system of accountability for results. It proposes a model for reporting test results desgned to highlight the importance of reading standards, mobilize the education community to reach them, track progress, and identify students in need of extra support.

This paper—a product of the Education Sector, Human Development Department, Latin America & the Caribbean Region—is part of a larger effort in the department to help clarifying standards and establishing a stronger accountability system to improve educational quality and outcomes. Policy Research Working Papers are also posted on the Web at http:// econ.worldbank.org. The author may be contacted at ikudo@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
12 heterodox programs. However, as can be seen in Figure 2, the recessionary effects were both small and short-lived.

When the period of exchange rate stabilization extended over a considereble span we observe that the recessionary phase started before the large maxidevaluations set in. This was the case in the Southern Cone stabilizations of the 70s, as well as in Uruguay 1969 and in Israel.

In order to obtain a better understanding of the cycle it is useful to relate it to the long term trend. Accordingly, we present in figure 3 the cycles in terms of deviations from the long term evolution of GDP per capita.<sup>9</sup> These diagrams confirm that almost all of the cycles can be characterized as such even with respect to the long term trend. In this respect the expansions in chronic inflation countries differ from those which are sometimes observed in posthyperinflations, as in the case of Germany where industrial output remained well below trend (see Garber op. cit.). It may be pointed out that while the cycles may have influenced the trend, as calculated in our study, this interaction was minimized by taking relatively long time intervals.

Note also that most of the ERBS's were preceded by a recessionary period relative to trend. This indicates the existence of excess capacity which may have provided suitable conditions, from the supply side, for the upswing. One exception deserves special attention. The Brazilian stabilization in 196467 was characterized by a continuous recession relative to trend. This may be a significant fact in explaining the sustained low level of inflation in the following ("miracle") years. We may also note that the Krieger Vasena 9 To compute the trend we fitted a linear or quadratic equation for log GDP per capita in a piecewise manner and appropriate intervals. In the case of Argentina there is overlapping in the periods used to calculate the trend. We then averaged the residuals from the overlapping parts.
Clearly, this type of feed-back effect would muddle the relationships; to avoid this problem, years during which the crisis is unfolding are typically excluded from the sample.

Another key element of our study was the construction of the banking crisis dummy variable. Beginning from a sample of all the countries in the world, economies in transition were excluded based on the view that the problems in these countries were of a special nature. The following step was to identify all episodes of banking sector distress, drawing from the surveys of Caprio and Klingebiel (1996) and Lindgren _et al._ (1996) and from other case studies. To distinguish between fragility in general and crises in particular, and between localised crises and systemic crises, we established – somewhat arbitrarily – that for an episode of distress to be classified as a full-fledged crisis in our panel, at least one of the following four conditions had to hold: the ratio of non-performing assets to total assets in the banking system exceeded 10 per cent; the cost of the rescue operation was at least 2 per cent of GDP; banking sector problems had led to a large scale nationalisation of banks; extensive bank runs took place or emergency measures such as deposit freezes, prolonged bank holidays, or generalised deposit guarantees were enacted by the Government in response to the crisis.

Table 1 shows a version of the regressions in our 1998 paper, in which the sample has been extended through 2002 and to include more countries. The number of crises episodes in 4 the baseline specification has risen from 31 to 77, a sizable improvement (table 2). The findings are by and large consistent with those of the earlier paper, indicating that the relationships are fairly robust.

Low GDP growth, high real interest rates, and high inflation are significantly correlated with the occurrence of a banking crisis. Thus, crises tend to manifest themselves during periods of weak economic growth and loss of monetary control. Exposure to real interest rate risk is also a source of banking fragility. This is consistent with the view that 9
Palacios, R., Robalino, D., 2009. Matching Contributions as Way to Increase Pension Coverage, in: Holzmann, R., Robalino, D., Takayama, O. (Eds.), Closing the Coverage Gap: the Role of Social Pensions and Other Retirement Income Transfers. World Bank, Washington, D.C.

Perry, G., Maloney, W., Arias, O., Fajnzylber, P., Mason, A., Saavedra, J., 2007. Informality: Exit and Exclusion. World Bank, Washington, D.C.

Piggot J., Robalino D., Jimenez-Martin, S., 2009. Incentive Effects of Retirement Income Transfers, in: Holzmann, R., Robalino, D., Takayama, O. (Eds.), Closing the Coverage Gap: the Role of Social Pensions and Other Retirement Income Transfers. World Bank. Washington, D.C.

Pizer W., 1996. Modeling Long Term Policy Under Uncertainty. PhD. Dissertation. Harvard University. Cambridge, Massachusetts.

Queiroz, B. L., 2007. Retirement Incentives: Pension Wealth, Accrueal and Implicit Tax. Unpublished paper, Department of Demography, Centro de Desenvolvimento e Planejamento Regional, (Cedeplar), Universidade Federal de Minas Gerais, Brazil.

Queiroz, B. L., 2005. Labor Force Participation and Retirement Behavior in Brazil. Unpublished Ph.D. dissertation, Department of Demography, University of California at Berkeley, Berkeley.

Robalino, D, Bodor, A. 2009. On the Financial Sustainability of Earnings Related Pay-as-you-go Systems and the Role of Government Indexed Bonds. Journal of Pension Economics and Finance, Vol. 8, No. 2, p. 153-187.

Samwick, A. A., 1998. New Evidence on Pensions, Social Security, and the Timing of Retirement. Journal of Public Economics, 70, 207-236.

Takayama, N., 1990. How Much Do Public Pensions Discourage Personal Saving and Induce Early Retirement in Japan?. Hitotsubashi Journal of Economics, 31, 87-103.

Valdés-Prieto, S., 2008. A theory of contribution density and implications for pension design. Pensions Primer. World Bank, Washington, D.C.

Vodopivec, M., 2004. Income Protection Systems for Workers. World Bank, Washington, D.C.

Whitehouse, E., 2007. Pensions panorama: retirement-income systems in 53 countries. World Bank. Washington, D.C.

Whitehouse, E., 2009. Neutrality and Fairness: Actuarial Concepts and Pension-System Design. Pensions Primer. World Bank, Washington, D.C.

World Bank. 2002. Brazil Jobs Report. Vol. 1 of Report no.24408-BR, World Bank, Washington, D.C.

World Bank. 2007. Brazil: Towards a Sustainable and Fair Pension System. Report. World Bank, Washington, D.C.

World Bank. 2008. “Social Insurance and Labor Supply: Assessing Incentives and Redistribution. Draft Technical Report. Human Development Department.” Latin America and Caribbean Region. Washington DC.

40
The protection level Define the amount of adaptation capital that would be obtained if the government invests the equivalent of the average hurricane damage into adaptation as A . If a constant share of GDP is invested in adaptation capital and GDP grows at a rate , then in the long run adaptation capital will KK<sup>A</sup> accumulate to a steady state share of GDP and grow at the same rate as GDP, giving the steady-state relation . Inserting this in the equation for the accumulation of adaptation capital, gg gives =ttAA tt−1AA . Solving for adaptation capital, generates = 1+g . If the expected value AAKK 1−δδ= (1 + gg)KKAA AA ����AA A of gross damages is invested into adaptation each year then tt tt tt and is equal to KK 1+gg KK + II KK gg+δδ II<sup>AA</sup> A =<sup>1 + gg</sup> ����� II<sup>AA</sup> = GGDD KK<sup>A</sup> KK<sup>A</sup> GGDD. Not all adaptation capital projects will offer the same level of protection per unit of adaptation capital. gg+ δδ To account for this, the per unit effectiveness or amount of protection ( ) derived from successive adaptation capital projects is assumed to decline with additional projects (Bosello et al., 2010; de Bruin, PP Dellink, & Tol, 2009; Millner & Dietz, 2015). The amount of protection ( ) from a given level of adaptation capital can then be expressed as a function of the ratio of actual investment and the PP maximum adaptation capital stock, KK<sup>AA</sup> KK<sup>AA</sup> 2 1 A γγ , � KK<sup>AA</sup> PP= �γγ where 2 < 1 is a parameter that indicates the extent of diminishing returns to protection. KK<sup>A</sup> 2 = 1 implies that the marginal protection from a one dollar of adaptation capital is constant and equal to 1 . 0 < γγ A γγ 1 reflects the effectiveness of adaptive capital. If 1 equals one and protection would offset damages ( ) and equal to the expected value of damages. If 1 < 1 then average return to a γγ γγ γγ KK<sup>AA</sup> = KK<sup>A</sup> dollar of investment is less than one and even if adaptation investments were equal to the expected PP= 1 γγ damage from hurricanes, protection would be incomplete. Residual hurricane damage, , is determined by the product of gross damage ( and one less the level of protection, RRDD GGDD) An economy without adaptation capital ( ) will be affected by the full force of the hurricanes. Any RRDD= (1 −PP)GGDD. country that achieves a protection level of one would experience zero damages from a hurricane (assuming 1 = 1 ). PP= 0 damage per year, then we can expect the government to set The amount of investments γγ is a policy choice of the government. If �������� , otherwise the economy would is the average hurricane αα GGDD expend more resources on adaptation investments than actual expected hurricane damage. ααYY≤GGDD

# Accounting equations

The investment into adaptation capital needs to be considered in the calculation of GDP and government expenses. The standard GDP and government spending identities are modified to account for spending on adaptation capital as follows: + ΔS S YY= CC<sup>PP</sup> + CC<sup>GG</sup> + II+ II<sup>AA</sup> SS+ XX−MM+ D DDSS, 6
WPS4206

# **Does ‘Good Government’ Draw Foreign Capital?   Explaining China’s Exceptional Foreign Direct Investment Inflow**

## **Joseph P.H. Fan**<sup>**a**</sup> **, Randall Morck**<sup>**b**</sup> **, Lixin Colin Xu**<sup>**c**</sup> **, and Bernard Yeung**<sup>**d**</sup>

## **Abstract**

China is now the world’s largest destination of FDI, despite assessments highlighting its institutional deficiencies. But this FDI inflow corresponds closely to predicted FDI flows into China from a model that predicts FDI inflow based on government quality indicators and controls and is estimated across a sample of other weak-institution countries. The only real discrepancy is that, if government quality is measured by constraints on executive power, China receives somewhat more FDI than the model predicts. This might reflect an underestimation of the strength of these constraints in China, a unique institutional setting for FDI operations, FDI based on expected future institutional improvements, or a unique Chinese model of development. We conclude that Ockham’s razor disfavors the last. We also note that FDI may be elevated because Chinese institutions protected foreign firms better than domestic ones.

## World Bank Policy Research Working Paper 4206, April 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._

- a.   Professor, School of Accountancy and Department of Finance, Chinese University Of Hong Kong, Shatin, N.T. Hong Kong. Phone: (852) 2609-7839; Fax: (852) 2603-5114; Email: pjfan@cuhk.edu.hk.

- b.   Stephen A. Jarislowsky Professor of Finance, University of Alberta Business School, Edmonton Canada T6G 2R6.  Phone (780) 492-5683; Fax (780) 492-3325; E-mail:  randall.morck@ualberta.ca. Research Associate, National Bureau of Economic Research, 1050 Mass Ave.  Cambridge MA 02138

- c.   Senior economist, Development Research Group, World Bank, 1818 H Street, N.W., Washington, DC 20433, USA.  Phone: (202) 473-4664; Fax: (202) 522-1155; Email: LXU1@WORLDBANK.ORG.

- d.  Abraham Krasnoff Professorship in Global Business, Professor of Economics, Professor of Management, Stern School of Business, New York University, 44 W. 4th Street, KMC 7-65, New York NY 10012, USA.  Phone (212) 998-0425; E-mail: <u>byeung@stern.nyu.edu.</u>

We are grateful to Steve Knack for providing the cross-country data on rule of law and bureaucratic quality. Randall Morck thanks the SSHRC for partial funding. We have benefited from comments of Jiaxing Zhu and other participants of the SSE-LSE-CCER Annual Conference on Law, Finance and Economic Growth in China.
severe stunting in urban clusters. This observation suggests varying degrees of dependence on watershed conditions between rural and urban clusters, highlighting the crucial role of upstream forests specifically for rural areas.

**Table 6: Impact of upstream forest loss on children health, 2004-2020 (global urban non-migrant sample)**

||**(1)**|**(2)**|**(3)**|**(4)**|**(5)**|
|---|---|---|---|---|---|
||**Dependen**|**t variable: Diarrhe**|**al Disease**|**Dependent va**|**riable: Severe**|
|||||**Stun**|**ting**|
|Upstream Forest Loss||||||
|Survey Year t-1 to t|0.396|0.332|0.324|||
||(0.281)|(0.279)|(0.278)|||
|Survey Year t-2 to t-1|-0.214|-0.161|-0.163|||
||(0.275)|(0.266)|(0.265)|||
|Birth Year b-1 to b||||0.228<br>(0.301)||
|Birth Year b-3 to b|||||-0.0642<br>(0.144)|
|N|184,151|184,151|184,151|129,217|129,217|
|Fixed Effects|Y|Y|Y|Y|Y|
|Climate Controls|Y|Y|Y|Y|Y|
|Demographic Controls|N|Y|Y|Y|Y|
|Improved Water|N|N|Y|N|N|
|R-sq|0. 031|0. 048|0.048|0. 044|0.044|

_Notes_ : Table presents estimates where the dependent variable is the health (diarrheal disease and severe stunting) incidence for non-migrant children residing in urban areas that are under the age of 5 between years 2004-2020. See notes to Table 3 and 5 for details on the variable construction and specifications of equations (1) and (2), respectively. Robust standard errors clustered at the province level and are reported in parentheses. * p<0.10, ** p<0.05, *** p<0.01.

# **4.2. Peru Case Study**

Having established global results, next we test our model for Peru, a country of particular interest for our study given the considerable threats to forests and the ecosystem services they provide. The model for this subset shows qualitatively similar results for DD in Table 7 as our global sample analysis. The results in columns 1, 2, and 3 in Table 7 indicate that when the share of forest loss in the year prior to the survey increases from 0 to 1 (a 100-percentage point change), DD incidence increases by 2.06 percentage points on average. In other words, a 1 percent decline in upstream forest cover significantly increases the likelihood of DD by 0.0206 percentage points. The magnitude of this effect is more than double the effect in the global sample, with a 1 percent decline in upstream forest cover increasing the probability of DD by approximately 16.29 percent. The same falsification tests are also carried out for the Peru sample, including using the falsified forest loss variable (column 4) and urban sample (column 5). The coefficient estimates are insignificant, providing further evidence that we are able to isolate the water channel.

**Table 7: Impact of upstream forest loss on DD incidence, 2004-2020 (Peru sample)**

||**(1)**|**(2)**|**(3)**<br>**(4)**<br>**(5)**|
|---|---|---|---|
||**Depe**|**ndent variable**|**: Incidence for Diarrheal Disease**|
|Upstream forest loss||||
|Year t-1 to t|2.056**|2.047**|2.059***<br>-0.155|
||(0.826)|(0.798)|(0.796)<br>(0.558)|

21
<!-- Start of picture text --> Figure 8: Average deal size across governing laws<br>(dollar-denominated central government bonds )<br>1,800 $ millions<br>1,600 U.K. Law U.S. Law<br>1,400<br>1,200<br>1,000<br>800<br>600<br>400<br>200<br>0<br><!-- End of picture text --> Source: Authors’ calculations based on Dealogic data.

There are also legal nuances and issuance trends that merit attention. The first relates to collective action clauses (CACs) that allow a qualified majority of creditors to impose a settlement on a minority of holdouts. Several studies attributed the difference in yields to the different voting requirements (Tsatsaronis 1999, Eichengreen and Mody 2004). However, the sign of the relationship between CACs and yields is ambiguous. Intuitively, one may think that since CACs facilitate orderly resolution of crises, they make bonds more attractive and their yields lower (Kletzer 2003). On the other hand, it would be reasonable to think that CACs drive up yields, because the prospect of orderly restructuring exacerbates moral hazard. As Eichengreen and Mody (2000) noted, the answer to this question is empirical. These authors found one effect or the other to prevail depending on the issuer’s creditworthiness. While “renegotiation-friendly loan provisions” reduce borrowing costs for higher-rated issuers (for whom default is a rare event), the opposite is true at the lower end of the rating spectrum (Eichengreen and Mody 2004). Earlier studies (Tsatsaronis 1999, Eichengreen and Mody 2004) normally used the governing law under which debt was issued as a proxy for the inclusion of CACs. In accordance with each jurisdiction’s traditional common practice, bonds issued under U.K. governing law were assumed to contain CACs, while those issued under U.S. law were not.<sup>7</sup> But this simplification has now lost its validity since CACs are prevalent in both jurisdictions (Tomz and Wright 2013). Hence, authors have included in their analyses variables that explicitly identify the existence of CACs at the individual bond level (Häseler 2010, Bardozzetti and Dottori 2013). This is also the approach we followed. In fact, we too find that in the post-crisis period CACs are almost as prevalent under U.S. law as under U.K. law (Table 2).

> 7 This practice had some historical foundation: CACs have been used in London since 1879, while they were reintroduced in New York governing law only in 2003, after an 80-year absence (Buchheit 2012).

9