rafmacalaba/datause-encoder-data huggingface dataset:
Policy Research Working Paper 10059

# **Abstract**

This paper uses data on nearly half a million actual shipments from a trucking portal in India to provide evidence on how trucking costs depend on route characteristics and affect the intensive and extensive margins of shipment flows. The empirical analysis using pre-pandemic data (before March 24, 2020) confirms the presence of thick market externalities along a route and spillovers across routes due to network externalities, both of which confer advantages to origins and destinations with larger market sizes. The paper utilizes exogenous variations in value-added tax on gasoline across states to provide causal estimates of the elasticity of shipment flows with respect to trucking costs.

The empirical estimates suggest that a 1 percent increase in trucking unit costs reduces trade flows by 2.8–3.9 percent. On the extensive margin of trade, three eastern states and several smaller territories constitute isolated regions that were largely cut off from the trading networks during the pre-pandemic period. Trucking costs increased by 32 percent during the early post-lockdown period (June 2020 to February 2021). The increase was greater along longer routes. In the short run, the increase in freight rates led to a proportionate decrease in trade flows across states. It pushed a significant number of poorer and remoter states into the ranks of isolated regions.

This paper is a product of the Development Research Group, Development Economics and the office of the Chief Economist, Equitable Growth, Finance and Institutions Group. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at fshilpi@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
Figure 11. Real exports and real imports compared with COVID L-shape recovery – 2030 (%) <!-- Start of picture text --> 40<br>30<br>20<br>10<br>0<br>-10<br>-20<br>-30<br>-40<br>Real Exports Real Imports<br>Reshoring leading economies Reshoring all GVC friendly liberalization + TF imports<br>USA Rest of High Income Countries Europe China Philippines Vietnam Rest of South Asia Rest of East Asia and Pacific Brazil India Rest of Sub-Saharan Africa Malaysia South Africa Rwanda Turkey Mexico Rest of Latin America and Caribbean Middle East & North Africa Nigeria Thailand Europe & Central Asia World China Rest of High Income Countries USA Europe Nigeria Rest of East Asia and Pacific Vietnam Philippines Brazil Middle East & North Africa Europe & Central Asia Rest of Sub-Saharan Africa Mexico Malaysia Rest of South Asia Rest of Latin America and Caribbean India South Africa Rwanda Turkey Thailand World<br><!-- End of picture text --> Source: Envisage simulations.

# Resilience to supply shocks and reshoring efforts

Becoming more GVC-friendly makes developing countries more resilient to supply shocks. In the _Reshoring All_ scenario and the _GVC-friendly_ scenario countries have different abilities to adapt to external shocks. In the _Reshoring All_ world, countries face higher trade barriers and have less ability to substitute between domestic and imported commodities, as well as choose between different import sources. At the same time, in the _GVC-friendly_ world both developed and developing regions are more resilient in the face of disruptions in production or supply chains.

A _GVC-friendly_ world provides better shock absorbers than the localized world. In this section we showcase such difference by looking into a stylized experiment where we estimate impacts of a hypothetical supply shock in Thailand and its disruption to the supply chain of electronics in a similar way in which the floods impacted the output of electronics in Thailand in 2010 (e.g. Haraguchi and Lall 2015). We assume a 10 percent negative shock to the total factor productivity of Thailand’s computer, electronic and optical products industry in 2027 and explore how this shock impacts both domestic and global supply chains under the _Reshoring All_ and _GVC-friendly_ world assumptions. In terms of the impacts on Thailand’s domestic economy, in the _GVC-friendly_ world, the country’s real income falls by 26 percent less compared to the case when the same shock is implemented in the _Reshoring All_ scenario (-2 percent vs -2.7 percent respectively) (Figure 12). Due to the lower trade barriers and higher trade substitution possibilities, output of Thailand’s electronics is impacted more negatively in the _GVC-friendly_ world. At the same time, output of all other sectors increases substantially (compared to the _Reshoring All_ scenario), as there is a partial reallocation of resources away from electronics production towards other sectors of the economy. As a 23
the share of income of the top 1 percent ( _S_ ), the fraction of the population ( _P_ ) in that group ( _P_ = 1%), and an estimated coefficient of the inverted Pareto distribution ( _β_ ) that captures the shape of the income distribution function within the 1 percent. The formula used is: _G_ = ( _β −_ 1) _/_ ( _β_ + 1) _PS_ + _G_<sup>_∗_</sup> (1 _− P_ )(1 _− S_ ) + _S − P_ ; _G_<sup>_∗_</sup> is estimated using the household survey, while _S_ and _β_ are obtained from tax records.

In this paper, we build upon the contribution of Alvaredo (2011) and propose a methodology that differs from those in several dimensions. First, their formula obtains an estimate of the Gini coefficient of the bottom 99 percent of the population ( _G_<sup>_∗_</sup> ) from the household survey. However, as previously noted, household surveys are not representative of the full population, which means that _G_<sup>_∗_</sup> does not capture the true bottom 99 percent of the population. Estimating _G_<sup>_∗_</sup> by computing the Gini coefficient of the bottom 99 percent of those households that are present in the household survey will yield a biased result if there is survey underreporting at the top of the income distribution (since it will use the bottom 99 percent of a sample which is truncated at the top, not of the true income distribution). Alternatively, _G_<sup>_∗_</sup> can be estimated as the Gini coefficient of the entire household survey (without excluding the top 1 percent of the respondents), under the assumption that the household survey is effectively representative of the bottom 99 percent of the income distribution due to underreporting at the top. This approach would be correct if we were certain that the household survey misses precisely the top 1 percent. However, if household survey underreporting is significant at a different income level (for example, below the top 1 percent), the estimated _G_<sup>_∗_</sup> would not correspond to the Gini coefficient of the bottom 99 percent of the true income distribution.

A second difference between the two approaches is that, even assuming an accurate estimation of _G_<sup>_∗_</sup> , the formula only corresponds (up to the approximation discussed in Alvaredo 2011) to the one presented in this paper with a choice of _b_ equal to the 99th income percentile, as opposed to the optimal _b_ discussed above. As previously argued, we believe that choosing a lower _b_ (corresponding to the income threshold that triggers mandatory tax filings) results in a better estimate because it reduces the reliance on household survey data for the top of the income distribution.

9
Policy Research Working Paper 7616

# **Abstract**

Industry and financial profiles of MENA firms may underpin the observation that MENA country exports are below potential and skewed toward low value-added goods that are unable to spur rapid job creation and inclusive growth. To assess this link, the paper combines analysis highlighting external financing as a determinant of export performance, and analysis highlighting sector asset tangibility and governance. Why? Because high value-added sectors tend to have higher shares of intangible assets and to create innovative products requiring substantial research and development or investments, thereby making these sectors more dependent on external financing. Using sector- and firm-level export data with country-level indicators, the results indicate that countries with more developed financial sectors and stronger governance tend to have higher exports from sectors that are more reliant on finance external to the firm, and lower exports from sectors with higher shares of tangible assets. Interestingly, financial sector development boosts exports less in MENA than in non-MENA countries. To foster expansion of higher value exports, the results suggest a critical need for: (i) deeper financial sector development that strengthens market-based systems, such as asset registries and credit reporting agencies, and (ii) strengthening of legal and governance frameworks.

This paper is a product of the Office of the Chief Economist, Middle East and North Africa Region. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at cwood@worldbank.org and jyang4@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
Workers could easily ascertain the piece rates paid by different firms, but the effect of firm characteristics on a worker’s productivity should have been harder to predict. Firms that had made investments that led to higher worker productivity should have wanted to advertise that information in order to convince workers that they should accept a lower piece rate, while firms that had not should have wanted to hide the fact. Newman and Jarvis also found that piece rates were adjusted in many packing sheds if the quantity and/or quality of the grapes being processed changed. Although strikes were legally prohibited, female workers were able to “stop” production and successfully negotiate an increase in the piece rate, and the reverse was also true. Indeed, several male shed managers said that they found it easier to negotiate a “fair” piece rate with women than to negotiate pay with men.

The evidence in Newman and Jarvis suggested that women workers were both aware of the importance of firm-influenced productivity differences and able to obtain information about what firms actually provided. Thus, there was evidence that female workers operated within and were part of a highly sophisticated labor market in which firms and workers obtained and used information regarding about their heterogeneity. Neither workers nor firms thought that firms or workers were homogeneous.

# **8. Attitudes toward Work**

Each worker was asked how many months he/she would have liked to work during 1991 and 1992. The mean response by females was 11.1 months and 9.7 months, respectively. The responses were surprisingly high, given that most women had worked much less than this in 1991. The question did not specify a wage at which they would be

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<!-- Start of picture text --> Figure 3<br>Earnings Profile for teachers and other comparable groups<br><!-- End of picture text --> <!-- Start of picture text --> 5.000<br>4.500<br>4.000<br>3.500<br>3.000<br>2.500<br>2.000<br>1.500<br>1.000<br>1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41<br>Years of experience<br>Teacher in basic public schools Teacher in basic private schools Other government workers Private sector workers<br>Log Hourly Earnings<br><!-- End of picture text --> Source: Authors’ estimates based on ENIGH 1996 Teachers in basic private schools face the most uncertainty about lifetime salary and job tenure. Moreover, between eleven and thirty years of experience they earn more than public school teachers and the other groups. Teachers in basic public schools and comparable groups deal with a significantly lower risk from their salaries than do basic private school teachers. Teachers labor earnings in basic public school profiles are slightly flatter than the income profile for the private sector workers. At their initial stage of their professional life, teachers are paid about 79% more per hour than the private sector workers, and about 77% more than the other government workers. However, as can be seen in Figure 3, the public teacher's earnings grow at a slower rate than the comparable occupations. Note that other government workers’ wages grow at a significantly higher rate than do public teacher's salaries. Other government workers face significant risk through their professional life, possibly due to the uncertainty of obtaining retirement benefits and the lack of a civil service career in the public sector. But the public teachers ́ union has been effective in stabilizing teachers ́ jobs and salaries. Once a public school teacher enters the labor market, the union not only protects her position, but also protects her lifetime income. Teachers in basic public schools are better paid early in 21
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|**Sections**|**Survey questions**|#|**Different scenarios**|**Scores**|**Qualifications**|
|---|---|---|---|---|---|
|||13|Limit on the number of licenses: No license issued at all or<br>exclusive monopoly, except in mobile telephony where limitation<br>of spectrum constrains the number ofproviders.|100||
||Is there a limit on the<br>number of licenses?|14|Limit on the number of licenses or discretion which is clearly<br>restriction on entry, such as economic needs test (discriminatory)<br>or limit on total value of services or transactions (total FDI in<br>insurance sector etc), or approval requirement by non-prudential<br>agencies (such as approval of the President, Prime Minister, and<br>Parliament required)|50|A. This rule applies to all sectors<br>except for transportation. In<br>transportation, licensing section<br>was not covered in the 2007<br>versions of the survey, which<br>affect 56 countries. Thus|
|**III LICENSING**||15|Reciprocity is a pre-condition for supplying the services|50|<br>licensing is not scored across all|
|**.**||16|There is a temporaryrestriction on licenses|50|countries.<br>|
|||17|Discretionary licensing, which is not clearly based on prudential<br>grounds|25|B. For all sectors, if license<br>needs to be renewed annually, it<br>|
|||18|Discretion or approval which is purely prudential. If approval of<br>the banking sector regulator, such as the Central Bank, is<br>required,it is consideredprudential.|0|is not treated as a restriction.<br>License renewal is mentioned in<br>the summary when it appears,<br>|
||Are the licensing criteria<br>discriminatory?|19|Discriminatory licensing requirements that are significant (such<br>asprolongedpriorpresence such as representative office)|50|but not scored as a restriction.|
|||20|Discriminatory licensing requirements that are minor, such as<br>additional documentation|25||
||Nationality requirement for<br>board of directors?|21|Nationality requirement for Board of directors: 50 percent or<br>more of BOD must be nationals.|25|Nationality requirement for<br>BOD captured in the FDI. If<br>BOD majority is not captured by<br>FDI (missing), then the score<br>should be 25. If BOD<br>requirement is for nationals OR<br>residents,this is not scored.|
|**IV. OPERATIONS**|Nationality requirement for<br>employees?|22|Minority of BOD must be nationals or nationality requirement<br>applies, but percentage is not defined (i.e. limitations expressed<br>in numbers).|0||
|||23|Nationality requirement for employees not treated as a restriction|0||
||Restrictions on repatriation<br>of earnings?|24|Restrictions on repatriation of earnings, such approval,<br>discriminatorytaxes,foreign exchange rules|25||
|||25|Repatriation of earning is subject to tax and approval, but non-<br>discriminatory|0||
it a weak source of information for Argentina. Additionally, export duties, which are among the most distortive taxes, have exhibited significant fluctuations ( **Figure 15** ).

To measure the cyclicality of tax rate policy, it is crucial to consider that tax rates tend to vary very little or remain unchanged compared to government spending and other macroeconomic variables. While government spending is a continuous process, changes in tax rates typically result from parliamentary discussions, leading to a more rigid dynamic. Consistent with recent findings (Vegh Vuletin, 2015) and based on the database used (i.e., CIT, PIT, and VAT top rates), the average frequency of tax rate changes per year ranges from 0.12 to 0.20 globally. Moreover, the frequency of changes in Argentina is even lower, approximately 0.10. This means that top-statutory tax rates of the three main taxes change, on average, once every 10 years. Therefore, while the usual approach to measure cyclicality involves using the cyclical component of a fiscal variable (e.g., government consumption), it is more appropriate to utilize the percentage change in tax rates for analyzing the cyclicality of tax policy. A positive (negative) correlation between the change in tax rates and real GDP indicates a countercyclical (procyclical) tax policy stance. Furthermore, to capture the overall cyclical behavior of taxes in each country, a tax index is constructed, which comprises a weighted average of the three tax rates (weighting on their respective share of tax revenue).

# Ti = CITi ∗ WeightCIT + PITi ∗ WeightPIT + VATi ∗ WeightVAT

When analyzing the three main taxes included in the tax index, it appears that Argentina has pursued a relatively acyclical tax policy. The correlation between changes in the tax rate index and the real GDP cycle for Argentina is +0.27, although not significantly different from zero. This suggests a tax policy that is neutral in terms of its cyclical impact, at least for the subset of taxes analyzed (CIT, PIT, and VAT). Furthermore, in a cross-country comparison, unlike what has been observed on the spending side, the cyclicality of tax policy appears to be less correlated with the country's income level ( **Figure 16** ).<sup>18</sup> The analysis of each individual tax yields similar results for Argentina (see Annex C). In all three cases, Argentina is positioned towards the right end of the charts, indicating a positive correlation with GDP. However, these correlations are not significantly different from zero, suggesting that, at least regarding the top statutory rate of these taxes, Argentina has pursued a relatively acyclical tax policy in recent decades. In relative terms, these results are more favorable compared to those of its peers.

## **Figure 16. Correlation between the change in the Tax Index and cyclical real GDP (1990-2020)**

18 See the figures in the Annex for individual cyclical correlation between PIT, CIT and VAT rates with real GDP.
# **9. Impact on the general consolidated budget**

The impact on the budget was assessed by taking into account the effects of the increase in minimum wage on the revenues side (first-round effects, but also second-round effects) and on the expenditure side (for more details see Annex 4).

Between 2012 and 2016, the net impact of the increase in the minimum wage on the general consolidated budget was a positive one, between 3.4 million RON in 2012 and 1,362 million RON in 2016. The impact of the measure on the revenues side was between 56 million RON in 2012, when the minimum wage increased by almost 5% and 1,468 million RON in 2016, when the minimum wage increased by around 19%. The impact on the revenues side has significantly increased in 2015 as the number of employees from the private sector that were influenced by the measure grew by more than 40%. This trend continued in 2016.

_Figure 34. Evolution of the minimum wage impact on the budget_ <!-- Start of picture text --> thousands RON<br>1600<br>1468.3<br>1431.7<br>1400 1250<br>1200 1050<br>1000 900<br>800<br>800 700<br>600 493.8<br>400 298.1<br>175.8 178.4<br>200 106.0<br>56.3 52.9<br>0.0<br>0<br>2012 2013 2014 2015 2016<br>on revenues on expenditures minimum wage level (end of year)<br><!-- End of picture text --> Source: Authors, based on MPF, Substantiation notes of the Government decisions, NBR calculations On the expenditure side, the impact varies between 53 million RON in 2012 and around 106 million RON in 2016. The maximum impact on the expenditure side was registered in 2015, when almost 500,000 employees from the budget sector were beneficiaries of the measure. After a 25% across-the-board wage cut in July 2010, employees from the public sector had 33
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- Stallings, Jane A., Stephanie L. Knight, and David Markham. 2014. “Using the Stallings Observation System to investigate time on task in four countries.” World Bank Report No. 92558. <u>http://documents.worldbank.org/curated/en/496851468182672630/Using-the-stallingsobservation-system-to-investigate-time-on-task-in-four-countries</u>

- Wolf, Sharon, Mahjabeen Raza, Sharon Kim, J. Lawrence Aber, Jere Behrman, and Edward Seidman. 2018. “Measuring and predicting process quality in Ghanaian pre-primary classrooms using the Teacher Instructional Practices and Processes System (TIPPS). _Early Childhood Research Quarterly 45_ : 18-30.

- World Bank. 2004. World Development Report 2003: Making Services Work for Poor People. Washington, DC: Oxford University Press and The World Bank.

- World Bank. 2015. _Conducting Classroom Observations: Analyzing Classrooms Dynamics and Instructional Time_ . Washington, DC.

- World Bank. 2018. World Development Report 2018: Learning to Realize Education’s Promise. Washington, DC: Oxford University Press and The World Bank.

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