rafmacalaba/datause-encoder-data huggingface dataset:
31

## **Table V. Probability of Onset of Intervention, Probit Estimation, 1961–96**

||**Type of In**<br>|**tervention On**<br>|**set**<br>||
|---|---|---|---|---|
|**Characteristics of interven-**<br>**tion target**|**Democrati**<br>**tions**|**c Interven-**|**Autocratic i**|**nterventions**|
|**Explanatory variables**|β<br>**(s.e.)**|**p-value**|β<br>**(s.e.)**|**p-value**|
|Polity2, lagged|–0.0020<br>(0.00072)|0.780|–0.0094<br>(0.022)|0.211|
|Polity2, lagged, squared|–0.0039<br>(0.0016)|0.016**|–0.00016<br>(0.0015)|0.914|
|Number of Non-governmental<br>organizations,logged|–0.075<br>(0.030)|0.012**|–0.098<br>(0.032)|0.002**|
|Post-Cold war period|0.38<br>(0.078)|<0.0005***|–0.059<br>(0.12)|0.623|
|**Civil conflict, lagged**<br>No conflict<br>Minor<br>War|ref.gr.<br>0.46<br>(0.106)<br>0.62<br>(0.089)|ref.gr.<br><0.0005***<br><0.0005***|ref.gr.<br>0.30<br>(0.12)<br>0.34<br>(0.11)|ref.gr.<br>0.012*<br>0.003**|
|Constant|–1.63<br>(0.169)||–1.41<br>(0.19)||
|N|4,844||4,844||
|Loglikelihood|–523.83||-666.66||
|Pseudo-R2|0.080||0.028||

(*) Significant at 0.10 level

* Significant at 0.05 level

** Significant at 0.01 level

- *** Significant at 0.001 level

The model was estimated using robust standard errors. Significance levels refer to two-sided tests. ‘ref. gr.’ is the reference category of the respective dummy variable

# **Democratizing Interventions?**

Do democratic interventions tend to lead to democratization? Tables V and VI reports the results of the logistic regression analysis of the probability of a positive change in Polity2 from one year to another.<sup>29</sup> Table VI reports the results from probit analyses of the probability of democratization. Three models are presented, one for each of the three types of intervention variables.

The model labeled ‘recent intervention’ indicates that there is a weak positive relationship between democratic interventions including the years immediately following them and democratization. The estimate for ‘democratic military

> 29 Recall that the change in Polity2 has to be at least two units, and that countries with Polity2score of 9 and 10 were excluded from the analysis since a positive change is impossible by definition.
related to having a household budget, or savings set aside for an emergency.<sup>7</sup> Coupled with the evidence of low financial literacy, there is also evidence suggesting that individuals may not be managing their financial products correctly. For example, a recent study by Ponce, Seira, and Zamarripa (2009) analyzing credit card use and payment behavior in Mexico suggests that consumers make financially unsophisticated decisions in the credit card market. Also, Mexican workers tend to choose their pension fund administrator based on features not related to fees or returns (Hastings and Tejeda-Ashton, 2008, and Lara-Ibarra, 2011).

The Mexican government has addressed the concern for low levels of financial education in several ways. CONDUSEF has held a Financial Education Week annually since 2008. The Ministry of Finance has also launched campaigns to improve financial literacy and financial education awareness. Furthermore, one of the objectives of the 2008-2012 National Development Financing Program was “to develop financial culture and consumer protection, promoting that people realize that they can save, get financing for their productive products, be responsible with their loans and protect against risks” (Saavedra 2012). The government’s efforts have also been matched by the development bank BANSEFI and by private sector, e.g. commercial bank, initiatives. In 2009, a total of 59 programs throughout the country were promoting financial education among different audiences (Treviño Garza, 2011).

# **2.2 Literature Review**

Financial education programs act under the assumption that lack of knowledge may be preventing individuals from making sound financial decisions. This is in part due to growing evidence showing strong associations between financial literacy measures and financial decisions. For example, Lusardi and Tufano (2008) find that individuals who have low measured levels of financial literacy tend to pay minimum balances on credit cards, incur late fees on cards, and use informal sources of credit. Stango and Zinman (2009) show that people who make mistakes in interest and future value calculations tend to borrow more and save less. Lusardi and Mitchell (2009) illustrate that people with low levels of financial literacy think less about retirement and most of them have not planned for retirement at all. And in Mexico, Hastings and Tejeda-Ashton (2008) conducted a survey that reveals that less literate individuals tend to choose mutual pension funds with higher fees.

> 7 Overall, the Barometer ranked Mexico in the top 3. However, this result may be biased by “taste”-related questions such as: At what age should the government require financial literacy? How well do you think teens understand finance? How often do you speak to your kids about money? <u>http://www.practicalmoneyskills.com/summit2012/decks/bodnar.pdf</u>

6
32 Table 2: Nominal rates of assistance, all covered products, 19 African focus countries,

# 1961–64 to 2000–04

# (percent)

||1961–64|1965–69|1970–74|1975–79|1980–84|1985–89|1990–94|1995–99|2000–04|
|---|---|---|---|---|---|---|---|---|---|
|**Africa**|**-1**|**-11**|**-17**|**-23**|**-18**|**-15**|**-16**|**-10**|**-10**|
|Benin|na|na|-3|-1|-1|-1|-4|-4|-1|
|Burkina Faso|na|na|-2|-3|-4|-1|-3|-3|0|
|Cameroon|-4|-8|-12|-25|-19|-5|-4|-4|-1|
|Chad|na|na|-12|-11|-8|-1|-3|-3|-1|
|Côte d'Ivoire|-29|-35|-33|-40|-40|-28|-22|-22|-28|
|Ethiopia|na|na|na|na|-12|-15|-17|-10|-7|
|Ghana|-15|-28|-23|-41|-32|-8|-3|-5|-2|
|Kenya|13|-2|-24|-15|-30|-8|-30|-4|4|
|Madagascar|-19|-23|-20|-38|-51|-26|-7|-4|2|
|Mali|na|na|-6|-8|-7|-3|-5|-7|0|
|Mozambique|na|na|na|-56|-42|-51|-4|5|14|
|Nigeria|21|12|7|5|8|15|4|0|-5|
|Senegal|-15|-12|-33|-34|-30|5|7|-10|-12|
|Sudan|-26|-37|-48|-28|-33|-39|-54|-29|-15|
|Tanzania|na|na|na|-50|-60|-52|-30|-29|-17|
|Togo|na|na|-1|-1|-2|-2|-4|-3|-1|
|Uganda|-3|-5|-12|-24|-12|-14|-1|1|1|
|Zambia|-24|-32|-42|-57|-26|-68|-53|-34|-36|
|Zimbabwe|-36|-36|-44|-54|-47|-43|-45|-38|-73|

Source: Anderson and Valenzuela (2008)
income if income increases. We can use this “wisdom” as our prior until we have evidence that it is not the case in certain circumstances. Some human behavior is universal and imprinted in the genes of all humanity but other types of behavior are culturally determined. Therefore some behavioral responses to a particular program or policy will not be the same. For instance, it is not clear that one can draw lessons from the Latin American experience with conditional cash transfers (there are CCT programs in almost every country) that are relevant for, say, rural Africa.

The political dimension of policy is also important. An evaluation should be able, at the very least, to distinguish between gainers and losers. For example, Lanjouw and Ravallion (1998) estimate the marginal odds for individuals of different income categories to participate in school and anti-poverty programs, using 1993-94 National Sample Survey data from rural India. Their results suggest that the benefits of these programs are captured early on by the non-poor. The lack of fiscal discipline (called the “soft budget constraint” by János Kornai) is an economic issue with political roots that is prevalent around the world. It makes public expenditure management and macroeconomic control particularly difficult, because the state must be able to resist the pressure of interest groups, and greatly complicates the process of reforming governance. For example, there are enormous pressures to increase local expenditures to counteract growing unemployment and the closure of loss-making enterprises, not to mention other kinds of subsidies to friends and cronies. Such pressures can create problems in restoring fiscal discipline at the macroeconomic level.

It is important to understand the heterogeneity of the impact of the program on various population groups. This is very relevant for the political economy of anti-poverty policies, or for privatization and restructuring of enterprises, since it may indicate the need for supplementary policies for better protecting the losers. For example, the foregone labor earnings incurred by participants in workfare or conditional cash transfer schemes (via the loss of earnings from child labor) will vary according to skills and local labor-market conditions. Heterogeneity of impacts in terms of observables is readily allowed for by adding interaction effects with the treatment dummy variable (Ravallion 2005).

55
in Brazil," World Development 36(9): 1647-1664.

- Emerson, P. and A. Portela  Souza, 2007.  “Child Labor, School Attendance and IntraHousehold Gender Bias in Brazil”. _World Bank Economic Review_ , forthcoming.

- Ejrnaes, M. and C. Portner, 2004, "Birth order and the intra-household allocation of time and  education," _Review of Economics and Statistics_ 86: 1008-1019.

- Ermisch, J., and M. Francesconi, 2000.  “Educational Choice, Families and Young People’s Earnings” _Journal of Human Resources_ , 35(1):146-176.

- Filmer, D., and N. Schady, 2008. “Who Benefits? Scholarships, School Enrollment and Work of Recipients and their Siblings”, mimeo, World Bank.

- Foster, A., 1995. "Prices, Credit Constraints and Child Growth in Rural Bangladesh." _Economic Journal_ , 105(43):551-570.

- Hoddinott, J., H. Alderman, and L. Haddad, 1997.  “Testing Competing Models of Intra-

- household Allocation”, Chapter 8 in _Intra-household Resource Allocation in Developing Countries_ , 129-141.

- Kim, H., 2005.  “Parental Investment Between Children With Different Abilities”, mimeo University of Wisconsin at Madison.

- Kruger, D. and M. Berthelon, 2007.  “Work and Schooling: The Role of Household Activities Among Girls in Brazil”, mimeo, Pontificia Universidad Católica de Valparaíso.

- Macours, K., and R. Vakis, 2008. “Changing households’ investments and aspirations through social interactions: Evidence from a randomized transfer program in a lowincome country”, mimeo, Johns Hopkins University and The World Bank.

- Macours, K., and R. Vakis, 2005. “Weather risk and poverty in Nicaragua: Expanding risk management options for the poor. Pilot program objectives and impact evaluation design”, mimeo, Johns Hopkins University and The World Bank.

- Maluccio, J., 2003.  “Education and Child Labor: Experimental Evidence from a Nicaraguan Conditional Cash Transfer Program”, in Orazem, Sedlaceck, and Tzannatos (eds.), _Child Labor in Latin America_ .

- Manacorda , M., 2006. “Child labor and the labor supply of other household members: Evidence from 1920 America,” _American Economic Review_ 96: 1788-1800.

- Mansuri, 2006. “Migration, Sex Bias, and Child Growth in Rural Pakistan”, _World Bank Policy Research Paper_ 3946.

- Rangel, M., 2008.  “Is Parental Love Colorblind? Allocation of Resources within Mixed Families” BREAD Working paper No.167.

- Rose, E., 1999. "Consumption Smoothing and Excess Female Mortality in Rural India," _The Review of Economics and Statistics,_ 81(1):41-49.

- Rosenzweig, M. and T. P. Schultz, 1982. "Market Opportunities, Genetic Endowments and Intra-family Resource Distribution: Child Survival in Rural India," _The American Economic Review_ , 72(4): 803-815.

- Skouffias, E. and S. Parker (2001).  “Conditional Cash Transfers and their Impact on

- Child Work and Schooling: Evidence from the _Progresa_ Program in Mexico”, IFPRI FCND Discussion Paper No. 123.

- Thomas, D, 1997.  “Income, Expenditures, and Health Outcomes: Evidence on Intrahousehold Resource Allocation” in Chapter 9 in _Intra-household Resource Allocation in Developing Countries_ , 142-164.

20
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doubt that education is a pleasant activity mostly useful to enhance marriage prospects of young ladies and gentlemen (we are far from human capital here!), work is never to be undertaken (unless characters really get into serious trouble), and everybody’s social position is measured by the annual rent he (mostly he) commands. It is back to this, by the most current views revolved type of society, that developed capitalist economies are trending to—argues Piketty. They are moving toward the income relationships where the Rastignac dilemma will again be relevant.

But why did β, after the period of the Belle Époque,<sup>8</sup> decline precipitously in continental Europe, UK and Japan (and less so in the US)? It is, Piketty argues, because of physical destruction of capital during the extraordinary period of the two World Wars, high taxation of inheritance and “confiscatory” income taxes (both being closely linked to the need to sustain war effort), high inflation that helped debtors vs. creditors, and finally because of the more labor-friendly political atmosphere after World War II. All of these factors were detrimental to capital accumulation, reducing β, and the share of capital in national income. It was however capitalism’s Golden Age, the years of “les trente glorieuses” (1945-75), as they are called in France, or “Wirtschafts-wunder” in Germany. The European economies, US and Japan expanded the fastest in their histories. The European economies and Japan almost fully caught up with the United States in terms of worker’s per-hour productivity,<sup>9</sup> the capitaloutput ratio and net return on capital were low, taxation high, the functional distribution shifted in favor of labor, and the personal income distribution became more equal.<sup>10</sup> This was, seen from today’s perspective, a Golden Age indeed, whose passing is often lamented (as Piketty points out) by the now aging baby boomers, born and raised at that time.

> 8 _La Belle Époque_ normally designates in France a period of the 3rd republic, from the suppression of the Commune in 1871 to the break out of World War I. It is the same period whose description appears in the famous first pages of Keynes’ _Economic consequences of the peace_ .  One is never sure to what extent Piketty uses the term with a slightly ironic touch.

9 See the latest Penn World Table version 8.0 where US per hour productivity in 2011 is estimated (in 2005 constant PPP dollars) at $55, and French and German at $50.

10 If we rank countries in increasing order of their GDP per capita in 1950, their average real GDP per capita growth rates over the next 60 years were: Japan 4.6%, Germany 3.3%, France 2.4%, UK 2.0%, US 1.7%. Textbook case of convergence economics.

7
leading experts<sup>2</sup> on public procurement and the regulation teams of private sector companies with international presence.<sup>3</sup> The data on public procurement were collected through structured expert surveys. Respondents were chosen based on their expertise in public procurement law as well as their experience in advising businesses that are interested in providing services to the government. Respondents include private sector companies, professionals in law firms, accounting firms, business advisory firms, chambers of commerce, legal bar associations, and public officials dealing with public procurement. Over 1,900 experts responded to the surveys, which were then coded by a World Bank team managed by one of the authors.

To obtain comparable data across countries, a hypothetical scenario was developed to anchor survey responses. This approach follows Djankov et al (2002) in devising a methodology for evaluating business regulations. The standardized case study for public procurement has assumptions on three elements: (i) the procuring entity, (ii) the bidding company, and (iii) the public call for tender. The procuring entity is restricted to one that is located in the economy’s largest business city, is a local authority, and is planning to resurface a flat two-lane road with asphalt. The bidding business is a limited liability company, operates in the economy’s largest business city, is 100 percent domestically and private owned, and has previously responded to public calls for tender and won similar-size service contracts. The following assumptions are made regarding the public call for tender. First, it is initiated by the procuring entity. Second, it follows an open and competitive process. Third, the public tender concerns the resurfacing with asphalt of

> 2 Experts from the following international organizations and universities were consulted: European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IaDB), Islamic Development Bank (IsDB), Millennium Challenge Corporation (MCC), Organisation for Economic Co-operation and Development (OECD), United Nations Commission on International Trade Law (UNCITRAL), George Washington University, University of Nottingham, and University of Rome Tor Vergata.

> 3 Several round table discussions on relevant public procurement regulation and processes were held with procurement specialists at General Electric, Microsoft, Merck, Boeing, Veolia Environment, Cisco, Green Soluce and Siemens.

5
Although direct taxes became more progressive in relative terms between 2014 and 2017 (as poorer people paid a lower share of their incomes), when considering the absolute amount of tax relief, most of the gains of the changes in policy were concentrated in the top four deciles. This in turn has meant that the redistributive impact of PIT declined. The PIT’s marginal contribution to redistribution fell by 0.008 Gini points between 2014 and 2017, while that of social contributions also fell slightly by 0.002 Gini points. The slight improvement in the redistributive power of the VAT (0.003) was not enough to offset this increase in inequality, leading to a slightly higher Disposable income Gini (Figure 11). This combined with an estimated 0.5 percent of GDP reduction in tax collections from both the PIT and the VAT (European Commission, 2017), implies that the reforms put in place so far led to lower collections and lower redistribution.

However, when it comes to poverty, the impact of lower VAT on electricity and utility bills is expected to be poverty reducing. Poverty, measured using the US$10 PPP-a-day poverty line is expected to fall from 50 to 49 percent on account of the recent changes in VAT (Figure 12). Similarly, it declines from 17.5 to 16.6 percent using the US$5 PPP-a-day poverty line. However, this impact is not large enough to mitigate the impact of the burden of other taxes in the system.

<!-- Start of picture text --> Figure 11. Croatia. Gini Coefficient Figure 12. Croatia. Poverty Headcount Rate<br>($10 PPP-a-day)<br>0.39<br>55% 50.0% 49.0%<br>50%<br>0.37<br>45%<br>0.35 40%<br>35% 31.3% 31.1%<br>0.33 30% 28.1% 28.1%<br>25%<br>0.31<br>2014 20%<br>0.29 2016 Simulation 15%<br>10%<br>0.27 2017 Simulation 5%<br>Market Income + Disposable Consumable<br>0.25<br>Contributory Income Income<br>Market Disposable Consumable Final Income<br>Pensions<br>Income + Income Income<br>Contributory 2014 2016 Simulation 2017 Simulation<br>Pensions<br>Poverty (share of population)<br><!-- End of picture text --> <u>Source: World Bank estimates based on Croatian PIS and HBS 2014.</u>

# **VII. Alternative reforms: Reducing the VAT rate to 24 percent?**

The existing framework can also be used to simulate reforms going forward. For instance, one potential reform that has been discussed is a reduction in the VAT rate from 25 to 24 percent. A simulation of the distributional impacts of such a change, holding everything else constant shows that such a change would lead to a reduction in the relative poverty headcount rate by 0.21 percentage points and it would reduce consumable income inequality by only 0.001 Gini points (Figures 13). However, the cost of such a move would amount to about HRK1.3 billion in 2014 25