rafmacalaba/datause-encoder-data huggingface dataset:
# **Cartels, Antitrust Enforcement, and Industry Performance: Evidence from Mexico**<sup>∗</sup>

Tristan Reed<sup>a</sup> , Mariana Pereira L ́opez<sup>b</sup> , Ana Urrutia Arrieta<sup>c</sup> , Leonardo Iacovone<sup>d</sup> Originally published in the Policy Research Working Paper Series on _December 2022._ This version is updated on _March 2023._ To obtain the originally published version, please email prwp@worldbank.org.

<u>JEL Classifications:</u> K21, L40, 047 <u>Keywords:</u> abuse of dominance, antitrust, antitrust enforcement, cartels, collusion, competition law, Federal Competition Commission, Federal Economic Competition Commission, market power, Mexico, monopolistic practices, per se illegal, rule of reason

> ∗The authors thank Alejandro Casta ̃neda Sabido, Seidu Dauda, Santiago Levy Algazi, Penny Goldberg, Charl Jooste, Pete Klenow, Eduardo Mart ́ınez Chombo, Graciela Miralles Murciego, James A. Robinson, James Sampi, Chad Syverson, Ekaterina Vostroknutova, Shang-Jin Wei and seminar participants at Banco de M ́exico, CIDE, COFECE, Colegio de M ́exico, Universidad Iberoamericana, and the World Bank for extremely valuable comments and suggestions. Francisco Lucero Bravo and Joaquin Ramirez Cabaracas provided excellent research assistance. Reed thanks the Development Research Group Research Support Budget and the Knowledge for Change Program III for funding. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the World Bank or its affiliated organizations, or those of the Executive Directors of the World Bank, their Managements, or the governments they represent. The authors thank Natalia Volkow and INEGI for access to the Economic Census microdata. All results have been reviewed to ensure that confidential information is not released. Any errors remain our own. a: World Bank Development Research Group. Corresponding author, Phone: +1 (202) 505-0925, 1818 H St NW, Washington, DC, 20433, treed@worldbank.org.; b: International Finance Corporation, c: World Bank; d: World Bank
4 surplus and expenditure-based measures of benefits are illustrated in Figure 1 for the case of efficient pruvbion of the public good (at qo). The compensating variation or total benefit measure consists of areas "A" and "B" in the graph (Aaron and McGuire, 1970; Maital, _1975;_ Meerman, 1979; Hewitt, 1987; Piggott and Whalley, 1987). Conventional expenditure-based benefit incidence studies typically allocate the expenditure on the public good among households, represented by area "A" on the graph. Benefits are then compared among households in different income groups or other socio-economic groups.

On the one hand, this typical method of measuring household benefits does not consider a number of important issues that affect benefit incidence. For exnample, it assumes that all relative prices and real incomes are fixed, and benefits are not shifted, marginal benefits are equal to average benefits, and average cost is a good proxy for marginal benefit. These assumptions expose the traditional methodology to numerous criticisms. Many programs, such as agricultural programs, are designed to affect real incomes and relative prices. In addition, public transfers to low-income households may crowd out private transfers and shift benefits to the households fonnerly making private transfers (Hochman and Rodgers, 1969; Barro, 1974, 1978; Lampman and Smeeding, 1983; Andreoni, 1990; Cox and Jimenez, 1992). Added to these basic issues are those sr:rounding the treatment of benefits from physical capital expenditures and from human capital investments that accrue to households m more than one time period.

On the other hand, expenditure-based benefit measures are more comparable to tax burdens and to private disposable income than are compensated variation measures, insofar as tax burdens and disposable income do not include the consumer surplus related to private spending (Aaron and McGuire, p. 909; Maital, pp. 407-408). Also, total benefit measures require information about the demand schedule for the public good and may be difficult to implement. In any event, for many small policy changes the total benefit and expenditure-based approaches should yield similar results (Selden and Wasylenko, 1992).

Despite its limitations, we believe the expenditure-based incidence approach can provide a useful first look at the allocation of government expenditure among households. The
<!-- Start of picture text --> Eligible communities (n=218):<br>Samplin * Cabo Delgado Province: Chiure (n=59)<br>ping * Nampula Province: Erati (n=40), Memba (n=40)<br>* Tete Province: Angonia (n=39), Changara (n=40)<br>Treatment communities (n=110) Control communities (n=108)<br>Communities surveyed (n=108) Communities surveyed (n=108)<br>Communities not surveyed due to Communities not surveyed due to<br>problem of identification on the field problem of identification on the<br>(n=2) field (n=0)<br>2414 householdswith target child 3-5 2273 householdswith target child<br>years old assessed 3-5 years old assessed<br>Communities surveyed (n=108) 3-year Communities surveyed (n=108)<br>Follow-up<br>112 pre-schools surveyed<br>1941 target households surveyed 1824 target households surveyed<br>1903 target children assessed 1779 target children assessed<br>Households lost to follow-up (n=473) Households lost to follow-up (n=449) ;<br>* HHs/Caregiver absent (n=188) * HHs/Caregiver absent (n=176)<br>* Moved away (n=109) * Moved away (n=95)<br>* Not identified/Not localized (n=102) * Not identified/Not localized (n=77)<br>* Not surveyed because of cholera (n=33) * Not surveyed because of cholera (n=71)<br>* Target child passed away (n=34) * Target child passed away (n=24)<br>* Refused to answer (n=6) * Refused to answer (n=5)<br>* No information (n=1) * No information (n=1) .<br><!-- End of picture text -->
THE CENTRAL AFRICAN REPUBLIC’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

# Irrigation

The irrigation potential in the CAR is substantial. Only 135 of a potential 1.9 million hectares are irrigated (see figure 3d) (FAO 2004). The irrigated area could be increased substantially with good economic returns. Simulations suggest that with a threshold internal rate of return (IRR) of 6 percent it would be economically viable to develop 6,048 hectares of land for irrigation through small-scale projects. If the threshold IRR is raised to 12 percent, the economically viable area for irrigation shrinks to 1,824 hectares. The required investment for attaining this expansion is $9 million (table 6). Large-scale projects do not appear to be economically viable in the CAR at any rate of return.

**Table 6. Irrigation potential for small-scale projects**

|**Cutoff**|**Investment**|**Internal rate of return**|**Area increase**|
|---|---|---|---|
|(%)|$million|%|**hectares**|
|**0**|68|4.0|13,065|
|**6**|31|10.0|6,048|
|**12**|9|0.0|1,824|
|**24**|0|0.0|0|

_Source:_ Derived from You and others (2009). _Note:_ Water for irrigation can be collected in two ways: through large, dam-based schemes or through small projects based on the collection of runoffs from rainfall. The investment costs of large-scale irrigation development reflect only irrigation-specific infrastructure, such as distribution canals and on-farm system development. The potential for small-scale irrigation is assessed not only on the basis of agroecological conditions, but also in terms of market access, since irrigation is typically viable only if the increased yields can be readily marketed. The unit cost for large-scale projects is set at $3,000/hectare and for small-scale projects at $2,000/hectares.

# Water supply and sanitation

## **Achievements**

Since the end of the conflict, the CAR has made important efforts to improve the institutional and legal framework of the water supply and sanitation sectors. In 2006 the Water Code was promulgated and the Government’s Policy and Strategy Paper on the National Water and Sanitation Program (NESP) was approved, and in 2007 the National Agency for Water and Sanitation was established. But a clear definition of responsibilities among the different actors in the water supply and sanitation sectors is pending.

The CAR has managed to reach people with some form of water supply and sanitation, as shown by the relatively low reliance on surface water and open defecation. According to the results of the 2006 Multiple Indicator Survey (box 2), the CAR’s reliance on surface water is only one-third of the average for fragile states, which in fact do better than other low-income countries. In particular, due to the rapid expansion of utility connections in urban centers since the end of the conflict, it is expected that the use of surface water has decreased further in recent years. Reliance on open defecation in the CAR is at the level of other fragile countries.

19
shocks, but not for persistent ones (Aiyagari (1994), Heaton and Lucas (1996), and Levine and Zame (2002)). For this and other reasons (to be discussed in detail below), we eventually focus on persistent shocks and their relation to trade policy.

# _II.1. Data_

In Mexico, the National Urban Employment Survey (ENEU) conducts extensive _quarterly_ household interviews in the 16 major metropolitan areas and is available from the mid-1980s (we use data from 1987-1998 in our study). The sample is selected to be geographically and socio-economically representative. The survey questionnaire is extensive in scope and covers all standard elements such as participation in the labor market, earnings etc. The ENEU is structured so as to track a fifth of each sample across a five quarter period. To construct the panels, workers were matched by position in an identified household, level of education, age and sex to ensure against generating spurious transitions. Taken together, we have 44 complete panels of 5 periods (i.e., quarters) each, spanning a total of 12 years (48 quarters). The number of individuals surveyed in any given calendar year is approximately 100,000. Table I presents a summary description of the workers surveyed by the ENEU. Data on sectoral (i.e., industry) trade barriers and other sectoral and macroeconomic variables were obtained from the World Bank.

# _II.2. Specification_

Our survey data provide us with earnings (wage rate times number of hours worked) of individuals. As in previous empirical work, we assume that the log of this labor income of individual _i_ employed in industry _j_ in period _t_ , _log yijt_ , is given by: _log yijt_ = α _jt_ + β _t_ ⋅ _xijt_ + _uijt_ . (1)

> In (1) α _jt_ and<sup>β</sup> _t_<sup>denote time-varying coefficients,</sup> _xijt_ is a vector of observable characteristics (such as age and education), and _uit_ is the stochastic component of earnings. The stochastic component _uijt_ represents individual income changes that are

reform.

5
# **(b) Rice Straw, wheat Straw, and sugarcane bagasse**

||Rice Straw||Wheat Straw||SugarcaneB|agasse|
|---|---|---|---|---|---|---|
||Feedstock|Biofuel<br>Production|Feedstock|Biofuel<br>Production|Feedstock|Biofuel<br>Production|
|Asia|489.69|137.11|105.42|30.57|101.87|28.52|
|Africa/Middle East|13.01|3.64|30.45|8.83|5.54|1.55|
|CIS|0|0|51.26|14.86|0|0|
|European Union|2.13|0.60|68.60|19.90|0|0|
|Other Eastern European|||||||
|Countries|0|0|0.69|0.20|0|0|
|Latin America|13.98|3.91|11.51|3.34|136.37|38.18|
|North America|8.78|2.46|41.97|12.17|12.70|3.56|
|Oceania|0|0|11.28|3.27|5.92|1.66|
|ROW|37.41|10.47|1.51|0.44|0|0|
|**Total**|**565.00**|**158.20**|**322.69**|**93.58**|**262.40**|**73.47**|

Source: Elaborated by the authors. ROW=rest of the world.

A major advantage of using residues for biofuel production when compared to the grain crops and dedicated energy crops is that no additional land is needed. By avoiding the competition for land, residue based biofuel production should have minimal direct impact on food prices. Furthermore, greenhouse gas emissions associated to direct and indirect land use changes are also avoided, improving their carbon balance (Searchinger et al 2008). Crop residue removal can also be beneficial for some crops (and situations) as it may help control pests and diseases, and increase soil temperature in the spring facilitating seed germination (Andrews 2006).

On the other hand, crop residues are important to conserve soil properties, conserve water, enhance soil productivity, and to sequester carbon in soils. Excessive removal will have adverse impacts not only on soil properties and the environment, but also on crop production (Blanco-Canqui and Lal, 2009).

# _2.1.2 Forest residues_

Forest residues include logging residues produced from harvest operations, fuel wood extracted from forestlands, and primary and secondary wood processing mill residues (Perlack et al. 2005). Table 3 shows the composition of different forest residues feedstocks. Note that conversion rates obtained in commercial production are likely to be lower than these theoretical yields, with the difference decreasing over time. While NREL (2007) assumed yields of 65 gallons (246 liters) per ton of feedstock, the same 7
dependency ratio grows to 120 percent.

In the absence of reforms, balancing the pension system in 2070 would require increasing the contribution rate to more than 55 percent, or reducing the replacement ratio from around 60 percent to less than 3 5 percent. This would either cause even greater distortions in the labor market and/or great dissatisfaction and unrest among future pensioners. It is also clear that the absence of reforms would imply a massive burden on future generations, irrespective of whether the future imbalances were financed by higher contributions, lower replacement ratios, or general taxes. Recent calculations of generational accounts confirm that workers under 38 years of age would be net contributors to the system, and that the net tax burden on future generations would be particularly heavy.<sup>7</sup>

# **3. The Hungarian Pension Reform**

## _General Description of the Original Reform Package_

The reform package gave workers the choice to stay in a reformed PAYG or to switch to a new, mixed pension system until end-August 1999. Workers who initially opted for the new system will be able to return to the reformed PAYG until December 2002. After that date, workers will be permanently affiliated either with the reformed PAYG or with the new system. New entrants in the labor force after July 1998 have been automatically enrolled in the new mixed system.

The reforms to the PAYG included the following main components: (i) a higher normal retirement age of 62 for both men and women (from 60 and 55, respectively); (ii) an increase in the number of years of service to be eligible for early retirement without penalties to 40 years; (iii) increases in the penalties .for early retirement and in the rewards for late retirement; (iv) changes in the benefit formula designed to eliminate its explicit redistributive elements (i.e. a correction factor that penalized higher income workers); (v) a new tax regime; and (vi) a shift from backward net wage indexation to a "Swiss" indexation formula consisting of a combination of contemporaneous price and wage indexation (50 percent net wages, 50 percent consumer prices).

The new legislation included detailed transition tables for the retirement age increase, the corresponding early retirement penalties, the minimum years of service for early retirement without and with penalties, and a new set of accrual rates which apply to gross rather than net wage history. The retirement age and the minimum years of service for early retirement started rising immediately but only reach their final state in the year 2009. The new legislation also included a transition period for the new 6
_Table B. 6. Annual spending associated with investments and households’ consumption under the Public Lighting Measure relative to the Reference Scenario by sector of economic activity for the period 2020-2030 (in million euros)_

||**2020**|**2021**|**2022**|**2023**|**2024**|**2025**|**2026**|**2027**|**2028**|**2029**|**2030**|
|---|---|---|---|---|---|---|---|---|---|---|---|
|**Agricu**<br>**lture**|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**Forest**<br>**ry**|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**Minin**<br>**g**|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**Food**<br>**Manuf**<br>**acturi**|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**ng**||||||||||||
|**Textile**|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**Wood**<br>**and**<br>|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**Paper**||||||||||||
|**Chemi**<br>**cal**<br>**and**<br>**Plastic**<br>**Produ**<br>|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**cts**||||||||||||
|**Metal**<br>**Produ**|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**cts**||||||||||||
|**Machi**<br>**nery**<br>**and**<br>**Equip**<br>|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**ment**||||||||||||
|**Energ**<br>**y**|0.00|5.67|3.02|0.33|0.33|0.34|0.34|0.34|0.35|0.35|0.35|
|**Constr**<br>**uction**|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**Trade**|0.00|0.13|0.27|0.36|0.36|0.37|0.37|0.38|0.38|0.38|0.39|
|**Accom**<br>**modat**|0.00|0.04|0.09|0.12|0.12|0.12|0.12|0.12|0.12|0.12|0.12|
|**ion**<br>**and**<br>**Food**<br>**Servic**||||||||||||
|**es**||||||||||||
|**Trans**<br>**portat**<br>|0.00|0.06|0.12|0.16|0.16|0.16|0.16|0.16|0.16|0.16|0.17|
|**ion**||||||||||||
|**Banki**<br>**ng-**|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|**Financ**||||||||||||
|**ing**||||||||||||
|**Real**<br>**Estate**|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|0.00|

40
Reinhart and Rogoff (2011) definition of _banking crises_ , placing bank supervision in the central bank appears to mitigate the likelihood of crises irrespective of the country context.

Our findings have important policy implications. Based on the lessons from the global crisis, several countries (including Belgium, Hungary, and the United Kingdom) went on to reform their institutions for financial sector supervision, including bringing bank supervision and macroprudential supervision under one roof. Other countries (including Poland and Turkey) have kept the status quo, partly because empirical evidence on which institutional arrangements work better in preventing or coping more efficiently with future banking crises is lacking. Other countries cannot reform because there is no political consensus and the reform requires broad support from the highest political levels (such as the parliament) for implementation. Our paper is the first to show that moving bank supervision into the central bank could generate substantial macroeconomic benefits by, at a minimum, helping countries with significant financial depth or those undergoing extensive financial deepening to greatly lessen their propensity for future systemic crises. In this way, our results could help build the needed political consensus for reform.

The remainder of the paper is organized as follows. Section 2 introduces the regression model and discusses the estimation methodology. Section 3 describes the data employed. Section 4 discusses the estimation results. Section 5 reports the results of robustness analysis. Section 6 concludes.

# **2. Regression Model and Estimation Methodology**

We seek to identify variables that could have helped predict banking crises during 2007-12. We put an emphasis on identifying features of the supervisory architecture that could have lowered the probability of a banking crisis. Among these features, we focus on the placement of bank supervision in the central bank. We analyze this question using a cross-sectional regression model that employs data from 124 countries.

8
researchers. There have always been close connections between IDA and researchers interested in development economics. At least since the early 1970s, research on development has been informed by practice and, with continuous feedback from evaluation, IDA has been a learning institution. The operations prepared by IDA staff have integrated lessons and findings from research. It is doubtful whether, without the influence of research and the close connections between research, policy advice and policy practice, IDA would have become a premier development organization.

The World Bank has been a pioneer in the measurement of poverty and has conducted many surveys (household surveys or health and demography surveys). Many advances, such as poverty mapping and research on equity, also originate with the World Bank. Research at the World Bank—with its close links with academia around the world—has been the interface and intermediary between cutting edge intellectual advances and informed operations. The Bank’s research staff—the quality of which, over the years, is attested by its rankings and citation counts—has excelled at publishing relevant research and helped their colleagues in other departments by participating in IDA/Bank operations.

The allocation of IDA funds is an important area that has been influenced by changes in development thinking. First, the dominant thinking on development has influenced IDA in terms of sector priorities, putting emphasis first on infrastructure and increasingly on agriculture, then in the 1980s on macroeconomic adjustment and policy reform, and finally in the 1990s on governance and institutional factors.

Second, starting in the late 1980s, IDA assistance became less determined by political considerations and more subject to selectivity, i.e., the idea that assistance would have a greater impact on poverty reduction if it were focused on countries with stronger economic institutions and policies. The formula now used by IDA attempts to balance needs and performance, and gives a lot of weight to governance. Governance and institutions—increasingly viewed by economists as one of the major causes of underdevelopment—represent a real challenge for IDA, and it is not clear how much can be achieved. In the absence of direct instruments to reduce poverty, the Bank has sought to understand the institutional constraints blocking development governance through its PERs, PEIRs, CFAA, CPARs, governance reviews, and PEFAs, and has developed 57