rafmacalaba/datause-encoder-data huggingface dataset:
17 system. They illustrate their method by analyzing the incentive failures that resulted in the Japanese banking crisis of the early 1990s.

A recent example of work that is close in substance to an incentive audit is Calomiris's (2011) analysis of the incentive failures that led to the U.S. financial crisis and his evaluation of reform proposals in terms of their impact on market and supervisory incentives. The reform measures examined address mortgage risk subsidization, regulators inability to measure risks ex ante and losses ex post, the too-big-to-fail problem, liquidity risk, macro-prudential regulations that vary over the cycle, prudential regulations to encourage the greater use of clearing houses in clearing over-the-counter transactions, and designing appropriate guidelines to constrain government assistance to banks during crises. These reforms are shown to be “incentive-robust,” in the sense they improve not only market incentives and discipline, but they also improve incentives of regulators and supervisors by making rules and their enforcement (or lack of it) more transparent, therefore increasing credibility and accountability.

What would an incentive audit cover? It would involve a detailed analysis of the key structural and organizational features of the financial system that affect the incentives to conduct and monitor financial transactions. The detailed design of an incentive audit would need to evolve with experience and practice. But the key issues to be covered in the audit would include contract design, banking powers, banking relationships, structure of ownership and liabilities, industrial organizations, existence of guarantees, and the adequacy of safety nets. More specifically, the main elements of an audit would include:

- Ownership and control structure of financial and non financial firms, including financial system infrastructure. This analysis should include unregulated activities where financial activity is significant. It should examine group structures and important interconnections and channels of control;

- Institutional framework for oversight of financial systems, including the responsibilities, independence, resources and accountability of the supervisory and regulatory bodies; and the role, liability and funding sources of self regulatory bodies and agencies responsible for due diligence in financial systems (credit rating agencies, accounting firms) -- to help identify conflicts of interest and potential moral hazard;

- Adequacy of financial statistical data and information disclosures on the risk exposures of financial institutions, and the adequacy of the analysis and early warnings based on financial information -- to identify significant information gaps that would weaken market discipline or effective surveillance of financial systems;

- Role of implicit and explicit guarantees in the financial system and the role and effectiveness of crisis management, resolution and bankruptcy provisions, including potential systemically important and too-big-to-fail financial institutions -- to identify potential moral hazard;
xvii nature and scale of motor vehicle pollution in urban areas in developing countries and to identify typical urban and transport characteristics associated with elevated air pollution levels.

- Environmental characteristics of reformulated and substitute transportation fuels. Clean fuels offer the most promising approach to reducing harmful pollutant emissions from motor vehicles in developing countries. The proposed research would investigate the emission characteristics (from production to end-use) in motor vehicles of a variety of alternative transport fuels ranging from lead-free gasoline and low-sulfur diesel to LPG, CNG, alcohols, and various types of reformulated gasolines. The main objective would be to compare the end-use costs of these fuels and their cost-effectiveness in reducing pollutant emissions. A further objective of the research would be to document the experience of developing countries in using alternative fuels such as ethanol in Brazil and CNG/LPG in a number of Asian countries. The proposed study would also examine safety considerations in end-use and the institutional and other constraints affecting the distribution, marketing and acceptance of alternative fuels by users. The proposed research would be a useful complement to the earlier Bank work on alternative transport fuels from natural gas [Moreno and Bailey 1989].

- Cost effectiveness of measures to control motor vehicle emissions. This study has identified four key elements -- motor vehicles, fuel, traffic management, and fiscal instruments -- in terms of formulating a strategy to combat motor vehicle air pollution. A comprehensive framework for cost-effectiveness analysis of control measures related to these four elements is not available. Furthermore the control measures and their effects are not mutually exclusive; it is not clear whether the various control measures are mutually reinforcing or relative to the large array of pollutants emitted by motor vehicles. The first step will be to identify the cost of the control measures and their impact on the type and amount of pollutants emitted by motor vehicles. This information would be reduced to a common cost-effectiveness scale so as to provide a more systematic basis for formulating motor vehicle pollution abatement programs.

- Evaluation of vehicle inspection and maintenance programs. An effective vehicle inspection and maintenance (I/M) program is considered the basic cornerstone of vehicle pollution control, particularly where the emission control strategy relies on electronic engine control and exhaust treatment devices. The proposed research would review worldwide experience with I/M programs, their costs and actual benefits. The study would identify the institutional and technical characteristics of good I/M programs and provide recommendations for the planning, design, and operation of I/M programs in developing countries. The study would explore the possibility of private financing and management of I/M programs.
_γ_ is smallest (in absolute value) in the developed countries, indicating that productivity or sizedependent distortions are relatively less important there. For example, these factors account 2 for 14% and 16% of _σ_ ( _arpk_ ) in Japan and the US, respectively. In contrast, the figures tend to be substantially higher in the developing countries, where correlated factors explain from 25% (Turkey) to 73% (Malaysia) of total _arpk_ dispersion. The implied TFP losses in these latter countries are thus substantial, ranging from 6% to as high as 23%.

# **4 Heterogeneity in Markups and Technologies**

In this section, we dig deeper into the firm-specific factors that seem to generate much of the observed _arpk_ dispersion. In particular, we investigate two potential sources – unobserved heterogeneity in markups and production technologies. In our baseline setup, all firms within an industry (1) had homogeneous production technologies and (2) were monopolistically competitive facing CES demand curves and therefore, set identical markups. As a result, any firm-level heterogeneity in technologies and/or markups would show up in our estimates as other firmspecific factors. In what follows, we relax both of these assumptions. To focus on the role of these two forces, the analysis abstracts from adjustment/information frictions in firms’ input decisions. This is largely in the interest of simplicity, but it is also supported by the relatively modest role played by these dynamic considerations in our baseline estimates.

**Markup dispersion.** To explore the potential for markup dispersion, we follow the methodology in De Loecker and Warzynski (2012). We first extend our production function to include raw materials. Under two key assumptions: (i) the materials elasticity in production is common across firms (within an industry) and (ii) the materials choice is a static, otherwise undistorted (besides the markup) decision, we can directly measure these firm-specific markups using the average revenue product of materials, _arpm_ (the inverse of the share of revenues paid to intermediates). This result implies that the cross-sectional dispersion in _arpm_ can be mapped one-for-one into dispersion in markups (for detailed derivations, see Appendix B).

Data on intermediate inputs are only available for four of the countries in our sample – China, Colombia, Mexico and the US.<sup>17</sup> In the first column of Table 4, we report the (withinindustry) dispersion in the _arpm_ for these four countries. In the first column of the second panel of the table, we report the dispersion in _arpk_ that arises from markups (this is simply equal 2 to the markup dispersion itself, given by _σ_ ( _arpm_ )) and the share of observed _arpk_ dispersion 17In the US, we construct the measure of intermediate expenditures as sales less operating income before depreciation less wage bill. Following, e.g., Keller and Yeaple (2009), the wage bill is imputed as the number of employees multiplied by the average industry wage calculated using data from the NBER-CES Manufacturing Industry Database (available at http://www.nber.org/nberces/).

13
expenditures (including snacks, extra classes, bicycle parking, lesson copies and other daily expenses). The sum of these expenses is US $44 per year per child, on average; of these, the bulk is made up of fees incurred at the beginning of the school year (34 percent of the total), and daily expenditures (63 percent of the total), while other annual fees are a very small amount (2 percent of the total). The indirect cost of the CSP is given by the foregone earnings. In Table 4 above, and focusing on the Tobit marginal effects, we show that the average recipient reduced work for pay by approximately 1.2 hours per week; separate calculations using the survey data show that the mean hourly wage in the for-pay sector for applicant children who did not receive scholarships is US $0.38. Assuming that the school year has 8 months, this amounts to $14 of foregone earnings per year. Total costs (including direct and opportunity costs) are therefore $58, while the transfer is $45. The CSP program represented a 78 percent (45/58) reduction in costs. This, in turn, resulted in an increase in school enrollment of approximately 21 percentage points, from a baseline value of approximately 55 percent, for an increase in enrollment of 37 percent. The elasticity of enrollment with respect to cost is therefore 0.48 (37/78).<sup>22</sup> (If we include the reduction in hours worked without pay, which is not significant, and value it at the wage paid to children working for pay, the elasticity is similar, 0.51.) Although we are not aware of estimates from other settings we could use for comparison, this appears to be a reasonable value for this elasticity.

# **6. Discussion and conclusion**

Cash transfer programs, both conditional and unconditional, have become very popular in the developing world. In many countries, they have become the largest social assistance program, covering millions of households (as is the case in Brazil, Mexico, Ecuador, and South Africa). Many of these programs also seek to increase the educational attainment of children. However, because enrollment rates are already very high at some school grades, some analysts have suggested that cash transfers (in particular, those which are conditioned on school enrollment) could be made more efficient if they were

> 22 These calculations are weighted averages of the means and impacts for boys and girls, respectively. Similar calculations using the OLS regression coefficients rather than the Tobit marginal effects yield an elasticity of 0.69, which is larger because of the larger estimated effect on hours worked for pay in the OLS specifications.

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# **8.4.1 Enrollment**

Table 11 shows enrollment rate by student group in the baseline (panel a) and enrollment rate increase relative to the baseline under universal and performance-based free college (panels b and c, respectively). We focus on these two counterfactuals because the remaining four are special cases of these. For example, the “low income” row of panel b displays the effects of need-based free college, while the “high ability” column displays the effects of ability-based free college.

**Table 11: Free College Counterfactuals: Enrollment Effects.**

||a.|Baseli|ne|b|. Unive|rsal|c. Per|forman|ce-Based|
|---|---|---|---|---|---|---|---|---|---|
||Enrol|lment|Rate|Free C|ollege:|Change|Free|College:|Change|
||||||Abil|ity||||
|Income|High|Mid|Low|High|Mid|Low|High|Mid|Low|
|High|83.8|65.5|39.3|7.1|11.4|12.0|5.8|9.0|9.2|
|Mid|73.1|47.4|27.3|15.0|21.1|18.3|12.5|16.8|13.9|
|Low|51.4|26.0|13.6|32.2|36.5|27.8|27.1|28.5|20.1|

_Source_ : Model’s predictions for baseline and counterfactuals. _Notes_ : For each student type, panel a shows predicted enrollment rate (%) in the baseline; panel b shows the enrollment rate difference (pp) between universal free college and baseline; and panel c shows the enrollment rate difference (pp) between performance-based free college and baseline.

Both free college programs raise enrollment rates for all student groups. Under universal free college, the greatest effects are for low- and middle-income students, who are most budgetconstrained in the baseline. Their greater responsiveness justifies need-based free college as opposed to universal free college, which provides a subsidy to many students who do not need it. In terms of ability, effects are not greatest for high-ability students. Ability-based free college, therefore, cannot be justified based on enrollment considerations, but rather on the grounds that it raises overall graduation rate through new students’ positive selection and lowers the income-based enrollment gap among high-ability students.

As for performance-based free college, its enrollment effects are qualitatively similar to those of universal free college, albeit smaller. Effects are similar because performance-based free collegeprovides free college to all students in year 1, but smaller because some potential students do not enroll to avoid the effort necessary to remain in tiers 1 or 2 in subsequent years.

These enrollment results are consistent with the small free college program run in Colombia between 2014 and 2018, _Ser Pilo Paga_ (”being diligent pays off.”) This was an ability-, need-, and performance-based program that offered free tuition to high-ability, low-income students for the theoretical duration of their program; students who dropped out were required to pay the tuition back. Among the eligible population, the program raised college enrollment rates by 32 pp (Londo ̃no et al 2020), in line with the 27-32 pp increase depicted in Table 11 (panels b and c) for these students.

36
communication tool in other stated preference surveys involving mortality risks (Alberini et al., 2004; Corso, Hammitt and Graham, 2001; Krupnick et al., 2002) and has also been used previously in a developing country context (Melhuish et al., 2005).

Risk communication exercises were followed by the three WTP scenarios. In all three scenarios a payment card (shown in the Appendix) was used to elicit WTP. In pretests of the questionnaire, we found that standard dichotomous choice questions did not work well: The percentage of “yes” respondents was insensitive to the bid assigned to the respondents, and over half of respondents who said “yes” to a given bid value in a dichotomous choice framework later stated that their maximum WTP was less than the bid value. We therefore switched to a payment card, which we found to work reasonably well in a subsequent pretest.<sup>8</sup> Respondents were also allowed to state a bid not shown on the card.

The survey ended with questions asking respondents about their experience with traffic crashes, as well as the experience of persons in their family. This was followed by questions asking respondents whether they thought that particular policies would be effective in reducing traffic fatalities in Delhi.

# **D.  Sample Selection and Questionnaire Administration**

Our respondents were selected by sampling households at random from the urban population of Delhi and inquiring whether the household contained a person meeting our selection criteria. Four hundred enumeration blocks (EBs) were selected, in proportion to population, from the 132 urban wards in Delhi. Households in each EB were counted, order of magnitude of fatal traffic risks, but difficult to use to represent specific risks changes in different scenarios.

- 9 -
no discernible impact on firm growth in Latin America. On the contrary, other studies, such as van der Sluis, van Praag, and Vijverberg (2005), conclude that an additional year of schooling raises entrepreneurial income by an average of 5.5 percent. Similarly, McPherson (1996) found that in Botswana and Zimbabwe, business owners who have completed secondary school run faster-growing firms than do those proprietors with no schooling. Finally, Goedhuys and Sleuwaegen (2000, 2010), using data from Côte d’Ivoire and from 11 Sub-Saharan African countries, respectively, found unequivocal evidence that formal education of an entrepreneur positively affects a firm’s growth performance, measured in terms of the growth rates of sales and employment, respectively (in both studies, the greatest effect on growth is found for entrepreneurs who hold a university degree).<sup>16</sup> Nichter and Goldmark (2009) maintain that such apparent contradictions disappear if one takes into account a sort of “threshold effect” of education. Small firms with more educated owners are more likely to experience faster growth rates, but a country-specific threshold should be reached for this effect to take place. For example, whereas the threshold enabling faster growth appears to be secondary school in African countries, in Latin America, one can observe a higher threshold at the university level. Finally, it is worth noting the potential harmful effects of higher education, which may divert the attention of firms’ owners to other business opportunities, leading these owners to pay little attention to the workings of their actual business (Alvarez and Crespi 2003).

# _Technological Change_

If the underlying motivation to start a new firm is linked to innovative projects, then better post-entry performance should be expected.<sup>17</sup> Empirically, this seems to be the case. In fact, a propensity for innovation emerges generally as a firm’s growth driver (see, for instance, Coad and Rao 2008; Altindag, Zehir, and Acar 2011; Colombelli, Krafft, and 18
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goods or services sector:<sup>3</sup> Let _Xij_<sup>_k_denotethevalueofshipmentsatdestinationpricesfromorigin</sup><sup>_i_todestination</sup><sup>_j_in</sup> services class _k_ . _Ej_<sup>_k_istheexpenditureonservices</sup><sup>_k_atdestination</sup><sup>_j_fromallorigins.</sup><sup>_Y_</sup> _i_<sup>_k_</sup> denotes the sales of services _k_ at destination prices from _i_ to all destinations, while _Y_<sup>_k_</sup> is the total output of services _k_ at delivered prices. _t_<sup>_k_</sup> _ij_<sup>_≥_1 denotes the variable trade cost factor on</sup> shipments of _k_ from _i_ to _j_ . _σk_ is the trade elasticity of substitution across origin countries _i_ in services class _k_ . Π<sup>_k_</sup> _i_<sup>and</sup><sup>_P k_</sup> _j_<sup>are theoretical constructs that capture general equilibrium trade</sup> cost effects. Anderson and van Wincoop (2003) refer to these terms as outward multilateral resistance (OMR) and inward multilateral resistance (IMR), respectively. Anderson and Yotov (2010a) refine the interpretation of the multilateral resistances as sellers’ and buyers’ incidence of all trade costs. The outward multilateral resistance Π<sup>_k_</sup> _i_<sup>consistentlyaggregates</sup> the incidence of trade costs on the producers of services _k_ in origin _i_ as if they shipped to a unified world market. The inward multilateral resistance _Pj_<sup>_k_consistentlyaggregatesthe</sup> incidence of trade costs on the consumers of services _k_ in destination _j_ as if they consumed from a world market.

The structural gravity system (1)-(3) translates into a simple econometric specification. Following now standard practice, we assume that bilateral trade data follow a Poisson distribution (see Santos Silva and Tenreyro, 2006, 2011) with its conditional mean taking the

> 3The demand-side gravity theory that we present here has alternative theoretical foundations on the supply side, e.g. Eaton and Kortum (2002). Anderson (2011) and Costinot and Rodriguez-Clare (2014) review the literature on the theoretical foundations and extensions of gravity.

5
estimate logit models of firm exit, changing formality, and employment growth using base wave characteristics. Since entering firms do not exist in the base wave, we do not estimate models for new firms.

# **4. Results**

# **4.1. Situating our universe of firms and employment**

We focus on non-agricultural, private sector employment, in firms in establishments with 1-24 workers. This is about a fifth of employment in Egypt’s economy (22%, Table 1), a quarter of employment is in the public sector (24%), another quarter outside of establishments (24%) and a further fifth (19%) in agriculture. Lastly, 11% of employment is in non-agricultural private firms in establishments that have 25+ employees. The segment we focus on represents 5.3 million workers, out of the 24.4 million workers in Egypt.

The table also measures employment formality in terms of social insurance. Not even in the public sector do all employees have social insurance (only 82% do). Among non-agricultural private firms in establishments with 25+ workers, half (52%) of workers have social insurance. The share is much lower, only 12%, among those working in non-agricultural private sector firms with 1-24 workers, and lower still outside establishments (8%) and in agriculture (2%). It is important to note that many of the workers who lack social insurance may still be in firms that are registered or otherwise formal, so this is an underestimate of workers who are working in formal firms. Hereafter we focus on non-agricultural, private sector employment in establishments with 1-24 workers and turn to the firm as the unit of analysis.

**Table 1. Employment and employment formality by firm type**

||**Percentage**<br>**of emp.**|**No. of emp.**<br>**in millions**|**Percentage**<br>**w/ soc. ins.**|
|---|---|---|---|
|**Public sector**|24|5.9|82|
|**Private agriculture**|19|4.6|2|
|**Non-ag. private outside est.**|24|5.9|8|
|**Non-ag private in est. 1-24**|22|5.3|12|
|**Non-ag private in est. 25+**|11|2.8|52|
|**Total**|100|24.4|31|

Source: Authors’ calculations based on ELMPS 2018 10