rafmacalaba/datause-encoder-data huggingface dataset:
# **INTRODUCTION**

While the neo-classical theory of international trade predicts substitution between international migration and international trade, a growing empirical literature has provided evidence that migrant networks could facilitate bilateral economic transactions. This pro-trade effect could operate through the dissemination of migrants’ preferences for goods from their country of origin, the removal of informational and cultural barriers between host and origin countries (Rauch and Casella, 2003) or/and through the facilitation of contract enforcement in weak institutional environments (Greif, 1993). Migration would then reduce transaction costs associated with trade and serve to complement trade.

Although African trade has significantly grown over the last decade, African exports still 2 represent a negligible portion of global exports. African products suffer from significant trade barriers, both formal (time to export, transportation difficulties) and informal stemming from the relatively weak legal institutions present in African countries, as well as from limited information about international trading opportunities in these countries. Meanwhile African migration has increased and one might wonder whether these movements in population, by 3 reducing the main obstacles to African trade, may have stimulated African exports.

While the existing literature examining the pro-trade effect of migration has mainly focused on specific developed countries, the aim of this paper is to investigate the relationship between the population of African migrants and exports from African countries. Moreover, to better understand this relationship in the case of Africa, we examine whether African migrants can help overcome some of the constraints to African trade: the weakness of institutions, information costs, cultural differences and lack of trust.

This paper contributes to the literature on migrant networks in several ways. First, because African countries are particularly affected by institutional weakness, it tests the pro-trade effect of migration, identified mainly in the literature for developed countries, in the case of African countries. Second, an instrumental variable (IV) estimator is used to take explicitly the problem of endogeneity into account (previous empirical research has mostly treated migration as exogenous). The bilateral instruments employed include the existence of a bilateral social security agreement between two countries, the lagged share of migrants from the origin country who live in the host country and the difference in life expectancy between

> 2 According to WTO data, merchandise exports from Africa represented only 3.5 percent of world merchandise exports in 2012.

> 3 The number of migrants from Sub-Saharan Africa in the OECD countries increased by nearly 80 percent during the 1990s (Lucas, 2006).

2
In columns 4-6, we present the coefficient estimates from testing our alternative mechanism. In this case, the presidential party status is interacted with a dummy equal to one when the government is divided (opposition majority in the lower House), and zero when the government is unified (ruling party majority in the lower House). Our findings point to larger highway investments in municipalities barely won by the president’s party when the opposition has the majority in the legislature. These results are robust across different polynomial orders and consistent with McCarty’s (2000) predictions of large presidential pork when the size of the president’s party in the legislature is small. To further check this result, we split our observations into periods of divided versus unified governments and estimate equations 2 and 3 on each subsample. We report the estimates in Table 6, which consistently confirms the prevalence of political bias in the distribution of highways when the opposition controls the Chamber of Deputies (panel B).

# **VII. Conclusion**

Given its potential economic benefits, physical infrastructure plays a key role in economic development policies (see surveys by Redding and Turner (2015); Berg et al. (2017)). Over 2012-2017, the World Bank Group loaned US$42 billion—about 17% of its total lending—to help improve transportation systems in developing countries. Yet, many observers fear that public infrastructure investment decisions often reflect political rather than economic objectives (Crain and Oakley, 1995).

In line with these concerns, this study documents the prevalence of political bias in road infrastructure investment in a democratic setting, focusing on the case of Mexico. Using a close election regression discontinuity approach, the paper finds strong evidence of partisan allocation of federally-funded highways in constituencies electing legislators from the incumbent president’s party. The effect is stronger under divided government, 24
5 ,One way to expose the system operator to such costs is through the pricing of transportation contracts. These contracts are priced according to the reliability of supply provided by the system operator. Thus interruptible transportation contracts are sold at lower prices than firm transportation contracts, because interruptible shipments are curtailed first, and firm shipments last, in the event of a system imbalance. Users purchase the contracts that match their needs for reliability of supply, paying a premium for more reliable transportation.

Another way to expose the system operator to the costs of balancing is by establishing a - spot market for imbalances the excess or missing gas in the system. The system operator can use the price signals generated by a spot market to compare the costs of system balancing measures with the cost of the gas needed to restore system balance, then decide whether to purchase or sell the missing or excess gas in the spot market or to curtail gas flows on the basis of the cost of each transaction. A spot market thus brings market forces to bear on the system operator. In addition, it allows an effective penalty to be imposed on users that cause a system imbalance, a penalty based on the spot price for the missing or excess gas. This price which reflects the market value of the imbalance, is an effective penalty because the price of a positive imbalance is typically lower than the price the users paid in the gas market, and the price of a negative imbalance typically higher.

# **System operation under the Network Code**

The Network Code of British Gas TransCo is a set of rules for system balancing, capacity acquisition and trading, and gas transportation and trading in the pipeline system operated by BGT. ' And it is the legal document that forms the basis of the agreement between BGT and shippers regarding the operation and use of the pipeline system.

The Network Code facilitates cooperation among the participants in the unbundled, deintegrated gas industry in the U.K., requiring each participant is required to perform certain activities, or processes, that in the end lead to optimal system operation and balancing (for a description of the gas industry and its participants see box I and the appendix). Because coordinating these processes requires the exchange of a large amount of data, the participants communicate with one another through the U.K. Link, a computer system developed by BGT.

' This section draws from **BGT** 1996.
contrasting negative and positive effects from the own-cell and second ring respectively. Table 11 below, with more precise ring employment data, will also suggest that there are negative competition effects of employment in the own cell and positive spillovers beyond that.

We then looked at these effects by sub-industry. In general we found no effects of population or Landscan measures on any outcomes for any sub-industry, including no effects of nearby population on retail trade or personal services. The same comment applies to employment measures with one set of exceptions. These are industries which can be characterized as producing traded goods: manufacturing and business services. We expect that such firms are likely to benefit differently from density compared to other industries. Manufacturing, in particular, as well as business services are archetypal industries that are not only exportable in scope, but also input and/or employee intensive. Hence, such firms may not need to be close to local population and consumers, but they need good connectivity to transport infrastructure and employment. Moreover, such firms are likely to benefit more positively from knowledge spillovers and labor sharing, meaning there is a greater advantage of these firms to cluster together.

In Table 11, we focus on this sub-sample of firms. To maintain sample size, we pooled these two sets of industries. Table 11 in the left panel shows that manufacturing and business services firms in our sample see no benefit from greater population or Landscan density. However, they experience greater positive effects from employment and ownemployment density in the second and third rings, which compete against negative effects from greater local density in the own-cell. We think the own ring is dominated by negative competition effects whether in input markets (poaching of employees and suppliers) or output markets (shopping externalities with loss of customers to competitors and negative price effects). Those effects appear to apply to overall employment even more than own industry. Beyond the first two rings, positive spillovers dominate and have very strong elasticities, especially at ring 2. In the right panel of Table 11 we explore this more with detailed own industry data, looking at precise rings based on point locations and trying both own industry employment and own industry count of firms as the scale measure. In both cases, we find significant negative, competition effects in the own ring, and positive 30
Girls’ enrollment in public schools Unadjusted difference between treatment and comparison districts <!-- Start of picture text --> ice)<br>ioe) TM<br>e+<br>ran] TM<br>On<br>oO cen ce ee EE<br>oO oO SO es ee eT TT eS<br>oOo<br>XO al ee<br>E © aaihinaatmmenerepereerra eee _<br>Ot 4 ne<br>Cc eee meee seen seer eee aene<br>5 won weeee<br>N<br>2003 2004 2005 2006 2007 2008<br>Year<br>--------- Lower bound see Comparison District<br>oe Treaiment District <-------- Upper Bound<br><!-- End of picture text --> Source: Author's calculations using EMIS School Cansus Data
Policy Research Working Paper 10678

# **Abstract**

This paper examines the distributional effects of fiscal policy in Grenada. Using data from the 2017–18 Living Conditions and Household Budgets Survey and following the Commitment to Equity analysis framework, the paper estimates the effects of fiscal policy interventions on inequality and poverty. It analyzes the distributional incidence of direct and indirect taxes, direct transfers provided by social transfers and school feeding programs, and in-kind transfers generated by public services in health and education. The results show that Grenada has a tax system that is neutral on the value-added tax side and progressive on the personal income tax side. Furthermore, direct transfers make a modest contribution to poverty reduction and are almost neutral in their distributive impact. The results contribute to the understanding of who bears the burden of taxation and benefits from transfers and of how Grenada’s fiscal system can improve its redistributive effect.

This paper is a product of the Poverty and Equity Global Practice and the Macroeconomics, Trade and Investment Global Practice. 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 gcanavire@worldbank.org; ranli@worldbank.org; Chevanne.britton@gmail.com; friosa@gmail.com; wjimenezpozo@gmail.com; sgranadosibarra@worldbank.org; and ggomezaliaga@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
- Home-based work: In the last 30 days, has the share of workers working from home increased or decreased? Increase/Decrease/No change.

# **A3. Sampling frame of the FAT and COV-BPS Surveys**

For both Firm-level Adoption of Technology Survey (FAT) and Business Pulse Survey (COVBPS), the sampling strategy was based on the latest establishment census available from national statistical agencies or administrative business register. The sampling frame for the state of Cear ́a in Brazil was the 2017 _Relac ̧ ̃ao Anual de Informac ̧ ̃oes Sociais_ (RAIS) managed by the Ministry of Economy (MoE); the 2018 Establishment Census from the General Statistical Office (GSO) for Vietnam; and the 2016 _Recensement G ́en ́eral des Entreprises_ (RGE) from the _Agence Nationale de la Statistique et de la D ́emographie_ (ANSD) in Senegal. Each database covers all registered establishments operating in each country.

( _17_ ) drew a nationally representative sample of establishments with 5 or more employees in agriculture, manufacturing, and services. The sample was randomly selected based on three strata: region, size, and sector. The FAT data for the State of Cear ́a in Brazil, Vietnam, and Senegal were collected between August 2019 and February 2020, and most observations were collected before December 2019. For Cear ́a-Brazil, Senegal, and Vietnam, the BPS survey was implemented on a nationally representative sub-sample of FAT data. This data was collected between April and July 2020.

The FAT-BPS data covers around 1,000 businesses both before and after the COVID-19 pandemic crisis. Table A1 provides the sample size of the linked FAT-COV-BPS data and the interview periods in each country. Figure A2 shows the interview period of the COV-BPS survey in each country and the average mobility trend as a proxy for the severity of the COVID-19 shock over this period.

||Sample size|FAT|COV-BPS|
|---|---|---|---|
|Brazil-Cear ́a|124|08/2019-12/2019|05/26/20 - 07/24/20|
|Senegal|464|08/2019-02/2020|04/28/20 - 05/08/20|
|Vietnam|475|11/2019-02/2020|06/12/20 - 07/07/20|

Table A1: Sample size and interview dates for the FAT and BPS surveys.

26
incomplete restructuring that prevents firms from exploiting the benefits of scale economies. Whereas innovation would be expected to be associated with higher productivity, the innovation dummy appears as insignificant in all specifications. This may indicate that the innovation activities carried our within firms may be insufficient to have an impact on productivity. This result could indicate a prevalence of defensive as opposed to strategic restructuring by the firms in the sample, where the former is related to short-term cost-cutting measures, while the latter is focused on increasing the long-term efficiency and viability of the firm, by investing in labour training, fixed assets and other innovation related activities such as R&D (Grosfeld and Roland, 1997; Aghion et al., 1997; Frydman et al., 1999). The other controls are statistically insignificant.

Examination of the OLS results in columns 1 and 2 shows that the coefficients on both time and bribe tax are statistically insignificant. It is, however, unlikely that the corruption variables are exogenous in this productivity estimation. For example, highly productive firms may have a better ability to engage in bribing or may be preferred targets of bureaucrats aiming at exacting bribes. This would introduce reverse causality in the equation or, more formally, a correlation between the right-hand-side variable and the error term. Another potential source of endogeneity is the impact of unobserved institutional characteristics at the firm level. We argue that our measures of perception of the quality of courts and political instability go some way to address these concerns.

The Wu-Hausman test is performed to check whether bribe is endogenous and the results are given at the bottom of Table 3. The significant p-value rejects the null hypothesis of exogeneity of bribe tax. This is not the case for time tax, however, where we cannot reject exogeneity. However, in both cases we implement an instrumental variables (IV) technique to estimate equation (1) to check the implications this has for the coefficient on corruption.

The _bribe tax_ has a negative and significant effect on productivity when adjusting for potential endogeneity bias (Table 3, column 4). The negative and significant coefficient of bribe tax indicates that firms that pay bribes to officials experience lower productivity than other firms. The size of the coefficient suggests that a firm that pays bribes is on average around 45 percent 24
**Table** **<u>3.  Impact by Decile of VAT Excluded/Exempt Products</u>**

|Deciles|Expe<br>VAT Excluded|nditure on<br>/Exempt Products|Average income<br>per decile|Subsidy relative<br>to household|
|---|---|---|---|---|
||COP(1,000)|Percent of total|COP(1,000)|income(%)|
|1|18.9|2.3|118.1|16.0|
|2|27.0|3.3|282.5|9.6|
|3|34.7|4.2|437.3|7.9|
|4|41.4|5.0|644.6|6.4|
|5|52.7|6.4|905.1|5.8|
|6|56.7|6.9|1,266.6|4.4|
|7|74.3|9.0|1,767.8|4.2|
|8|99.0|12.0|2,618.8|3.7|
|9|141.4|17.1|4,295.2|3.3|
|10|278.6|33.8|15,156.1|1.8|
|Total|824.5|100.0|||

Source: IMF (2011a) using 2003 ECV household survey data and DIAN data.

29. **While the system of VAT exemptions reduces income inequality by 0.6 Gini points it does so at a cost of 1.54 percent of GDP.** To reach this conclusion, a household data simulation exercise was undertaken of the following possible reform package: (1) Elimination of most VAT exemptions except education, health, transport and financial services. (2) Conversion of VAT exclusions to VAT exemptions to insure that producers are reimbursed for VAT of the inputs that they use. (3) Taxation of real estate transactions. (4) Conversion of reduced VAT rates (0, 1.6 and 10 percent) to the general rate of 16 percent.

30. **Modifications of the VAT system could thus yield substantial revenue gains, part of which could be used to compensate the poor.**<sup>**18**</sup> Given that the VAT exemptions help reduce inequality by 0.45 Gini points, dismantling them would obviously increase inequality. However, the additional tax revenue of 1.54 percent of GDP could be used to compensate the poorest. To illustrate, the fiscal cost (in terms of higher public monetary transfers) of ensuring a neutral impact for the poorest 30 percent is relatively modest at 0.33 percent of GDP, yielding a net revenue gain of 1.21 percent of GDP. Similarly, keeping the poorest half of the population is also comparatively inexpensive. There are several ways in which the poor could be compensated, such as through an expansion of the conditional cash transfer program, which is particularly well targeted to the poor, as discussed in Section 4.

# **3.3 Other Taxes**

31. **The distributional impact of other taxes is largely unknown.** The discussion thus far, has covered about 50 percent of all central government tax revenues (VAT and personal income tax). The remaining taxes consist largely of income taxes for firms (about 30 percent of revenues), import tariffs, financial transaction taxes, wealth taxes and fuel taxes (see Figure 3). Unfortunately, detailed analyses is not available to shed light on the distributional impact of these taxes. The wealth tax is primarily levied on firms, with few private individuals paying it (IMF, 2011a)<sup>19</sup> . The fuel tax (about 28 percent of the pump price, excluding VAT) is primarily

> 18 See also IMF (2011a,b), which conclude that VAT exemptions may be an inferior instrument to target the poor. 19 About 30,000 private individuals account for approximately 6 percent of wealth tax contributions, according to DIAN.

12
# **Chart 4A: Average income level of world exports of sophisticated products, 19902006**

<!-- Start of picture text --> 26000<br>above median<br>25000<br>above 75th pctile<br>24000<br>23000<br>22000<br>21000<br>1990 1995 2000 2002 2003 2005 2006<br>Income level (per capita GDP, $ PPP)<br><!-- End of picture text -->

# _Source: UN COMTRADE_ .

There are two definitions of sophisticated products. The first covers exports that lie above the median value of PRODY (defined in the text) calculated for 1990. The second covers exports that lie in the top 25<sup>th</sup> percentile of PRODY values. For each definition, we compute the weighted average of per capita GDP of the exporting countries, with the weights being the share of each country in the total exports of sophisticated products.

16