rafmacalaba/datause-encoder-data huggingface dataset:
has suggested a number of common barriers to successful subsidy reform, including lack of information about the magnitude and shortcomings of subsidies and lack of government credibility and administrative capacity (IMF [10]). Widespread media and information campaigns appear to have played an important role in successful reform efforts in countries such as Ghana, Namibia, and the Philippines, and the need for public information campaigns has been identified as a key lesson learned from country case studies (Vagliasindi [14]). Case studies on the political economy of reform in sectors other than energy also highlight the importance of providing information to citizens about the benefits and costs of different policy choices (Fritz et al. [6]). Finally, creative solutions such as advanced compensatory payments deposited in new bank accounts for households, have allowed governments to circumvent lack of trust among citizens when implementing subsidy reform efforts as in the case of Iran (IMF [11]). To the best of our knowledge our paper provides the first empirical test on the role that information and trust in the government capacity play in explaining support for an energy subsidy reform.

We identify three main factors that explain the evolution of the popularity of the reform: the individual’s level of information (which is especially relevant ex-ante), his/her trust in the government’s ability to implement the reform effectively (or the ability to deliver the subsidy ex-post), and his/her political views. Using Logit and Probit regressions we test the marginal effect of each of these factors in the six surveys, respectively conducted in January 2011, May 2011, August 2011, May 2012, August 2012, and September 2013. Our results - robust to a large set of checks - suggest three main conclusions. We first show that in January 2011 - before implementation – the level of information about the reform, the expectations on the ability of the government to deliver and political priors help explain most of the overall satisfaction rate. On average, around 70 percent of the variance of the dependent variable is captured by our main regressors. Second, we show that the increase in the satisfaction rate over time is essentially driven by the ability of the government to deliver the subsidy. Throughout the five surveys following April 2011 the significance and magnitude of the coefficient identifying the above effect progressively increases. Finally, we show a non-marginal effect of political partisanship in the perception of the reform not only before the reform was implemented but also throughout the entire period of analysis.

Our findings may be useful for those considering subsidy reforms. The starting point of a reform cannot be to assume that accurate information is widely known or that departures from perfect information are un4
**Figure 9. Shared prosperity numbers for two scenarios including and excluding zero income**

<!-- Start of picture text --> Shared prosperity growth rates in selected LAC countries including and excluding zero income, 2006-2011<br>Period Country with zeros without zeros<br>2006-2011 Bolivia 12.66 12.36<br>Peru 9.94 9.94<br>Paraguay 7.53 7.53<br>Brazil 5.71 6.08<br>Ecuador 4.35 4.43<br>Honduras 4.23 4.41<br>Chile 3.90 3.91<br>Dominican Repub.. 2.32 2.29<br>difference in growth rate of bottom 40, pp total share of zero income earners<br>Difference in growth rate of bottom 40 and share of population with zero income<br>1.6 2.0<br>1.5<br>1.2<br>0.8 1.0<br>0.4 0.5<br>0.0 0.0<br>-0.4<br>total share of zero income earners<br>difference in growth rate of bottom 40, pp<br>Brazil Honduras Ecuador Chile Paraguay Peru Dominican Republic Bolivia<br><!-- End of picture text --> Source: SEDLAC, microdata provided by regional focal points, members of the Global Poverty Working Group. Authors’ calculations.

Expectedly, larger absolute differences in obtained estimates (in percentage points) are observed in countries with higher shares of the population with zero incomes. However, the magnitude of the population with zero income is not the only factor behind the impact of excluding zero income earners. For example, impact is stronger in Bolivia than in Ecuador (bars in figure 9) even though the share of zero earners is higher in Ecuador than in Bolivia (lines in figure 9). This is a result of the changes in shares across years and as a result, excluding zero earners affects means differently across time. This cannot be clearly observed in figure 9 because it sums up the shares across two years, but table 6 shows shares of the population with zero income by years. The impact of excluding households with zero income is higher in Bolivia than in Ecuador because the share of zero earners drops in Bolivia from 0.49 percent in 2006 to 0.17 percent in 2011. At the same time, the share of zero earners in Ecuador remains relatively stable ranging from 0.64 to 0.75 percent.

17
# **Figure B1**

**Tanzania: Seed Prices Paid by Cotton Processors (TZ shs/kg)**

<!-- Start of picture text --> I II III IV<br><!-- End of picture text -->

**Note** : The numbers represent annual average; I, II, III, and IV refer to 4 of the companies interviewed. **Source** : Interviews with industry representatives (Vasilaky 2009). 11

# **Figure B2**

**Tanzania: 2008 Seasonal Price Variation of Seed (TZ shs/kg)**

<!-- Start of picture text --> June December<br><!-- End of picture text -->

**Note** : The numbers refer to companies that reported complete data **Source** : Interviews with industry representatives (Vasilaky 2009).

12

**_Page 35_**
though still not significant. The larger coefficient is probably due to the fact that _NRDOT_ is capturing some of the effect of _NRDN._ We also examined whether the elasticities differed in the post-NAFTA period (post-1994) and found no significant difference. Moreover, we ran regressions with interaction effects of the foreign R&D variables and a dummy variable (DR) for the R&D-intensive industries, in order to examine whether the elasticities are different in those industries. As shown in column (iv) of Table 2, the interaction effects are not significantly different from zero. Thus, the elasticity of TFP with respect to foreign R&D appears invariant with respect to the industry's R&D intensity.

# 6. Simulation

We need to assess the extent of trade creation and trade diversion associated with NAFTA. Mexico's total imports for the 16 industries are shown in Table 3. Comparing 1994 and 1995, we see that imports remained approximately unchanged, falling by $.85 billion. Imports from NAFTA countries increased by $1.1 billion and those from<sup>other</sup> OECD countries fell by $1.95 billion. Under trade diversion, total imports remain unchanged. Assume that total imports remain at $59.1 billion in 1995 and that the change in imports due to trade diversion is equal to the average of $1.1 billion and $1.95 billion, or a $1.5 billion increase in imports from NAFTA neighbors and the same decrease from the other OECD countries. In that case, imports from NAFTA neighbors in 1995 would have been $49.4 billion and those from the rest of the OECD $9.7 billion.

12
25

### Section 3

## THE KEY ISSUES OF SOCIAL POLICY: PENSION REFORM AND BETTER TARGETING OF SOCIAL ASSISTANCE

The two key issues in social policy reforms are the pension reform and improvement of social assistance. They are the key issues for different reasons. The pension reform’s importance stems from financial considerations: pensions account for between 7 and 15 percent of GDP in transition economies, and for 70 to 80 percent of all cash social transfers. The reform of social assistance is needed to prevent massive increases in destitution during the transition. Its main motivation is thus humanitarian or welfarist (minimization of utility losses of the population) and political (to prevent backlash against the transition). In both reforms, incentive issues also play a role, although incentive issues are probably subsidiary to the two key objectives: financial and political. Examples of incentive considerations that must be taken into account in the design of the reforms are: for pensions, the current non-actuarial pension calculations that lead people to choose early retirement and then continue working; and for social assistance, 100 percent withdrawal of benefits which makes recipients indifferent between working and not working.

# THE ISSUE OF PENSIONS: RISING SHARE OF PENSIONS IN GDP”

In all East European countries, pensions spending as a share of GDP increased during the transition. The average (unweighted) increase between 1987-88 and 1993 is 3 percentage points of GDP: from an average of 7.4 percent to 10.3 (see Table 6). The most spectacular increases were recorded in Poland and Slovenia where the share rose by respectively 8 and 4 percentage points. The situation is less dramatic in the former Soviet Union for two reasons. First, historically, pension spending was less—even in the parts of the USSR that were demographically similar to Eastern Europe—because the pension-wage ratios were lower. Second, the share of pensions in GDP has remained about the same in the Slavic republics, Moldova, and the Baltics (at under 7 percent), and in Central Asia (6 percent). Overall, out of 20 countries, pension spending as a share of GDP decreased by more than | GDP percentage point in only three: Estonia, Moldova, and Kyrgyzstan. In seven others, it remained within + GDP percentage point where it was before the transition. In ten countries, it went up.

It is useful to illustrate the problem with a simple "back of the envelope” calculation. The composition of Eastern European population is such that 4 of the population are the young, little more than 2 is of the working age (between 15 and 55, for women, or 60 for men), and some 20 percent are the people of the retirement age. However, large numbers of early and invalidity pensioners make the actual number of pension recipients greater than the number of people of pensionable age. We can then, for simplicity, put the number of pension recipients at 4 of the population. This gives about 2 working-age persons per each pensioner. But, only about 80 “For a very comprehensive review of the pension issue see World Bank (1994a; Chapter 8).
# **6. References**

Alberola, E. S., Cervero, S., Lopez, H., and A. Ubide (1999) “Global equilibrium exchange rates: euro, dollar, ‘ins’, ‘outs’, and other major currencies in a panel cointegration framework, IMF Working Paper, No. 99/175.

Baffes, J., Elbadawi, A., and O’Connell, A. (1999), “Single equation estimation of the equilibrium real exchange rate” in Hinkle, L and Montiel, P, J (eds), Exchange Rate Misalignment, Concepts and Measurements for Developing Countries, A World Bank Research Publication, Oxford University Press.

Balassa, B. (1990) “Incentive policies and export performance in Sub-Saharan Africa”, World Development 18 (3), 383–391.

Babetskii, I. and B. Égert (2005) “Equilibrium exchange rate in the Czech Republic: how good is the Czech BEER?” Center for Economic Research and Graduate Education, Economics Institute, Working Paper Series ISSN 1211–3298.

Bénassy-Quéré, A., Béreaunn, S., and V. Mignon (2009), “Robust estimations of equilibrium exchange rates within the G20: a panel BEER approach”, _Scottish Journal of Political Economy_ , Vol. 56, No. 5.

Black, S. W. (1994) “On the concept and usefulness of the equilibrium rate of exchange”, in _Estimating Equilibrium Exchange Rates_ , edited by J. Williamson. Washington, D.C: Institute for International Economics.

Clark, P. B. and MacDonald, R. (1999) “Exchange rates and economic fundamentals: a methodological comparison of BEERs and FEERs”, in MacDonald, R and Stein, J (eds), Equilibrium exchange rates, Kluwer Academic Publishers.

Chinn, M. D. (1997) “Sectoral productivity, government spending and real exchange rates: empirical evidence for OECD countries”, NBER Working Paper No. 6017.

Chinn, M. D. (1998) “On the won and other East Asian currencies”, NBER Working Papers 6671, National Bureau of Economic Research, Inc.

Cline, W. R. (2015) “Estimates of fundamental equilibrium exchange rates, May 2015”, Peterson Institute for International Economics Policy Brief No. PB15–8.

Coakley, J. and A. M. Fuertes (1997) “New panel unit root tests of PPP”, Economic Letters, Vol. 57, 17–22.

Cui, Y. (2013) “How is the RMB exchange rate misaligned? A recent application of behavioral equilibrium exchange rate (BEER) to China”, _Journal of East Asian Economic Integration_ , Vol. 17, No. 3, 281–310.

Dibooglu, S. and W. Enders (1995) “Multiple cointegrating vectors and structural economic models: an application to the French franc/U.S. dollar exchange rate”, _Southern Economic Journal_ , Vol. 61, 1098–1116.

Dornbusch, R. (1976), “Expectations and exchange rate dynamics”, _Journal of Political Economy_ , Vol. 84, 161–176.

Driver, R. L. and Westaway, P. F. (2004) “Concepts of equilibrium exchange rates”, Bank of England Working Paper No. 248.

Edwards, S. (1988) “Real and monetary determinants of real exchange behaviour: theory and evidence from developing countries”, Journal of Development Economics, vol.29, 311–341.

29
will be wasted subsidizing non deserving households.<sup>24</sup> Focalizing subsidies directly to the poor or using these funds to improve access infrastructure (as it is usually the case that the poor households are located in places with difficult and costly access to motorized public transport) or walking infrastructure would be more helpful to needy households.

Even when the poor do use public transport, the economic characteristics of this service do not necessarily make it a good candidate to distribute benefits. As discussed by Alderman (2002), to distribute transfers in kind or through a price subsidy, the good in question should ideally be an inferior good (consumption decreases with a rise in income) or at least a strong necessity (consumption increases with income but less than proportionally). Subsidizing inferior or necessity goods generates self-selection of beneficiaries since higher households consume much less of the good than low income households.

Unfortunately, the evidence indicates that public transport tends to be a luxury (consumption increases more than proportional to increases in income) or a weak necessity, at least for low levels of income. The data presented in Table 10 gives an example from Ukraine (urban households) showing that public transport is a luxury good up to the highest income category.

It is usually the case that, in many developing countries, the relation between public transport expenditure and income has an inverted U shape, as is shown in Figure 1. This implies that the self-selection mechanism discussed above will not operate well in the transport sector or at least not as well as with other goods. Subsidies transferred through untargeted fare reductions will benefit the poor but will also benefit many middle to high income households, making it, in most cases, a regressive subsidy.

**<u>Table 10: Expenditure on public transport per income group</u>**

|**U**|**kraine (urban households)**|
|---|---|
|**Income per month**|**Public transport share in total expenditure**|
|<4000|1.8%|
|4000-8000|2.2%|
|8000-12000|2.6%|
|12000-16000|3.0%|
|16000-20000|3.2%|
|> 20000|2.6%|

_Sources_ : NEA and ECORYS (2004) and Godard and Diaz Olivera (2000).

This structural characteristic may distinguish developing countries from developed countries. As income increases and private automobile ownership becomes more widespread, the use of public transport (at least buses) may become more of a necessity and used almost exclusively by lower income households. Of course, one cannot generalize, but this conjecture may explain why public transport subsidies are often found

> 24 As an example, Cropper (2007) reports an elasticity of walking to bus fares between 0.06 and 0.08 for Mumbai, India. Thus, a 10% decrease in the bus fares would only decrease walking trip by less than 1%.

40
Action Party that was elected in 1959 has since been returned to power at every election. During the politically turbulent 1960s, the government concentrated on issues of employment creation and housing provision and Singapore’s efforts at attracting foreign investment in labor intensive industries met with great success.

Today, there are over 5,000 foreign companies located in Singapore and many multinational corporations and foreign financial institutions have established regional operating and manufacturing bases on the island. Full employment was achieved by the early 1970s. Between 1966 and 1990, the Singaporean economy grew at 8.5% per annum. The per capita income grew at 6.6%, roughly doubling every decade. The World Development Report 1998 estimated that Singapore's 1997 GNP per capita of US$32,940 (based on purchasing power parity) was the fourth highest in the world (after Switzerland, Japan and Norway). Over the years, the economy has also gradually moved up the technological level. Many labor intensive industries like textiles are no longer an important part of the economic landscape in Singapore. The impressive growth momentum was only halted after the 1997 Asia economic crisis. A sharp decline in growth rates together with a depreciation of the Singapore dollar brought the country’s per capita GNP in 2002 down to US$20,690 (on a PPP basis), making it only the 17<sup>th</sup> highest in the world.<sup>15</sup> A stable, farsighted, and uncorrupt government, which adopted proactive growth strategies, has long been credited as one of the main factors behind the success of the Singapore economy in the pre-Asia crisis period. To attract mobile capital and talent, the government has tried to ensure that immobile factors such as infrastructure facilities and system management complement growth. The key concern for the government has always been “efficiency”. Indeed, it has been recognized right from the beginning that, to compensate for the natural “comparative disadvantage” associated with a small economy with a limited domestic market and population size, Singapore will have to develop a highly efficient and productive infrastructure system to help reduce production cost and attract foreign investors.

The results of such a drive for efficiency are widely recognized. The IMD World Competitiveness Scoreboard 2002, for example, ranked Singapore as the fifth most competitive country in the world, based on factors such as economic performance, government efficiency,

> 15   See World Development Report 2004.

5
The distribution of education from the RPED data across gender and geographical regions reveals that in the formal manufacturing sector, the majority of workers have completed middle or secondary education (see tables 1 and 2). The data contain three notable features. First, middle school is the most conmmon level of completed education (46 percent). Second, almost twice as many employed females as males have not completed any education.<sup>7</sup> Third, fewer of the workers employed in Accra (9 percent) have completed less than secondary education, compared with workers employed elsewhere in Ghana.

Table 2 presents the percentage of workers in each sector that has completed each level of education. Most notably, the share of workers with no or primary education is quite small in the metal sector (6 percent) compared with the average share across all across sectors (13 percent). University graduates make up the largest share in the food sector (3 percent).

**Table 2. Education by Manufacturing Sector (percent)**

||||lvlanufac|turing Secto|r|
|---|---|---|---|---|---|
|Educational level completed|Total<br>Manufacturing|Metal|Textile|Food|Wood|
|None|9.3|3.7|1]0.0|16.6|7.8|
|Primary school|3.3|2.0|3.8|3.9|3.5|
|Middle school|45.8|50.8|46.7|_35.5_|58.3|
|Secondary school|13.5|12.6|4L3.8|15.4|8.7|
|Vocational school|13.6|15.0|40.7|13.5|13.0|
|Professional and technical schools|13.3|15.6|13.9|12.0|7.9|
|University|1.3|0.3|[.0|3.1|0.9|
|Total||||||
|Percent|100|100|[00|100|100|

7 Note that only 17.9 percent of the sampled workers are women and less than 0.5 percent are non-Africans.

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# **Introduction**

There is now broad recognition of the potential benefits of facilitating cross-border trade flows by reducing the incidence of “red tape” associated with the implementation of domestic tax and regulatory policies. This recognition is informed by a plethora of academic research, supported by business surveys, documenting that the associated costs are often a multiple of import tariffs that apply to goods without generating similar benefits for the economy in the form of government revenue.<sup>1</sup> The associated costs reflect a combination of the real resources that must be allocated by firms to satisfy administrative requirements and the uncertainty and unpredictability that often are associated with border clearance processes. Many of the provisions of the GATT are aimed at facilitating trade in the sense of reducing such costs. Examples include publication and related transparency requirements and substantive rules regarding how trade policies should be implemented – e.g., relating to the classification and valuation of products for purposes of collecting import duties or the permitted basis for charging additional fees and charges. The 2013 WTO Trade Facilitation Agreement (TFA) builds on extant GATT rules to define in much greater detail a series of good practices that all WTO members agreed should be implemented to further facilitate trade in goods (see Hoekman, 2016).

The TFA applies only to goods, not to services. In most countries, services account for 55-75% or more of total output and employment. For the world as a whole, the role of services has been increasing rapidly, reflecting a mix of technological changes and rising average per capita incomes. Efficient services are ever more critical for economic development, in part because many services are inputs into the production of other services and goods and thus the cost, quality and variety of services determine the competitiveness of firms and impact on overall economic growth. Although services account for the majority of economic activity in most economies, the share of services output that is traded is much less than for goods. However, technological changes are making services increasingly tradable. Many services that were not tradable in the past can now be provided cross-border at arms-length using the internet and telecommunications networks (Gervais and Jensen, 2019).<sup>2</sup> Although cross-border trade in services has been growing rapidly – epitomized by the offshoring of business process services – in many cases suppliers or customers still need to physically move to the location of the other to allow service provision to occur. Here too a mix of technological advances and policy reforms have supported greater international exchange. Falling costs of air transportation and shifts towards use of international supply

> 1 See for example <mark>Moïsé and Sorescu (2013)</mark> .

> 2 WTO (2019) provides an in-depth overview and discussion of trade in services.

2