rafmacalaba/datause-encoder-data huggingface dataset:
2.5 million person-years of employment and total labor income of $1.3 billion.

Subsequent maintenance generates about 110,000 rural jobs, with an annual income flow of about $55 million. Comparison of employment generated with the abutting population range indicates a large local labor deficit during the upgrade, with consequent overflow benefits for more distant settlements. Assuming that 40% of the local population is employable on road construction,<sup>42</sup> annual maintenance demand can absorb between 4% and 26% of available labor in abutting settlements. In the full network, 18 countries have high-range absorption percentages of 10% or more.

For the whole trans-Africa network, we estimate that 8.4 million person-years of rural construction employment would be generated by initial upgrading, with about 365,000 rural jobs generated by annual maintenance. This would have a significant impact on employment and earnings in some of the poorest parts of rural Africa and, coupled with a clear prior understanding about the link between road siting and jobs, would probably be sufficient to motivate removal of barricades in most areas.

The second major source of income for local settlements would be growth in income-earning opportunities from large increases in network traffic. Abutting settlements would increase sales of goods and services to truckers and vehicle passengers, as well as having greatly-expanded export markets for local produce. To assess the potential scale of this effect, we have used GIS to define spatial corridors extending 10 km on either side of all network links. Overlaying these 20-km corridors on the most recent spatial population distribution map for rural Sub-Saharan Africa (SSA),

> 42  Network countries have a mean population percentage of 53% in the age range 15-64.

41
3

# **Table 1.1**

Viet-Nam's Organized non-Agricultural Private Sector: Corporations (SAs and SARLs) and Sole Proprietorships (as of March 3, 1994)

|**Sector**|**Number of**<br>Units|**Registered**<br>**Capital**<br>**(dong million)**|
|---|---|---|
|Manufacturing|2,557|622,318|
|Trade|2,913|965,127|
|(Foreign Trade)|(14)|(67,948)|
|Transport, Tourism, and other Services|554|574,366|
|**Total**|6,024|2,161,811|

Source: State Arbitration Authority, Hanoi; unpublished data provided during mission.

Private sector involvement in the industrial sector grew rapidly in 1989-90. A series of failures led to a consolidation in 1991-92, reducing both the total number of private units and their output. As a result, private industrial output growth has averaged a modest 6 percent p.a. during the last three years. Unlike other transition economies in Eastern Europe, Viet-Nam's private sector has not been enlarged by privatization of state-owned enterprises. Only three SOEs have been designated to be privatized in a pilot program.

In general, Viet-Nam's industrial sector is still dominated by SOEs, although the private sector is more active in the trade and service sectors. The dynamism of the trade sector is evidenced by the increasing number of new shops throughout the country and, more importantly, by their increased earnings. Private sector activities in the trade sector are, however, limited to domestic trade. Current trade laws and regulations practically give SOEs a monopoly in foreign trade. Although some 3,000 foreign trade permits were issued recently, only 14 were given to the private sector.

# **Foreign Investment**

A policy milestone in Viet-Nan's transition toward a market economy was the new Foreign Investment Law enacted to attract foreign capital and technology. The revision of the Foreign Direct Investment (FDI) law in 1990 and amendments in 1991, 1992, and 1994 (including an important provision to allow 100 percent foreign-owned investment) formed a basis for facilitating FDI. Viet-Nam's incentives package for FDI is standard, more or less
# **Efficient Financial Allocation and Productivity Growth in Brazil**<sup>**#**</sup>

Pietro Calice<sup>*</sup> Eduardo P. Ribeiro<sup>**</sup> Steen Byskov<sup>***</sup> JEL Classification Numbers: O40, O43, O47 Keywords: access to credit, Brazil, misallocation, productivity, public credit

> # We would like to thank Martin Reiser, Mark Dutz, Antonio Nucifora and the participants of the SBE/ANPEC meeting held on December 13, 2017, in Natal, Brazil, for their useful comments. We would also like to acknowledge Brazilian Development Bank (BNDES) staff support in clarifying the details on microdata obtained according to _Lei de Acesso a Informação_ ( _pedido_ 99903.000274/2016-68). Firm level data from IBGE ́s industry surveys were used only for statistical purposes and the output was cleared according to IBGE procedures ( _processo_ 03605.000346/2017-43). The results and interpretations represent the outcome of individual scholarly work and may not necessarily represent the position of BNDES, IBGE, The World Bank or institutions we are affiliated with. Any error or omission is only ours.acknowledge BNDES staff support in clarifying the details on microdata obtained according to _Lei de Acesso a Informação_ ( _pedido_ 99903.000274/2016-68). Firm level data from IBGE ́s industry surveys were used only for statistical purposes and the output was cleared according to IBGE procedures ( _processo_ 03605.000346/2017-43). The results and interpretations represent the outcome of individual scholarly work and may not necessarily represent the position of BNDES, IBGE, The World Bank or institutions we are affiliated with. Any error or omission is only ours.

> * The World Bank Group. Corresponding author: pcalice@worldbank.org.

**   Institute of Economics, Federal University of Rio de Janeiro and CNPq Researcher.

*** The World Bank Group.
analyzing the comparative effects of different forms of subnational government on development outcomes. Such research could be important both to guide future policy-making by the World Bank and also to provide better information for public discussions of decentralization reforms. Broad public understanding of these issues may be essential for decentralization reforms to get appropriate consideration against the opposition of powerful national elites that have a vested interest in centralization. There has been some fundamental research on comparisons of local political institutions (see UCLG 2007, Ghosh 2012, Hankla et al 2012, Faguet 2014), but this is a vital area where the great research capabilities of the World Bank could make a particularly important contribution.

# **References**

Richard C. Crook and James Manor, _Democracy and Decentralization in South Asia and West Africa_ (Cambridge U. Press, 1998).

Ruben Enikolopov and Ekaterina Zhuravskaya, "Decentralization and political institutions," _Journal of Public Economics_ 91:2261-2290 (2007).

Jean-Paul Faguet, _Decentralization and Popular Democracy: Governance from below in Bolivia_ , (U. Michigan Press, 2012).

Jean-Paul Faguet, editor, special issue on "Decentralization and Governance," _World_ _Development_ 53(1):1-112 (January 2014).

Louise Fortmann, "The Role of Local Institutions in Communal Area Development," (Gaborone, Botswana: Applied Research Unit, Ministry of Local Government and Lands, 1983), http://pdf.usaid.gov/pdf_docs/PNAAT392.pdf (accessed Feb 2013).

Ashraf Ghani and Clare Lockhart, _Fixing Failed States_ (Oxford U. Press, 2008). Sharmishtha Ghosh, "List of resources on local democracy in the developing world" (2012) http://home.uchicago.edu/~rmyerson/research/locdemocinfo.pdf Charles A. Hankla, Jorge Martinez-Vazquez, Raul A. Ponce-Rodriguez, and Eunice HerediaOrtiz, "Rethinking the political economy of decentralization: how elections and parties shape the provision of local public goods," working paper 12-32, International Center for Public Policy, Andrew Young School, Georgia State University (2012). http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1903106 Ghazala Mansuri and Vijayendra Rao, _Localizing Development: Does Participation Work?_ 11
Following September 11, the SEC, the Federal Reserve and US Treasury held discussions with market participants about the vulnerabilities in the settlement system for government securities. Concerns existed over operational risk, financial risk (if a clearing bank’s financial condition were to become impaired), and structural risk ( if one of the two clearing banks ere to exit the market). In response to these discussions, the SEC and the Federal Reserve Board issued a white paper setting forth issues relating to the possibility of establishing an industry utility to conduct settlement.<sup>160</sup>

# **9. RATING AGENCIES AND THEIR ROLE**

Credit ratings have been used most widely and for the longest period of time in the United States. Their use has grown in tandem with the development of increasingly complex financial instruments, which individual investors find difficult to assess. The purpose of credit ratings is to provide objective and independent opinions of relative credit risk. There are three dominant rating agencies in the United States, Moody's Investors Service, Standard and Poor’s, and Fitch, Inc. Moody’s and Standard and Poor’s rate all taxable securities sold in the US domestic market that are registered with the SEC, whether or not they are compensated by issuer.<sup>161</sup> Credit rating agencies in the United States are virtually unregulated. They are not subject to any federal reporting requirements nor are they required to have written rules concerning the training and hiring of employees.<sup>162</sup> The SEC has developed a concept called a, “nationally recognized statistical rating organization” (NRSRO). NRSRO status essentially means that the rating agency has some degree of recognition in the market. NRSRO status is significant because it is the trigger for a number of regulatory and other events. For example, when calculating a firm’s net capital, a favorable capital charge may accrue to investments in those instruments of issuers that have received a certain rating from an NRSRO. Institutional investors may be required to hold instruments of certain NRSRO status in their portfolios. Also, downgrades in NRSRO ratings are frequently embedded in loan and other financing agreements as a trigger requiring acceleration of payment. The SEC currently has granted NRSRO status only to the three rating agencies identified above and to Dominion Bond Rating Service Ltd.

Credit rating agencies received significant criticism in the wake of the recent corporate scandals. It was frequently noted in the financial press, for example, that credit rating agencies had been well behind the curve in their ratings of many failing companies, including Enron. Politicians, government officials, and the financial press raised questions about the rating agencies’ independence and the conflicts of interest that

> 160US SEC, 2002

> 161 IMF, 1998.

> 162 The SEC has required credit rating agencies to register as investment advisers; however, their credit ratings business is not subject to any regular reporting requirements.

44
1 percentage point per year.

Gylfason et al. (1999) postulate that the natural resources sector creates and needs less human capital than other productive sectors, which is similar to the assumption of this paper. A larger primary sector induces an appreciation of the currency, which makes the development of a skill-intensive sector difficult. Thus the model they develop predicts an inverse relationship between real exchange rate volatility and human capital accumulation and, hence, growth. Similarly, they predict a positive relationship between external debt and profitability in the secondary (industrial) sector and growth. However, the evidence they provide regarding these two explanatory variables is at best mixed: exchange rate volatility is not statistically significant, and external debt is statistically significant but has the wrong sign.

According to Gylfason et al. (1999), the share of the labor force in the primary sector can be used as an explanatory variable. However, they find it to be statistically significant only when human capital is excluded from the regressions. This result may be due to multicollinearity, which our model can explain, since the fraction of the labor force (or human capital) employed in the primary sector depends on the level of human capital. Thus Gylfason et al. (1999) find that “an increase in either the share of the primary sector in the labor force or in the share of the primary exports on total exports from 5% to 30% from one country or period to another reduces per capita growth by about 0.5% percent per year, other things being equal.” In short, the model we have presented is consistent with the results found by Gylfason et al. (1999) related to the size of the labor force in the primary sector.

In a multisectoral study, Feenstra et al. (1997) test the hypothesis of semiendogenous growth using data on bilateral trade between the United States and South Korea and between the United States and Taiwan. Their study focuses on sixteen industrial sectors, for which they test whether changes in the relative varieties of inputs affect the growth rate of relative total factor productivity between South Korea and Taiwan. They classify seven of these sectors as primary and nine as secondary, defining firms that use raw materials and natural resources as inputs as belonging to the primary sector. Their results show that variety of inputs affects the growth rate of total factor productivity in seven secondary sectors but only one primary sector. The mining sector displays a positive relationship, although this effect disappears after controlling for imperfect competition. The remaining sectors in the primary sector 15
weighting assets was introduced by the first Basel capital accord (BCBS, 1988) to distinguish risk of different asset types and require banks to hold more capital against portfolio items with higher risk.

Figure 6 below shows the minimum regulatory capital requirements. On average most of the ECA sub-regions set capital requirements (as % of RWA) well above the average for the rest of the world. There are, however, some important differences. On average EU countries set the lowest capital requirements, but these countries are also more apt to have in place additional capital surcharges, meaning that the minimum regulatory capital set for banks is, in practice, higher than before the financial crisis. Countries in Central Europe and Baltic countries, Turkey and Russia had higher capital requirements than the EU in 2008 but lowered their capital regulatory requisites by the end of 2016.

**Figure 6: Mean regulatory capital requirements (% of RWA, equally weighted)**

<!-- Start of picture text --> 2008 2009 2010 2011 2012 2013 2014 2015 2016<br>EU CE & BC WB<br>SC CA Russia<br>Turkey EE RoW<br>13<br>12<br>11<br>(% of RWA) 10<br>9<br>Mean regulatory capital requirements<br>8<br><!-- End of picture text --> Source: Bank Regulation and Supervision Survey conducted by the World Bank. Note: **EU** stands for Western Europe, Southern Europe, Northern Europe; **CE & BC** for Central Europe & Baltic Countries; **WB** for Western Balkans; **SC** for South Caucasus; **CA** for Central Asia; **EE** for Eastern Europe; **ROW** for the rest of the world **.** Since capital acts as a buffer against liquidity, information and economic shocks, the quality of capital is important in determining the solvency of a bank. Lower quality capital tends to be made of components that are difficult to value and can be subject to information asymmetries. Capital elements other than common equity can thus be significantly undervalued during times of distress, reducing their effectiveness to act as a cushion against shocks. Risk exposures are also difficult to estimate, and current regulations provide substantial discretion to banks in determining risk-weights. Risk-weights can thus be manipulated by banks to meet or to improve regulatory requirements. A number of studies have shown that risk-weights only weakly reflect the actual risks of banks’ operations and can be manipulated through securitization and use of complex risk models (Le Leslé and Avramova, 2012; Acharya et al., 2013; Mariathasan and Merrouche, 2014). Consistent with the notion that there is significant discretion 7
The cyclical fall in productivity must be framed within a longer-term perspective. The procyclical behavior of productivity along the business cycle has been well documented and researched in developed economies (Bernanke, 2000). In these economies, productivity shows a stable long-run trend, and deviations from it are reversed through time. The shocks in these circumstances are transitory, and they explain most of the volatility of the series. Hence, a productivity rebound could take place after the global economy recovers. However, in emerging economies, the productivity trend is more volatile, and hence shocks tend to be more persistent. For instance, in Mexico, factor productivity recovered its pre-Tequila level only five to six years after the shock (Aguiar and Gopinath, 2007).

The crisis may have long-lasting impact on factor productivity for several reasons. First, subdued global demand for Egyptian goods and services is expected to continue for the few years to come. Second, as aggregate demand shifts from tradable producing sectors towards non-tradable sectors, such as construction and retail trade, resources will be reallocated to the latter, generating less value added per worker. Therefore, aggregate productivity will decrease. Moreover, due to costly labor mobility<sup>21</sup> , resources will not be reallocated in tandem with the global recovery. Third, limited and more expensive access to finance for international corporations will slow down foreign direct investment, resulting in lower levels of capital formation. These expected outcomes imply slower technology transfer and lower capital/labor ratios, and hence, lower labor productivity. Fourth, the return of migrants from the GCC countries will imply less worker remittances, which are used productively by households (Assaad _et al._ , 2009a) and have a positive effect on schooling (Assaad, _et al.,_ 2009b). Therefore, to mitigate these likely productivity-depressing long-lasting effects, the Government must resume structural reform policies that support real cost reduction.

# **A. PROSPECTS: IMPACT ON POTENTIAL GDP IN THE LONG RUN**

To estimate potential GDP in the period 2010-2020, we adopt a production function approach. First we construct a potential GDP baseline based on assumed trajectories for human capital, physical capital, and productivity growth had there been no crisis. Second, we examine deviations of the medium-term (defined as ten years after the crisis) level of output from the baseline (or the level it would have reached without the crisis). We assume that the impact on potential GDP will be mostly through the effect of the crisis on capital accumulation, as has been the case in most OECD revisions of potential growth (OECD, 2009). We also assume lower TFP growth as a result of increased public spending (Kheir El-Din and Moursi, 2007) and reduced savings rates (Bernanke and Gurkaynak, 2000).

> 21 The 2008 _Doing Business_ indicators show that Egypt tops the list of countries on ending-employment costs: the cost of firing, in terms of weeks of salary, is 132 weeks, while in India it is 56, in Tunisia 17, in Morocco 85, and in Brazil 37 weeks.

24
Jones, B., 1999b. Rights Revenues and Resources: The problems and potentials of conservancies as community wildlife management institutions in Namibia. Evaluating Eden Series Discussion Paper No. 2, London: IIED.

Newman, K. and J. Webster, 1993. African biodiversity: Foundation for the Future. A framework for integrating biodiversity conservation and sustainable development. Biodiversity Support Program. Gland, Switzerland: World Wildlife Fund.

Rubin, D.B., 1973. The use of matched sampling and regression adjustments to remove bias in observational studies. Biometrics 29: 159-183 Weaver, Larrye Chris and Patricia Skyer. 2003. Conservancies: Integrating wildlife landuse options into the livelihood, development, and conservation strategies of Namibian communities. Paper Presented At the Vth World Parks Congress To The: Animal Health And Development (AHEAD) Forum; Durban, Republic of South Africa, September 8-17, 2003 19
applications by foreign entities. The analysis examines trends in domestic and foreign patent applications over the 1982-1999 period. Descriptive statistics of patent application counts are provided in Table I, as are descriptive statistics for other variables that are used in the regression analysis that follows.

Finally, information on the timing and content of IPR regime changes come from a number of sources. Our starting point was the complete set of significant patent reforms identified by Maskus (2000). Information on the details of individual reforms was obtained from Ryan (1998), Uphoff (1990), and Sakakibara and Branstetter (2001), and various reports published by the patent agencies. We also undertook a series of interviews with multinational managers, legal experts on intellectual property rights based in some of the reforming countries, and international IPR consultants, in order to understand better the substance of the reforms and to confirm their timing.<sup>25</sup> Table II displays the list of patent reforms considered in the analysis that follows, and Appendix A provides additional details about these reforms. This is not a complete or exhaustive list of IPR regime changes that occurred over our sample period. For instance, some countries undertook reforms of their copyright laws in ways that impacted the computer software and entertainment industries – these are not studied in the current paper.<sup>26</sup>

# **4. Results**

# _4.1 Technology Transfer to Affiliates_

To provide a general sense of trends in technology transfers, Figure 1 displays pre- and post reform averages of the ratio of aggregate royalties to aggregate sales in each

> 25  By prior agreement, our interviewees must remain anonymous.

> 26  An additional complication is that some countries undertook a series of patent reforms in different years. Our current analysis focuses on the particular change to the patent system judged most likely to impact technology licensing by foreign firms.

15