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Measuring Rents from Public Employment: Regression Discontinuity Evidence from Kenya - Working Paper 457

6/21/17
Nicholas Barton , Tessa Bold and Justin Sandefur

Public employees in many developing economies earn much higher wages than similar private-sector workers. These wage premia may reflect an efficient return to effort or unobserved skills, or an inefficient rent causing labor misallocation. To distinguish these explanations, we exploit the Kenyan government’s algorithm for hiring eighteen-thousand new teachers in 2010 in a regression discontinuity design. Fuzzy regression discontinuity estimates yield a civil-service wage premium of over 100 percent (not attributable to observed or unobserved skills), but no effect on motivation, suggesting rent-sharing as the most plausible explanation for the wage premium.

Working Paper 455 (revised) cover

The Labor Market Effects of Refugee Waves: Reconciling Conflicting Results - Working Paper 455

5/22/17

An influential strand of research has tested for the effects of immigration on natives’ wages and employment using exogenous refugee supply shocks as natural experiments. Several studies have reached conflicting conclusions about the effects of noted refugee waves such as the Mariel Boatlift in Miami and post-Soviet refugees to Israel. As a whole, the evidence from refugee waves reinforces the existing consensus that the impact of immigration on average native-born workers is small, and fails to substantiate claims of large detrimental impacts on workers with less than high school.

Gender Matters in Economic Empowerment Interventions: A Research Review - Working Paper 456

5/22/17

A review of the recent evaluation evidence on financial services and training interventions questions their gender neutrality and suggests that some design features in these interventions can yield more positive economic outcomes for women than for men. These include features in savings and ‘Graduation’ programs that increase women’s economic self-reliance and self-control, and the practice of repeated micro borrowing that increases financial risk-taking and choice. Subjective economic empowerment appears to be an important intermediate outcome for women that should be promoted and more reliably and accurately measured. Lastly, whenever possible, results should be sex-disaggregated and reported for individuals as well as households.

Identification as a National Priority: The Unique Case of Peru - Working Paper 454

5/11/17
William Reuben and Flávia Carbonari

Peru is a remarkable example of a country that established civil identification as a national priority in response to the need to re-integrate the state after a serious insurgency. The approach has combined the creation of an autonomous civil registration and identification agency and the use of performance-based financing to expand coverage to poor, remote, communities and to help integrate civil registration with the national ID.

Immigration Restrictions as Active Labor Market Policy: Evidence from the Mexican Bracero Exclusion - Working Paper 451

4/3/17
We study a natural experiment that excluded almost half a million Mexican ‘bracero’ seasonal agricultural workers from the United States, with the stated goal of raising wages and employment for domestic farm workers. We reject the wage effect of bracero exclusion required by the model in the absence of induced technical change, and fail to reject the hypothesis that exclusion had no effect on US agricultural wages or employment. Important mechanisms for this result include both adoption of less labor-intensive technologies and shifts in crop mix.

Expanding Global Liquidity Insurance: Myths and Realities of the IMF’s Precautionary Credit Lines - Working Paper 449

2/28/17

This paper addresses four misconceptions (or ‘myths’) that have likely played a role in the limited utilization of the IMF’s two precautionary credit lines, the Flexible Credit Line (FCL) and the Precautionary and Liquidity Line (PLL). These myths are 1) too stringent qualification criteria that limit country eligibility; 2) insufficient IMF resources; 3) high costs of precautionary borrowing; and 4) the economic stigma associated with IMF assistance. We show, in fact, that the pool of eligible member states is likely to be seven to eight times larger than the number of current users; that with the 2016 quota reform IMF resources are more than adequate to support a larger precautionary portfolio; that the two IMF credit lines are among the least costly and most advantageous instruments for liquidity support countries have; and that there is no evidence of negative market developments for countries now participating in the precautionary lines.

Fiscal Policy, Income Redistribution and Poverty Reduction in Low and Middle Income Countries - Working Paper 448

1/30/17

Current policy discussion focuses primarily on the power of fiscal policy to reduce inequality. Yet, comparable fiscal incidence analysis for 28 low and middle income countries reveals that, although fiscal systems are always equalizing, that is not always true for poverty. To varying degrees, in all countries a portion of the poor are net payers into the fiscal system and are thus impoverished by the fiscal system. Consumption taxes are the main culprits of fiscally-induced impoverishment.

Analytic Foundations: Measuring the Redistributive Impact of Taxes and Transfers - Working Paper 446

1/3/17
Ali Enami , Nora Lustig and Rodrigo Aranda

This paper provides a theoretical foundation for analyzing the redistributive effect of taxes and transfers for the case in which the ranking of individuals by pre-fiscal income remains unchanged. We show that in a world with more than a single fiscal instrument, the simple rule that progressive taxes or transfers are always equalizing not necessarily holds, and offer alternative rules that survive a theoretical scrutiny. In particular, we show that the sign of the marginal contribution unambiguously predicts whether a tax or a transfer is equalizing or not.

The Impact of Taxes and Social Spending on Inequality and Poverty in El Salvador - Working Paper 447

1/3/17
Margarita Beneke , Nora Lustig and José Andrés Oliva

We conducted a fiscal impact study to estimate the effect of taxes, social spending, and subsidies on inequality and poverty in El Salvador, using the methodology of the Commitment to Equity project. Taxes are progressive, but given their volume, their impact is limited. Direct transfers are concentrated on poor households, but their budget is small so their effect is limited; a significant portion of the subsidies goes to households in the upper income deciles, so although their budget is greater, their impact is low. The component that has the greatest effect on inequality is spending on education and health. Therefore, the impact of fiscal policy is limited and low when compared with other countries with a similar level of per capita income. There is room for improvement using current resources.

The Impact of Anti-Money Laundering Regulation on Payment Flows: Evidence from SWIFT Data - Working Paper 445

12/20/16

Regulatory pressure on international banks to fight money laundering (ML) and terrorist financing (TF) increased substantially in the past decade. We find countries that have been added to a high-risk greylist face up to a 10% decline in the number of cross border payments received from other jurisdictions, but no change in the number sent. We also find that a greylisted country is more likely to see a decline in payments from other countries with weak AML/CFT institutions. We find limited evidence that these effects manifest in cross border trade or other flows. Given that countries that are placed on these lists tend to be poorer on average, these impacts are likely to be more strongly felt in developing countries.

Internationally Comparable Mathematics Scores for Fourteen African Countries - Working Paper 444

12/2/16

Internationally comparable test scores play a central role in both research and policy debates on education. However, the main international testing regimes, such as PISA, TIMSS, or PIRLS, include very few low-income countries. For instance, most countries in Southern and Eastern Africa have opted instead for a regional assessment known as SACMEQ. This paper exploits an overlap between the SACMEQ and TIMSS tests—in both country coverage, and questions asked—to assess the feasibility of constructing global learning metrics by equating regional and international scales. I find that learning levels in this sample of African countries are consistently (a) low in absolute terms; (b) significantly lower than predicted by African per capita GDP levels; and (c) converging slowly, if at all, to the rest of the world during the 2000s. Creating test scores which are truly internationally comparable would be a global public good, requiring more concerted effort at the design stage.

The Impact of Taxes, Transfers, and Subsidies on Inequality and Poverty in Uganda - Working Paper 443

11/10/16
Jon Jellema , Nora Lustig , Astrid Haas and Sebastian Wolf

This paper uses the 2012/13 Uganda National Household Survey to analyze the redistributive effectiveness and impact on poverty and inequality of Uganda’s revenue collection instruments and social spending programs. Fiscal policy—including many of its constituent tax and spending elements—is inequality-reducing in Uganda, but the reduction of inequality due to fiscal policy in Uganda is lower than other countries with similar levels of initial inequality, a result tied to low levels of spending in Uganda generally. The impact of fiscal policy on poverty is negligible, while the combination of very sparse coverage of direct transfer programs and nearly complete coverage of indirect tax instruments means that many poor households are net payers into, rather than net recipients from, the fiscal system. As Uganda looks ahead to increased revenues from taxation and concurrent investments in productive infrastructure, it should take care to protect the poorest households from further impoverishment from the fiscal system.

Fiscal Policy, Inequality and the Poor in the Developing World - Working Paper 441

11/8/16

Using comparable fiscal incidence analysis, this paper examines the impact of fiscal policy on inequality and poverty in twenty-five countries for around 2010. Success in fiscal redistribution is driven primarily by redistributive effort (share of social spending to GDP in each country) and the extent to which transfers/subsidies are targeted to the poor and direct taxes targeted to the rich. While fiscal policy always reduces inequality, this is not the case with poverty. While spending on pre-school and primary school is pro-poor (i.e., the per capita transfer declines with income) in almost all countries, pro-poor secondary school spending is less prevalent, and tertiary education spending tends to be progressive only in relative terms (i.e., equalizing but not pro-poor). Health spending is always equalizing except for Jordan.

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