Economics serving society

Les Notes du G-MonD

Note n°19 - December 2017

Title: « Inter-industry relatedness as a key determinant of industrial-policy efficiency »
Authors: Zhao CHEN, Sandra PONCET and Ruixiang XIONG
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We study the efficiency of the export-promoting policies implemented in China within the so-called Export Processing Zones (EPZ) and investigate whether the effect depends on the consistency of their focus with local comparative advantage. In the early 2000s the Chinese government established 57 Export Processing Zones, a type of free trade zone (FTZ) offering tax incentives and a barrier-free environment, to encourage investments from multinational companies into processing trade activities. We use sector-level data from Chinese manufacturing surveys over the 1998-2007 period and exploit information on the targeted sectors in each zone and on the adequation between targeted sectoral activities and the local availability of capabilities and resources. We find export benefits from the EPZ policy which are greater for sectors with denser links with the local productive structure. Our results suggest that industrial-policy effectiveness is magnified by pre-existing productive knowledge.

Note n°18 - December 2016

Title: « Income Hiding and Informal Redistribution: A Lab in the Field Experiment in Senegal »
Authors: Marie Boltz, Karine Marazyan and Paola Villar
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In a context where people heavily rely on their social networks and have limited access to financial markets, redistributive obligations can lead to hidden costs. In this project we estimate these costs by relying on an original lab-in-the-field experiment conducted in Senegal which has the unique feature of combining a small scale randomized controlled trial (RCT) and a lab experiment. The lab component allows us to estimate the cost of the informal redistribution taking place in the community, through the elicitation of the willingness-to-pay to hide income and to identify the relevant population: two thirds of the experiment participants are ready to forgo up to 14% of their gains to keep them private. Based on the RCT component, we find that giving the opportunity to hide their income to people fearing the redistributive pressure allows them to decrease by 27% the share of the gains they devote to transfers to kin out of the lab. They reallocate this extra money to health and personal expenses. This is the first paper to both identify the individual cost of this informal redistribution and to relate it to real-life resource allocation decisions, in a controlled setting.

Note n°17 - October 2016

Title:« Wages, Taxes… and Prices: Global Migration and the Real Income of European »
Author :Frédéric Docquier

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The rising mobility of people has triggered lively debates over the societal and economic consequences of global migration. Contrary to popular perceptions, the academic literature has identified relatively small labor market and fiscal responses to migration. However, most existing studies have disregarded the effect of global migration on the market size, on firms’ entry/exit decisions, and on the variety of goods available to consumers. By affecting the variety of goods, migration-driven changes in market size influence the consumer price index and the real income of people. This note suggests that this market-size channel is crucial to understanding the economic consequences of recent migration flows. On average, the 2000-2010 inflows and outflows of migration decreased the consumer price index by 1.4 percent in the EU15. Although the labor market and fiscal responses to migration are non-negligible in some countries, the market-size effect is a greater source of variability – usually a source of gain – in real income.

Note n°16 - June 2016

Title: “Can natural disasters have positive consequences ? Evidence from earthquakes in rural Indonesia”
Authors: Jérémie Gignoux and Marta Menéndez

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Using longitudinal household surveys together with precise measures of – numerous, large, but mostly not extreme – earthquakes that occurred in rural Indonesia since 1985, we find evidence that affected individuals experience short-term economic losses, but recover in the medium run, and even exhibit income and welfare gains in the long term. The stocks of productive assets, notably in farms, get reconstituted and public infrastructures are improved, seemingly partly through external aid, allowing productivity to recover. These findings tend to discount the presence of poverty traps and exhibit the potential long-term benefits from well-designed post-disaster interventions in contexts where disasters primarily affect physical assets.

Note n°15 - April 2016

Title: “Migration, knowledge diffusion and the dynamic comparative advantage of nations”
Authors: Dany Bahar and Hillel Rapoport

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The fact that knowledge diffusion – at least for its “tacit” component – requires direct human interaction implies that the international diffusion of knowledge should follow the pattern of international migration. The main finding of our research is that migration, and particularly skilled immigration, is a strong and robust driver of productive knowledge diffusion. We measure knowledge diffusion through the appearance of new goods in the export basket of countries and show that the appearance of new goods (at the extensive margin) or the growth of exports of certain goods (at the intensive margin) is positively affected by immigration from, or emigration to countries with a strong comparative advantage in the production of those goods. The results are robust to accounting for shifts in product-specific global demand, to excluding bilateral trade possibly generated by network effects, as well as to instrumenting for migration using a gravity model.

Note n°14 - may 2015

Title: “Using incomplete VAT rebates to promote exports: evidence from China during the global crisis”
Authors: Julien Gourdon, Laura Hering, Stéphanie Monjon and Sandra Poncet

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Compared to most developed countries, China’s value-added tax (VAT) system is not neutral and makes it less advantageous to export a product than to sell it domestically. However, the large and frequent changes to the VAT refunds which are offered to exporters have led China to be accused of providing its firms with an unfair advantage in global trade. In this article the authors use city-specific export quantity data at the HS6-product level over the 2003-12 period to assess how changes in these VAT rebates have affected Chinese export performance. They find that changes in VAT rebates have significant export repercussions.

Note n°13 - March 2015

Title: “Tradable Refugee-admission Quotas and EU Asylum Policy”
Authors: Jesus Fernández-Huertas Moraga and Hillel Rapoport

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The current refugee crisis in the neighborhood of the European Union is putting EU policies and institutions dealing with refugees and asylum seekers under heavy pressure to reform. This note suggests that Tradable Refugee-Admission Quotas (TRAQs) can help addressing some of the main problems identified with the existing policies. It builds on well-established models in public economics (markets for tradable quotas) and on recent contributions in the field of mechanism design (the “matching” mechanism below) to design policies that promote efficiency, fairness in burden (or responsibility) sharing, and take refugees’ preferences over destinations (and vice-versa) seriously.

Note n°12 - December 2014

Title: “Does malaria control impact education? Evidence from ’Roll Back Malaria’ in Africa”
Authors: Maria Kuecken, Josselin Thuilliez and Marie-Anne Valfort

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Relying on microeconomic data, we examine the impact of the Roll Back Malaria (RBM) control campaigns on the educational attainment of primary school children in 14 Sub-Saharan African countries. Combining a difference-in-differences approach with an IV analysis, we exploit exogenous variation in pre-campaign malaria prevalence and exogenous variation in exposure to the timing and disbursements of the RBM campaign. In all 14 countries, the RBM campaign reveals itself as a particularly cost-effective strategy to improve primary school children’s educational attainment.

Note n°11 - August 2014

Title: “Tax revenues, development and the fiscal cost of trade liberalization (1792-2006)”
Authors: Julia Cagé, Lucie Gadenne

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This research puts the recent evolution of tax revenues in developing countries in historical perspective. Using a novel dataset on total and trade tax revenues covering 130 countries from 1792 to 2006, we compare the fiscal cost of trade liberalization in developing countries and in today’s rich countries at earlier stages of development. We find 140 episodes of trade liberalization; these episodes led to larger and longer-lived decreases in total tax revenues in developing countries since the 1970s than in rich countries in the 19th and early 20th centuries. The fall in total tax revenues lasts more than ten years in half the developing countries in the sample which experienced an episode of trade liberalization.

Note n°10 - May 2014

Title: “Cash or information? Changing parental behavioral for early child development in Nicaragua”
Author: Karen Macours

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In many developing countries, young children suffer from profound delays in early cognitive development. This can seriously impair their success as adults, in part because investments in schooling and other dimensions of human capital will have low returns if children do not have adequate levels of cognitive and social skills before they enter school. Understanding the causes for these delays and identifying interventions that address these deficits are hence important priorities for research. Evidence from a series of evaluations in Nicaragua suggest that, beyond cash transfers, interventions that manage to change parents’ behavior can achieve impacts that are sustained in the long-term.

Note n°9 - March 2014

Title: “Market positioning and competitiveness: evidence from the French luxury sector”
Author: Lionel Fontagné

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A new class of wealthy consumers in emerging markets is snapping up luxury goods, and European luxury houses are taking full advantage of the boom. While tough competition from emerging countries is hitting many firms in high-wage countries, the luxury market shows how globalization can be a plus for premium products combining high prices with quality and tradition.
Drawing on an innovative approach to the analysis of trade statistics, the author shows how European luxury houses have benefited from a “first mover” advantage and offers some thoughts on what is needed for this to be maintained.

Note n°8 - January 2014

Title: “Affirmative Action, Education and Gender: Evidence from India”
Author: Guilhem Cassan

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Since its Independence, India has implemented affirmative action programs, also called « reservations », to protect minority groups such as the Scheduled Castes (SC), the Scheduled Tribes (ST), or the Other Backward Classes (OBC). Those programs consist mainly in quotas in public employment, legislative assemblies, higher education institutions and a variety of other programs.
However, no matter how widespread and old those programs are, they are still strongly debated. Particularly in education, in a context of intense competition among students to enter higher education institutions, affirmative action policies are heavily contested. Nonetheless, quite surprisingly, the effect of those policies on education has been under researched. In this study, I use a unique historical event taking place in the 1970’s to evaluate the effect of access to affirmative action program on school attainment. I show that while males see the number of years of schooling increase by up to 0.8 years, females do not seem to benefit from affirmative action programs to prologue their studies.

Note n°7 - November 2013

Title: “Do infrastructure reforms reduce the effect of corruption ? Evidence from Latin America and the Caribbean”
Author: Liam Wren-Lewis

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Corruption is a major problem that can reduce growth and worsen productivity. Infrastructure services such as water, electricity and telecoms are particularly vulnerable due to a high level of government intervention and frequent lack of competition. In the last couple of decades, major reforms have been carried out globally to improve the governance of these sectors. The author analyzes how the impact of these reforms interacts with corruption, using data on 153 electricity firms in Latin America and the Caribbean over the period 1995 to 2007. Results suggest that regulatory independence and, to a lesser extent, privatisation can significantly reduce the negative effect of corruption on efficiency, while it is not certain that this benefits directly the consumers through lower prices or better services.

Note n°6 - may 2013

Title: “Workfare programs and Private Sector wages: lessons from India”
Authors: Clément Imbert and John Papp

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Many countries throughout the developing world have implemented workfare programs, i.e. social safety nets whose beneficiaries are hired on public infrastructures projects. Beyond their direct benefits to participants, these programs are likely to have indirect effects, through their impact on labor markets.
We study India’s National Rural Employment Guarantee Scheme, which is the largest workfare program in the world today. Using the gradual roll-out of the program to identify its impact, we show that it crowds out private sector work and increases wages for unskilled laborers. Our estimates suggest that the welfare gains from increases in equilibrium wages for the poor are large in absolute terms and large relative to the gains received solely by program participants.

Note n°5 - March 2013

Title: “Export upgrading and growth in China: the prerequisite of domestic embeddedness”
Authors: Sandra Poncet and Felipe Starosta de Waldemar

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In China, as in many other developing countries, the attraction of Foreign Direct Investments (FDI) inflows has been contemplated as a powerful tool to promote quality upgrades to the product structure and consequently to boost economic growth.This research relying on data from 200 Chinese cities (1997-2009) invalidates these expectations. More precisely, the authors assess to what extent the growth gains from the complexity of goods produced by firms depend on whether they are domestic or foreign. They find that product sophistication is not conducive to economic growth when it emanates from foreign firms which are mostly engaged in processing trade activities.
This invites to be cautious about the gains to be expected from an internationalization strategy based on special economic zones as they mainly attract foreign firms involved in export-platform FDI.

Note n°4 - november 2012

Title: “How regional agreements tend to restrain Southern countries’ exports”
Authors: Anne-Celia Disdier, Lionel Fontagné and Olivier Cadot

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Recent years have seen a surge in regional trade agreements, many of which including provisions on non-tariff measures. This research investigates whether the technical requirements contained in North-South Agreements affect international trade. More precisely, the authors assess to what extent North-South harmonization of technical barriers creates or reinforces a hub-and-spoke trade structure potentially detrimental to the integration of Southern countries in the world economy. Empirical results provide strong support to this conjecture.

Note n°3 - september 2012

Title: “The End of Bank Secrecy ? An evaluation of the G20 Tax Haven Crackdown”
Authors: Niels Johannesen, Gabriel Zucman

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In April 2009, G20 countries launched the most concerted ever push against tax evasion by compelling offshore tax havens to exchange bank information with foreign countries. The G20 has celebrated this policy initiative as “the end of bank secrecy.” In new research relying on unique data on bank deposits in tax havens, Niels Johannesen and Gabriel Zucman argue that the G20 tax haven crackdown has so far largely failed. There is as much money in tax havens today as in 2009, and funds are moving toward the least cooperating havens. These results suggest that G20 countries should push for a much more ambitious standard of information exchange.

Note n°2 - july 2012

Title: “Towards a unified global tax on carbon”
Authors: Antoine d’Autume, Katheline Schubert, Cees Withagen

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Almost everyone agrees that we must tackle global warming. But so far there is no consensus on how to curb the greenhouse gas emissions that contribute to climate change. This second G-MonD Note argues that one of the most efficient ways would be to levy a uniform global tax on carbon, on top of existing national taxes on fossil fuels that are designed to achieve domestic objectives such as reducing local pollution. Details of how this could work are presented by Nicholas Bray, based on conversations with researchers at the Paris School of Economics and the VU University Amsterdam that led the initial study.

Note n°1 - june 2012

Title: “Student loans. Measuring credit constraints in South Africa”
Authors: Marc Gurgand, Adrien Lorenceau, Thomas Melonio
Abstract: PNGAccess to higher education is believed to be a condition for sustained growth based on innovation and technological adaptation. However, university enrolment remains low in most developing countries. South Africa is a relevant case study: as an emerging country it faces the need for an upgraded workforce, but its enrolment ratio into tertiary education remains only 15%. This “G-Mond Note” introduces a research showing that a significant number of South Africans face a credit constraint that prevents them from investing in tertiary education. Based on the evaluation of a credit scheme named Eduloan, it indicates that the development of education loan seems highly suitable and that targeting such loans to a middle-income population is workable and has significant impact on participation into higher education.