Resumen:

This paper studies monetary policy in a New Keynesian model with persistent supply shocks, that is, sustained increases in production costs due to factors such as wars or geopolitical fragmentation. First, we demonstrate that Taylor rules fail to stabilize long-term inflation due to endogenous shifts in the natural interest rate. Second, we analyze optimal policy responses under discretion and commitment. Under discretion, a systematic inflationary bias emerges when the shock impacts the economy. Under commitment, the optimal policy adopts a lean-against-the-wind approach without compensating for past…

Resumen: Over 2 billion people lack access to clean drinking water, a chief cause of child mortality globally. The two leading responses have faced high costs and unreliable quality (piped water) or persistently low demand (point-of-use treatment). In partnership with a private water provider, we use a cluster-randomized experiment covering approximately 60,000 households in rural Odisha, India, to evaluate an increasingly popular third alternative: decentralized treatment and home delivery of water. We study demand under three treatment arms: varying prices, a free ration (quota), and an exchangeable entitlement, allowing households to either order water for free…

Abstract

This paper studies the dynamics of farm size distribution, how they are in uenced by weather shocks, and the implications for aggregate productivity. Using data from several developing countries, we first document new empirical facts about households' landholding choices and how weather shocks in uence these decisions. Building on a rich longitudinal dataset for Colombia on farm sizes, land transactions, and households' consumption and investment decisions, we then show that weather shocks increase the frequency of land sales and reduce farm sizes within municipalities, especially among smaller farms. To rationalize…

Abstract

Resumen: I study the effects of improvements in transportation infrastructure on informality. To deal with endogeneity issues, I implement two complementary identification strategies. First, taking advantage of the staggered rollout of highways, I apply a generalized difference-in-difference regression model. Second, I conduct an instrumental variable strategy by exploiting the fact that municipalities along the route of important cities in Brazil were more likely to be connected to the federal highway system. I find that once a municipality is connected to the federal highway network, there is a reduction in informality, measured by the self-employment rate among non-…

Abstract

Abstract

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La participación de los jueces en políticas públicas, especialmente en política macroeconómica, ha generado debates con distintos niveles de abstracción: desde la (i)legitimidad democrática hasta los impactos prácticos que genera la modificación de una política pública en estrados judiciales. Esta…

Approach

This study analyzes the constraints faced by small farmers in Colombia in accessing formal credit. Through a literature review and an empirical analysis, it identifies frictions that constrain small farmers' access to credit by increasing costs for financial intermediaries or discouraging producers from applying for financing.

The analysis begins with a characterization of the agricultural credit market in Colombia and the institutional framework that regulates it. It examines current financing mechanisms, paying special attention to the Agricultural Bank of Colombia (BAC) and the Agricultural Guarantee Fund (FAG). Then, it presents empirical…

Resumen: Differences in school choice by race contribute to school segregation and unequal access to effective schools. Conditional on test score and district of residence, Black and Hispanic families consistently choose schools with fewer white and Asian students, lower average achievement, and lower value-added. This paper combines unique survey data and administrative data from New York City to identify the determinants of racial disparities in school choice and shows that attending a more diverse middle school can mitigate racial choice gaps. Instrumental variable estimates show that middle school students exposed to more diverse peers apply to and enroll in high…

Abstract

Abstract: This paper investigates the role of behavioral frictions and information provision on retirement planning using Dual Advisory, an information provision program in Colombia. The program, which offers personalized information on switching pension plans, was gradually made mandatory to prevent costly mistakes. We estimate the causal effects of the introduction of the program on switching behavior and contribution patterns. Our findings indicate that the program reduced unfavorable switches in pension plans by approximately 43%, due to increased inertia (33%) and better information (10%). Personalized information increased the likelihood of selecting a pension plan…

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This paper analyses theoretically and quantitatively the effect that different higher education funding policies have on welfare (on aggregate and at the individual level) and wealth inequality. A heterogeneous agent model in continuous time, which has uninsurable income risk and endogenous educational choice is used to evaluate five different higher education financing schemes. Educational investments can be self-financed, supported by government guaranteed student loans – that may come with or without income contingent support – or be covered by the public sector. When…

Abstract

Abstract: Do governments systematically intervene in agricultural markets in response to climate shocks? If so, what are the aggregate and distributional consequences? We construct a global dataset of agricultural policies and extreme heat exposure by country and crop since 1980. We find that extreme heat shocks to domestic production lead to increased consumer assistance. This effect is persistent, primarily implemented via border policies, and stronger in election years when politicians are particularly responsive to constituent demands. Shocks to foreign production lead to increased producer assistance, consistent with policymakers’ targeting redistribution…

Abstract

In this paper, we show that an increase in apprenticeship wages reduces the demand for apprentices. We exploit a natural experiment that provides exogenous variation in apprenticeship wages combined with discontinuities in the eligibility criteria (firms with fewer than 15 employees are not required to train apprentices). Our main results, based on difference-in-discontinuity methods, indicate that increasing apprenticeship wages from 75% to 100% of the national minimum wage leads to a reduction in the demand for apprentices of 83% in non-eligible firms. The intensive margin analysis, which compares the number of apprentices observed for firms with their…

Resumen 

This paper provides a comprehensive analysis of the forecastability of the real price of natural gas in the United States at the monthly frequency considering a universe of models that differ in their complexity and economic content. Our key finding is that considerable reductions in mean-squared prediction error relative to a random walk benchmark can be achieved in real time for forecast horizons of up to two years. A particularly promising model is a six-variable Bayesian vector autoregressive model that includes the fundamental determinants of the…

Abstract: Developing economies often encounter significant credit and insurance market failures, hindering individuals' ability to manage financial risks effectively. Unemployment insurance (UI) plays a crucial role in enhancing workers' welfare by smoothing consumption during joblessness and addressing credit constraints. This study examines the impact of UI on labor market outcomes in Colombia using employer–employee matched records from administrative records from the social security system. Findings indicate longer unemployment duration for UI-eligible workers, no evidence of higher reemployment wages, but longer employment duration in new jobs.

About…

Resumen

Las decisiones de política monetaria afectan a la economía no sólo al influir condiciones de mercados al cambiar tasas, sino también al cambiar las expectativas futuras afectadas por los anuncios de estas decisiones. Este artículo estudia cómo las expectativas de inflación y crecimiento responden ante cambios inesperados de la tasa de política monetaria utilizando datos para Brasil y Chile que satisfacen tres condiciones: alta frecuencia de recolección, horizontes de corto plazo para las expectativas y fuente común para la medición de variables…

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We document that the real effects of monetary shocks last for over a decade. Our approach relies on (1) identification of exogenous and non-systematic monetary shocks using the trilemma of international finance; (2) merged data from two new international historical cross-country databases; and (3) econometric methods robust to long-horizon inconsistent estimates. Notably, the capital stock and total factor productivity (TFP) exhibit greater hysteresis than labor. When we allow for asymmetry, we find these effects with tightening shocks, but not with loosening shocks. When extending the horizon of the responses reported in several recent studies that use…

Abstract: In the benchmark public finance model, a social planner allocates transfers to maximize a social welfare function, balancing equity and efficiency. This trade-off is central to college financial aid, where eligibility increasingly depends on both SES and academic ability. This paper examines how targeting rules shape the equity-efficiency trade-off using variation in eligibility cutoffs from a Colombian aid program and linked administrative data. We find that test-score selectivity reduces equity without clear efficiency gains. Higher-scoring students are more advantaged…

Abstract

This study assesses the impact of housing provision in a rural area of a developing country. It examines a government program that delivered prefabricated houses to households whose dwellings were destroyed by flooding caused by the breach of the Canal del Dique in Santa Lucía, Colombia, at the end of 2010. The evaluation combined Difference-in-Differences and Propensity Score Matching methodologies to draw causal inference and mitigate the endogeneity arising from the program’s non-random assignment. Housing conditions were measured with an index that captures the main components affected by the intervention, including construction materials, access to basic sanitation…

Resumen:

La transición baja en carbono implica un cambio estructural de la economía, esto es, empezar a marchitar o transformar los sectores más contaminantes para incentivar los sectores menos contaminantes, por lo que la economía enfrenta diversas clases de vulnerabilidades. Aquí se analizan tres tipos de vulnerabilidades macroeconómicas para Colombia: i) la primera asociada al sector externo, que es muy alta, por la alta dependencia de los sectores extractivos, ii) la fiscal, que es mucho menor, pero hay que considerar el mayor esfuerzo fiscal que habría que…

Abstract

This paper analyses the role of capital in Central Banks (CBs), the implications for the effectiveness of economic policy objectives, and the strategies employed to preserve capital levels. Based on a review of literature and cases of CBs that have presented scenarios of considerable losses and capital impairment, the evidence suggests that the financial soundness of CBs may be a necessary condition for achieving their policy objectives, as it can impact their various transmission channels, through agents' expectations and public confidence. In this sense, a negative shock on these channels can compromise CBs' credibility and financial autonomy. However…

Resumen: We present experimental evidence on the economic impacts of mobile phone access. Our results are based on a randomized control trial in the Philippines, through which 14 isolated and previously unconnected villages were randomly assigned to either receive or not receive a new cellphone tower. Following a pre-analysis plan, we find that the introduction of mobile phones had large and significant impacts on household income and expenditure, particularly for wage workers. Mobile phone access also increased social connections within and between communities. However, there are no consistent impacts on market access, informedness, or subjective well being. In post-…

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In this paper, we analyze the relationship between financial development and informality. Using Enterprise Surveys (WBES) data, we find a negative correlation: economies with higher financial development exhibit lower informality rates. To rationalize these observations, we propose a theoretical model where firms are subject to a financial friction and endogenously choose formal and informal labor. The financial friction is a correlated distortion, so higher financial development reduces misallocation and benefits more productive firms. This leads to increased labor demand,…

Abstract: Many events and policies (treatments), such as opening of businesses, building of hospitals, and sources of pollution, occur at specific spatial locations, with researchers interested in their effects on nearby individuals or businesses (outcome units). However, the existing treatment effects literature primarily considers treatments that could experimentally be assigned directly at the level of the outcome units, potentially with spillover effects. I approach the spatial treatment setting from a similar experimental perspective: What ideal experiment would we design to estimate the causal effects of spatial treatments? This perspective motivates a comparison…

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Financial cycles can be important drivers of real activity, but there is scant evidence about how well they signal recession risks. We address this question, using a range of financial cycle measures. Unlike most papers, ours assesses forecasting performance not just for the United States but also for a panel of advanced and emerging market economies. We find that financial cycle measures have significant forecasting power both in and out of sample, even for a three-year horizon. Moreover, they…

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We develop a model where temporary non-technology shocks can lead to permanent changes in the rate of growth of total factor productivity (TFP). The model features matching processes between basic researchers, product developers, and the stock of knowledge of the economy. In this context, search externalities generate vicious and virtuous cycles in R&D. The model has a unique equilibrium path but multiple balanced growth paths (BGPs) with different growth rates. After a deep or long-lived shock, the economy can transit between these BGPs, generating “super- hysteresis” in…

Abstract: The increase in human longevity is a major achievement, which brings individual well-being and strong contributions to society, but population ageing also generates challenges. This paper documents demographic trends in OECD countries, highlighting that ageing today largely reflects past fertility, longevity, and migration developments. Policies have moderate or delayed impacts on population ageing, hence they should also focus on adapting to ongoing demographic trends. The paper quantifies ageing’s potential impacts on labour supply and GDP per capita, showing that the extension of working lives as longevity rises could mitigate, but not completely offset, the…

Abstract: This paper examines the concept of “climate matching” in migration—the idea that migrants seek out destinations with familiar climates. Focusing on the US, we document that temperature distance between origin and destination predicts the distribution of migrants across counties. This pattern holds for internal and international migration in the past (1850-1940) and today (2011-2019), and is not explained by the spatial correlation of climate or the persistence of ethnic networks. We provide suggestive evidence for two mechanisms driving climate matching: climate-specific skills and climate-as-amenity. Then, we study the implications of climate matching for…