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22. Direct Distribution of Oil Revenues in Venezuela: A Viable Alternative?
- Author:
- Pedro L. Rodríguez, José R. Morales, and Francisco J. Monaldi
- Publication Date:
- 09-2012
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- Venezuela is a textbook example of a resource-dependent country—between 1950 and 2008, oil generated over a trillion dollars of income for the state. Nevertheless, Venezuela currently combines an economy that is stagnant, despite high oil prices, with an increasingly authoritarian government. The authors argue that large oil rents that accrue to the state, together with a lack of formal and transparent mechanisms to facilitate citizen oversight, are a large part of the problem. They consider the nature of the fiscal contract between the Venezuelan government and its people. This has been characterized by increasing discretion of the executive; only a small share of the rents is now subject to political oversight within the framework of the budgetary system. The authors consider the case for direct distribution of rents, distinguishing it from a populist approach to transfers as effected through Venezuela's misiones. They also report on focus group discussions of the directdistribution approach and the political viability of direct transfers.
- Topic:
- Civil Society, Economics, Energy Policy, Government, Oil, and Political Economy
- Political Geography:
- Argentina and Latin America
23. Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico.
- Author:
- Nora Lustig, Luis F. Lopez-Calva, and Eduardo Ortiz-Juarez
- Publication Date:
- 10-2012
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- Between 2000 and 2010, the Gini coefficient declined in 13 of 17 Latin American countries. The decline was statistically significant and robust to changes in the time interval, inequality measures, and data sources. In-depth country studies for Argentina, Brazil, and Mexico suggest two main phenomena underlie this trend: a fall in the premium to skilled labor and more progressive government transfers. The fall in the premium to skills resulted from a combination of supply, demand, and institutional factors. Their relative importance depends on the country.
- Topic:
- Development, Economics, Emerging Markets, Globalization, International Trade and Finance, Poverty, and Social Stratification
- Political Geography:
- Brazil, Argentina, Latin America, and Mexico
24. The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, and Peru: A Synthesis of Results
- Author:
- Nora Lustig
- Publication Date:
- 11-2012
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- We apply a standard tax-and-benefit-incidence analysis to estimate the impact on inequality and poverty of direct taxes, indirect taxes and subsidies, and social spending (cash and food transfers and in-kind transfers in education and health). The extent of inequality reduction induced by direct taxes and transfers is rather small (2 percentage points on average), especially when compared with that found in Western Europe (15 percentage points on average). What prevents Argentina, Bolivia, and Brazil from achieving similar reductions in inequality is not the lack of revenues but the fact that they spend less on cash transfers—especially transfers that are progressive in absolute terms—as a share of GDP. Indirect taxes result in that net contributors to the fiscal system start at the fourth, third, and even second decile on average, depending on the country. When in-kind transfers in education and health are added, however, the bottom six deciles are net recipients. The impact of transfers on inequality and poverty reduction could be higher if spending on direct cash transfers that are progressive in absolute terms were increased, leakages to the nonpoor reduced, and coverage of the extreme poor by direct transfer programs expanded.
- Topic:
- Development, Economics, Education, Health, and Poverty
- Political Geography:
- Brazil, Argentina, Latin America, Mexico, Peru, and Bolivia
25. The public law challenge: Killing or rethinking international investment law?
- Author:
- Stephan W. Schill
- Publication Date:
- 01-2012
- Content Type:
- Policy Brief
- Institution:
- Columbia Center on Sustainable Investment
- Abstract:
- At the heart of the so-called “legitimacy crisis” of international investment law, prominently reflected in the Public Statement on the International Investment Regime, is what I call the public law challenge. It builds on the observation that one-off appointed arbitrators, instead of standing courts, review government acts and reach far into the sphere of domestic public law by crafting and refining the standards governing in vestor-state relations. Arbitrations against Uruguay and Australia concerning cigarette packaging are the most recent examples of genuinely public law disputes now settled in arbitration. The disputes about Argentina's emergency legislation and Canada's ban on pesticide s are others. These arbitrations create friction with domestic public law as arbitrators, having little democratic legitimacy, often operate in non-transparent proceedings and produce increasing amounts of incoherent decisions.
- Topic:
- Economics, International Law, International Trade and Finance, Markets, and Foreign Direct Investment
- Political Geography:
- Canada, Argentina, and Australia
26. Growth and Recovery in a Time of Default: Lessons from the Role of the Urban Sector in Argentina
- Author:
- Michael Cohen
- Publication Date:
- 03-2011
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- International narratives on Argentina's recovery from the crisis of 2001-02 tend to emphasize the role of rising commodity prices and growing demand from China. Argentina is said to have been 'lucky', saved by global demand for its agricultural exports. The international narrative has also been used by local agricultural exporters to justify their objections against higher export taxes during periods of high commodity prices. These narratives are not correct. Data on the country's recovery show that it was not led by agricultural exports but was fuelled by urban demand and production. When the Convertibility period ended and the peso was devalued in 2002, price increases for imports stimulated the production of domestic goods and services for consumers. This production in turn generated multiplier effects which supported small and medium-sized firms and helped to create many new jobs. This later produced a revival of the construction and then the manufacturing sectors as well.
- Topic:
- Agriculture, Economics, International Trade and Finance, Markets, and Financial Crisis
- Political Geography:
- China, Argentina, and Latin America
27. Is Greece heading for default?
- Publication Date:
- 02-2010
- Content Type:
- Working Paper
- Institution:
- Oxford Economics
- Abstract:
- Greece has slid into a serious fiscal crisis over the last few months. A ballooning budget deficit and high levels of government debt have raised questions in the minds of investors about the sustainability of the country's public finances. The level of concern among investors can be seen from developments in Greek borrowing costs relative to those in Germany. At the beginning of 2008, the yield on Greek 10-year bonds was only around 0.3% higher than on equivalent German securities, but this gap has now risen to over 3%. This yield spread is at its widest for more than a decade and is by far the largest within the Eurozone. The root cause of Greece's problems is a long period of fiscal indiscipline. In 2009, after years of heavy spending, the budget deficit rose to almost 13% of GDP and the public debt to GDP ratio is set to reach 125% this year. The deteriorating fiscal position has led to a slew of ratings downgrades, and outside the Eurozone Greece's credit rating would probably be in 'junk' territory. On top of the fiscal problems, Greece also suffers from weak external competitiveness. The real exchange rate has appreciated substantially since Greece joined the Eurozone, contributing to a sharp widening in the current account deficit to around 12% of GDP last year. On some estimates, the real effective exchange rate is now around 20% overvalued. As a result Greece now faces a series of policy choices all of which look unpalatable. Within the Eurozone, the only realistic orthodox option is a combination of massive fiscal retrenchment and 'internal devaluation' – forcing down costs relative to those of Greece's competitors. But fiscal cutbacks and cost deflation on the scale required could plunge the country into a deep and prolonged recession and might prove politically and socially unsustainable. The Greek economy is already showing signs of serious stress, with GDP down 2.6% on the year in 2009Q4. The extreme alternatives are default and/or leaving the Eurozone and enacting devaluation. But the political barriers to such moves are immense, and while default and devaluation could ease budgetary and external imbalance problems, they would also cause massive economic and financial disruption and probably a deeper recession in the near-term. Default and devaluation would also risk huge negative contagion effects on the Eurozone and the wider global economy. With Greece's debt approaching €300 billion a default would be the largest sovereign collapse since WWII, dwarfing those in Russia and Argentina. Eurozone banks could face losses of up to €100 billion on top of the heavy writedowns already suffered, risking a renewed Europe-wide credit squeeze. There could also be collapses in demand for the debt of other weaker Eurozone members such as Spain, Portugal and Ireland. World markets for equities, corporate bonds and emerging market debt would also likely be badly affected. There could also be pressure for the major economies to accelerate their fiscal adjustment efforts, given the impact on investor confidence and the scale of their budget deficits. Our estimation results suggest that a Greek default could be a real threat to the progress of the global recovery, cutting growth in the major economies by around 1% per annum compared to our baseline forecast and world growth by 0.6%. Given the potential massive consequences of a Greek default, the pressure for a bailout has been growing. Although there are questions about the legality of such a move, we believe it is possible if the political will exists. Estimation results using the Oxford Model suggest a bailout would be likely to be less economically damaging than a default, even assuming some negative impact from higher bond yields in the core Eurozone countries. The costs of a bailout could rise rapidly, however, if it extended beyond Greece to other troubled countries. A bailout would create a big risk of moral hazard, perhaps inducing fiscal misbehaviour among other Eurozone members or being used by Greece to sidestep the necessary adjustment. To avoid this, any bailout would have to incorporate strict conditionality, perhaps raising serious questions about fiscal sovereignty within the Eurozone. Over the last two weeks, the other EU countries have taken a relatively hard line with Greece, stopping short of announcing explicit financial support and pushing for strong fiscal adjustment measures. Although a bailout remains the most likely outcome if Greece struggles to refinance its debts, there are some signs that political resistance to such a move is growing. The key risk period could be April-May, when a large volume of Greek debt matures.
- Topic:
- Economics, Markets, and Financial Crisis
- Political Geography:
- Europe, Greece, and Argentina
28. Earnings Mobility in Times of Growth and Decline: Argentina from 1996 to 2003
- Author:
- Gary S. Fields and María Laura Sánchez Puerta
- Publication Date:
- 01-2008
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- In recent years, the economy of Argentina has experienced both rapid economic growth and severe economic decline. In this paper, we use a series of one -year long panels to study who gained the most in pesos when the economy grew and who lost the most in pesos when the economy contracted. To answer these questions, we test two hypotheses both unconditionally and conditionally. The 'divergence of earnings' hypothesis holds that in any given year, the highest earning individuals are those who experienced the largest earnings gains or the smallest earnings losses in pesos. The 'symmetry of gains and losses' hypothesis holds that those groups that gained the most in pesos when the economy grew are those that lost the most in pesos when the economy contracted. Both hypotheses are decisively rejected in the data.
- Topic:
- Development and Economics
- Political Geography:
- Argentina and South America
29. Constructive Data Mining: Modeling Argentine Broad Money Demand
- Author:
- Neil R. Ericsson and Steven B. Kamin
- Publication Date:
- 09-2008
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- his paper assesses the empirical merits of PcGets and Autometrics–two recent algorithms for computer-automated model selection–using them to improve upon Kamin and Ericsson’s (1993) model of Argentine broad money demand. The selected model is an economically sensible and statistically satisfactory error correc- tion model, in which cointegration between money, inflation, the interest rate, and exchange rate depreciation depends on the inclusion of a “ratchet” variable that cap- tures irreversible effects of inflation. Short-run dynamics differ markedly from the long run. Algorithmically based model selection complements opportunities for the researcher to contribute value added in the empirical analysis.
- Topic:
- Economics, Markets, Finance, and Inflation
- Political Geography:
- Argentina and South America
30. Patronage-Preserving Federalism? Legislative Malapportionment and Subnational Fiscal Policies in Argentina
- Author:
- Jorge Gordin
- Publication Date:
- 06-2007
- Content Type:
- Working Paper
- Institution:
- German Institute of Global and Area Studies
- Abstract:
- This paper builds on institutional analysis to generate new conclusions about the economic viability of federalism. It does so by suggesting that Weingast´s seminal model of marketpreserving federalism falls short of accounting for the poor fiscal performance of multitiered systems in the developing world. This theoretical deficiency stems to a large extent from the insufficient attention paid by this model to the institutional complexity of federal systems, particularly the public policy effects of legislative malapportionment. Subsequent to an analytical discussion of the potential public spending and distributive politics distortions resulting from overrepresentation, we offer preliminary empirical evidence from Argentina, a federation exhibiting one of the most decentralized fiscal systems in the world and severe imbalances in the territorial distribution of legislative and economic resources. The findings show not only that said imbalances lead to sub‐optimal fiscal results but also that they have a mutually‐reinforcing relationship with regionalized patronage.
- Topic:
- Economics and Government
- Political Geography:
- Africa, Argentina, and South America