Credit Constraints in Latin America: An Overview of the Micro Evidence
Working Papers - English - Sep, 2002
This paper summarizes and discusses new evidence on the nature, extent, evolution and consequences of financing constraints in Latin America; this evidence is drawn from a recent series of papers. The countries covered are Argentina, Colombia, Costa Rica, Ecuador, Mexico, and Uruguay. All the new contributions share the characteristics of being based on micro data. Most of the data sources are firms’ balance sheets. For Argentina information on debt contracts and credit history is also available, while for Costa Rica personal information on entrepreneurs was also collected. Some of the papers investigate the determinants of firms’ financing choices, and the consequences of access or debt composition on performance. Other papers attempt to assess the severity of financing constraints, by focusing on firms’ investment choices. All the papers (but one) were part of the project “Determinants and Consequences of Financial Constraints Facing Firms in Latin America and the Caribbean,” financed by the IADB. However, other recent micro-econometric contributions are discussed as well. The results suggest that access to credit (and its cost) depends not only upon favorable balance sheet characteristics, but also upon the closeness of the relationship between firms and banks as well as credit history. Access to long-term loans and to loans denominated in foreign currency is positively related to the size and tangibility of firms’ assets and negatively related to measures of country risk. Moreover, firms that have foreign participation appear to be less financially constrained in their investment decisions. The same is true for firms that are associated with business groups. On the whole, it appears that financial liberalization tends to relax financial constraints for firms that were previously constrained, while financial crises tighten them. However, firms that have more access to external sources of finance via, for instance, exports or ownership links, appear to suffer less in the post-crisis period. The paper concludes with a discussion of the policy implications of these results.
Political Particularism around the World
Gaviria, Alejandro; Stein, Ernesto H.; Seddon Wallack, Jessica; Panizza, Ugo
Working Papers - English - Jan, 2002
This paper presents a new dataset on electoral systems and outlines its potential uses in further research exploring the connections between electoral systems and economic outcomes. The dataset provides indicators of the degree to which individual politicians can further their careers by appealing to narrow geographic constituencies on the one hand, or party constituencies on the other.
Does the Stopler-Samuelson Theorem Explain the Movement in Wages? The Linkage Between Trade and Wages in Latin American Countries
Working Papers - English - Nov, 2000
How does trade liberalization affect the wage gap between skilled workers and unskilled workers? The Heckscher-Ohlin (HO) trade model gives a prediction about the relation between wages and prices. However, its simple Stolper-Samuelson (SS) and Specific-Factors (SF) versions make opposite predictions about the correlation between prices and wages of certain types of workers (specific factors in industries) when they are not used intensively. The analysis in this paper provides evidence that may allow one to distinguish empirically between these two versions of the HO model, using wage data from household surveys in several Latin American countries Bolivia, Mexico, and Venezuela. Two different specifications for the specific factor are examined: educated workers and experienced workers. In summary, the results favor SS, when educated workers are defined as the specific factor for these Latin American countries from the late 1980s to the mid-1990s.
Trade Liberalization and Private Savings: The Spanish Experience, 1960-1995
Martin Prieto, Juan Manuel; Boldrin, Michele
Working Papers (Research Network) - English - Mar, 1998
This paper provides an interpretation of the evolution of Spanish private and national savings over the period 1960-1995. During these 35 years private and national saving rates oscillated widely from a very high level in the 1960s to historical minima in the early and mid-1980s to a strong recovery in the more recent years. At the same time, Spain transformed itself from an autarkic, underdeveloped and dictatorial country into an advanced, open economy with a fully democratic political life. First, we show that the apparent long-run reduction in Spanish saving rates is mostly due to a change in relative prices and to the choice of what, in our view, is the incorrect deflator. When Spanish real private savings are measured by using the deflator for the price of capital they appear to behave as a stationary, albeit highly volatile, time series relative to private disposable income. We find that a stable "saving function" can be derived from first principles and estimated using annual macroeconomic data. We adopt a traditional model of intertemporal optimization by a representative agent, facing a complete set of borrowing/lending opportunities and an exogenous income process. We use a "habit formation" utility function, to explain the crucial feature of the data, i.e., the strong and positive impact that innovations in the growth rate of income (either national or private) have on saving (either national or private).
North-South Customs Unions and International Capital Mobility
Fernández-Arias, Eduardo; Spiegel, Mark M.
Working Papers - English - Mar, 1997
This paper examines the implications of a North-South trade accord where investments in the Southern partner nation exhibit country risk. Our analysis demonstrates that North-South trade accords can serve as credibility-enhancing mechanisms that induce additional foreign capital inflows into Southern partner nations. The presence of sovereign risk changes the tradeoffs between trade creation and diversion, enhancing the potential for regional trade accords to increase the welfare of accord members.