Sebastian Galiani

Papers in Journals

The causal effect of competition on prices and quality: Field experimental evidence. American Economic Journal: Applied Economics, Volume 11, 2019, pages 33-56 (with. M. Busso).

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Abstract: This paper provides experimental evidence on the effect of increased competition on prices and quality in the retail sector. We randomized the entry of 61 firms into 72 markets serving the beneficiaries of a conditional cash transfer program in the Dominican Republic. Six months after the intervention entry into the market led to reductions in prices ranging from 2 to 6 percent and to a statistically significant improvement in self-reported service quality. Prices dropped more in areas where the number of entrants was larger. Competition seems to have driven part of the clientele away from incumbent retailers.

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Voter Response to Peak and End Transfers: Evidence from a Conditional Cash Transfer Experiment. American Economic Journal: Economic Policy, Volume 11, 2019, pages 232-60 (with. N. Hajj, P. Ibarraran, N. Krishnaswamy and P. McEwan).

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Abstract: In a Honduran field experiment, sequences of cash transfers to poor households varied in amount of the largest (peak) and last (end) transfers. Larger peak-end transfers increased voter turnout and the incumbent party's vote share in the 2013 presidential election, independently of cumulative transfers. A plausible explanation is that voters succumbed to a common cognitive bias by applying peak-end heuristics. Another is that voters deliberately used peak-end transfers to update beliefs about the incumbent party. In either case, the results provide experimental evidence on the classic non-experimental finding that voters are especially sensitive to recent economic activity.

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International organizations and structural reforms. Journal of International Economics, Volume 121, 2019, 103249 (with I. Torre and G. Torrens).

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Abstract: We develop a simple dynamic model of policy reform that captures some of the determinants that underlie the differences between the reform paths taken by a number of countries since the early 1990s. The model focuses on the interaction between domestic institutions and international organizations that promote reform, on the one hand, and the political incentives for reversing reforms, on the other. At equilibrium, there are three types of reform paths. A country can undergo a full-scale, lasting reform, can carry out a partial but lasting reform, or can go through cycles of reforms and costly counter-reforms. Domestic institutions, along with the incentives provided by international organizations, determine the equilibrium path. A politically myopic international organization may induce cycles of reforms and costly counter-reforms, thereby reducing the country's well-being. An international organization that only provides funds to promote reforms may have a less beneficial effect than one that assists the country with fresh funds to defend reforms when there is a risk of reversal. International funds that promote reforms can also influence domestic institutions. For example, due to the intervention of an international organization, countries could have incentives to dismantle institutions that build up reversal cost and/or do not fully build their fiscal capacity.


Horizontal and vertical conflict: Experimental evidence. Kyklos, Volume 72, 2019, pages 239-269 (with C. Long, C. Navajas Ahumada and G. Torrens).

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Abstract: We experimentally explore the connections between horizontal conflict of interests (citizens have heterogeneous preferences over collective decisions) and vertical conflict of interests (agents in charge of implementing collective decisions earn political rents). We identify two sets of models that incorporate both types of conflicts: electoral models with endogenous rents, and common‐agency models. We adapt these models to a laboratory setting and test their main theoretical predictions. In both cases we find support for the proposition that more intense horizontal conflict leads to higher rents. Our findings have important implications. At the macro level, they help explaining the persistence of corruption in very unequal societies. At the micro level, our findings suggest that anti‐corruption programs should allocate more resources (e.g., inspectors and auditors) to areas with intense horizontal conflicts.


An empirical approach based on quantile regression for estimation citation ageing. Journal of Infometrics, Volume 13, 2019, pages 738-750 (with R. Galvez).

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Abstract: An aspect of citation behavior, which has received longstanding attention in research, is how articles’ received citations evolve as time passes since their publication (i.e., citation ageing). Citation ageing has been studied mainly by the formulation and fit of mathematical models of diverse complexity. Commonly, these models restrict the shape of citation ageing functions and explicitly take into account factors known to influence citation ageing. An alternative—and less studied—approach is to estimate citation ageing functions using data-driven strategies. However, research following the latter approach has not been consistent in taking into account those factors known to influence citation ageing. In this article, we propose a model-free approach for estimating citation ageing functions which combines quantile regression with a non-parametric specification able to capture citation inflation. The proposed strategy allows taking into account field of research effects, impact level effects, citation inflation effects and skewness in the distribution of cites effects. To test our methodology, we collected a large dataset consisting of more than five million citations to 59,707 research articles spanning 12 dissimilar fields of research and, with this data in hand, tested the proposed strategy.

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Poverty alleviation strategies under informality: Evidence for Latin America. Latin American Economic Review, Volume 28, 2019, pages 7-47. Special Issue. Lead Article (with M. Caruso and F. Weinschelbaum).

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Abstract: Strategies based on growth and inequality reduction require a long-run horizon, and this paper therefore argues that those strategies need to be complemented by poverty alleviation programs. With regards to such programs, informality in Latin America and the Caribbean is a primary obstacle to carry out means testing income-support programs, and countries in the region have therefore mostly relied on proxy means testing mechanisms. This paper studies the relative effectiveness of these and other mechanisms by way of a formal model in which workers choose between job opportunities in the formal and informal sectors. Although the means testing mechanism allows for a more pro-poor design of transfers, it distorts labor decisions made by workers. On the other hand, (exogenous) proxy means testing does not cause distortions, but its pro-poor quality is constrained by the power of observable characteristics to infer income levels. However, since taxation is necessary to fund programs, redistribution becomes less effective, especially for programs other than means testing. The paper concludes by discussing the implications of these results for the design of more efficient targeting programs.


The half-life of happiness: Hedonic adaptation in the subjective well-being of poor slum dwellers to a large improvement in housing. Journal of the European Economic Association, Volume 16, 2018, pages 1189-1233 (with. P. Gertler and R. Undurraga).

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Abstract: Subjective well-being may not improve in step with increases in material well-being due to hedonic adaptation, a psychological process that attenuates the long-term emotional impact of a favorable or unfavorable change in circumstances. As a result, people’s degree of happiness eventually returns to a stable reference level. We use a multicountry field experiment to examine the impact on subjective measures of well-being of the provision of improved housing to extremely poor populations in order to test whether they exhibit hedonic adaptation when their basic housing needs are met. After 16 months, we find that subjective perceptions of well-being improve substantially for recipients of improved housing but that, after, on average, eight additional months, 60% of that gain has dissipated. Extrapolation achieved through estimation of a structural model of hedonic adaptation suggests that the decay rate of the treatment effect is 20% per month. As a result, after 28 months of treatment exposure, we forecast that the entire treatment effect will have disappeared.

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Stirring up a hornests’ nest: Geographical distribution of crime. Journal of Economic Behavior and Organization, Volume 152, 2018, pages 17-35 (with. I. Lopez Cruz and G. Torrens).

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Abstract: How to make police deployment strategies more efficient is becoming the crucial research agenda for the economics of crime and law enforcement. We contribute to this agenda developing the first general equilibrium model designed to study how the geographic distribution of police protection affects the decision to pursue illegal activities, the intensity and location of crime, residential choices, housing prices, and the welfare of different socioeconomic groups. The target is to explore the positive and normative long-run effects of different ways of spatially allocating police forces in an urban area. We find that, when the police protect some neighborhoods (concentrated protection), the city becomes segregated, while when the police are evenly deployed across the city (dispersed protection), an integrated city emerges. Unequal societies face a difficult dilemma in that concentrated protection maximizes aggregate welfare but exacerbates social disparities. Taxes and subsidies can be employed to offset the disadvantages of police concentration. Private security makes an integrated city less likely to occur in equilibrium. Even under dispersed public protection, rich agents may use private security to endogenously isolate themselves in closed neighborhoods.

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Path dependent import substitution policies: The case of Argentina in the XX century. Latin American Economic Review, Volume 27, 2018 (with P. Somaini). Special Issue.

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Abstract: We use a simple three-sector model to narrate the economic history of Argentina during the twentieth century as seen through the prism of its integration into and dis-integration from the world economy. Assuming that capital moves between the primary and secondary sectors more slowly than labor moves between the secondary and tertiary sectors, we show that import-substitution policies exhibit path dependence. We contend that the endogenous industrialization of the inter-war period generated political changes that paved the way for import-substitution industrialization during the post-war period. Even if this inward-oriented strategy failed to spur economic growth, protectionist policies became entrenched. In the absence of mature political institutions, the liberalization process was delayed and, when it finally did occur, it was extremely costly.


Argentine trade policies in the XX century: 60 years of solitude. Latin American Economic Review, Volume 27, 2018 (with I. Brambilla and G. Porto). Special Issue.

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Abstract:At the turn of the last century, the Argentine economy was on a path to prosperity that never fully developed. International trade and trade policies are often identified as a major culprit. In this paper, we review the history of Argentine trade policy to uncover its exceptional features and to explore its contribution to the Argentine debacle. Our analysis tells a story of bad trade policies, rooted in distributional conflict and shaped by changes in constraints, that favored industry over agriculture in a country with a fundamental comparative advantage in agriculture. While the anti-export bias impeded productivity growth in agriculture, the import substitution strategy was not successful in promoting an efficient industrialization. In the end, Argentine growth never took-off.


The effect of aid on growth: Evidence from a quasi-experiment. Journal of Economic Growth, Volume 22, 2017, pages 1-33 (with S. Knack, C. Xu and B. Zou). Lead Article.

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Abstract: The literature on aid and growth has not found a convincing instrumental variable to identify the causal effects of aid. This paper exploits an instrumental variable based on the fact that, since 1987, eligibility for aid from the International Development Association (IDA) has been based partly on whether or not a country is below a certain threshold of per capita income. The paper finds evidence that other donors tend to reinforce rather than compensate for reductions in IDA aid following threshold crossings. Overall, aid as a share of gross national income (GNI) drops about 59 % on average after countries cross the threshold. Focusing on the 35 countries that have crossed the income threshold from below between 1987 and 2010, a positive, statistically significant, and economically sizable effect of aid on growth is found. A 1 percentage point increase in the aid to GNI ratio from the sample mean raises annual real per capita growth in gross domestic product by approximately 0.35 percentage points.

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Shelter from the storm: Upgrading housing infrastructure in Latin America Slums. Journal of Urban Economics, Volume 98, 2017, pages 187-213 (with P. Gertler, S. Martinez, R. Cooper, A. Ross and R. Undurraga).

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Abstract: This paper provides empirical evidence on the causal effects that upgrading slum dwellings has on the living conditions of the extremely poor. In particular, we study the impact of providing better houses in situ to slum dwellers in El Salvador, Mexico and Uruguay. We experimentally evaluate the impact of a housing project run by the NGO TECHO which provides basic pre-fabricated houses to members of extremely poor population groups in Latin America. The main objective of the program is to improve household well-being. Our findings show that better houses have a positive effect on overall housing conditions and general well-being: treated households are happier with their quality of life. In two countries, we also document improvements in children's health; in El Salvador, slum dwellers also feel that they are safer. We do not find this result, however, in the other two experimental samples. There are no other noticeable robust effects on the possession of durable goods or in terms of labor outcomes. Our results are robust in terms of both internal and external validity because they are derived from similar experiments in three different Latin American countries.


On the effect of the costs of operating formally: New experimental evidence. Labour Economics, Volume 45, 2017, pages 143-157 (with M. Melendez and C. Navajas).

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Abstract: This paper analyzes the impact of the elimination of the initial fixed costs of registration on the decision of informal firms to operate formally in Bogota, Colombia. The Chamber of Commerce of Bogota (CCB) conducts workshops for prospective formal-sector entrants and arranges personalized meetings for them with CCB agents. The CCB's decision to significantly reduce the transaction costs of registration and the entry into force of Act No. 1429 of 2010, which eliminated the costs of the initial procedure for registering as a formal enterprise and provided exemptions from relevant taxes during the first years after formalization, provided us with an ideal experiment for studying how the elimination of the initial fixed costs of formalization would influence firms' decision to operate formally or not. We obtained two important results. First, while a workshop treatment had no effect on firms' formalization decisions, meetings at the firm with CCB agents raised the likelihood that a business would begin to operate formally by 5.5 percentage points for all the firms that were invited, at random, to participate in this arm of the intervention and by 32 percentage points for the firms that accepted the invitation. Second, the effect on the treatment firms did not persist over time. After a year of formal operation, it disappeared. These results indicate that substantial reductions in the fixed costs of operating formally are not effective in formalization choices, since such reductions had no lasting effect on formalization decisions.

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Collective action: Experimental evidence. Games and Economic Behavior, Volume 99, 2016, pages 36-55 (with M.V. Anauati, B. Feld and G. Torrens).

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Abstract: We conducted a laboratory experiment to test the comparative statics predictions of a new approach to collective action games based on the method of stability sets. We find robust support for the main theoretical predictions. As we increase the payoff of a successful collective action (accruing to all players and only to those who contribute), the share of cooperators increases. The experiment also points to new avenues for refining the theory. We find that, as the payoff of a successful collective action increases, subjects tend to upgrade their prior beliefs as to the expected share of cooperators. Although this does not have a qualitative effect on comparative static predictions, using the reported distribution of beliefs rather than an ad hoc uniform distribution reduces the gap between theoretical predictions and observed outcomes. This finding also allows to decompose the mechanism that leads to more cooperation into a "belief effect" and a "range of cooperation effect".

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Non-contributory pensions. Labour Economics, Volume 38, 2016, pages 35-48 (with P. Gertler and R. Brando).

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Abstract: The creation of non-contributory pension schemes is becoming increasingly common as countries struggle to reduce poverty. Drawing on data from Mexico's Adultos Mayores Program (Older Adults Program), a cash transfer scheme aimed at rural adults over 70 years of age; we evaluate the effects of this program on the well-being of the beneficiary population. Exploiting a quasi-experimental design whereby the program relies on exogenous geographical and age cutoffs to identify its target group, we find that the mental health of elderly adults in the program is significantly improved, as their score on the Geriatric Depression Scale decreases by 12%. We also find that the proportion of treated individuals doing paid work is reduced by 20%, with most of these people switching from their former activities to work in family businesses; treated households show higher levels of consumption expenditures (on average, an increase of 23%). Very importantly, we also rule out significant anticipation effects that might have been associated with the program transfers. Thus, overall, we find that non-contributory pension schemes targeting the poor in developing countries can improve the well-being of poor older adults without having any indirect impact (through potential anticipation effects) on the earnings or savings of future program participants.

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Promoting handwashing behavior: The effect of a large-scale community and school level interventions. Health Economics, Volume 25, 2016, pages 1545-1599 (with P. Gertler, N. Ajzenman and A. Orsola).

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Abstract: This paper analyzes a randomized experiment that uses novel strategies to promote handwashing with soap at critical points in time in Peru. It evaluates a large-scale comprehensive initiative that involved both community and school activities in addition to communication campaigns. The analysis indicates that the initiative was successful in reaching the target audience and in increasing the treated population's knowledge about appropriate handwashing behavior. These improvements translated into higher self-reported and observed handwashing with soap at critical junctures. However, no significant improvements in the health of children under the age of 5 years were observed.


Fiscal federalism and legislative malapportionment: Causal evidence from independent but related natural experiments. Economics and Politics, Volume 28, 2016, pages 133-159 (with I. Torre and G. Torrens).

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Abstract: We exploit three natural experiments in Argentina in order to study the role of legislative malapportionment on the biased federal tax sharing scheme prevalent in the country. We do not find support to attribute it to legislative malapportionment during periods when democratic governments were in place; nor did we find any evidence that the tax sharing distribution pattern became less biased under centralized military governments. We argue that these results are attributable to two of Argentina's institutional characteristics: first, the predominance of the executive branch over the legislature; and, second, the lack of any significant difference in the pattern of geographic representation in the executive branch under democratic and autocratic governments. Thus, the observed biases in the distribution of tax revenues among the Argentine provinces are not caused by legislative malapportionment, but are instead the result of a more structural political equilibrium that transcends the geographic distribution of legislative representation and even the nature of the political regime. Our findings also illustrate the importance of informal institutions and the interactions between formal and informal institutions. Legislative malapportionment could have an innocuous influence in countries with a strong executive branch but could become a key factor in countries with an empowered Congress.


Quantifying the Life Cycle of Scholarly Articles across Fields of Economic. Economic Inquiry, Volume 54, 2016, pages 1339-1355 (with M.V. Anauati and R. Galvez).

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Abstract: Does the life cycle of economic papers differ across fields of economic research? By constructing and analyzing a large dataset that combines information on 9,672 articles published in the top five economic journals from 1970 to 2000 with detailed yearly citation data obtained from Google Scholar, we find that published articles do have a life cycle that differs across fields of economic research (which we divide into the categories of applied, applied theory, econometric methods, and theory). Applied and applied theory papers are the clear winners in terms of citation counts. For the first years after their publication, they receive higher numbers of citations per year than papers in other fields of research do. They also reach a higher peak number of citations per year and apparently sustain those peak levels for longer, in addition to being cited over longer periods of time (i.e., they have a longer lifespan). Citation patterns are much less favorable for theoretical papers, which are the object of fewer citations per annum in the first years following publication, have lower peak numbers and a shorter lifespan. Econometric method papers are a special case; the pattern for most of these papers is similar to the pattern for theory papers, but the most successful papers (as measured by the number of citations) on econometric methods are also the most successful papers in the entire discipline of economics.

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Optimal climate change adaptation and mitigation to climate change in small environmental economies. Economia, Journal of the Latin American and Caribbean Economic Association, Volume 17, 2016, pages 65-94 (with O. Chisari and S. Miller).

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Abstract: We study the optimal role of mitigation and adaptation strategies for environmentally small economies, that is, economies that are witnessing an exogenous increase in emissions to which they are contributing very little. Our results lead to three main conclusions. First, small economies should concentrate their environmental efforts, if any, on adaptation. This is a recommendation based on cost effectiveness rather than on any idea about these economies indulging in free riding. Second, environmentally small economies that are unable to spend enough on adaptation may end up spending less on mitigation in the long term, owing to their impoverishment as a result of negative climate shocks. Third, higher mitigation expenditures may arise not only as a result of greater optimal adaptation expenditures, but also because of increased adaptation to the incentives for mitigation provided by richer countries. For the simulations, we use a calibrated optimal growth model for Brazil, Chile, and the United States.

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The deregularization of land titles. Man and the Economy, Volume 3, 2016, pages 169-188 (with E. Schargrodsky). Lead Article.

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Abstract: In the last years, several countries implemented policy interventions to entitle urban squatters, encouraged by the results of studies showing large welfare gains from entitlement. We study a natural experiment in the allocation of land titles to very poor families in a suburban area of Buenos Aires, Argentina. Although previous studies on this experiment have found important effects of titling on investment, household structure, educational achievement, and child health, in this article we document that a large fraction of households that went through a situation at which formalization was challenged (death, divorce, sale/purchase), ended up being de-regularized. The legal costs of remaining formal seem too high relative to the value of these parcels and the income of their inhabitants.

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Estimating neighborhood choice models: Lessons from a housing assistance experiment. American Economic Review, Volume 105, 2015, pages 3385-3415 (with A. Murphy and J. Pantano).

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Abstract: We use data from a housing-assistance experiment to estimate a model of neighborhood choice. The experimental variation effectively randomizes the rents which households face and helps identify a key structural parameter. Access to two randomly selected treatment groups and a control group allows for out-of-sample validation of the model. We simulate the effects of changing the subsidy-use constraints implemented in the actual experiment. We find that restricting subsidies to even lower poverty neighborhoods would substantially reduce take-up and actually increase average exposure to poverty. Furthermore, adding restrictions based on neighborhood racial composition would not change average exposure to either race or poverty.


On the distributive costs of drug related homicides. Journal of Law and Economics, Volume 58, 2015, pages 779-803 (with. N. Ajzenman and E. Seira).

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Abstract: We exploit the manifold increase in homicides in 2008-11 in Mexico resulting from its war on organized drug traffickers to estimate the effect of drug-related homicides on housing prices. We use an unusually rich data set that provides national coverage of housing prices and homicides and exploits within-municipality variations. We find that the impact of violence on housing prices is borne entirely by the poor sectors of the population. An increase in homicides equivalent to 1 standard deviation leads to a 3 percent decrease in the price of low-income housing.

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The rise of noncommunicable diseases in Latin America and the Caribbean: Health in Latin America: Challenges for public health policies. Latin American Economic Review, Volume 24, 2015, pages 7-63 (with M.V. Anauati and F. Weinschelbaum). Special Issue. Lead Article.

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Abstract: The health landscape in Latin America and the Caribbean is changing quickly. The region is undergoing a demographic and epidemiological transition in which health problems are highly concentrated on noncommunicable diseases (NCDs). In light of this, the region faces two main challenges: (1) develop cost-effective policies to prevent NCD risk factors, and (2) increase access to quality healthcare in a scenario in which a large share of the labor force is employed in the informal sector. This paper describes both alternative interventions to expand health insurance coverage and their trade-off with labor informality and moral hazard problems. The paper also focuses on obesity as a case example of an NCD, and emphasizes how lack of knowledge along with self-control problems would lead people to make suboptimal decisions related to food consumption, which may later manifest in obesity problems.


Climate change in Latin America and the Caribbean: Policy options and research priorities. Latin American Economic Review, Volume 24, 2015, pages 150-188 (with B. Feld). Special Issue.

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Abstract: Although climate change is filled with uncertainties, a broad set of policies proposed to address this issue can be grouped in two categories: mitigation and adaptation. Developed countries that are better prepared to cope with climate change have stressed the importance of mitigation, which ideally requires a global agreement that is still lacking. This paper uses a theoretical framework to argue that in the absence of a binding international agreement on mitigation, Latin America should focus mainly on adaptation to cope with the consequences of climate change. This is not a recommendation that such economies indulge in free-riding. Instead, it is based on cost-benefit considerations, all else being equal. Only in the presence of a global binding agreement can the region hope to exploit its comparative advantage in the conservation and management of forests, which are a large carbon sink. The decision of which policies to implement should depend on the results of a thorough cost-benefit analysis of competing projects, yet very little is known or has been carried out in this area to date. Research should be directed toward cost-benefit analysis of alternative climate change policies. Policymakers should compare other investments that are also pressing in the region, such as interventions to reduce water and air pollution, and determine which will render the greatest benefits.

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Autocracy, democracy and trade policy. Journal of International Economics, Volume 93, 2014, pages 173-193 (with G. Torrens).

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Abstract: This paper develops a politico-economic model for use in studying the role of intra-elite conflict in the simultaneous determination of a country's political regime, trade policy and income-tax-based redistribution scheme. Three socioeconomic groups are involved: two elite groups and workers, whose preferences regarding trade policy and income taxation are derived from a simple open-economy model. The critical point is that income taxation induces a rich/poor/elite/workers political cleavage, while trade policy opens the door to intra-elite conflict. In this model, when there is no intra-elite conflict, changes in trade policy are associated with political transitions. Coups (democratizations) open up the economy if and only if both elite groups are pro-free-trade (protectionist). However, in the presence of intra-elite conflict, autocracies respond to popular revolts by changing trade policy and reallocating political power within the elite (to the elite group with the same trade policy preference as the workers) rather than offering to democratize the country. The change in trade policy is credible because the elite group with the same trade policy preference as the workers controls the autocracy. Moreover, in the presence of intra-elite conflict, coups tend to result in the maintenance of the existing trade policy unless popular demands are extremely radical and/or the elite group with the same trade policy preference as the workers is exceptionally weak.


Factor endowments, democracy and trade policy convergence. Journal of Public Economic Theory, Volume 16, 2014, pages 119-156 (with N. Schofield and G. Torrens).

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Abstract: We develop a stochastic model of electoral competition in order to study the economic and political determinants of trade policy. We model a small open economy with two tradable goods, each of which is produced using a sector-specific factor (e.g., land and capital) and another factor that is mobile between these tradable sectors (labor); one nontradable good, which is also produced using a specific factor (skilled labor), and an elected government with the mandate to tax trade flows. The tax revenue is used to provide local public goods that increase the economic agents' utility. We use this general equilibrium model to explicitly derive the ideal policies of the different socioeconomic groups in society (landlords, industrialists, labor, and skilled workers). We then use those ideal policies to model the individual probabilistic voting behavior of the members of each of these socioeconomic groups. We use this model to shed light on how differences in the comparative advantages of countries explain trade policy divergence between countries as well as trade policy instability within countries. We regard trade policy instability to mean that, in equilibrium, political parties diverge in terms of the political platforms they adopt. We show that in natural resource (land)-abundant economies with very little capital, or in economies that specializes in the production of manufactures, parties tend to converge to the same policy platform, and trade policy is likely to be stable and relatively close to free trade. In contrast, in a natural resource-abundant economy with an important domestic industry that competes with the imports, parties tend to diverge, and trade policy is likely to be more protectionist and unstable.

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The political Coase theorem: Experimental evidence. Journal of Economic Behavior and Organization, Volume 103, 2014, pages 17-38 (with G. Torrens and M. Yanguas).

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Abstract: The Political Coase Theorem (PCT) states that, in the absence of transaction costs, agents should agree to implement efficient policies regardless of the distribution of bargaining power among them. This paper uses a laboratory experiment to explore how commitment problems undermine the validity of the PCT. Overall, the results support theoretical predictions. In particular, commitment issues matter, and the existence of more commitment possibilities leads to better social outcomes. Moreover, we find that the link is valid when commitment possibilities are asymmetrically distributed between players and even when a redistribution of political power is required to take advantage of those possibilities. However, we also find that at low levels of commitment there is more cooperation than strictly predicted by our parameterized model while the opposite is true at high levels of commitment, and only large improvements in commitment opportunities have a significant effect on the social surplus, while small changes do not.

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Natural disasters and economic growth. Review of Economics and Statistics, Volume 95, 2013, pages 1549-1561 (with E. Cavallo, I. Noy and J. Pantano).

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Abstract: We examine the average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies. For each country affected by a large disaster, we compute the counterfactual by constructing synthetic controls. We find that only extremely large disasters have a negative effect on output in both the short and the long runs. However, we also show that this results from two events where radical political revolutions followed the disasters. Once we control for these political changes, even extremely large disasters do not display any significant effect on economic growth.


Experimental heterogeneous effects in conditional cash transfers. Journal of Public Economics, Volume 103, 2013, pages 85-96 (with P. McEwan).

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Abstract: The Honduran PRAF experiment randomly assigned conditional cash transfers to 40 of 70 poor municipalities, within five strata defined by a poverty proxy. Using census data, we show that eligible children were 8 percentage points more likely to enroll in school and 3 percentage points less likely to work. The effects were much larger in the two poorest strata, and statistically insignificant in the other three (the latter finding is robust to the use of a separate regression-discontinuity design). Heterogeneity confirms the importance of judicious targeting to maximize the impact and cost-effectiveness of CCTs. There is no consistent evidence of effects on ineligible children or on adult labor supply.


Optimal recall period for caregiver-reported illness in studies that estimate treatment effects: a multicountry study. American Journal of Epidemiology, Volume 177, 2013, pages 361-370 (with B. Arnold, B. Briceno, J. Colford, P. Gertler, A. Hubbar and R. Pavani).

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Abstract: Many community-based studies of acute child illness rely on cases reported by caregivers. In prior investigations, researchers noted a reporting bias when longer illness recall periods were used. The use of recall periods longer than 2-3 days has been discouraged to minimize this reporting bias. In the present study, we sought to determine the optimal recall period for illness measurement when accounting for both bias and variance. Using data from 12,191 children less than 24 months of age collected in 2008-2009 from Himachal Pradesh in India, Madhya Pradesh in India, Indonesia, Peru, and Senegal, we calculated bias, variance, and mean squared error for estimates of the prevalence ratio between groups defined by anemia, stunting, and underweight status to identify optimal recall periods for caregiver-reported diarrhea, cough, and fever. There was little bias in the prevalence ratio when a 7-day recall period was used (<10% in 35 of 45 scenarios), and the mean squared error was usually minimized with recall periods of 6 or more days. Shortening the recall period from 7 days to 2 days required sample-size increases of 52%-92% for diarrhea, 47%-61% for cough, and 102%-206% for fever. In contrast to the current practice of using 2-day recall periods, this work suggests that studies should measure caregiver-reported illness with a 7-day recall period.


Social status and corruption. Nordic Journal of Political Economy, Volume 38, 2013, pages 1-16 (with F. Weinschelbaum). Lead Article.

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Abstract: We study the interaction between social and economic incentives in determining the level of corruption. Using social rewards as incentives for civil servants may help to reduce corruption. In our model, a decrease in corruption produces an externality that reduces the cost of hiring civil servants. In particular, it makes wage schemes which avert corruption (efficiency wages) cheaper. We show that the existence of this externality reduces the "optimal" level of corruption in a society, the greater the power of social status, the lower the level of corruption.

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Social mobility: What is it and why does it matter? Economica, Volume 59, 2013, pages 167-229, Universidad Nacional de La Plata.

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Abstract: The definition of social mobility is a matter of debate. In the following discussion, conceptual issues in the literature on mobility are commented. This paper defines social mobility as a situation in which the relative economic status of an agent is not dependent on starting conditions such as parental income or family background. Analyzing the determinants of mobility involves exploring the channels through which offspring's income is correlated to its parents', such as inherited bequest, education, skills, among many others. This survey explores, in an analytical framework, the relation between social mobility and inequality, among other important dimensions of income distribution that are jointly determined. The focus is on the relevance of social mobility as it affects variables determining welfare and economic efficiency, and therefore on policies to promote it.


Reality versus propaganda in the formation of beliefs about water privatization. Journal of Public Economics, Volume 96, 2012, pages 553-567 (with R. Di Tella and E. Schargrodsky).

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Abstract: Argentina privatized most public utilities during the 1990s but re-nationalized the main water company in 2006. We study beliefs about the benefits of the privatization of water services measured immediately after the 2006 nationalization. Negative opinions about privatization prevail. We find that "reality" can change beliefs: people who had first-hand experience observing the investments made by the privatized company have a better opinion of water privatization (relative to other privatizations) than people who did not gain access to water. The effect, while statistically significant, seems small adding only 0.8 points on a 1-10 scale. Moreover, the effect of priming subjects with government propaganda against privatization has an effect that almost offsets the effect of gaining water. However, our evidence suggests that the presence of firm investments makes beliefs about the benefits of privatization less susceptible to be affected by propaganda.


Land property rights and resource allocation. Journal of Law and Economics, Volume 54, 2011, pages 329-345. Special issue on Markets, Firms and Property Rights: A Celebration of the Research of Ronald Coase (with E. Schargrodsky).

[link journal][link WP]

Abstract: In this paper, we review the most significant empirical literature on the causal effects of land property rights. The literature indicates that secure property rights boost investment in both rural and urban areas. These effects, however, do not appear to be the result of improved credit conditions. In rural areas, clear land rights also lead to increases in productivity and farm earnings. In contrast, for urban areas, the evidence for an effect on earnings is mixed. We find little empirical evidence to suggest that land-titling programs enhance the development of land markets. Finally, some evidence suggests that land titling induces changes in household structure that foster human capital accumulation and may help to increase the incomes of future generations.


Modeling informality formally: Households and firms. Economic Inquiry, Volume 50, 2012, pages 821-838 (with F. Weinschelbaum). 2012 Best Article Award.

[link journal][link WP]

Abstract: Informality is widespread in most developing countries. In Latin America, 50 percent of salaried employees work informally. Three stylized facts characterize informality: 1) small firms tend to operate informally while large firms tend to operate formally; 2) unskilled workers tend to be informal while skilled ones have formal jobs; 3) Ceteris paribus, secondary workers are less likely to operate formally than primary workers. We develop a model that account for all these facts. In our model both heterogeneous firms and workers have preferences over the sector they operate and choose optimally whether to function formally or informally. There are two labor markets, one formal and the other informal, and both firms and workers act unconstrained in them. By contrast, a prominent feature of the pre-existing literature is that worker's decisions play no role in determining the equilibrium of the economy. Using our model, we show that an increase in the participation of secondary workers would tend to raise the level of informality in the economy. This effect partially accounts for the increases in informality seen in Latin America over the past two decades.


Investment and expropriation under oligarchy and democracy. Economics and Politics, Volume 24, 2012, pages 24-46 (with F. Albornoz and D. Heymann).

[link journal][link WP]

Abstract: We study the incentives to expropriate foreign capital under democracy and oligarchy. We model a two-sector small open economy where foreign investment triggers Stolper-Samuelson effects through reducing exporting costs. The incentives to expropriate depend on the distributional effects associated to the investment. How investment affects the incomes of the different groups in society depends on the sectors where these investments are undertaken and on structural features of the economy such as factor intensity, factor substitutability, and price and output elasticities. We characterize the equilibria of the expropriation game and show that if investment is undertaken in the sector that uses labor less intensively then democratic expropriations are more likely to take place. We test this prediction and provide strong evidence of its validity.


Conscription and Crime: Evidence from the Argentine Draft Lottery. American Economic Journal: Applied Economics, Volume 3, 2011, pages 119-136 (with M. Rossi and E. Schargrodsky).

[link journal][link WP]

Abstract: We estimate the causal effect of mandatory participation in military service on individuals' subsequent involvement in criminal activities. To identify this causal effect, we exploit the random assignment of young men to conscription in Argentina through a draft lottery. Using a dataset that includes draft eligibility, participation in military service, and criminal records, we find that conscription increases the likelihood of developing a criminal record. The effects are significant not only for cohorts that provided military service during wartime, but also for those that served during peacetime. Our results do not support the introduction of conscription for anti-crime purposes.


Preschool and maternal labor supply: Evidence from a regression discontinuity design. Economic Development and Cultural Change, Volume 59, 2011, pages 313-334 (with S. Berlinski and P. McEwan).

[link journal][link WP]

Abstract: In developing countries, employment rates for mothers with young children are relatively low. This study analyzes how maternal labor market outcomes in Argentina are affected by the preschool attendance of their children. Using pooled household surveys, we show that 4-year-olds with birthdays on June 30 have sharply higher probabilities of preschool attendance than children born on July 1, given enrollment-age rules. Regression-discontinuity estimates using this variation suggest that preschool attendance of the youngest child in the household increases the probability of full-time employment and weekly hours of maternal employment. We find no effect of preschool attendance on maternal labor outcomes for children who are not the youngest in the household.


Trends in tariff reforms and in the structure of wages. Review of Economics and Statistics, Volume 92, 2010, pages 482-494 (with G. Porto).

[link journal][link WP]

Abstract: This paper provides new evidence on the impacts of trade reforms on wages. We first introduce a model of trade that combines a noncompetitive wage-setting mechanism due to unions with a factor abundance hypothesis. The predictions of the model are then econometrically investigated using Argentine data. Instead of achieving identification by comparing industrial wages before and after one episode of trade liberalization, our strategy exploits the recent historical record of policy changes adopted by Argentina: from significant protection in the early 1970s, to the first episode of liberalization during the late 1970s, then back to a slowdown of reforms during the 1980s, and finally to the second episode of liberalization in the 1990s. These swings in trade policy represent broken trends in trade reforms that we can compare with observed trends in wages and wage inequality. We use unusual historical data sets of trends in tariffs, wages, and wage inequality to examine the structure of wages in Argentina and explore how it is affected by tariff reforms. We find that trade liberalization, ceteris paribus, reduces wages; industry tariffs reduce the industry skill premium; and conditional on the structure of tariffs at the industry level, the average tariff in the economy is positively associated with the aggregate skill premium. These findings suggest that the observed trends in wage inequality in Latin America can be reconciled with the Stolper-Samuelson predictions in a model with unions.


Property rights for the poor: Effects of land titling. Journal of Public Economics, Volume 94, 2010, pages 700-729 (with E. Schargrodsky).

[link journal][link WP]

Abstract: Secure property rights are considered a key determinant of economic development. The evaluation of the causal effects of property rights, however, is a difficult task as their allocation is typically endogenous. To overcome this identification problem, we exploit a natural experiment in the allocation of land titles. In 1981, squatters occupied a piece of land in a poor suburban area of Buenos Aires. In 1984, a law was passed expropriating the former owners' land to entitle the occupants. Some original owners accepted the government compensation, while others disputed the compensation payment in the slow Argentine courts. These different decisions by the former owners generated an exogenous allocation of property rights across squatters. Using data from two surveys performed in 2003 and 2007, we find that entitled families substantially increased housing investment, reduced household size, and enhanced the education of their children relative to the control group. These effects, however, did not take place through improvements in access to credit. Our results suggest that land titling can be an important tool for poverty reduction, albeit not through the shortcut of credit access, but through the slow channel of increased physical and human capital investment, which should help to reduce poverty in future generations.

[blog post]

The Wall Street Journal: Barrio Study Links Land Ownership to a Better Life, November 9, 2005 [link]

Time: Giving the Poor their Rights, July 5, 2007 [link]


Payroll taxation, wages and employment: New quasi-experimental evidence. Labour Economics, Volume 17, 2010, pages 743-749 (with G. Cruces and S. Sduka).

[link journal][link WP]

Abstract: This paper investigates the effect of changes in payroll taxes on wages and employment in Argentina. The analysis, based on administrative data, focuses on the impact of a series of major changes in payroll taxes which varied across geographical areas. This setup offers two main advantages over previous studies. First, using longitudinal data, the variation in tax rates across space and time provides a plausible source of identification of their effects on employment and wages. Second, the use of legal tax rates for each area at each point in time provides a remedy for the measurement error bias raised by the use of empirical rates constructed from observed tax and wage bills. Once this bias is accounted for, the results indicate that changes in payroll tax rates are only partially shifted onto wages, and they point to the absence of any significant effect on employment.


Performance Pay and Productivity of Low- and High-Ability Workers. Labour Economics, Volume 17, 2010, pages 317-322 (with I. Francescheli and E. Gulmez).

[link journal][link WP]

Abstract: Existing literature has mainly focused on analyses of the overall effect of a change in the incentive scheme. Lazear (Lazear, E., 2000, “Performance pay and productivity”, American Economic Review, 90, 1346–1361.), for example, estimates the average increase in productivity after a firm switches from an hourly-wage scheme to a piece-rate plus basic-wage scheme. His paper does not, however, account for the fact that many workers remained within the basic-wage range after the change was made in the incentive scheme. In the present paper we explore how the incentive effect might have been different for those workers seeking the basic wage, and those workers seeking the piece-rate component of the wage. Interestingly, the change in productivity is approximately the same in percentage terms for both types of workers.


Housing, Health and Happiness. American Economic Journal: Economic Policy, Volume 1, 2009, pages 75-105 (with M. Cattaneo, P. Gertler, S. Martinez and R. Titiunik). Featured in Science, February 17, 2008.

[link journal][link WP]

Abstract: We investigate the impact of a large-scale Mexican program to replace dirt floors with cement floors on child health and adult happiness. We find that replacing dirt floors with cement significantly improves the health of young children measured by decreases in the incidence of parasitic infestations, diarrhea, and the prevalence of anemia, and an improvement in children's cognitive development. Additionally, we find significant improvements in adult welfare measured by increased satisfaction with their housing and quality of life, as well as by lower scores on depression and perceived stress scales.


The effect of pre-primary education on primary school performance. Journal of Public Economics, Volume 93, 2009, pages 219-234 (with S. Berlinski and P. Gertler).

[link journal] [link WP]

Abstract: The theoretical case for universal pre-primary education is strong. However, the empirical foundation is less so. In this paper, we contribute to the empirical case by investigating the effect of a large expansion of universal pre-primary education on subsequent primary school performance in Argentina. We estimate that one year of pre-primary school increases average third grade test scores by 8% of a mean or by 23% of the standard deviation of the distribution of test scores. We also find that pre-primary school attendance positively affects student's self-control in the third grade as measured by behaviors such as attention, effort, class participation, and discipline.


Water in shantytowns: Health and savings. Economica, Volume 76, 2009, pages 607-622 (with M. Gonzalez-Rozada and E. Schargrodsky).

[link journal] [link WP]

Abstract: This paper examines the effects of the expansion of the water network in urban shantytowns in Argentina. We find large reductions in the presence, frequency and severity of diarrhoea episodes among children reached by network expansions relative to a control group. Moreover, expanded connections induce savings in water expenditures, as these families are able to substitute piped water for more expensive and distant sources of water provision. These health and savings effects are also important for households that previously had clandestine self-connections to the water network, which were free but of low quality.


School Decentralization: Helping the good get better, but leaving the poor behind. Journal of Public Economics, Volume 92, 2008, pages 2106-2120 (with P. Gertler and E. Schargrodsky).

[link journal] [link WP]

Abstract: The decentralization of public services is a major feature of institutional innovation. The main argument in support of decentralization is that it brings decisions closer to the people, thereby alleviating information asymmetries and improving accountability. However, decentralization can also degrade service provision in poor communities that lack the ability to voice and defend their preferences. In this paper, we analyze the average and distributional effects of school decentralization on educational quality in Argentina. We find that decentralization had an overall positive impact on student test scores. The decentralization gains, however, did not reach the poor. Thus, although “bringing decisions closer to the people” may help the good get better, the already disadvantaged may not receive these benefits.


On the emergence of public education in land rich economies. Journal of Development Economics, Volume 86, 2008, pages 434-446 (with D. Heymann, C. Dabus and F. Thome).

[link journal] [link WP]

Abstract: We analyze the emergence of large-scale education systems by modeling the incentives that the economic elite could have (collectively) to accept taxation destined to finance the education of credit-constrained workers. Contrary to previous work, in our model this incentive does not arise from a complementarity between physical and human capital in manufacturing. Instead, we emphasize the demand for human-capital-intensive services by high-income groups. Our model seems capable to account for salient features of the development of Latin America in the 19th century, where, in particular, land-rich countries such as Argentina established an extensive public education system and developed a sophisticated service sector before starting significant manufacturing activities.


Giving children a better start: Preschool attendance and school-age profiles. Journal of Public Economics, Volume 92, 2008, pages 1416-1440 (with S. Berlinski and M. Manacorda).

[link journal] [link WP]

Abstract: We study the effect of pre-primary education on children's subsequent school outcomes by exploiting a unique feature of the Uruguayan household survey (ECH) that collects retrospective information on preschool attendance in the context of a rapid expansion in the supply of pre-primary places. Using a within household estimator, we find small gains from preschool attendance at early ages that get magnified as children grow up. By age 15, treated children have accumulated 0.8 extra years of education and are 27 percentage points more likely to be in school compared to their untreated siblings. Instrumental variables estimates that attempt to control for non-random selection of siblings into preschool lead to similar results. Pre-primary education appears as a successful and cost-effective policy to prevent early grade failure and its long lasting consequences in low income countries.


Why has unemployment risen in the new South Africa? Economics of Transition, Volume 16, 2008, pages 715-740. Special issue (with A. Banerjee, J. Levinsohn, Z. McLaren and I. Woolard).

[link journal] [link WP]

Abstract: We document the rise in unemployment in South Africa since the transition in 1994. We describe how changes in labour supply interacted with stagnant labour demand to produce unemployment rates that peaked between 2001 and 2003. Meanwhile, compositional changes in employment at the sectoral level widened the gap between the skill-level of the employed and the unemployed. Using nationally representative panel data, we show that stable unemployment rates mask high individual-level transition rates in labour market status. Our analysis highlights several key constraints to addressing unemployment in South Africa. We conclude that unemployment is near equilibrium levels and is unlikely to self-correct without policy intervention.


The impact of privatization on the earnings of restructured workers: Evidence from the oil industry. Journal of Labor Research, Volume 29, 2008, pages 162-176 (with F. Sturzenegger).

[link journal]

Abstract: We study the long-term impact of job displacement from a big state owned enterprise as a result of its privatization in a developing country. Our results suggest large reductions in earnings, which persist throughout the years. However, we also find that the displaced worker’s post-displacement earnings are in line with competitive market wages, and unrelated to sector of employment or to tenure losses, indicating that the long-term reduction in earnings as a result of displacement because of privatization can be traced to the loss of wage rents. Our results indicate that job displacement in SOEs may have very large redistributive implications for the workers involved but that this loss does not necessarily reflect the loss of specific human capital associated to these jobs.


The Formation of Beliefs: Evidence from the Allocation of Land Titles to Squatters. Quarterly Journal of Economics, Volume 122, 2007, pages 209-41(with R. Di Tella and E. Schargrodsky).

[link journal] [link WP]

Abstract: We study the formation of beliefs in a squatter settlement in the outskirts of Buenos Aires exploiting a natural experiment that induced an allocation of property rights that is exogenous to the characteristics of the squatters. There are significant differences in the beliefs that squatters with and without land titles declare to hold. Lucky squatters who end up with legal titles report beliefs closer to those that favor the workings of a free market. Examples include materialist and individualist beliefs (such as the belief that money is important for happiness or the belief that one can be successful without the support of a large group). The effects appear large. The value of a (generated) index of “market” beliefs is 20 percent higher for titled squatters than for untitled squatters, in spite of leading otherwise similar lives. Moreover, the effect is sufficiently large so as to make the beliefs of the squatters with legal titles broadly comparable to those of the general Buenos Aires population, in spite of the large differences in the lives they lead.

[blog post]

The Wall Street Journal: Barrio Study Links Land Ownership to a Better Life, November 9, 2005 [link]


The effect of a large expansion of pre-primary schools on enrollment and maternal employment. Labour Economics, Volume 14, 2007, pages 665-80 (with S. Berlinski).

[link journal] [link WP]

Abstract: We provide evidence on the impact of a large-scale construction of pre-primary school facilities in Argentina. We estimate the causal impact of the program on pre-primary school attendance and maternal labor supply. Identification relies on a differences-in-differences strategy where we combine differences across regions in the number of facilities built with differences in exposure across cohorts induced by the timing of the program. We find a sizeable impact of the program on pre-primary school participation among children aged between 3 and 5. In fact, we cannot reject the null hypothesis of a full take-up of newly constructed places. In addition, we find that the implicit childcare subsidy induced by the program appears to increases maternal employment.


Fertility and female labor supply in Latin America: New causal evidence. Labour Economics, Volume 14, 2007, pages 565-73 (with G. Cruces).

[link journal] [link WP]

Abstract: We study the effect of fertility on maternal labor supply in Argentina and Mexico exploiting a source of exogenous variability in family size first introduced by Angrist and Evans [Angrist, J., Evans, W., 1998. Children and their parents' labor supply: evidence from exogenous variation in family size. American Economic Review 88 (3), 450–577] for the United States. We find that the estimates for the US can be generalized both qualitatively and quantitatively to the populations of two developing countries where, compared to the US, fertility is known to be higher, female education levels are much lower and there are fewer formal facilities for childcare.

[link older WP with emphasis on External Validity]


Optimal income support targeting. International Tax and Public Finance, Volume 13, 2006, pages 661-84 (with S. De Wachter).

[link journal] [link WP]

Abstract: This paper considers the practical problem of distributing a fixed budget for poverty alleviation to a population whose poverty status is not directly observable. The solution we propose improves on the techniques that are commonly used in practice by taking both the concavity of the social welfare function and the entire conditional distribution of poverty status into account, and by endogenously determining the optimal transfer levels. We provide an algorithm to calculate the optimal transfers for any population of benefit applicants. Finally, we explain how our method is a generalization of statistical classification techniques and thus provide an intuitive discussion of the defects of currently operational methods.


Water for life: The impact of the privatization of water supply on child mortality. Journal of Political Economy, Volume 113, 2005, pp. 83-120 (with P. Gertler and E. Schargrodsky).

[link journal] [link WP]

Abstract: While most countries are committed to increasing access to safe water and thereby reducing child mortality, there is little consensus on how to actually improve water services. One important proposal under discussion is whether to privatize water provision. In the 1990s Argentina embarked on one of the largest privatization campaigns in the world, including the privatization of local water companies covering approximately 30 percent of the country’s municipalities. Using the variation in ownership of water provision across time and space generated by the privatization process, we find that child mortality fell 8 percent in the areas that privatized their water services and that the effect was largest (26 percent) in the poorest areas. We check the robustness of these estimates using cause‐specific mortality. While privatization is associated with significant reductions in deaths from infectious and parasitic diseases, it is uncorrelated with deaths from causes unrelated to water conditions.

The Economist: Rise a Glass: How to improve child health, March 20, 2003 [link]


Persistence and regional disparities in unemployment. Regional Science and Urban Economics, Volume 35, 2005, pages 375-94 (with C. Lamarche, A. Porto and W. Sosa Escudero).

[link journal]

Abstract: We study the regional evolution of unemployment in Argentina for the period 1980–1997. First, we show that the Argentine regional unemployment structure is not very persistent. We find less persistence in Argentina than in the US. Second, we model the conditional means of regional unemployment and measure the persistence of unemployment to shocks based on our conditional model. We find a low degree of unemployment persistence to shocks. Finally, we identify regional factors that explain regional unemployment differences and whose changes account for the low persistence of the regional unemployment structure.


Changes in the Panamanian wage structure: A quantile regression analysis. Económica, Volume 51, 2005, pages 3-27, Universidad Nacional de La Plata (with R. Titiunik).

[link journal]

Abstract: The changes in the wage structure of a country are an important area of research. However, the empirical evidence about the evolution of wages in developing countries is still quite scant. In this paper we contribute to fill this gap by studying the evolution of the wage structure in Panama for the period 1982-1997. We model the (conditional) distribution of wages by means of the quantile regression technique and apply this model to study the male wage distribution and its evolution during the last two decades in Panama. Overall, we find that the wage structure remained fairly stable over the period studied.


The health effects of land titling. Economics and Human Biology, Volume 2, 2004, pages 353-72. Lead article. Special Issue (with E. Schargrodsky).

[link journal]

Abstract: This paper examines the impact of urban land titling on child health. We hypothesize that land titling may translate into positive effects on health through its impact on housing investments and household structure. To address selection concerns, we take advantage of a natural experiment of land occupation in a suburban area of Buenos Aires, Argentina, that ensures that the allocation of property rights is exogenous to the characteristics of the squatters. Our results show that in the titled parcels children enjoy better weight-for-height scores (but similar height-for-age scores), and teenage girls have lower pregnancy rates than those in untitled parcels.


The impact of trade liberalization on wage inequality: Evidence from Argentina. Journal of Development Economics, Volume 72, 2003, pages 497-513 (with P. Sanguinetti).

[link journal] [link WP]

Abstract: Wage inequality in Argentina greatly increased during the nineties. During this period, a rapid and deep process of trade liberalization was implemented. In this paper we study whether trade liberalization played any role in shaping the Argentine wage structure during the nineties. Specifically, we test whether those sectors where import penetration deepened are also the sectors where, ceteris paribus, a higher increase in wage inequality is observed. Even though we find some evidence that supports this hypothesis, as has been found for some developed economies, trade deepening can only explain a relatively small proportion of the observed rise in wage inequality.


Duration and risk of unemployment in Argentina. Journal of Development Economics, Volume 71, 2003, pages 199-212 (with H. Hopenhayn).

[link journal] [link WP]

Abstract: After a decade of structural reforms, unemployment rates have tripled in Argentina. This paper is concerned with the measurement of unemployment risk and its distribution. We show the importance of considering re-incidence in the measurement of unemployment risk and develop a methodology to do that. Our estimates for Argentina show that, though the typical unemployment spell is short, once re-incidence is taken into account, unemployment risk is high, has risen substantially in the last decade and is shared very unequally in the labor force. This counters the established view that unemployment is a small risk, short-duration phenomenon, which arises when re-incidence is not considered.


Great expectations and hard times: The Argentine convertibility plan. Economia, Journal of the Latin American and Caribbean Economic Association, Volume 3, 2003, pages 109-147 (with D. Heymann and M. Tommasi).

[link journal] [link WP]


Financial dollarization and debt deflation under a currency board. Emerging Markets Review, Volume 4, 2003, pages 340-67. Lead article. Special Issue (with E. Levy-Yeyati and E. Schargrodsky).

[link journal]

Abstract: In the late currency board years, Argentina faced a real exchange rate adjustment through price deflation amidst growing devaluation expectations. Using a firm-level panel database to analyze the incidence of these factors on the currency composition of private debt and on firms’ performance, we find that widespread debt dollarization showed no relationship with the firms’ production mix or the ever-changing probability of a nominal devaluation. While relative price changes favored export-oriented firms with the expected impact on sales, earnings and investment, increases in devaluation expectations elicited only a marginal differential response in investment from more financially dollarized firms. Our findings provide support to two criticisms faced by the Argentine currency board in recent years, namely, that by fueling beliefs in an implicit guarantee it stimulated across-the-board debt dollarization and that it could not fully isolate the economy from real shocks, as the feared balance sheet effect was replaced by a gradual but equally deleterious debt deflation effect.


Evaluating the impact of school decentralization on education quality. Economia, Journal of the Latin American and Caribbean Economic Association, Volume 2, 2002, pages 275-314 (with E. Schargrodsky).

[link journal] [link WP]

Abstract: An important piece of the major fiscal and structural reforms undertaken in Argentina in the early 1990´s was the decentralization of education services from the federal government to the provincial governments. The theoretical literature does not find absolute superiority of centralization or decentralization in the provision of public services. We evaluate empirically the effect of the decentralization of secondary schools in Argentina on education quality. Our results suggest that, on average, decentralization improved the performance of public school students in test scores. We also explore whether the effect of decentralization depends on province characteristics. We find that the effect is positive when schools are transferred to fiscally ordered provinces, but negative when provinces run significant fiscal deficits.