2005년 대한 생화학·분자생물학회 하계학술대회를 다녀와서

This paper proposes a new model of the link between expanding trade and rising wage inequality in developing countries, and investigates its causal implications in a newly constructed panel of Mexican manufacturing establishments. In a theoretical setting with heterogeneous rms and quality dierentiation, only the most productive rms in a developing country like Mexico enter the export market, and they produce a better-quality good for export than for the domestic market in order to appeal to richer developed-country consumers. Producing high-quality goods requires paying high wages both to white-collar and to blue-collar { but especially to white-collar { employees. An increase in the incentive for developing-country producers to export generates dierential quality upgrading within industries, as more-productive rms increase exports and produce a greater share of high-quality goods, while less-productive rms remain focused on the domestic market. This process raises wage inequality both between rms and within the rms that upgrade. The empirical part of the paper uses a major exchange rate shock { the Mexican peso crisis of late 1994 { to test this causal mechanism. I nd robust evidence that during the years of the crisis initially more-productive plants increased both white-collar and blue-collar wages and increased the relative wage of white-collar workers as compared to initially less-productive plants. This pattern is absent in the periods before or after the crisis years. The results thus provide strong support for the hypothesis that dierential quality upgrading induced by the exchange rate shock contributed to the increase in wage inequality in Mexico in the mid-1990s.

/pdf/trade-quality-upgrading-and-wage-inequality-in-the-mexican-2pqy4boapb.pdf

Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector: Theory and Evidence from an Exchange-Rate Shock

This paper examines whether there is a threshold above which …nancial development no longer has a positive eect on economic growth. We use dierent empirical approaches to show that there can indeed be "too much" …nance. In particular, our results suggest that …nance starts having a negative eect on output growth when credit to the private sector reaches 100% of GDP. We show that our results are consistent with the "vanishing eect" of …nancial development and that they are not driven by output volatility, banking crises, low institutional quality, or by dierences in bank regulation and supervision.

Too much finance

The literature on the benefits and costs of financial globalization for developing countries has exploded in recent years, but along many disparate channels with a variety of apparently conflicting results. There is still little robust evidence of the growth benefits of broad capital account liberalization, but a number of recent papers in the finance literature report that equity market liberalizations do significantly boost growth. Similarly, evidence based on microeconomic (firm- or industry-level) data shows some benefits of financial integration and the distortionary effects of capital controls, but the macroeconomic evidence remains inconclusive. At the same time, some studies argue that financial globalization enhances macroeconomic stability in developing countries, but others argue the opposite. This paper attempts to provide a unified conceptual framework for organizing this vast and growing literature, particularly emphasizing recent approaches to measuring the catalytic and indirect benefits to financial globalization. Indeed, it argues that the indirect effects of financial globalization on financial sector development, institutions, governance, and macroeconomic stability are likely to be far more important than any direct impact via capital accumulation or portfolio diversification. This perspective explains the failure of research based on cross-country growth regressions to find the expected positive effects of financial globalization and points to newer approaches that are potentially more useful and convincing.

http://prasad.dyson.cornell.edu/doc/research/imfsp200836a.pdf

Financial Globalization: A Reappraisal

Tax base variability and procyclical fiscal policy in developing countries

1. The Pain of Original Sin

This paper updates our previous work on the level and evolution of original sin. It shows that while the number of countries that issue local-currency debt in international markets has increased in the past decade, this improvement has been quite modest. Although we find that countries have been borrowing at home, thanks to deepening domestic markets, we document that foreign participation in these markets is more limited than what is usually assumed. The paper shows that the recent decline of currency mismatches and the consequent ability to conduct countercyclical macroeconomic policies is due to lower net debt (abstinence) and not to redemption from original sin. We conclude that original sin continues to make financial globalization unattractive and developing countries have opted for abstinence because foreign currency debt is too risky. The promised paradise of financial globalization will need to wait for redemption from original sin.

Redemption or Abstinence? Original Sin, Currency Mismatches and Counter-Cyclical Policies in the New Millenium

Credit supplied by the banking sector is the most important funding source for firms and households in Latin America and the Caribbean. Unfortunately, credit is scarce, costly and volatile. Without deep and stable credit markets, the region will be hard pressed to achieve high and sustainable growth rates and combat poverty. Given the importance of banking to growth and prosperity, the Inter-American Development Bank has made this sector the focus of its 2005 Report on Economic and Social Progress in Latin America. The Report analyzes the three main characteristics of bank credit--scarcity, expense and volatility--and makes policy recommendations.

Unlocking Credit: The Quest for Deep and Stable Bank Lending

There is a large literature showing that fiscal policy is either acyclical or countercyclical in industrial countries and procyclical in developing countries. Most of this literature is based on OLS regressions that focus on the correlation between a fiscal variable (usually the budget balance or expenditure growth) and either GDP growth or some measure of the output gap. This paper argues that such a methodology does not permit the identification of the effect of the business cycle on fiscal policy and hence cannot be used to estimate policy reaction functions. The paper proposes a new instrument for GDP growth and shows that, once GDP growth is properly instrumented, procyclicality tends to disappear.

Procyclicality or Reverse Causality

In China local public debt issuance between 2006 and 2013 crowded out investment by private manufacturing firms by tightening their funding constraints, while it did not affect state-owned and foreign firms. Using novel data for local public debt issuance, we establish this result in three ways. First, local public debt is inversely correlated with the city-level investment ratio of domestic private manufacturing firms. Instrumental variable regressions indicate that this link is causal. Second, local public debt has a larger negative effect on investment by private firms in industries more dependent on external funding. Finally, in cities with high government debt, firm-level investment is more sensitive to internal funding, also when this sensitivity is estimated jointly with the firm's likelihood of being credit-constrained. Altogether these results suggest that, by curtailing private investment, the massive public debt issuance associated with the post-2008 fiscal stimulus sapped long-term growth prospects in China.

/pdf/local-crowding-out-in-china-185s4p1s9e.pdf

Ugo Panizza

Papers

1. The Pain of Original Sin

Redemption or Abstinence? Original Sin, Currency Mismatches and Counter-Cyclical Policies in the New Millenium

Unlocking Credit: The Quest for Deep and Stable Bank Lending

Procyclicality or Reverse Causality

Local Crowding Out in China