11-01. Gutiérrez, E. and K. Teshima. "Import Competition and Environmental Performance: Evidence from Mexican Plant-level and Satellite Imagery Data"

Abstract: We investigate the impact of international trade, in particular import competition, on the environment. We tackle this question from a new perspective, i.e., whether trade liberalization affects production plants' environmental performance by changing incentives of firms to undertake two types of investment: investment in the environment and in efficient energy use, and investment in technology in general. Identifying such effects empirically has been challenging. Not only is it unusual to obtain direct information on plants' environmental performance as well as plants' effort towards environmental protection; it is also difficult to find an exogenous source of variation in tariffs on goods produced by plants. We overcome these difficulties by constructing a unique combination of Mexican plant-level data and satellite imagery data, thus providing evidence of the effects of import competition on three direct measures: energy efficiency in terms of electricity use; investment at the plant level in efficient energy and the environment; and measures of pollution around plants' geographic location. We use tariff changes due to free trade agreements as shocks to import competition, which are arguably less endogenous than unilateral tariff reduction and have been shown to have no systematic correlation with initial plant-level characteristics. The key finding is that the reduction of tariffs on goods produced by Mexican plants induced them to increase efficiency in energy use, thus allowing them to reduce pollution and in turn also reduce direct investment in efficient energy and environmental protection. The results suggest that even when detailed data on environmental effort at the plant level are available, caution should be taken when trying to measure the effects of openness to trade on environmental performance, as trade is also likely to change the firms' incentive to invest in technology in general, which may indirectly be more environmentally friendly.

11-02. Gomberg, A. "Vote Revelation: Empirical Characterization of Scoring Rules"

Abstract: In this paper I consider choice correspondences defined on an extended domain: the decisions are assumed to be taken not by individuals, but by committees and, in addition to the budget sets, committee composition is observable and variable. For the case of varying committees choosing over a fixed set of two alternatives I provide a full characterization of committee choice structures that may be rationalized with sincere scoring. For the general case of multiple alternatives a necessary implication of choice by sincere scoring is provided.

11-03. Gutiérrez, E., L. Juárez, and A. Rublí. "Grandfathers and Grandsons: Should Cash Transfers be Targeted to Women?"

Abstract: This paper uses the introduction of an unconditional cash transfer to older adults in Mexico City to test whether the gender of the person who receives money transfers affects household expenditures and children’s school enrollment. We conclude, as most of the existing literature on this topic has, that households cannot be treated as unitary entities. Some specific results, however, differ from the literature. While money in the hands of women has a higher impact on household expenditures on children and education, it does not affect the probability that children will enroll in school. On the other hand, money distributed to men does not increase schooling expenditures, but it does have a strong and positive effect on children’s school enrollment. We conclude that targeting cash transfers to women may not be an optimal strategy when they are aimed at improving some specific children’s outcomes.

11-04. Pratap, S., and C. Urrutia. "Financial Frictions and Total Factor Productivity: Accounting for the Real Effects of Financial Crises"

Abstract: Financial crises in emerging economies are accompanied by a large fall in total factor productivity. We explore the role of financial frictions in exacerbating the misallocation of resources and explaining this drop in TFP. We build a two-sector model of a small open economy with a working capital constraint to the purchase of intermediate goods. The model is calibrated to Mexico before the 1995 crisis and subject to an unexpected shock to interest rates. The financial friction generates an endogenous fall in TFP and output and can explain more than half of the fall in TFP and 74 percent of the fall in GDP per worker.

11-05. Lama, R., and C. Urrutia. "Employment Protection and Business Cycles in
Emerging Economies"

Abstract: We build a small open economy, real business cycle model with labor market frictions to evaluate the role of employment protection in shaping business cycles in emerging economies. The model features matching frictions and an endogenous selection effect by which inefficient jobs are destroyed in recessions. In a quantitative version of the model calibrated to the Mexican economy we find that reducing separation costs to a level consistent with developed economies would reduce output volatility by 15 percent. We also use the model to analyze the Mexican crisis episode of 2008 and conclude that an economy with lower separation costs would have experienced a smaller drop in output and in measured total factor productivity with no significant change in aggregate employment.

11-06. Fernández A., and F. Meza "Labor, Output and Consumption in Business Cycle Models of Emerging Economies: A Comment"

Abstract: Motivated by the fact that, over the business cycle, labor dynamics in emerging economies differ in nontrivial ways from those observed in developed economies, we assess the relative importance of trend shocks in emerging economies in the business cycle model of Aguiar and Gopinath (2007) when labor data is explicitly taken into account. We study Mexico and Canada as representatives of emerging and developed economies, respectively. We find for Mexico that, in the benchmark case with Cobb-Douglas preferences, the income effect on consumption of trend shocks is too strong, delivering countercyclical and counterfactual fluctuations in employment. The model faces a trade-off between, on the one hand, having sizeable growth shocks, thereby having a good match in terms of relatively high consumption volatility, and, on the other, having procyclical employment dynamics. This is remedied when both quasilinear preferences are assumed and the identification strategy explicitly takes into consideration labor dynamics. In this case trend shocks continue to be relatively stronger in emerging economies. Additionally, we find that differences in labor dynamics across emerging and developing economies are associated with the relatively large informal labor sector in emerging economies. It is in this dimension, when trying to match the dynamics of formal employment, that we find less evidence supporting an important role of trend shocks as being the main driving force of business cycles in emerging economies.

11-07. Martinelli C. "Ignorance and Naivete in Large Elections"

Abstract: We consider a two-alternative election with voluntary participation and nearly common interests in which voters may acquire information about which alternative is best. Voters may be rational or naive in the sense of being able, or not, to update their beliefs about the state of the world conditioning on the behavior of others. We show that there is full information equivalence if all voters are rational and there is arbitrarily cheap information.  Electoral participation converges to zero if and only if information is costly for all voters. Per contra, if some voters are naive, participation remains bounded way from zero, and full information equivalence requires that information is free for some voters. Increasing the number of naive voters is bad for information aggregation if naive voters are few, but may be good if there are already many.