Public procurement in developing countries

Public procurement in developing countries

by Andres Gonzalez-Lira

Creating effective institutions that regulate the way public authorities purchase goods, works, and services is critical to promote a level playing field for all businesses and ensuring efficient resource allocation. This research project aims to study the role of different institutional features in improving economic efficiency.

Multiproduct firms and markup

Multiproduct firms and markup

by Chaewon Baek & Todd Messer

Many studies in international trade and macroeconomics typically assume that all firms produce only a single product. However, as emphasized by Hottman et al. (2016), multi-product firms actually account for a significant portion of sales and tend to be large. This project aims to investigate the implications of relaxing the assumption of single-product firms. In particular, we examine the importance of product scope in explaining how markups are determined and distributed across firms. First, theoretically, we argue that the definition of a firm-level markup is no longer obvious when one relaxes the assumption of single-product firms. Markups can then vary due to how product scope affects pricing decisions by product. Second, we test the theory in the data by matching bar code level sales to firm production data in order to estimate how markups are related to product scope. Our results have important implications in explaining declining competition since the 1980s and patterns of international trade.

Informality, Commuting & Urban transport improvements: evidence from Mexico City

Informality, Commuting & Urban transport improvements: evidence from Mexico City

by Roman Zarate

This paper assesses the impact of urban transit improvements on labor allocation between informal and formal firms in Mexico City. I exploit the construction of new subway lines and a Bus Rapid Transit (BRT) system to study the relationship between commuting costs and informality rates. An important characteristic of labor markets in developing countries is the presence of informal, household-run businesses that employ more than 60% of the total workforce, and are substantially less productive than formal firms. This study explores a new mechanism that can explain the prevalence of informal workers: the high commuting costs within cities. In the second part, I develop a quantitative urban model to measure the welfare effects of these improvements accounting for this reallocation across sectors and estimate optimal policies to attract more workers to formal firms.

Labor Effects of Multinational Firms Entry

Labor Effects of Multinational Firms Entry

by Isabela Manelici & Jose P. Vasquez

This project studies the impact of the entry of multinational corporations (MNCs) on worker outcomes using administrative data from Costa Rica. Policy makers from developed and developing countries alike and at all levels of government compete for the attraction of superstar firms (typically MNCs) through large economic incentives. In return, they expect an improvement in the labor market conditions of their jurisdiction. Despite the pervasiveness of such incentives, there is relatively little worker-level evidence on the impact of MNCs on the labor market and, in particular, on the distribution of labor earnings.  Our project would contribute to the literature by providing evidence on who are the winners, the losers, and how the impacts of MNC entry are distributed across different worker groups (by education, occupation, initial position in the income distribution etc.).

The Productivity Effects of Joining Multinational Supply Chains

The Productivity Effects of Joining Multinational Supply Chains

by Isabela Manelici and Jose-P. Vasquez

” Can local firms boost their productivity by supplying to multinational firms (MNCs)? The answer to this question has, so far, proven elusive. We make progress by using an administrative dataset that records all firm-to-firm transactions within Costa Rica.

Topics

Development

Initiatives

International Trade & Development

Financial Intermediation in International Macroeconomics

Financial Intermediation in International Macroeconomics

by Emily Eisner

This project aims to understand the role of value-at-risk (VaR) constraints and bank risk-taking behavior in determining entry and exit into global asset markets. The model informs the aggregate risk of the global financial markets and informs macroeconomic dynamics that depend on financial frictions in intermediation. The project develops an open economy model of financial markets based on the closed economy model in Coimbra and Rey (2017). In the extended model, financial intermediaries, which are heterogeneous in their VaR constraint as in Coimbra and Rey (2017), have an opportunity to invest in foreign assets. The model predicts the risk-taking composition and international asset composition of financial intermediaries under different interest rate environments.

Topics

Initiatives