The Effects of government spending on the distribution of consumption

We study the effects of government spending on the distribution of consumption. We find a substantial degree of heterogeneity: consumption increases at the bottom and falls at the top of the distribution, implying a significant temporary reduction of consumption inequality. The effects of the shock display correlations of around -0.7/-0.9 with the percentage of stockholders within the decile. We interpret the results as in line and yielding support to models of limited participation where, while the Ricardian equivalence holds for rich households, for poor household, with no access to capital markets, the Keynesian multiplier is at work.

Fiscal foresight, forecast revisions and the effects of government spending in the open economy

This paper investigates the effects of government spending on the real exchange rate and the trade balance in the US using a new VAR identification procedure based on spending forecast revisions. I find that the real exchange rate appreciates and the trade balance deteriorates after a government spending shock, although the effects are quantitatively small. The findings broadly match the theoretical predictions of the standard Mundell-Fleming model and differ substantially from those existing in literature. Differences are attributable to the fact that, because of fiscal foresight, the government spending is non-fundamental for the variables typically used in open economy VARs. Here, on the contrary, the estimated shock is fundamental.

Globalization and the Symphony of the New (Post-modern) World: From Westphalia to Maastricht…passing by Washington DC

Taking on the challenge of understanding and explaining the Symphony of (today’s) New World in realistic terms (not realist), this essay aims to analyse the Post-Cold war era by devising a multi-conceptual framework that combines different theoretical contributions not yet linked in a fully explanatory way. This paper suggests two inter-related analytical contexts (or background melodies) to understand Dvorak´s "New World”. First, the socio-economic structural context that falls under the controversial category of Globalization and, second, the post-modern political structural context that is built on Robert Cooper’s threefold analysis (Pre-modern, Modern and Post-modern) of today’s world [Cooper, R: 1997, 1999]. Lastly, the closing movement (allegro con fuoco) enters the normative arena to assess American foreign policy options in the light of the theoretical framework devised in the first part of the essay.

Spain in Europe 2004-2008

In March of 2004, the Observatory of European Foreign Policy published a special monograph about Spain in Europe (1996-2004) in digital format. The objective of the monograph was to analyse Spain’s foreign policy agenda and strategy during the period of José María Aznar’s presidency. As the title suggests, one of the initial suppositions of the analysis is the Europeanization of Spanish foreign activities. Is that how it was? Did Aznar’s Spain see the world and relate to it through Brussels? The publication was well received, considering the number of visits received and above all the institutions which asked to link the publication to their web pages. Among these, the EUobserver published the introduction to the piece in English titled Aznar: thinking locally, acting in Europe (described by the EUobserver as a paper of utmost importance). The fact that the elections were held three days after the tragic events of the 11th of March dramatically increased interest in Spain and the implications for Europe. This publication is the second of its type, in this case analysing the period of the Zapatero government (2004-2008). Once again the starting premise (the Europeanization of the agenda and the methods employed) has been considered by the analysts. And once again the articles collected in this publication serve to “triangulate” the analysis. Spain and Europe are two vertices (more or less distant, in essence and in form) which the authors handle in their analysis of the case (third vertex).

Behavioural Flexibility: evolutionary past and its role in a changing world

A través de la historia de la vida, gran parte de los organismos han desarrollado estrategias para responder a un mundo en constante cambio. Hoy en día, las actividades humanas producen cambios ambientales a una velocidad sin precedentes, lo cual se traduce en grandes desafíos para la persistencia de biodiversidad. Esta investigación evalúa las respuesta de los animales a los cambios ambientales enfocándose en la flexibilidad del comportamiento como estrategia adaptativa. En una primera aproximación a una escala evolutiva, se otorgan evidencias del vínculo hasta ahora tenue entre la cognición e historias de vida, entregando un claro apoyo a la relación entre longevidad, vida reproductiva y el tamaño del cerebro en mamíferos. La longevidad es el centro de muchas hipótesis respecto a las ventajas de desarrollar un cerebro grande, como por ejemplo en la hipótesis del buffer cognitivo y las respuestas flexibles frente a nuevos ambientes. En un segundo nivel, se abordan factores extrínsecos e intrínsecos que podrían explicar las diferencias individuales en innovación, un componente clave en la flexibilidad del comportamiento. Por medio de una aproximación experimental, se evalúan potenciales escenarios que podrían conducir a consistentes diferencias individuales en uno de los principales factores subyacentes a la innovación (i.e. la motivación), y el potencial control endocrino sobre estos escenarios. Posteriormente, con el objetivo de evaluar la respuesta de los animales frente a los cambios ambientales actuales, se explora la respuesta de los animales frente a una de las actividades humanas mas disruptivas sobre los ecosistemas, la urbanización. Por medio de un analisis filogenetico comparativo a nivel global en aves se abordan los mecanismos implicados en la perdida de biodiversidad observada en ambientes urbanos. Los resultados entregan evidencias sobre la importancia de procesos de dispersión local junto con el papel clave de los rasgos de historia de vida, pero en un sentido diferente al clasicamente pensado. Finalmente por medio de una revisión bibliográfica se entregan evidencias teóricas y empíricas que respaldan el rol clave de la flexibilidad del comportamiento en confrontar los desafíos de una vida urbana. La integración de estos resultados muestra cómo el pasado evolutivo contribuye a hacer frente a los retos ambientales actuales, y pone de relieve posibles consecuencias ante un planeta más cambiante que nunca.

Government and the distribution of skills

Individuals' life chances in the future will very much depend on how we invest in our children now. An optimal human capital model would combine a high mean with minimal variance of skills. It is well-established that early childhood learning is key to adult success. The impact of social origins on child outcomes remains strong, and the new role of women poses additional challenges to our conventional nurturing approach to child development. This paper focuses on skill development in the early years, examining how we might best combine family inputs and public policy to invest optimally in our future human capital. I emphasize three issues: one, the uneven capacity of parents to invest in children; two, the impact of mothers' employment on child outcomes; and three, the potential benefits of early pre-school programmes. I conclude that mothers' intra-family bargaining power is decisive for family investments and that universal child care is key if our goal is to arrive at a strong mean with minimal variance.

Sovereign Risk, Anonymous Markets, and the Effects of Globalization

The goal of this paper is to study the e¤ects of globalization on the workings of financial markets. We adopt a "technological" view of globalization, which consists of an exogenous reduction in the cost of shipping goods across di¤erent regions of the world. We model financial markets where agents anonymously trade securities issued by every other agent in the world. In the absence of frictions, we show how globalization creates trade opportunities among residents of different regions of the world, thereby raising welfare. In the presence of sovereign risk, however, there emerge two crucial interactions between trade among residents within a region and trade among residents of di¤erent regions. First, the more residents within a region trade with each other, the more they can trade with residents of other regions. Second, the possibility of trade with residents of other regions sometimes leads a government to not enforce payments by its residents, destroying trade opportunities among residents within the region. The net effect on welfare of this process of creation and destruction of trade opportunities is ambiguous. We argue that there are no policies governments can take to avoid the negative effects of globalization on trade among domestic residents. In a dynamic extension, we analyze how our results are a¤ected by reputational considerations.

Policy Making in Divided Government. A Pivotal Actors Model with Party Discipline.

This article presents a formal model of policy decision-making in an institutional framework of separation of powers in which the main actors are pivotal political parties with voting discipline. The basic model previously developed from pivotal politics theory for the analysis of the United States lawmaking is here modified to account for policy outcomes and institutional performances in other presidential regimes, especially in Latin America. Legislators' party indiscipline at voting and multi-partism appear as favorable conditions to reduce the size of the equilibrium set containing collectively inefficient outcomes, while a two-party system with strong party discipline is most prone to produce 'gridlock', that is, stability of socially inefficient policies. The article provides a framework for analysis which can induce significant revisions of empirical data, especially regarding the effects of situations of (newly defined) unified and divided government, different decision rules, the number of parties and their discipline. These implications should be testable and may inspire future analytical and empirical work.

Government Spending and Re-election

Does additional government spending improve the electoral chances of incumbent political parties? This paper provides the first quasi-experimental evidence on this question. Our research design exploits discontinuities in federal funding to local governments in Brazil around several population cutoffs over the period 1982-1985. We find that extra fiscal transfers resulted in a 20% increase in local government spending per capita, and an increase of about 10 percentage points in the re-election probability of local incumbent parties. We also find positive effects of the government spending on education outcomes and earnings, which we interpret as indirect evidence of public service improvements. Together, our results provide evidence that electoral rewards encourage incumbents to spend part of additional revenues on public services valued by voters, a finding in line with agency models of electoral accountability.

What do women do? World population growth and fertility patterns, 1960-2000

In this paper we attempt to describe the general picture reasons behind the world population explosion during the 20th century. In general we comment that if, according to some, at the end of the 20th century there were too many people, this was has a consequence of scientific innovation, circulation of information, and economic growth, leading to a dramatic improvement in life expectancies. Nevertheless, a crucial variable shaping differences in demographic growth is fertility. In this paper we identify as important exogenous variables affecting fertility female education levels, infant mortality, and racial identity and diversity. It is estimated that three additional years of schooling for mothers leads on average (at the world level ) to one child less per couple. Even if we can identify a worldwide trend towards convergence in demographic trends, the African case needs to be given more attention, not only because of its different demographic patterns, but also because this is the continent where the worldwide movement towards a higher quality of life has not yet been achieved for an important share of the world's population.

Fiat Money, Intrinsic Properties, and Government Transaction Policy

Why do people coordinate on the use of valueless pieces of paper as generally accepted money? A possible answer is that these objects have intrinsic properties that make them better candidates to be used as media of exchange. Another answer stresses the fact that unconvertible fiat money will not easily appear unless there is a centralized institution that favors its use. The main objective of the paper is to analyze these questions. In order to do this, we take a model of commodity money in which fiat money does not play any significant role and modify it to examine under which circumstances fiat money might come to circulate as medium of exchange. Some of the results obtained from the model differ in a rather substantial way from previous related literature.

The world distribution of income (estimated from individual country distributions)

We estimate the world distribution of income by integrating individualincome distributions for 125 countries between 1970 and 1998. Weestimate poverty rates and headcounts by integrating the density functionbelow the $1/day and $2/day poverty lines. We find that poverty ratesdecline substantially over the last twenty years. We compute povertyheadcounts and find that the number of one-dollar poor declined by 235million between 1976 and 1998. The number of $2/day poor declined by 450million over the same period. We analyze poverty across different regionsand countries. Asia is a great success, especially after 1980. LatinAmerica reduced poverty substantially in the 1970s but progress stoppedin the 1980s and 1990s. The worst performer was Africa, where povertyrates increased substantially over the last thirty years: the number of$1/day poor in Africa increased by 175 million between 1970 and 1998,and the number of $2/day poor increased by 227. Africa hosted 11% ofthe world s poor in 1960. It hosted 66% of them in 1998. We estimatenine indexes of income inequality implied by our world distribution ofincome. All of them show substantial reductions in global incomeinequality during the 1980s and 1990s.

Are rules-based government programs shielded from special-interest politics? Evidence from revenue-sharing transfers in Brazil

Manipulation of government finances for the benefit of narrowly defined groups is usuallythought to be limited to the part of the budget over which politicians exercise discretion inthe short run, such as earmarks. Analyzing a revenue-sharing program between the centraland local governments in Brazil that uses an allocation formula based on local population estimates,I document two main results: first, that the population estimates entering the formulawere manipulated and second, that this manipulation was political in nature. Consistent withswing-voter targeting by the right-wing central government, I find that municipalities withroughly equal right-wing and non-right-wing vote shares benefited relative to opposition orconservative core support municipalities. These findings suggest that the exclusive focus ondiscretionary transfers in the extant empirical literature on special-interest politics may understatethe true scope of tactical redistribution that is going on under programmatic disguise.

The skill bias of world trade

Under plausible assumptions about preferences and technology, the model in this papersuggests that the entire volume of world trade matters for wage inequality. Therefore,trade integration, even among identical countries, is likely to increase the skill premium.Further, we argue that empirical evidence of a falling relative price of skill-intensive goods can be reconciled with the fast growth of world trade and that the intersectoral mobility of capital exacerbates the effect of trade on inequality. We provide new empirical evidence in support of our results and a quantitative assessment of the skill bias of world trade.

Social capital, government expenditures, and growth

Countries with greater social capital have higher economic growth. We show that socialcapital is also highly positively correlated across countries with government expenditureon education. We develop an infinite-horizon model of public spending and endogenousstochastic growth that explains both facts through frictions in political agency whenvoters have imperfect information. In our model, the government provides servicesthat yield immediate utility, and investment that raises future productivity. Voters aremore likely to observe public services, so politicians have electoral incentives to underprovidepublic investment. Social capital increases voters' awareness of all governmentactivity. As a consequence, both politicians' incentives and their selection improve.In the dynamic equilibrium, both the amount and the efficiency of public investmentincrease, permanently raising the growth rate.