Brazilian international and inter-state trade flows: an exploratory analysis using the gravity model

Recent efforts toward a world with freer trade, like WTO/GATT or regional Preferential Trade Agreements(PTAs), were put in doubt after McCallum's(1995) finding of a large border effect between US and Canadian provinces. Since then, there has been a great amount of research on this topic employing the gravity equation. This dissertation has two goals. The first goal is to review comprehensively the recent literature about the gravity equation, including its usages, econometric specifications, and the efforts to provide it with microeconomic foundations. The second goal is the estimation of the Brazilian border effect (or 'home-bias trade puzzle') using inter-state and international trade flow data. It is used a pooled cross-section Tobit model. The lowest border effect estimated was 15, which implies that Brazilian states trade among themselves 15 times more than they trade with foreign countries. Further research using industry disaggregated data is needed to qualify the estimated border effect with respect to which part of that effect can be attributed to actual trade costs and which part is the outcome of the endogenous location problem of the firm.

Non-durable consumption and real-estate prices in Brazil: panel-data analysis at the state level

Housing is an important component of wealth for a typical household in many countries. The objective of this paper is to investigate the effect of real-estate price variation on welfare, trying to close a gap between the welfare literature in Brazil and that in the U.S., the U.K., and other developed countries. Our first motivation relates to the fact that real estate is probably more important here than elsewhere as a proportion of wealth, which potentially makes the impact of a price change bigger here. Our second motivation relates to the fact that real-estate prices boomed in Brazil in the last five years. Prime real estate in Rio de Janeiro and São Paulo have tripled in value in that period, and a smaller but generalized increase has been observed throughout the country. Third, we have also seen a recent consumption boom in Brazil in the last five years. Indeed, the recent rise of some of the poor to middle-income status is well documented not only for Brazil but for other emerging countries as well. Regarding consumption and real-estate prices in Brazil, one cannot imply causality from correlation, but one can do causal inference with an appropriate structural model and proper inference, or with a proper inference in a reduced-form setup. Our last motivation is related to the complete absence of studies of this kind in Brazil, which makes ours a pioneering study. We assemble a panel-data set for the determinants of non-durable consumption growth by Brazilian states, merging the techniques and ideas in Campbell and Cocco (2007) and in Case, Quigley and Shiller (2005). With appropriate controls, and panel-data methods, we investigate whether house-price variation has a positive effect on non-durable consumption. The results show a non-negligible significant impact of the change in the price of real estate on welfare consumption), although smaller then what Campbell and Cocco have found. Our findings support the view that the channel through which house prices affect consumption is a financial one.

The effects of state ownership in the internationalization of emerging multinationals

Esta tese é um compendio de três trabalhos de pesquisa que visam analisar o efeito da participação do estado na estrutura de propriedade das Multinacionais de Países Emergentes (EMNEs). A participação do estado como acionista é um fenómeno que pode trazer novas contribuições no âmbito da governança corporativa, administração da empresa e a tomada de decisões estratégicas. Os estudos aqui inclusos permitem identificar, a partir de momentos, diferentes, até que ponto o estado, na posição de proprietário da EMNE, pode impactar a mesma. Os trabalhos vão desde os mecanismos de escolha de firmas nas quais investir ate o impacto no ritmo de internacionalização das empresas, explicando também os mecanismos que o estado usa para ganhar aceso à tomada de decisões por meio de mudanças na governança corporativa

The effect of financiaI repression & enforcernent on entrepreneurship and economic deveIopment

This paper studies the effect of financiaI repression and contract enforcement on entrepreneurship and economic development. We construct and solve a general equilibrium mo deI with heterogeneous agents, occupational choice and two financiaI frictions: intermediation costs and financiaI contract enforcement. Occupational choice and firm size are determined endogenously, and depend on agent type (wealth and ability) and the credit market frictions. The mo deI shows that differences across countries in intermediation costs and enforcement generate differences in occupational choice, firm size, credit, output and inequality. Counterfactual experiments are performed for Latin American, European, transition and high growth Asian countries. We use empirical estimates of each country's financiaI frictions, and United States values for all other parameters. The results allow us to isolate the quantitative effect of these financiaI frictions in explaining the performance gap between each country and the United States. The results depend critically on whether à general equilibrium factor price effect is operative, which in turn depends on whether financiaI markets are open or closed. This yields a positive policy prescription: If the goal is to maximize steady-state efficiency, financial reforms should be accompanied by measures to increase financiaI capital mobility.

Time-dependent or state-dependent pricing? Evidence from firms’ response to inflation shocks

This paper proposes a test for distinguishing between time-dependent and state-dependent pricing based on whether the timing of pricing changes is affected by realized or expeted inflation. Using Brazilian data and exploring a large discrepancy between realized and expected inflation in 2002-3, we obtain a strong relation between expected inflation and duration of price spells, but little effect of inflation shocks on the frequency of price adjustment. The results thus support models with timedependent pricing, where the timing for following changes is optimally chosen whenever firms adjust prices

Betting on winner: the effect of local elections on corporate political activity outcomes

How can managers successfully access political rents by way of corporate political strategies (CPA)? Existing research has suggested several endogenous factors that correlate with CPA outcomes. I offer a more robust solution to this problem. Drawing on insights from the perspective of CPA as exchanges between firms and political decision-makers, and from the special interest politics of political economy, I develop and test a causal mechanism that links local elections, legislative bargaining and access to political rents at the national level. I conducted a natural experiment using regression discontinuity design and propensity score matching in municipal elections in Brazil to show that firms enjoy superior access to subsidized financing from the state-owned national development bank (BNDES) when they decide to invest in municipalities whose winning mayoral candidate is coalition-aligned with the national ruler. This effect fades away fades away as the level of competition in the local election decreases. The evidence implies that when managers bet on national coalition-aligned winners in close local elections, they positively affect CPA outcomes. I extend the exchange-based typology of corporate political strategies by offering a novel possibility of targeting voters with financial inducements, which I call a private local development strategy. Finally, these results show that firms exchange their project-execution capabilities for superior access to subsidized financing.