Faculty Working Papers

Levy-Yeyati, E. & Montane, M., 2020. Specificity of Human Capital: An Occupation Space Based on Job-to-Job Transitions.Abstract
Using job transition data from Argentina’s Household Survey, we document the extent to which human capital is specific to occupations and activities. Based on workers’ propensity to move between occupations/industries, we build Occupation and Industry Spaces to illustrate job similarities, and we compute an occupation and industry similarity measures that, in turn, we use to explain wage transition dynamics. We show that our similarity measures influence positively post-transition wages. Inasmuch as wages capture a worker´s marginal productivity and this productivity reflects the degree to which a worker matches the job’s skill demand, our results indicate that a worker´s human capital is specific to both occupation and activity: closer occupations share similar skill demands and task composition (in other words, demand similar workers) and imply a smaller human capital loss in the event of a transition.
Revised May 2020.
Ganguli, I., Hausmann, R. & Viarengo, M., 2020. Gender Differences in Professional Career Dynamics: New Evidence from a Global Law Firm.Abstract

We examine gender gaps in career dynamics in the legal sector using rich panel data from one of the largest global law firms in the world. The law firm studied is representative of multinational law firms and operates in 23 countries. The sample includes countries at different stages of development. We document the cross-country variation in gender gaps and how these gaps have changed over time. We show that while there is gender parity at the entry level in most countries by the end of the period examined, there are persistent raw gender gaps at the top of the organization across all countries. We observe significant heterogeneity among countries in terms of gender gaps in promotions and wages, but the gaps that exist appear to be declining over the period studied. We also observe that women are more likely to report exiting the firm for family and work-life balance reasons, while men report leaving for career advancement. Finally, we show that various measures of national institutions and culture appear to play a role in the differential labor-market outcomes of men and women.

Hausmann, R., Ganguli, I. & Viarengo, M., 2014. Marriage, Education, and Assortative Mating in Latin America. Applied Economic Letters , 21 (12) , pp. 806-811. Publisher's VersionAbstract
In this article, we establish facts related to marriage and education in Latin American countries. Using census data from IPUMS International, we show how marriage and assortative mating patterns have changed from 1980 to 2000 and how the patterns in Latin America compare to the United States. We find that in Latin American countries, highly educated individuals are less likely to be married than the less educated, and the pattern is stronger for women. We also show that while it has been increasing over time, there is less positive assortative mating in Latin America than in the United States.
Hausmann, R., Ganguli, I. & Viarengo, M., 2014. Marriage, Education, and Assortative Mating in Latin America. Applied Economic Letters , 21 (12) , pp. 806-811. Publisher's VersionAbstract
In this article, we establish facts related to marriage and education in Latin American countries. Using census data from IPUMS International, we show how marriage and assortative mating patterns have changed from 1980 to 2000 and how the patterns in Latin America compare to the United States. We find that in Latin American countries, highly educated individuals are less likely to be married than the less educated, and the pattern is stronger for women. We also show that while it has been increasing over time, there is less positive assortative mating in Latin America than in the United States.
Hausmann, R., Ganguli, I. & Viarengo, M., 2014. Closing the gender gap in education: What is the state of gaps in labour force participation for women, wives and mothers?. International Labor Review , 153 (2) , pp. 173-207. Publisher's VersionAbstract

The educational gender gap has closed or reversed in many countries. But what of gendered labour market inequalities? Using micro‐level census data for some 40 countries, the authors examine the labour force participation gap between men and women, the “marriage gap” between married and single women's participation, and the “motherhood gap” between mothers' and non‐mothers' participation. They find significant heterogeneity among countries in terms of the size of these gaps, the speed at which they are changing, and the relationships between them and the educational gap. But counterfactual regression analysis shows that the labour force participation gap remains largely unexplained by the other gaps.

Hausmann, R., Ganguli, I. & Viarengo, M., 2018. Career dynamics and gender gaps among employees in the microfinance sector. Publisher's VersionAbstract

While microfinance institutions (MFIs) are increasingly important as employers in the developing world, there is little micro-level evidence on gender differences among MFI employees and MFIs’ relation to economic development.

We use a unique panel dataset of employees from Latin America’s largest MFI to show that gender gaps favouring men for promotion exist primarily in the sales division, while there is a significant gender wage gap in the administrative division. Among loan officers in the sales division, the gender gap in promotion and wages reverses.

Finally, female employees tend to work with clients with better loan terms and a history of loans with the institution.

Hausmann, R., Nedelkoska, L. & Noor, S., 2020. You Get What You Pay for: Sources and Consequences of the Public Sector Premium in Albania and Sri Lanka.Abstract

We study the factors behind the public sector premium in Albania and Sri Lanka, the group heterogeneity in the premium, the sources of public sector wage compression, and the impact of this compression on the way individuals self-select between the public and the private sector. Similar to other countries, the public sectors in Albania and Sri Lanka pay higher wages than the private sector, for all but the most valued employees. While half of the premium of Sri Lanka and two-thirds of it in Albania are explained by differences in the occupation-education-experience mix between the sectors, and the level of private sector informality, the unexplained part of the premium is significant enough to affect the preferences of working in the public sector for different groups. We show that the compressed distributions of public sector wages and benefits create incentives for positive sorting into the public sector among most employees, and negative sorting among the most productive ones.

Listen to a podcast with author Ljubica Nedelkoska as she discusses the factors behind public sector wage premiums. 

Hausmann, R., et al., 2019. A Roadmap for Investment Promotion and Export Diversification: The Case of Jordan.Abstract

Jordan faces a number of pressing economic challenges: low growth, high unemployment, rising debt levels, and continued vulnerability to regional shocks. After a decade of fast economic growth, the economy decelerated with the Global Financial Crisis of 2008-09. From then onwards, various external shocks have thrown its economy out of balance and prolonged the slowdown for over a decade now. Conflicts in neighboring countries have led to reduced demand from key export markets and cut off important trade routes. Foreign direct investment, which averaged 12.7% of gross domestic product (GDP) between 2003-2009, fell to 5.1% of GDP over the 2010-2017. Regional conflicts have interrupted the supply of gas from Egypt – forcing Jordan to import oil at a time of record prices, had a negative impact on tourism, and also provoked a massive influx of migrants and refugees. Failure to cope with 50.4% population growth between led to nine consecutive years (2008-2017) of negative growth rates in GDP per capita, resulting in a cumulative loss of 14.0% over the past decade (2009-2018). Debt to GDP ratios, which were at 55% by the end of 2009, have skyrocketed to 94%.

Over the previous five years Jordan has undertaken a significant process of fiscal consolidation. The resulting reduction in fiscal impulse is among the largest registered in the aftermath of the Financial Crises, third only to Greece and Jamaica, and above Portugal and Spain. Higher taxes, lower subsidies, and sharp reductions in public investment have in turn furthered the recession. Within a context of lower aggregate demand, more consolidation is needed to bring debt-to-GDP ratios back to normal. The only way to break that vicious cycle and restart inclusive growth is by leveraging on foreign markets, developing new exports and attracting investments aimed at increasing competitiveness and strengthening the external sector. The theory of economic complexity provides a solid base to identify opportunities with high potential for export diversification. It allows to identify the existing set of knowhow, skills and capacities as signaled by the products and services that Jordan is able to make, and to define existing and latent areas of comparative advantage that can be developed by redeploying them. Service sectors have been growing in importance within the Jordanian economy and will surely play an important role in export diversification. In order to account for that, we have developed an adjusted framework that allows to identify the most attractive export sectors including services.

Based on that adjusted framework, this report identifies export themes with a high potential to drive growth in Jordan while supporting increasing wage levels and delivering positive spillovers to the non-tradable economy. The general goal is to provide a roadmap with key elements of a strategy for Jordan to return to a high economic growth path that is consistent with its emerging comparative advantages.

Revised March 2020
Kasoolu, S., et al., 2019. Female Labor in Jordan: A Systematic Approach to the Exclusion Puzzle.Abstract

Women in Jordan are excluded from labor market opportunities at among the highest rates in the world. Previous efforts to explain this outcome have focused on specific, isolated aspects of the problem and have not exploited available datasets to test across causal explanations. We develop a comprehensive framework to analyze the drivers of low female employment rates in Jordan and systematically test their validity, using micro-level data from Employment and Unemployment Surveys (2008-2018) and the Jordanian Labor Market Panel Survey (2010-2016). We find that the nature of low female inclusion in Jordan’s labor market varies significantly with educational attainment, and identify evidence for different factors affecting different educational groups. Among women with high school education or less, we observe extremely low participation levels and find the strongest evidence for this phenomenon tracing to traditional social norms and poor public transportation. On the higher end of the education spectrum – university graduates and above – we find that the problem is not one of participation, but rather of unemployment, which we attribute to a small and undiversified private sector that is unable to accommodate women’s needs for work and work-family balance.

Listen to a podcast interview with author Semiray Kasoolu about her research on women and labor force exclusion in Jordan

Rodrik, D., 2019. Putting Global Governance in its Place.Abstract
In a world economy that is highly integrated, most policies produce effects across the border. This is often believed to be an argument for greater global governance, but the logic requires scrutiny. There remains strong revealed demand for policy and institutional diversity among nations, rooted in differences in historical, cultural, or development trajectories. The canonical case for global governance is based on two set of circumstances. The first occurs when there is global public good (GPG) and the second under “beggar-thy-neighbor” (BTN) policies. However, the world economy is not a global commons, and virtually no economic policy has the nature of a global public good (or bad). And while there are some important BTN policies, much of our current discussions deal with policies that are not true BTNs. The policy failures that exist arise not from weaknesses of global governance, but from distortions of domestic governance. As a general rule, these domestic failures cannot be fixed through international agreements or multilateral cooperation. The paper closes by discussing an alternative model of global governance called “democracy-enhancing global governance.”
Levy-Yeyati, E., Montané, M. & Sartorio, L., 2019. What Works for Active Labor Market Policies?.Abstract
The past 5 years have witnessed a flurry of RCT evaluations that shed new light on the impact and cost effectiveness of Active Labor Market Policies (ALMPs) aiming to improve workers´ access to new jobs and better wages. We report the first systematic review of 102 RCT interventions comprising a total of 652 estimated impacts. We find that (i) a third of these estimates are positive and statistically significant (PPS) at conventional levels; (ii) programs are more likely to yield positive results when GDP growth is higher and unemployment lower; (iii) programs aimed at building human capital, such as vocational training, independent worker assistance and wage subsidies, show significant positive impact, and (iv) program length, monetary incentives, individualized follow up and activity targeting are all key features in determining the effectiveness of the interventions.
Levy-Yeyati, E. & Gomez, J.-F., 2019. The Cost of Holding Foreign Exchange Reserves.Abstract
Recent studies that have emphasized the costs of accumulating reserves for self-insurance purposes have overlooked two potentially important side-effects. First, the impact of the resulting lower spreads on the service costs of the stock of sovereign debt, which could substantially reduce the marginal cost of holding reserves. Second, when reserve accumulation reflects countercyclical LAW central bank interventions, the actual cost of reserves should be measured as the sum of valuation effects due to exchange rate changes and the local-to-foreign currency exchange rate differential (the inverse of a carry trade profit and loss total return flow), which yields a cost that is typically smaller than the one arising from traditional estimates based on the sovereign credit risk spreads. We document those effects empirically to illustrate that the cost of holding reserves may have been considerably smaller than usually assumed in both the academic literature and the policy debate.
Levy-Yeyati, E., 2019. How ETFs Amplify the Global Financial Cycle in Emerging Markets.Abstract
Since the early 2000s exchange-traded funds (ETFs) have grown to become an important in- vestment vehicle worldwide. In this paper, we study how their growth affects the sensitivity of international capital flows to the global financial cycle. We combine comprehensive fund- level data on investor flows with a novel identification strategy that controls for unobservable time-varying economic conditions at the investment destination. For dedicated emerging mar- ket funds, we find that the sensitivity of investor flows to global financial conditions for equity (bond) ETFs is 2.5 (2.25) times higher than for equity (bond) mutual funds. In turn, we show that in countries where ETFs hold a larger share of financial assets, total cross-border equity flows and prices are significantly more sensitive to global financial conditions. We conclude that the growing role of ETFs as a channel for international capital flows amplifies the global financial cycle in emerging markets.
Fernandez-Arias, E., Hausmann, R. & Panizza, U., 2019. Smart Development Banks.Abstract
The conventional paradigm about development banks is that these institutions exist to target well-identified market failures. However, market failures are not directly observable and can only be ascertained with a suitable learning process. Hence, the question is how do the policymakers know what activities should be promoted, how do they learn about the obstacles to the creation of new activities? Rather than assuming that the government has arrived at the right list of market failures and uses development banks to close some well-identified market gaps, we suggest that development banks can be in charge of identifying these market failures through their loan-screening and lending activities to guide their operations and provide critical inputs for the design of productive development policies. In fact, they can also identify government failures that stand in the way of development and call for needed public inputs. This intelligence role of development banks is similar to the role that modern theories of financial intermediation assign to banks as institutions with a comparative advantage in producing and processing information. However, while private banks focus on information on private returns, development banks would potentially produce and organize information about social returns.
Hausmann, R., et al., 2019. Jordan: The Elements of a Growth Strategy.Abstract

In the decade 1999-2009, Jordan experienced an impressive growth acceleration, tripling its exports and increasing income per capita by 38%. Since then, a number of external shocks that include the Global Financial Crisis (2008-2009), the Arab Spring (2011), the Syrian Civil War (2011), and the emergence of the Islamic State (2014) have affected Jordan in significant ways and thrown its economy out of balance. Jordan’s debt-to-GDP ratio has ballooned from 55% (2009) to 94% (2018). The economy has continued to grow amidst massive fiscal adjustment and balance of payments constraints, but the large increase in population – by 50% between 2008 and 2017 – driven by massive waves of refugees has resulted in a 12% cumulative loss in income per capita (2010-2017). Moving forward, debt sustainability will require not only continued fiscal consolidation but also faster growth and international support to keep interest payments on the debt contained. We have developed an innovative framework to align Jordan’s growth strategy with its changing factor endowments. The framework incorporates service industries into an Economic Complexity analysis, utilizing the Dun and Bradstreet database, together with an evaluation of the evolution of Jordan’s comparative advantages over time. Combining several tools to identify critical constraints faced by sectors with the greatest potential, we have produced a roadmap with key elements of a strategy for Jordan to return to faster, more sustainable and more inclusive growth that is consistent with its emerging comparative advantages.

 

Pages