Faculty Working Papers

Hausmann, R., Ganguli, I. & Viarengo, M., 2010. Marriage, Education, and Assortative Mating in Latin America.Abstract

In this paper we establish six stylized facts related to marriage and work in Latin America and present a simple model to account for them. First, skilled women are less likely to be married than unskilled women. Second, skilled women are less likely to be married than skilled men. Third, married skilled men are more likely to work than unmarried skilled men, but married skilled women are less likely to work than unmarried skilled women. Fourth, Latin American women are much more likely to marry a less skilled husband compared to women in other regions of the world. Five, when a skilled Latin American woman marries down, she is more likely to work than if she marries a more or equally educated man. Six, when a woman marries down, she tends to marry the “better” men in that these are men that earn higher wages than those explained by the other observable characteristics. We present a simple game theoretic model that explains these facts with a single assumption: Latin American men, but not women, assign a greater value to having a stay-home wife.

This research is part of the "Closing the Global Gender Gap: A Call to Action," an initiative sponsored by the Women and Public Policy Program in collaboration with the Center for International Development at Harvard University, with support from ExxonMobil's Educating Women and Girls Initiative and the Women's Leadership Board of the Harvard Kennedy School.

Andrews, M., et al., 2017. Learning to Target for Economic Diversification: PDIA in Sri Lanka.Abstract

Many countries, like Sri Lanka, are trying to diversify their economies but often lack the capabilities to lead diversification programs. One of these capabilities relates to targeting new sectors to promote and pursue through a diversification policy: countries know they are ‘doomed to choose’ sectors to target,1 but lack effective capabilities to do the targeting. This paper narrates a recent (and ongoing) initiative to establish this kind of capability in Sri Lanka. The initiative adopted a Problem Driven Iterative Adaptation (PDIA) process, where a team of Sri Lankan officials worked with Harvard Center for International Development (CID) facilitators to build capabilities. The paper tells the story of this process, providing documented evidence of the progress over time and describing the thinking behind the PDIA process. It shows how a reliable targeting mechanism can emerge in a reasonably limited period, when a committed team of public officials are effectively authorized and engaged. The paper will be of particular interest to those thinking about targeting for diversification and to those interested in processes (like PDIA) which are focused on building state capability and fostering policy implementation in public contexts.

1 The term here comes from Hausmann, R. and Rodrik, D. 2006. Doomed to Choose: Industrial Policy as Predicament. Draft.

Andrews, M., et al., 2017. Learning to Engage New Investors for Economic Diversification: PDIA in Action in Sri Lanka.Abstract
Many countries, like Sri Lanka, are trying to diversify their economies but often lack thecapabilities to lead diversification programs. One of these capabilities relates to engaging new investors—in new sectors—to bring their FDI and know-how to a new country and kick-start new sources of activity. This paper narrates a recent (and ongoing) initiative to establish this kind of capability in Sri Lanka. The initiative adopted a Problem Driven Iterative Adaptation (PDIA) process, where a team of Sri Lankan officials worked with Harvard Center for International Development (CID) facilitators to build capabilities over a six-month period. The paper tells the story of this process, providing documented evidence of the progress over time (and describing thinking behind the PDIA process as well). It shows how an investment engagement approach can emerge in a reasonably limited period, when a committed team of public officials are effectively authorized and engaged. The paper will be of particular interest to those thinking about investor engagement challenges and to those interested in processes (like PDIA) focused on building state capability and fostering policy implementation in public contexts.
Andrews, M., et al., 2017. Learning to Improve the Investment Climate for Economic Diversification: PDIA in Action in Sri Lanka.Abstract
Many countries, like Sri Lanka, are trying to diversify their economies but often lack thecapabilities to lead diversification programs. One of these capabilities relates to preparing the investment climate in the country. Many governments tackle this issue by trying to improve their scores on ‘Doing Business Indicators’ which measure performance on general factors affecting business globally (like how long it takes to open a business or pay taxes). Beyond these common indicators, however, investors face context specific challenges when working in countries like Sri Lanka that are not addressed in global indicators. Governments often lack the capabilities to identify and resolve such issues. This paper narrates a recent initiative to establish these capabilities in Sri Lanka. The initiative adopted a Problem Driven Iterative Adaptation (PDIA) process, where a team of Sri Lankan officials worked with Harvard Center for International Development (CID) facilitators to build capabilities over a six-month period. The paper tells the story of this process, providing documented evidence of the progress over time (and describing thinking behind the PDIA process as well). The paper will be of interest to those thinking about the challenges associated with creating a climate that is investor or business friendly and to those interested in processes (like PDIA) focused on building state capability and fostering policy implementation.
Nano, E., Panizza, U. & Viarengo, M., 2021. A Generation of Italian Economists.Abstract

We examine the role of financial aid in shaping the formation of human capital in economics. Specifically, we study the impact of a large merit-based scholarship for graduate studies in affecting individuals’ occupational choices, career trajectories, and labor market outcomes of a generation of Italian economists with special focus on gender gaps and the role of social mobility. We construct a unique dataset that combines archival sources and includes microdata for the universe of applicants to the scholarship program and follow these individuals over their professional life. Our unique sample that focuses on the high end of the talent and ability distribution also allows us to analyze the characteristics of top graduates, a group which tends to be under-sampled in most surveys. We discuss five main results. First, women are less likely to be shortlisted for a scholarship as they tend to receive lower scores in the most subjective criteria used in the initial screening of candidates. Second, scholarship winners are much more likely to choose a research career and this effect is larger for women. Third, women who work in Italian universities tend to have less citations than men who work in Italy. However, the citation gender gap is smaller for candidates who received a scholarship. Fourth, women take longer to be promoted to the rank of full professor, even after controlling for academic productivity. Fifth, it is easier to become a high achiever for individuals from households with a lower socio-economic status if they reside in high social mobility provinces. However, high-achievers from lower socio-economic status households face an up-hill battle even in high social mobility provinces.

Nedelkoska, L., et al., 2021. The Role of the Diaspora in the Internationalization of the Colombian Economy.Abstract
We studied the geography as well as the demographic and socio-economic characteristics of 1.7 million members of the global Colombian diaspora (34% of the total estimated Colombian diaspora) using census and survey data from major host countries, and 3.5 million Twitter users located around the world presumed to be of Colombian origin. We also studied the locations and industries of Colombian senior managers and directors outside Colombia, using a global database of over 400 million companies. Moreover, we studied the migration journeys, the diaspora’s attachment to Colombia, the level of diaspora engagement and interest in engaging, the intentions to return back home, the interest in diaspora government policy, and the overall sentiment of the diaspora towards Colombia, through a survey which received 11,500 responses from the diaspora in well over 100 countries in less than two months. We additionally interviewed 12 Colombian transnational entrepreneurs and professionals, to understand what attracts them professionally to Colombia, and what may stand in the way of more diaspora engagement and professional growth.
Hausmann, R., et al., 2021. Loreto’s Hidden Wealth: Economic Complexity Analysis and Productive Diversification Opportunities.Abstract

The Growth Lab at Harvard University, with funding provided by the Gordon and Betty Moore Foundation, has undertaken this investigation with the aim of identifying the existing productive capacities in Loreto, as well as the economic activities with potential to drive the structural transformation of its economy. This paper is part of a broader investigation – Promoting Sustainable Economic Growth and Structural Transformation in the Amazon Region of Loreto, Peru – which seeks to contribute with context-specific inputs for the development of national and sub-national public policies that promote productive development and prosperity in this Peruvian state.

Hausmann, R., et al., 2021. Western Australia – Research Findings and Policy Recommendations.Abstract

The Government of Western Australia (WA), acting through its Department of Primary Industries and Regional Development (DPIRD), invited the Growth Lab of the Center for International Development at Harvard University to partner with the state to better understand and address constraints to economic diversification through a collaborative applied research project. The project seeks to apply growth diagnostic and economic complexity methodologies to inform policy design in order to accelerate productive transformation, economic diversification, and more inclusive and resilient job creation across Western Australia.

This report is organized in six sections, including this brief introduction. Section 2 is an Executive Summary. Section 3 explains the methodologies of Growth Diagnostics and Economic Complexity, including its theoretical foundations and main concepts. Section 4 describes the main findings of the Economic Complexity Report, including a characterization of Western Australia’s complexity profile. This is done at the state, regional, and city levels. Additionally, this section identifies diversification opportunities with high potential and organizes them into groupings to capture important patterns among the opportunities. This section also contextualizes the opportunities further by identifying relevant viability and attractiveness factors that complement the complexity metrics and consider local conditions. Section 5 highlights the main findings of the Growth Perspective Report. This section describes the economic growth process of Western Australia — with a focus on the past two decades — and identifies several issues with the way that growth has occurred. This section highlights three key channels through which negative externalities have manifested: labor market imbalances, pro-cyclicality of fiscal policy, and a misalignment of public goods. The section provides perspectives on the ways in which each of these channels have hampered the quality of growth and explores the deep-rooted factors that underpin these adverse dynamics. Section 6 introduces a policy framework that can be leveraged by WA to capitalize on revealed diversification opportunities and address the factors that impact the quality of the growth process of the state.

Hausmann, R., et al., 2021. Economic Complexity Report for Western Australia.Abstract

The Government of Western Australia (WA), acting through its Department of Primary Industries and Regional Development (DPIRD), invited the Growth Lab of the Center for International Development (CID) at Harvard University to partner with the state to better understand and address constraints to economic diversification through a collaborative applied research project. The project seeks to apply growth diagnostic and economic complexity methodologies to inform policy design in order to accelerate productive transformation, economic diversification, and more inclusive and resilient job creation across Western Australia.

This Economic Complexity Report is organized in six sections, including this brief introduction. Section 2 explains the methodology of economic complexity, including its theoretical foundations and main concepts, as well as the adjustments that were required to obtain the required export data at a subnational level and incorporate the service sector to the analysis. Section 3 describes the structure of the WA economy, identifying its productive capacities and exploring its complexity profile. This is done at the state, regional, and city levels. Section 4 identifies industries with high potential and organizes them into groupings to capture important patterns among the opportunities. Section 5 contextualizes the opportunities further by identifying relevant viability and attractiveness factors that complement the complexity metrics and consider local conditions, as well as a criterion for regional participation in the state-wide diversification strategy. Finally, Section 6 summarizes the main findings of this report and discusses implications for Government of WA strategy and policy toward capitalizing on these revealed opportunities.

Hausmann, R., et al., 2021. Growth Perspective on Western Australia.Abstract

The Government of Western Australia (WA), acting through its Department of Primary Industries and Regional Development (DPIRD), invited the Growth Lab of the Center for International Development at Harvard University to partner with the state to better understand and address constraints to economic diversification through a collaborative applied research project. The project seeks to apply growth diagnostic and economic complexity methodologies to inform policy design in order to accelerate productive transformation, economic diversification, and more inclusive and resilient job creation across Western Australia. As its name implies, this Growth Perspective Report aims to provide a set of perspectives on the process of economic growth in WA that provide insights for policymakers toward improving growth outcomes.

This Growth Perspective Report describes both the economic growth process of Western Australia — with a focus on the past two decades — and identifies several problematic issues with the way that growth has been structured. In particular, this report traces important ways in which policies applied during the boom and subsequent slowdown in growth over the last twenty years have exacerbated a number of self-reinforcing negative externalities of undiversified growth. The report analyzes three key channels through which negative externalities have manifested: labor market imbalances, pro-cyclicality of fiscal policy, and a misalignment of public goods. The report includes sections on each of these channels, which provide perspectives on the ways in which they have hampered the quality of growth and explore the reasons why problematic externalities have become self-reinforcing. In some cases, new issues have emerged in the most recent iteration of WA’s boom-slowdown cycle, but many issues have roots in the long-term growth history of WA.

Yildirim, M.A., 2021. Sorting, Matching and Economic Complexity.Abstract
Assignment models in trade predict that countries with higher productivity levels are assortatively matched to industries that make better use of these higher levels. Here, we assume that the driver of productivity differences is the differential distribution of factors among countries. Utilizing such a structure, we define and estimate the average factor level (AFL) for countries and products using only the information about the production patterns. Interestingly, our estimates coincide with the complexity variables of (Hidalgo and Hausmann, 2009), providing an underlying economic rationale. We show that AFL is highly correlated with country-level characteristics and predictive of future economic growth.
Goldstein, P., Yeyati, E.L. & Sartorio, L., 2021. Lockdown Fatigue: The Diminishing Effects of Quarantines on the Spread of COVID-19.Abstract

Non-Pharmaceutical Interventions (NPIs) have been for most countries the key policy instrument utilized to contain the impact of the COVID-19 pandemic. In this article, we conduct an empirical analysis of the impact of these policies on the virus’ transmission and death toll, for a panel of 152 countries, from the start of the pandemic through December 31, 2020. We find that lockdowns tend to significantly reduce the spread of the virus and the number of related deaths. We also show that this benign impact declines over time: after four months of strict lockdown, NPIs have a significantly weaker contribution in terms of their effect in reducing COVID-19 related fatalities. Part of the fading effect of quarantines could be attributed to an increasing non-compliance with mobility restrictions, as reflected in our estimates of a declining effect of lockdowns on measures of actual mobility. However, we additionally find that a reduction in de facto mobility also exhibits a diminishing effect on health outcomes, which suggests that lockdown fatigues may have introduce broader hurdles to containment policies.

Podcast: Do Lockdowns Work? Eduardo Levy Yeyati discusses the research with Sam Munson of the Octavian Report.

Cakmakli, C., et al., 2021. The Economic Case for Global Vaccinations: An Epidemiological Model with International Production Networks.Abstract
COVID-19 pandemic had a devastating effect on both lives and livelihoods in 2020. The arrival of effective vaccines can be a major game changer. However, vaccines are in short supply as of early 2021 and most of them are reserved for the advanced economies. We show that the global GDP loss of not inoculating all the countries, relative to a counterfactual of global vaccinations, is higher than the cost of manufacturing and distributing vaccines globally. We use an economic-epidemiological framework that combines a SIR model with international production and trade networks. Based on this framework, we estimate the costs for 65 countries and 35 sectors. Our estimates suggest that up to 49 percent of the global economic costs of the pandemic in 2021 are borne by the advanced economies even if they achieve universal vaccination in their own countries.
Hausmann, R. & Rodrik, D., 2002. Economic Development as Self-Discovery.Abstract
In the presence of uncertainty about what a country can be good at producing, there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated. We develop a general-equilibrium framework for a small open economy to clarify the analytical and normative issues. We highlight two failures of the laissez-faire outcome: there is too little investment and entrepreneurship ex ante, and too much production diversification ex post. Optimal policy consists of counteracting these distortions: to encourage investments in the modern sector ex ante, but to rationalize production ex post. We provide some informal evidence on the building blocks of our model.
Hausmann, R. & Sturzenegger, F., 2006. The Implications of Dark Matter for Assessing the US External Imbalance.Abstract
This paper clarifies how dark matter changes our assessment of the US external imbalance. Dark matter assets are defined as the capitalized value of the return privilege obtained by US assets. Because this return privilege has been steady over recent decades, it is likely to persist in the future or even to increase, as it becomes leveraged by an increasingly globalized world. Once this is included in future projections of US current accounts, the US external position looks much more balanced than depicted in official statistics.

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