South America

2016
Hausmann, R., Espinoza, L. & Santos, M.A., 2016. Shifting Gears: A Growth Diagnostic of Panama.Abstract

Panama has been one of the fastest growing economies in the world over the previous decade. Growth has been spearheaded by the development of a modern service sector on the activities surrounding the Canal, and non-residential construction. Large public infrastructure projects and the private provision for infrastructure demanded by the service sector, have fueled growth and created a vibrant labor market for non-skilled workers.

Two warning signals hover over Panama´s stellar performance. The construction sector has been growing for a decade at a rate that is equivalent to doubling its stock of structures every four years. The demand for non-residential construction cannot grow indefinitely at a higher rate than the rest of the economy. This feeds into the second signal: Income inequality. In spite of the minor improvements registered over the accelerated-growth spell, Panama remains amongst the world´s top five most unequal countries.

Both warning signals point out to the need of further diversifying the Panamanian economy, and promoting economic activity in the provinces so as to deconcentrate growth and make it more inclusive.

We deployed our Growth Diagnostic methodology in order to identify potential binding constraints to that process. Skilled labor, necessary to gradually diversify into more complex and high value-added activities, is relatively scarce. This scarcity manifests into large wage-premiums to foreigners across all occupations, which are particular large within more complex industries.

Major investments in education have improved indicators of schooling quantitatively, but quality remains a major concern. We find that Panama’s immigration policies are preventing skills from spilling over from their special economic zones into the rest of the economy. On top of that, the list of professions restricted to Panamanians and other constraints on skilled labor flows, are constraining even further the pool of skills. As we document here, these efforts are not helping the Panamanian workers, quite the contrary.

We also find that corruption, and to a lesser extent, red tape, are other important factors that shall be addressed in order to allow Panama to shift the gears of growth, tackle inequality and continue growing at a fast pace.

panama_growth_diagnostics_wp_325.pdf panama_growth_diagnostics_spanish.pdf Research Brief.pdf

Originally published October 2016. Revised January 2017.

Obuchi, R., Lira, B. & Raguá, D., 2016. Microeconomic binding constraints on private investment and growth in Venezuela A. Guerra, ed.,Abstract

Venezuela’s business environment is systematically evaluated as one of the worst in the world. Producing and investing in the country imposes costs and risks arising from macroeconomic instability. Beyond the problems of inflation, fiscal deficit and trade balance; firms and entrepreneurs also face enormous difficulties and discouragement going from the uncertainty about property rights to lack of electricity. To identify binding microeconomic constraints for investment in Venezuela, we reviewed international rankings and experiences about key elements of the business environment and conducted interviews with members of guilds and managers at large companies in the country. We find that the most biding constraints to investment are within the functioning of institutions, including weak property rights, and arbitrary, unbalanced and unpredictable enforcement of the law. Also binding is the flawed functioning of markets, including access to inputs and price controls.

microconstraints_venezuela.pdf
España, L.P., Morales, J.R. & Barrios, D., 2016. Poverty, coverage of the Missions and social protection needs for the economic reform of Venezuela.Abstract

Even before the oil price crisis began in 2014, progress in reducing poverty in Venezuela had ceased and official figures showed that. According to the INE, between 2008 and 2013, the percentage of the population living in poverty remained almost the same, going from 33.1% to 34.2%.

Estas son las últimas cifras oficiales de pobreza de ingreso que disponemos ya que la última contabilización oficial de porcentaje de población en situación de pobreza es la del segundo semestre de 2013[1]. A partir de ese momento la descripción social de la pobreza en Venezuela ha dependido de estudios independientes realizados entre otros, por un consorcio de varias universidades del país[2] que dan cuenta de la evolución de la pobreza entre 2014 y 2015 (ENCOVI, 2014 y 2015), años donde se precipitaron los precios del petróleo hasta un tercio de lo que llegaron a ser durante 2008 acelerando un proceso de deterioro en los indicadores de desempeño económico y bienestar del hogar.

Según estas fuentes independientes de información la pobreza de ingresos en Venezuela habría llegado hasta un 55% en 2014 y 76% en 2015. Cifras que por sí solas hablan de la necesidad diseñar un plan de reformas económicas y sociales para hacerle frente al impacto social de la caída de los precios del petróleo, así como al conjunto de factores, más allá de los precios del crudo, que han llevado al país a tres años continuos de recesión y aumento de la pobreza.

En atención a lo anterior, el presente trabajo se enmarca dentro del conjunto de ejercicios de investigación que son necesarios para poder diseñar un programa de estabilización económica y su correspondiente plan de protección social. En ese sentido, en lo que sigue trataremos de dimensionar el número de familias que necesitarían formar parte de este potencial plan de protección social.

Para ello nos valdremos como fuente de información de la ENCOVI 2014 y 2015, encuestas desde las cuales no sólo tenemos información para contabilizar los hogares e individuos en estado de necesidad, sino además las coberturas probables de los programas sociales (Misiones) que actualmente implementa el gobierno de Venezuela, para de esta forma estimar; en primer lugar, las familias en situación de pobreza que reciben beneficios sociales; en segundo lugar las que estando en esa condición de pobreza no los reciben y; por último, y con miras a la reforma de los programas y la introducción de elementos de progresividad distributiva, los beneficiarios que aún sin ser población objetivo, por no estar en situación de pobreza, son receptores de transferencias, pensiones o becas por parte del Estado.

Adicionalmente a lo anterior, las políticas de control de cambio y la regulación de los precios, aunado a los problemas de abastecimiento, han hecho que los precios de los bienes a los que tienen acceso los distintos grupos sociales varían según si se adquieren en los mercados controlados o en los informales. Estos diferenciales de precios son muy importantes y están generando impactos distributivos difíciles de estimar, pero fundamentales para entender las necesidades de protección social que requieren los hogares para cubrir la canasta de productos básicos.

Es por ello que este trabajo también se propone describir a muy alto nivel los problemas distributivos generados por los diferenciales de precios. Si bien probablemente no sea posible llegar a conclusiones definitivas, al menos plantearemos lo relevante del tema para entender como la escasez de productos y las regulaciones de precios han introducido un conjunto de distorsiones en los precios y en el acceso a los bienes esenciales y presentaremos algunos de los dilemas y preguntas que estas distorsiones generan al momento de analizar la capacidad de satisfacer necesidades básicas en Venezuela.

[1] En Agosto de 2016, el Instituto Nacional de Estadística (INE) publicó estadísticas sobre el porcentaje de hogares en situación de pobreza por primera vez desde el año 2013. La serie fue actualizada para incluir los datos de 2014 y el primer semestre de 2015. Para el primer semestre de 2014 la cifra de hogares en situación de pobreza por ingreso alcanzó 29,5%, para el segundo semestre de ese año llegó a 32,6% y finalmente para el primer semestre de 2015 33,1% de los hogares se encontraban en situación de pobreza por ingresos. Sin embargo, el INE no ha hecho públicas ni el valor de Canasta Alimentaria Normativa para 2015, ni las Encuestas de Hogares que sustentan este cálculo ni las cifras de pobreza por ingreso como porcentaje de la población.

[2] We refer to the National Survey of Living Conditions (ENCOVI) conducted in 2014 and 2015 by the Andrés Bello Catholic University, the Simón Bolívar University and the Central de Venezuela. The results and report of the 2014 survey can be seen in: Zuñiga, Genny and González, Marino. A look at the social situation of the Venezuelan population. National Survey of Living Conditions. 2014 . IIES-UCAB. Caracas. 2015, The report of the 2015 survey is being prepared but the database is available at the Institute of Economic and Social Research of the UCAB.

cid_rfwp74.pdf
Guerra, A., 2016. More Goals, More Growth? A Take on the Mexican Sports Economy through the Economic Complexity Framework.Abstract

In order to appropriately understand the sports sector, its magnitude, embeddedness in the economy, and strategic value, it is necessary to develop a framework through which to study it. Having a standardized and comprehensive methodology to analyze the sports sector will allow policymakers, academics, and other stakeholders to look at the sports sector at a new level of detail and rigor.

Previous work has outlined the numerous data quality and aggregation challenges currently present in the sports economy literature (Russell, Barrios & Andrews 2016). In light of these challenges, this paper attempts to build on the suggested categorization of the sports industry and develop a sound strategy to analyze the sector through an empirical exercise in a specific context: the Mexican Economy.

To this end, we first attempt to understand how connected the sports sector is to other activities in the economy and identify which sectors share similar know-how with m1. Additionally, we attempt to determine the relative magnitude of the sports sector through variables such as value added and employment.

Similarly, we consider study the spatial considerations around sports related economic activities at a subnational level. The advancement of spatial economics has allowed us to understand a new dimension of how an economic sector can develop and how characteristics inherent to a given geography can play a role in determining why some activities end up appearing and developing in the places they do.

Lastly, some descriptive and regression analysis efforts in this paper enabled us to better understand and characterize the sports sector. Such exercises allow us to learn what type of workers typically comprises the sports sector, and whether such profile is different across the different categories of sports activities. Among the variables analyzed I the descriptive exercise, we can look at education level and wages–among others–of those who work on this sector, and compare them to the overall employed population.

This paper is structured as follows: Section 1 will make the case for how publicly available data in Mexico meets the level of detail required for this type of study. Section 2 will look at the way in which the sports sector is nested in the overall economy. Section 3 studies the magnitude of the sports sector through different metrics. Section 4 looks at the type of jobs that comprise the sports sector. Section 5 looks at the differences in intensity of sports activities and early work on its potential causal roots. Section 6 provides some conclusions.
 

rfwp73.pdf
Russell, S., Barrios, D. & Andrews, M., 2016. Getting the Ball Rolling: Basis for Assessing the Sports Economy.Abstract

Data on the sports economy is often difficult to interpret, far from transparent, or simply unavailable. Data fraught with weaknesses causes observers of the sports economy to account for the sector differently, rendering their analyses difficult to compare or causing them to simply disagree. Such disagreement means that claims regarding the economic spillovers of the industry can be easily manipulated or exaggerated. Thoroughly accounting for the industry is therefore an important initial step in assessing the economic importance of sports-related activities. For instance, what do policymakers mean when they discuss sports-related economic activities? What activities are considered part of the "sports economy?" What are the difficulties associated with accounting for these activities? Answering these basic questions allows governments to improve their policies.

The paper below assesses existing attempts to understand the sports economy and proposes a more nuanced way to consider the industry. Section 1 provides a brief overview of existing accounts of the sports economy. We first differentiate between three types of assessments: market research accounts conducted by consulting groups, academic accounts written by scholars, and structural accounts initiated primarily by national statistical agencies. We then discuss the European Union’s (EU) recent work to better account for and understand the sports economy. Section 2 describes the challenges constraining existing accounts of the sports economy. We describe two major constraints - measurement challenges and definition challenges - and highlight how the EU's work has attempted to address them. We conclude that, although the Vilnius Definition improves upon previous accounts, it still features areas for improvement.

Section 3 therefore proposes a paradigm shift with respect to how we understand the sports economy. Instead of primarily inquiring about the size of the sports economy, the approach recognizes the diversity of sports-related economic activities and of relevant dimensions of analysis. It therefore warns against attempts at aggregation before there are better data and more widely agreed upon definitions of the sports economy. It asks the following questions: How different are sports-related sectors? Are fitness facilities, for instance, comparable to professional sports clubs in terms of their production scheme and type of employment? Should they be understood together or treated separately? We briefly explore difference in sports-related industry classifications using data from the Netherlands, Mexico, and the United States. Finally, in a short conclusion, we discuss how these differences could be more fully explored in the future, especially if improvements are made with respect to data disaggregation and standardization.

cidwp_321_assessing_sports_economy.pdf
Hausmann, R., et al., 2016. Hacia un Chiapas Prospero y Productivo: Instituciones, Políticas y Dialogo Público-Privado Para Promover el Crecimiento Inclusivo.Abstract

Desde la revolución zapatista de enero de 1994, Chiapas ha recibido una enorme cantidad de recursos del gobierno federal. Las brechas en años de escolaridad entre Chiapas y el resto de México se han reducido, y se han realizado numerosas inversiones que han mejorado la infraestructura vial, puertos y aeropuertos. Sin embargo, la brecha que separa a Chiapas del resto de México se ha venido ampliando sostenidamente. Un equipo multidisciplinario de doce expertos se ha dedicado a estudiar diferentes aspectos de la dinámica productiva, política y social de Chiapas. De allí han surgido cinco documentos base: Diagnóstico institucional, Complejidad económica, Diagnóstico de crecimiento, Perfil de pobreza y un piloto de diálogo productivo realizado en una comunidad indígena de Chiapas. Este reporte resume los principales hallazgos surgidos del conjunto de investigaciones y articula sus correspondientes recomendaciones de política.

Nuestra hipótesis es que Chiapas se encuentra en una trampa de baja productividad. Los métodos de producción moderna, estrechamente ligados al proceso de crecimiento y desarrollo, requieren de un conjunto de insumos complementarios que están ausentes en la mayor parte del territorio de Chiapas. Así, no existen incentivos para adquirir nuevos conocimientos que podrían ser utilizados en industrias que no existen. Esta incapacidad para resolver los problemas de coordinación y proveer los insumos requeridos por la producción moderna ha hecho que se desperdicie una buena parte de la inversión social que se ha volcado sobre la entidad.

Para superar el dilema actual y encender la chispa del crecimiento, Chiapas necesita resolver sus problemas de coordinación, conectividad, y promover gradualmente una mayor complejidad. Nuestras recomendaciones se basan en el aprovechamiento de las aglomeraciones de conocimientos que ya existen en los principales centros urbanos de Chiapas, para abordar nuevos sectores productivos de mayor valor agregado y complejidad. Para superar este reto, es necesario crear una estructura público-privada que resuelva de forma iterativa los problemas de coordinación y de provisión de bienes públicos que requieren estos sectores de alto potencial. Los sistemas de transporte público y la política de vivienda son mecanismos para integrar a la población aledaña a los centros urbanos a la nueva dinámica productiva. Zonas económicas especiales o agro-parques industriales pueden ser herramientas para promover la productividad y el crecimiento en lugares en donde hemos detectado que la disponibilidad de mano de obra barata y problemas de apropriabilidad son los principales cuellos de botella.

chiapas_recomendaciones_de_politica_cid_wp_317.pdf Abstract (English) chiapas_policy_recommendations_cidwp_317_english.pdf
2015
Levy, D., et al., 2015. Why is Chiapas Poor?.Abstract

No matter which way you look at it, Chiapas is the most backward of any state in Mexico. Its per capita income is the lowest of the 32 federal entities, at barely 40% of the national median (Figure 1). Its growth rate for the decade 2003-2013 was also the lowest (0.2%),1 causing the income gap separating Chiapas from the national average to increase from 53% to 60%. That is to say that today the average income for a worker in Mexico is two and a half times greater than the average in Chiapas. The two next poorest states, Oaxaca and Guerrero, are 25% and 30% above Chiapas.2 According to the Instituto Nacional de Estadística y Geografía de México (INEGI, National Institute of Statistics and Geography), Chiapas is also the state with the highest poverty rate (74.7%) as well as extreme poverty (46.7%).3

These major differences in income levels among Mexican federal entities are reproduced as in a fractal within Chiapas. In fact, while the wealthiest entity (Mexico City) is wealthier than the poorest (Chiapas) by a factor of six, the difference within Chiapas between the wealthiest municipality (Tuxtla Gutiérrez) and the poorest (Aldama and Mitontic) is by a factor greater than eight.4

As there are different "Mexicos" within Mexico,5 in Chiapas there are also different sorts of Chiapas (Figure 2). Income per capita in Tuxtla Gutiérrez, to the right of the distribution, is five standard deviations above the state average. Next comes a series of intermediate cities, San Cristóbal de las Casas, Comitán de Domínguez, Tapachula, and Reforma, between two and a half to four standard deviations above the average. The remaining municipalities of Chiapas follow (122 in all), clustered to the far left of the distribution. In addition, both the statistics available at the town level and our visits to various municipalities in Chiapas seem to indicate that significant differences also exist within these municipalities.

From this vantage point, questions as to why Chiapas is poor, or what explains its significant backwardness compared to other areas of Mexico, become much more complex. Why do some regions in Chiapas have high income levels, while other regions remain stagnant, fully dependent on federal transfers and deprived from the benefits of modern life?

1 This is the non-oil gross domestic product growth rate reported by INEGI, considered to be more representative of the productive spectrum. In any case, the overall rate of growth in Chiapas (-0.2%) was also the lowest amongst all Mexican entities for the decade.
2 Refers to non-oil GDP; in general terms, Guerrero and Oaxaca are 19% and 16% above Chiapas.
3 Growth figures refer to the decade 2003-2013, poverty figures are those published by INEGI for 2012.
4 Comparisons of Chiapas municipalities are made based on the data from the 10% sample of the 2010 Population Census, which is representative at the state level.
5 This is a reference to the report, A tale of two Mexicos: Growth and prosperity in a two-speed economy, McKinsey Global Institute (2014).

cid_wp_300_english.pdf cid_wp_300_spanish.pdf.pdf
Santos, M.A., 2015. The Right Fit for the Wrong Reasons: Real Business Cycle in an Oil-Dependent Economy.Abstract

Venezuela is an oil-dependent economy subject to large exogenous shocks, with a rigid labor market. These features go straight at the heart of two weaknesses of real business cycle (RBC) theory widely reported in the literature: Neither shocks are volatile enough nor real salaries are sufficiently flexible as required by the RBC framework to replicate the behavior of the economy. We calibrate a basic RBC model and compare a set of relevant statistics from RBC-simulated time series with actual data for Venezuela and the benchmark case of the United States (1950-2008). In spite of Venezuela being one of the most heavily intervened economies in the world, RBC-simulated series provide a surprisingly good fit when it comes to the non-oil sector of the economy, and in particular for labor markets. Large restrictions on dismissal and widespread minimum (nominal) wage put all the burden of adjustment on prices; which translate into highly volatile real wages.

santos_64.pdf
Coscia, M., Neffke, F. & Lora, E., 2015. Report on the Poblacion Flotante of Bogota.Abstract

In this document we describe the size of the Poblacion Flotante of
Bogota (D.C.). The Poblacion Flotante is composed by people who live
outside Bogota (D.C.), but who rely on the city for performing their job.
We estimate the Poblacion Flotante impact relying on a new data source
provided by telecommunications operators in Colombia, which enables us
to estimate how many people commute daily from every municipality of
Colombia to a specic area of Bogota (D.C.). We estimate that the size of
the Poblacion Flotante could represent a 5.4% increase of Bogota (D.C.)'s
population. During weekdays, the commuters tend to visit the city center
more.

rf_wp_67.pdf
Gomez-Lievano, A., Tellez, J. & Lora, E., 2015. New Insights About Wage Inequality in Colombia.Abstract

This paper presents a descriptive analysis of wage inequality in Colombia by cities and industries and attempts to evaluate the impact of the inequality of industries on inequality of cities. Using the 2010-2014 Colombian Social Security data, we calculate the gini coefficient for cities and industries and draw comparisons between their distributions. Our results show that while cities are unequal in similar ways, industries differ widely on how unequal they can be with ginis. Moreover, industrial structure plays a significant role to determine city inequality. Industrial framework proves to be a key element in this area for researches and policymakers.

wage_inequality_colombia_wp_66.pdf
Evidence That Calls-Based and Mobility Networks Are Isomorphic
Coscia, M. & Hausmann, R., 2015. Evidence That Calls-Based and Mobility Networks Are Isomorphic. PLOS One , 10. Publisher's VersionAbstract

Social relations involve both face-to-face interaction as well as telecommunications. We can observe the geography of phone calls and of the mobility of cell phones in space. These two phenomena can be described as networks of connections between different points in space. We use a dataset that includes billions of phone calls made in Colombia during a six-month period. We draw the two networks and find that the call-based network resembles a higher order aggregation of the mobility network and that both are isomorphic except for a higher spatial decay coefficient of the mobility network relative to the call-based network: when we discount distance effects on the call connections with the same decay observed for mobility connections, the two networks are virtually indistinguishable.

Campante, F. & Sole, A., 2015. Implementando Politicas de Desarrollo Productivo En Chiapas: Marco Institucional.Abstract

Este documento propone un nuevo marco institucional para la implementación de políticas de desarrollo productivo (PDP) en Chiapas, con el objetivo de impulsar un cambio estructural de la economía chiapaneca en búsqueda de mayor diversidad y complejidad productiva.

La primera sección contiene un diagnóstico del contexto actual de PDP en el Estado. Se observa un bajo grado de implementación y ejecución, pese a la abundancia de análisis, prescripciones e iniciativas de apoyo a la empresa privada. Esta situación no se puede atribuir a la escasez de recursos. Aunque a nivel estatal no se dispone de muchos recursos para PDP, sí los hay al nivel de programas federales existentes. Se trata de deficiencias de coordinación y liderazgo en el sector público, que interactúan con problemas de coordinación dentro del propio sector privado, con la percepción de inestabilidad político-institucional, y con una historia de desconfianza, para conformar un escenario de escasa colaboración a distintos niveles, por lo que muchas de las oportunidades existentes quedan desaprovechadas.

La segunda sección describe los fundamentos conceptuales para un nuevo marco institucional que haga posible la implementación efectiva de PDP, reflejados en cuatro principios básicos. Primero, el nuevo marco debe construirse con relativamente pocos recursos presupuestarios del Estado. Segundo, se subraya que debe centrarse en la coordinación entre sector público y sector privado, lo que requiere capacidades y conocimientos específicos dentro del sector público, la construcción de una relación de confianza, y la promoción proactiva de la organización y coordinación del sector privado. Tercero, un énfasis en la provisión de bienes y servicios públicos, y no intervenciones de mercado. Cuarto, la promoción de un proceso dinámico iterativo.

Una vez establecidos los principios, en la tercera sección se detalla la propuesta concreta de coordinación para la implementación del nuevo marco institucional. Se centra ella en los siguientes cinco puntos. Primero, la designación de un ente implementador sobre el cual recaiga con claridad el liderazgo y la responsabilidad del proceso de implementación de PDP. Segundo, se recomienda dotar a dicho ente de un staff técnicamente competente. Tercero, debe tener autonomía política. Cuarto, debe ser proactivo, en un proceso de dinamización orientado a la acción. Por último, debe fomentar el liderazgo en el sector privado. Al final, se discuten ejemplos ilustrativos de cómo se podría dar la implementación práctica de ese proceso dinámico.

cid_wp_305_chiapas_institucional.pdf
Santos, M.A., et al., 2015. Piloto de Crecimiento Inclusivo en comunidades indígenas de Chiapas (Cruztón, Chamula).Abstract

El Centro para el Desarrollo Internacional de la Universidad de Harvard (CID), la Fundación Los Grobo, y la Escuela de Alta Dirección y Administración de Empresas de Barcelona (EADA), con el apoyo de la Secretaría de Hacienda y Crédito Público del Gobierno de México, se han asociado para conducir una exploración de las actitudes y aptitudes productivas de las comunidades indígenas de Chiapas. Dado el alto grado de dispersión de estas comunidades, hemos decidido seleccionar una localidad piloto, relativamente próxima a zonas urbanas, e implementar allí la metodología del programa Potenciar Comunidades desarrollada por la Fundación Los Grobo.

Nuestro objetivo final es incrementar la comprensión de la complejidad social, política, cultural y productiva de las comunidades indígenas de Chiapas, utilizando como vehículo una metodología que promueve el diagnóstico participativo, identifica capacidades y recursos, en el proceso de diseñar un plan colectivo de desarrollo territorial. A través de la implementación piloto de Potenciar Comunidades, el equipo busca crear una base de conocimiento que permita fortalecer nuestra capacidad para diseñar e implementar políticas de desarrollo en las comunidades indígenas con una vertiente productiva, como complemento a las políticas de asistencia social que predominan en el lugar.

cid_rfwp_65_piloto_de_crecimiento_inclusivo.pdf
Hausmann, R., Espinoza, L. & Santos, M.A., 2015. Chiapas Growth Diagnosis: The Trap of Low Productivity.Abstract

Chiapas is not only the lowest per capita entity in Mexico, but also the one that has grown the least during the last decade. As a result, the gap that separates it from the rest of the country has been widening significantly. This performance contrasts with the environment of relative macroeconomic and institutional stability that has prevailed during this period.

The low level of income in Chiapas is consistent with the inability of the state to produce things that it can sell beyond its limits. Its per capita exports are among the lowest in Mexico and are concentrated in a series of agricultural primary products, which are traded in highly competitive markets with very low margins.

What are the reasons behind Chiapas' poor economic performance? This document follows the growth diagnosis methodology developed by Hausmann, Rodrik and Velasco (2005), adapting it to a sub-national context. Our objective remains the same: to identify the main constraints to economic growth in Chiapas.

According to the results of our analysis, the main restrictions on the growth of the state are not found in any of the usual suspects. Low levels of education to some extent are associated with the backwardness of Chiapas, but barely enough to explain a small part of the gap. The orography and the climate of Chiapas represent a challenge for the lifting and maintenance of its infrastructure, but the latter does not appear as the main restriction to the development of its productive fabric. There is also no evidence of credit market failures. The low levels of private credit in Chiapas are more associated with the low productivity of the economic activities carried out there than with bottlenecks or insufficiencies in the supply of financing.

Our conclusion is that Chiapas is in a (low) productivity trap. Its main problem is that it has an economy of very low complexity or sophistication, which reflects its few productive capacities. Modern production systems require a number of complementary inputs that are absent in Chiapas. In this context, productive diversity and private investment are low because returns to investment are also very low. Since the demand derived from private investment is low, it inhibits the emergence of a supply of complementary inputs, giving rise to a problem of coordination similar to that of the egg and the hen. Solving this coordination problem requires state intervention. Some of the few cases of manufactured exports that exist in Chiapas have resulted from successful state interventions to coordinate the existence of inputs needed for production with the demand for them. This feature provides the supporting argument that justifies the creation of Special Economic Zones.

In Chiapas, this situation is further aggravated by the combination of three factors: (1) high government transfers, (2) lack of public transportation and (3) low educational level.

Government transfers have effects similar to those identified in the economic literature of the Dutch disease: to increase the relative costs of tradable goods by tilting economic activity to the non-tradable sectors. The absence of a public transport system directly reduces the net benefit of working in the city if you live in the countryside. Thus, a dual equilibrium has been established with significant differences between wages across the entire range of professions and occupations between cities and their nearest rural communities. Finally, although Chiapas has gradually closed the educational gap that separates it from the rest of the country, there are still significant differences. In our opinion, This gap is due to the fact that the decision to accumulate years of schooling is partly endogenous to the returns obtained from education. Seen this way, education gaps would be a mirror of the differences in terms of production methods that predominate in Chiapas, in contrast to the rest of the country. For this reason, we observe that while returns to education are higher in Chiapas, it is more profitable for each educational level to emigrate (to a place where there are other complementary inputs that make higher productivity and a higher salary possible) than to stay in work the entity. Chiapas emigrants, although few, receive similar incomes to workers with the same level of education at the destination. Education gaps would be a mirror of the differences in terms of production methods that predominate in Chiapas, in contrast to the rest of the country. For this reason, we observe that while returns to education are higher in Chiapas, it is more profitable for each educational level to emigrate (to a place where there are other complementary inputs that make higher productivity and a higher salary possible) than to stay in work the entity. Chiapas emigrants, although few, receive similar incomes to workers with the same level of education at the destination. Education gaps would be a mirror of the differences in terms of production methods that predominate in Chiapas, in contrast to the rest of the country. For this reason, we observe that while returns to education are higher in Chiapas, it is more profitable for each educational level to emigrate (to a place where there are other complementary inputs that make higher productivity and a higher salary possible) than to stay in work the entity. Chiapas emigrants, although few, receive similar incomes to workers with the same level of education at the destination. For each educational level it is more profitable to emigrate (to a place where other complementary inputs exist that make possible a greater productivity and a higher salary) than to stay to work in the entity. Chiapas emigrants, although few, receive similar incomes to workers with the same level of education at the destination. For each educational level it is more profitable to emigrate (to a place where other complementary inputs exist that make possible a greater productivity and a higher salary) than to stay to work in the entity. Chiapas emigrants, although few, receive similar incomes to workers with the same level of education at the destination.

The policy implications of this diagnosis point to the need to take advantage of the knowledge that already exists in the greater populated centers of Chiapas and in the rest of Mexico to promote diversification towards other more complex activities that can build upon the capacities already Existing in the area. The creation of a public transport system linking the rural communities surrounding the city could solve the constraint of labor shortages, while opening up greater urban employment opportunities for the inhabitants of neighboring rural communities. This is a typical example of the egg and chicken dynamics that prevails in Chiapas, since a minimum scale of operation is required for the creation of an efficient public transport system,

Our prescription suggests that we take the mountain to Muhammad, since Muhammad has not gone to the mountain. That is to say, to try to solve the problems of coordination through an intervention that approaches the work opportunities to where the workers are, given that under the current conditions the latter do not find it profitable to get closer to where the job opportunities are. There are rural areas with low participation rates and high poverty rates in the neighborhood of San Cristóbal de las Casas. This is also a region where there is a lot of uncertainty for private economic activity, since the existence of ejido territories of community ownership predominates there. One implication of our analysis could be to create an Industrial Park around San Cristóbal, That solves the lack of public goods that has kept away the private economic activity (legal insecurity, difficulty to get land, social unrest), and at the same time bring the companies where the available labor is. The experience within Chiapas of companies like Arnecom-Yazaki indicates that with short training periods, workers could be integrated into relatively modern systems and deal productively.

This solution is a step on which we can enter a sustained development dynamic, through successive improvements in productivity derived from the transformation of production and the progressive adoption of more modern production systems. To grow, Chiapas must start by learning to do things that are already produced in the rest of Mexico and can sell out of the state. From there, the economic fabric and knowledge associated with more modern methods of production will be created, and from there gradually the export capacity can be developed and more complex activities can be developed. This process requires coordination between the different actors, government (national and regional), private sector, and academia, with the aim of proactively seeking adjacent activities,

chiapas_diagnostics_cidwp304_spanish.pdf chiapas_diagnostics_cidwp304_english.pdf
Hausmann, R., Cheston, T. & Santos, M.A., 2015. La Complejidad Economica de Chiapas.Abstract

Chiapas es el estado más pobre de México, y también el menos diversificado en su estructura productiva. Según los hallazgos de este reporte, esa dualidad no es una coincidencia casual. La escasa complejidad económica de Chiapas, medida tanto por la escasa sofisticación de sus exportaciones como por la exigua diversidad en la composición de su empleo, es uno de los factores asociados a sus bajos niveles de ingreso y escaso crecimiento. Para cambiar el patrón de crecimiento de Chiapas es necesario cambiar su estructura de producción, haciéndola más compleja y sofisticada.

Afortunadamente, existe un enorme potencial para que diferentes lugares de Chiapas se muevan de manera gradual hacia productos e industrias de mayor sofisticación, con base en el conocimiento con el que ya cuentan hoy en día. No todos los lugares tienen el mismo potencial; la diversidad de capacidades productivas que existe en México se reproduce hacia el interior de Chiapas de manera fractal. Nuestros análisis indican que la variedad de niveles de ingresos hacia adentro de las regiones sigue siendo mayor que las diferencias entre los promedios de esas regiones. Esta característica justifica la utilización de un enfoque municipal, centrado en aquellas zonas urbanas de mayor población, con suficiente diversidad y sofisticación como para justificar un análisis de productos e industrias “adyacentes” de mayor complejidad que requieran capacidades similares a las ya existentes. Este enfoque reconoce que la esperanza en el corto plazo para muchos ciudadanos que no habitan en la vecindad de las regiones más sofisticadas del estado está en la posibilidad de moverse gradualmente hacia niveles de productividad agrícola más alta.

En este reporte se identifican cuáles son los productos e industrias que ofrecen las mejores posibilidades de diversificación productiva para incrementar la complejidad económica de cuatro de los municipios más complejos de Chiapas, considerando sus capacidades iniciales. Como resultado, se presenta un resumen diferenciado de las principales posibilidades y los retos que debe superar cada lugar para capitalizarlas. Comitán de Domínguez debe centrarse en resolver restricciones logísticas asociadas a conflictos sociales para capitalizar sus posibilidades como destino turístico de alto nivel, y desarrollar una base de fabricación de artículos para el hogar y textiles. San Cristóbal de las Casas está bien posicionado para aprovechar las habilidades desarrolladas en la producción de artesanías y transferirlas a la de textiles sofisticados, en adición a nuevas oportunidades en recubrimientos metálicos, y fabricación de alimentos y bebidas. Para materializar el potencial de Tuxtla Gutiérrez se requiere reconvertir ese amplio sector de servicios que responde a la demanda creada por el gasto público en la capital del estado, en una base de manufacturas más diversa.  Los principales candidatos para movilizar esa transformación productiva son los sectores de textiles y peletería, procesamiento de alimentos, y ciertas categorías particulares de maquinaria por línea de producción.

De todas las regiones de Chiapas, Tapachula es la que posee mayor potencial para expandir su base exportadora hacia productos de mayor complejidad. La región concentra la mayoría de las exportaciones del estado, y cuenta con la creación de la Zona Económica Especial (ZEE) y su parque industrial que permiten abordar nuevas capacidades productivas más complejas y adyacentes. Se identifica el potencial de los productos plásticos, de pinturas y películas, y de metalurgia, de relojes y equipos de soldadura, como unas oportunidades únicas en el estado para promover su transformación productiva.

Nuestro reporte concluye con una reflexión sobre la necesidad de traducir la identificación de los potenciales de cada una de las regiones en una realidad distinta, en una economía diversa, compleja, y próspera. La transformación productiva de Chiapas comenzará por la mejora de la productividad agrícola y la creación de oportunidades en las zonas urbanas que permiten aglomeraciones de conocimientos diversos en firmas complejas. El crecimiento económico en Chiapas no requiere innovación, sino más bien de que el estado aprenda del resto de México a producir de manera eficiente los bienes que el resto del país ya produce.  

Esta posibilidad exige a su vez de la existencia de un sector público capaz de convocar a firmas existentes, y otras que ya operan en el resto de México, para inaugurar nuevas facilidades de producción en Chiapas, combinando nuevas tecnologías y conocimientos con los que ya existen en la región. Así, se va desarrollando de forma gradual la densidad de su tejido productivo y diversidad económica. En última instancia, la clave para capitalizar el enorme potencial de Chiapas está en un cambio en la orientación del discurso productivo, que priorice la diversificación de la economía y la conquista gradual de sectores de mayor complejidad como herramienta para promover el crecimiento inclusivo.

cid_wp_302.pdf executive_summary_english.pdf
Levy, D., et al., 2015. ¿Por Que Chiapas Es Pobre?.Abstract

Chiapas es, comoquiera que se le mire, el estado más atrasado de México. Su ingreso por habitante es el más bajo de las 32 entidades federativas, apenas 40% de la media nacional. Su tasa de crecimiento durante la década 2003-2013 también fue la más baja (0,2%), por lo que la brecha que lo separa del promedio nacional creció de 53% a 60%. Eso quiere decir que hoy en día el ingreso promedio de una entidad federal en México está dos veces y media por encima de Chiapas. Los dos estados que le siguen, Oaxaca y Guerrero, están 25% y 30% por encima de Chiapas2. De acuerdo con el Instituto Nacional de Estadística y Geografía de México (INEGI), Chiapas es también el estado de mayor pobreza (74,7%) y pobreza extrema (46,7%).

cid_wp_300_spanish.pdf cid_wp_300_english.pdf
Reinhart, C. & Santos, M.A., 2015. From Financial Repression to External Distress: The Case of Venezuela.Abstract

Recent work has supported that there is a connection between domestic debt level and sovereign default on external debt. We examine the potential linkages in a case study of Venezuela from 1984 to 2013. This unique example encompasses multiple financial crises, cycles of liberalization and policy reversals, and alternative exchange rate arrangements. The Venezuelan experience reveals a nexus among domestic debt, financial repression, and external vulnerability. Unlike foreign currency-denominated debt, debt in domestic currency may be reduced through financial repression, a tax on bondholders and savers producing negative real interest rates. Using a variety of methodologies we estimate the magnitude of the tax from financial repression. On average, this financial repression tax (as a share of GDP) is similar to those of OECD economies, in spite of much higher domestic debt-to-GDP ratios in the latter. The financial repression "tax rate" is significantly higher in years of exchange controls and legislated interest rate ceilings. In line with earlier literature on capital controls, our comprehensive measures of capital flight document a link between domestic disequilibrium and a weakening of the net foreign asset position via private capital flight. We suggest these findings are not unique to the Venezuelan case.

reinhart_santos_updated_june.pdf
2014
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.
Contreras, V., et al., 2014. Expropriation risk and housing prices: Evidence from an emerging market. Journal of Business Research , 67 (5) , pp. 935-942. Publisher's VersionAbstract
This paper examines the microeconomic determinants of residential real estate prices in Caracas, Venezuela, using a private database containing 17,526 transactions from 2008 to 2009. The particular institutional characteristics of many countries in Latin America, and Venezuela in particular, where land invasions and expropriations (with only partial compensation) have been common threats to property owners, provide us with an opportunity to test the effects of these risks on housing prices using a unique database. The effect of these risks on property prices is negative and significant. To our knowledge, this is the first attempt to quantify these impacts in the Hedonic pricing literature applied to real estate. Size, the number of parking spaces, the age of the property, the incidence of crime, and the average income in the neighborhood are significant determinants of prices. Finally, this paper analyzes the microeconomic determinants of housing prices at the municipal level.
expropriation_risk_housing_prices_santos.pdf

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