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Jel Classification:O10 

Journal Article
Remittances and COVID-19: A Tale of Two Countries

Looking at the effects of the COVID-19 pandemic on workers’ remittances flowing from the United States, this article focuses on the experiences of two countries, El Salvador and Mexico, which account for approximately 30 percent of all immigrants currently residing in the United States. Following the second quarter’s economic lockdown, transfers to these countries experienced perplexing dynamics.Specifically, remittances to El Salvador witnessed a record 40 percent sudden drop, while Mexico recorded an unexpected 35 percent increase. We discuss some of the narratives proposed to explain ...
Policy Hub , Volume 2020 , Issue 12 , Pages 11

Report
How Do Voters Respond to Welfare vis-à-vis Public Good Programs? An Empirical Test for Clientelism

This paper examines allocation of benefits under local government programs in West Bengal, India to isolate patterns consistent with political clientelism. Using household survey data, we find that voters respond positively to private welfare benefits but not to local public good programs, while reporting having benefited from both. Consistent with the voting patterns, shocks to electoral competition induced by exogenous redistricting of villages resulted in upper-tier governments manipulating allocations across local governments only for welfare programs. Through the lens of a hierarchical ...
Staff Report , Paper 605

Report
Firm Entry and Exit and Aggregate Growth

Using data from Chile and Korea, we find that a larger fraction of aggregate productivity growth is due to firm entry and exit during fast-growth episodes compared to slow-growth episodes. Studies of other countries confirm this empirical relationship. We develop a model of endogenous firm entry and exit based on Hopenhayn (1992). Firms enter with efficiencies drawn from a distribution whose mean grows over time. After entering, a firm?s efficiency grows with age. In the calibrated model, reducing entry costs or barriers to technology adoption generates the pattern we document in the data. ...
Staff Report , Paper 544

Working Paper
On the Transition to Sustained Growth: The Importance of Recent Agricultural Employment

We study a model where a single good can be produced using a diminishing-returns technology (Malthus) and a constant-returns technology (Solow). We map the former to agriculture and show that the share of agricultural employment declines at a constant rate during the economic transition and that recent observations on the share are sufficient to estimate the onset of transition. Our model implies that (i) output growth is higher and increasing after the onset of transition, (ii) during the transition, it is a first-order autoregressive process, and (iii) the rate of decline in the share of ...
Working Papers , Paper 2023-026

Report
An Assignment Model of Knowledge Diffusion and Income Inequality

Randomness in individual discovery disperses productivities, whereas learning from others keeps productivities together. Long-run growth and persistent earnings inequality emerge when these two mechanisms for knowledge accumulation are combined. This paper considers an economy in which those with more useful knowledge can teach others, with competitive markets assigning students to teachers. In equilibrium, students with an ability to learn quickly are assigned to teachers with the most productive knowledge. This sorting on ability implies large differences in earnings distributions ...
Staff Report , Paper 509

Working Paper
Modernization and Discrete Measures of Democracy

We reassess the empirical evidence for a positive relationship between income and democracy, commonly known as the ?modernization hypothesis,? using discrete democracy measures. While discrete measures have been advocated in the literature, they pose estimation problems under fixed effects due to incidental parameter issues. We use two methods to address these issues, the bias-correction method of Fernandez-Val, which directly computes the marginal effects, and the parameterized Wooldridge method. Estimation under the Fernandez-Val method consistently indicates a statistically and ...
Working Paper Series , Paper 2014-1

Working Paper
Spatial Wage Gaps in Frictional Labor Markets

We develop a job ladder model with labor reallocation across firms and regions, and estimate it on matched employer-employee data to study the large and persistent real wage gap between East and West Germany. We find that the wage gap is mostly due to firms paying higher wages per efficiency unit in West Germany and quantify a rich set of frictions preventing worker reallocation across space and across firms. We find that three spatial barriers impede East Germans’ ability to migrate West: migration costs, a preference to live in the East, and fewer job opportunities received from the West. ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 29

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Shared knowledge and the coagglomeration of occupations

This paper provides an empirical analysis of the extent to which people in different occupations locate near one another, or coagglomerate. We construct pairwise Ellison-Glaeser coagglomeration indices for U.S. occupations and use these measures to investigate the factors influencing the geographic concentration of occupations. The analysis is conducted separately at the metropolitan area and state levels of geography. Empirical results reveal that occupations with similar knowledge requirements tend to coagglomerate and that the importance of this shared knowledge is larger in metropolitan ...
Staff Reports , Paper 612

Report
Clientelistic Politics and Pro-Poor Targeting: Rules versus Discretionary Budgets

Past research has provided evidence of clientelistic politics in delivery of program benefits by local governments (gram panchayats (GPs)), and manipulation of GP program budgets by legislators and elected officials at upper tiers in West Bengal, India. Using household panel survey data spanning 1998-2008, we examine the consequences of clientelism for distributive equity. We find that targeting of anti-poverty programs was progressive both within and across GPs, and is explained by greater 'vote responsiveness' of poor households to receipt of welfare benefits. Across-GP allocations were ...
Staff Report , Paper 624

Report
Small firms’ formalization: the stick treatment

Firm informality is pervasive throughout the developing world, and Bangladesh is no exception. The informal status of many firms substantially reduces the tax basis and therefore affects the provision of public goods. The literature on encouraging formalization has focused predominantly on reducing the direct costs of formalization and has found negligible effects from such policies. In this paper, we focus on a stick intervention, which, to the best of our knowledge, is the first in a developing-country setting to deal with the most direct and dominant form of informality: the lack of ...
Staff Reports , Paper 728

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