Journal

Browse the categories to access the content of academic, scientific and opinion publications of the professors and students of the Department of Economics PUC-Rio.

The effect of rural credit on deforastation : Evidence from Brazilian Amazon

Economic Journal

V 130, P 290-330, 01/06/2020

In 2008, the Brazilian government made the concession of rural credit in the Amazon conditional upon stricter requirements as an attempt to curb forest clearings. This article studies the impact of this innovative policy on deforestation. Difference-in-differences estimations based on a panel of municipalities show that the policy change led to a substantial reduction in deforestation, mostly in municipalities where cattle ranching is the leading economic activity. The results suggest that the mechanism underlying these effects was a restriction in access to rural credit, one of the main support mechanisms for agricultural production in Brazil.

Juliano Assunção, Clarissa Costalonga e Gandour, Romero Cavalcanti Barreto da Rocha, Rudi Rocha.


The cross-sectional distribution of price stickiness implied by aggregate data

The Review of Economics and Statistics

V 102, P 162-179, 03/03/2020

We provide evidence on three mechanisms that can reconcile frequent individual price changes with sluggish aggregate price dynamics. To that end, we estimate a semi-structural model that can extract information about real rigidities and the distribution of price stickiness from aggregate data. Hence, the model can also speak to the debate about the aggregate implications of sales. Our estimates indicate large real rigidities and substantial heterogeneity in price stickiness. Moreover, the cross-sectional distribution of price stickiness implied by aggregate data is in line with an empirical distribution obtained from micro price data that factors out sales and product substitutions.

Carlos Viana de Carvalho, Niels Dam , Jae Won Lee.


Do government guarantees really matter in fixed exchange rate regimes?

EconomiA

31/12/2019

Since the mid 1990s, theories of speculative attacks have argued that fixed exchange rate regimes induce excessive borrowing in foreign currency as an optimal response to implicit guarantees that the government will not devalue the domestic currency. Using data on Brazilian firms before and after the end of the fixed exchange rate regime in 1999, we estimate the relevance of the government guarantees by comparing the changes in foreign debt of two groups of firms: those that hedged their foreign currency debt prior to the exchange rate float and those that did not. Using the difference-in-differences approach, in which firm-specific characteristics are introduced as control variables, we exclude the macroeconomic effects of the change in the exchange rate regime and the possible differences in foreign debt trends of the two groups of firms, thus obtaining an estimate of the impact of the government guarantees on borrowing in foreign currency. The results suggest that the guarantees do not induce excessive borrowing in foreign currency.

Marcio Magalhães Janot, Márcio Gomes Pinto Garcia, Walter Novaes.


Brazilian Private Pension: Portfolio Allocation, Risk-Taking and Interest Rate

Brazilian Review of Finance

V 17, 10/12/2019

Despite the fall in the interest rate observed in Brazil in recent decades, and specific regulations on the private pension segment that encourage long-term risk taking, institutions in this segment appear to be considerably sensitive to short-term factors, while avoiding exposure to long-term risk factors. With portfolio allocation data from large entities, we implemented a VAR model to evaluate the impact of interest rate changes on portfolio management decisions and performed a counterfactual analysis to define the causal effect of regulation on additional risk taking. Results indicate that interest rate increases lead to significant and persistent reduction of investment in riskier assets with longer maturities, while the implemented regulation was not able to force greater risk-taking by institutions, in addition to generating distortions in segments of the Brazilian financial market

Márcio Gomes Pinto Garcia, Luiz Guilherme Carpizo Costa.


Preferences over Wage Distribution: Evidence from a Choice Experiment

Journal of Economic Psychology

V 74, 10/10/2019

Using a choice experiment in the lab, we assess the relative importance of different attitudes to income inequality. We elicit subjects’ preferences regarding pairs of payoff distributions within small groups, in a firm-like setting. We find that distributions that satisfy the Pareto-dominance criterion attract unanimous suffrage: all subjects prefer larger inequality provided it makes everyone weakly better off. This is true no matter whether payoffs are based on merit or luck. Unanimity only breaks once subjects’ positions within the income distribution are fixed and known ex-ante. Even then, 75% of subjects prefer Pareto-dominant distributions, but 25% of subjects engage in money burning at the top in order to reduce inequality, even when it does not make anyone better off. A majority of subjects embrace a more equal distribution if their own income or overall efficiency is not at stake. When their own income is at stake and the sum of payoffs remains unaffected, 20% of subjects are willing to pay for a lower degree of inequality.

S. Cetre, M. Lobeck, C. Senik, Thierry Verdier.


Flex Cars and Competition in Fuel Retail Markets

International Journal of Industrial Organization

V 36, P 145-184, 10/05/2019

We study how the diffusion of flex (bi-fuel) cars affected competition on ethanol and gasoline retail markets. We propose a model of price competition in which the two fuels become closer substitutes as flex cars penetration grows. We use a large panel of weekly prices at the station level to show that fuel prices and margins have fallen in response to this change. This finding is evidence of market power in fuel retail and indicates that innovations that increase consumer choice benefit even those who choose not to adopt them.

Leonardo Rezende, Juliano Assunção, João Paulo Cordeiro De Noronha Pessoa.


Geographic Heterogeneity and Technology Adoption: Evidence from Brazil

Land Economics

V 95, 22/03/2019

This paper studies the relationship between geographic heterogeneity and technology adoption in the context of the direct planting system (DPS) in Brazil. The DPS is a no-till farming technique that increases productivity and decreases soil degradation. However, it requires adaptation to local conditions to be profitably used. Combining detailed geographic and agricultural data, we show that geographic heterogeneity reduces DPS adoption. This effect is robust to the inclusion of controls and not observed for technologies that do not require local adaptation. These findings are consistent with models in which geographic heterogeneity increases the cost of adapting technologies to local conditions

Juliano Assunção, Arthur Amorim Bragança, Pedro Hemsley.


Returns to experience across tasks: evidence from Brazil

Applied Economics Letters

V 20, P 1718-1723, 21/03/2019

Using a rich Brazilian panel dataset and an occupation-task mapping, we investigate whether returns to experience depend on the types of jobs performed by workers. We find that returns to experience in non-routine tasks, especially returns to analytical tasks, are much larger than returns to routine tasks. This gap increases with schooling, suggesting that schooling and nonroutine tasks are complementary in the human capital production function. These are important findings for developing countries similar to Brazil, where approximately 70% of workers’ tasks are routine

Gustavo Gonzaga, Tomás Guanziroli.


From Equals to Despots: The Dynamics of Repeated Decision Making in Partnerships with Private Information

Journal of Economic Theory

V 182, P 402-432, 11/03/2019

This paper considers an optimal renegotiation-proof dynamic Bayesian mechanism in which two privately informed players repeatedly have to take a joint action without resorting to side-payments. We provide a general framework which accommodates as special cases committee decision and collective insurance problems. Thus, we formally connect these separate strands of literature. We show: (i) first-best values can be arbitrarily approximated (but not achieved) when the players are sufficiently patient; (ii) our main result, the provision of intertemporal incentives necessarily leads to a dictatorial mechanism: in the long run the optimal scheme converges to the adoption of one player's favorite action. This can entail one agent becoming a permanent dictator or a possibility of having sporadic “regime shifts.”

William Fuchs , Satoshi Fukuda, Vinicius Nascimento Carrasco.


Apprenticeship as a stepping stone to better jobs: evidence from brazilian matched employer-employee data

Labour Economics

V 57, P 177-194, 08/02/2019

The objective of this paper is to evaluate the Brazilian Apprenticeship program adopted at a large scale since 2000. In particular, we investigate whether the program is a better stepping stone to permanent jobs when compared to other forms of temporary jobs. Similar to other apprenticeship initiatives around the world, the Brazilian program trains young workers under special temporary contracts aiming to help them successfully complete the transition from school to work. We make use of a matched employee-employer dataset covering all formal employees in Brazil, including apprentices. Our identification strategy exploits a discontinuity in the eligibility to enter the program in the early 2000s, when 17 was the age limit to take part in the program. This strategy allows us to consider selection based on unobservable characteristics. We find that the program increases the probability of employment in permanent jobs and decreases turnover rates and formal labor market experience in 2-3- and 4-5-year horizons. These results are consistent with a positive effect of the program on reservation utilities of workers and on their efforts to expand skills. This is also confirmed by the data as we find substantial impacts on schooling attainment. We also find evidence that the skill requirements of the apprentices’ occupation affect the likelihood of obtaining an open-ended job in the short run and the education achievement in the medium run. The results also evince much larger effects of the program for workers who had their first job in large firms

Gustavo Gonzaga, Carlos Henrique Corseuil, Miguel Nathan Foguel.


Joint analysis of the discount factor and payoff parameters in dynamic discrete choice models

Quantitative Economics

V 9, N 2, P 1153-1194, 28/11/2018

Most empirical and theoretical econometric studies of dynamic discrete choice models assume the discount factor to be known. We show the knowledge of the discount factor is not necessary to identify parts, or even all, of the payoff function. We show the discount factor can be generically identified jointly with the payoff parameters. On the other hand, it is known the payoff function cannot be nonparametrically identified without any a priori restrictions. Our identification of the discount factor is robust to any normalization choice on the payoff parameters. In IO applications, normalizations are usually made on switching costs, such as entry costs and scrap values. We also show that switching costs can be nonparametrically identified, in closed‐form, independently of the discount factor and other parts of the payoff function. Our identification strategies are constructive. They lead to easy to compute estimands that are global solutions. We illustrate with a Monte Carlo study and the dataset used in Ryan (2012).

Tatiana Komarova, Sorawoot Srisuma, Fábio Miessi Sanches, Daniel Silva Junior.


Minimum distance estimation of search costs using price distribution

Journal of Business & Economic Statistics

V 36, N 4, P 658-671, 08/11/2018

Hong and Shum (2006) show equilibrium restrictions in a search model can be used to identify quantiles of the search cost distribution from observed prices alone. These quantiles can be difficult to estimate in practice. This paper uses a minimum distance approach to estimate them that is easy to compute. A version of our estimator is a solution to a nonlinear least squares problem that can be straightforwardly programmed on softwares such as STATA. We show our estimator is consistent and has an asymptotic normal distribution. Its distribution can be consistently estimated by a bootstrap. Our estimator can be used to estimate the cost distribution nonparametrically on a larger support when prices from heterogeneous markets are available. We propose a two-step sieve estimator for that case. The first step estimates quantiles from each market. They are used in the second step as generated variables to perform nonparametric sieve estimation. We derive the uniform rate of convergence of the sieve estimator that can be used to quantify the errors incurred from interpolating data across markets. To illustrate we use online bookmaking odds for English football leagues' matches (as prices) and find evidence that suggests search costs for consumers have fallen following a change in the British law that allows gambling operators to advertise more widely.

Fábio Miessi Sanches, Daniel Silva Junior, Sorawoot Srisuma.


ArCo: An R package to Estimate Artificial Counterfactuals.

R Journal

V 10, P 98-108, 07/11/2018

In this paper we introduce the ArCo package for R which consists of a set of functions to implement the the Artificial Counterfactual (ArCo) methodology to estimate causal effects of an intervention (treatment) on aggregated data and when a control group is not necessarily available. The ArCo method is a two-step procedure, where in the first stage a counterfactual is estimated from a large panel of time series from a pool of untreated peers. In the second-stage, the average treatment effect over the post-intervention sample is computed. Standard inferential procedures are available. The package is illustrated with both simulated and real datasets. 

Gabriel F Vasconcelos, Yuri R Fonseca, Marcelo Medeiros, Ricardo Masini.


Economic shocks and crime: evidence from the Brazilian Trade liberalization

American Economic Journal: Applied Economics

V 10, N 4, P 158–195, 10/10/2018

This paper studies the effect of changes in economic conditions on crime. We exploit the 1990s trade liberalization in Brazil as a natural experiment generating exogenous shocks to local economies. We document that regions exposed to larger tariff reductions experienced a temporary increase in crime following liberalization. Next, we investigate through what channels the trade-induced economic shocks may have affected crime. We show that the shocks had significant effects on potential determinants of crime, such as labor market conditions, public goods provision, and income inequality. We propose a novel framework exploiting the distinct dynamic responses of these variables to obtain bounds on the effect of labor market conditions on crime. Our results indicate that this channel accounts for 75 to 93 percent of the effect of the trade-induced shocks on crime

Gabriel Ulyssea, Rafael Dix-Carneiro, Rodrigo Reis Soares.


Do Government Audits Reduce Corruption? Estimating the Impacts of Exposing Corrupt Politicians

Journal of Political Economy

V 125, N 5, 25/08/2018

This paper examines the extent to which government audits of public resources can reduce corruption by enhancing political and judiciary accountability. We do so in the context of Brazil’s anticorruption program, which randomly audits municipalities for their use of federal funds. We find that being audited in the past reduces future corruption by 8 percent, while also increasing the likelihood of experiencing a subsequent legal action by 20 percent. We interpret these reduced-form findings through a political agency model, which we structurally estimate. Our results suggest that the reduction in corruption comes mostly from the audits increasing the perceived nonelectoral costs of engaging in corruption.

Eric Avis, Claudio Ferraz, Frederico Finan.


ArCo: An Artificial Counterfactual Approach for High-Dimensional Panel Time-Series Data

The Journal of Econometrics

V 207, N 2, P 352-380, 31/07/2018

We consider a new, flexible and easy-to-implement method to estimate thecausal effects of an intervention on a single treated unit when a control group is not available and which nests previous proposals in the literature. It is a two-step methodology where in the first stage, a counterfactual is estimated based on a large-dimensional set of variables from a pool of untreated units by means of shrinkage methods, such as the least absolute shrinkage and selection operator (LASSO). In the second stage, we estimate the average intervention effect on a vector of variables, which is consistent and asymptotically normal. Our results are valid uniformly over a wide class of probability laws. We show that these results hold even when the exact date of the intervention is unknown. Tests for multiple interventions and for contamination effects are derived. By a simple transformation of the variables, it is possible to test for multivariate intervention effects on several moments of the variables of interest. Existing methods in the literature usually test for intervention effects on a single variable and assume that the time of the intervention is known. In addition, high-dimensionality is frequently ignored and inference is either conducted under a set of more stringent hypotheses and/or by permutation tests. A Monte Carlo experiment evaluates the properties of the method in finite samples and compares it with other alternatives. As an application, we evaluate the effects on inflation, GDP growth, retail sales and credit of an anti tax-evasion program.

Marcelo Medeiros, Carlos Viana de Carvalho, Ricardo Masini.


Optimal Selling Mechanisms Under Moment Conditions

Journal of Economic Theory

V 177, P 245-279, 08/05/2018

We study the revenue maximization problem of a seller who is partially informed about the distribution of buyer's valuations, only knowing its first N moments. The seller chooses the mechanism generating the best revenue guarantee based on the information available, that is, the optimal mechanism is chosen according to maxmin expected revenue. We show that the transfer function in the optimal mechanism is given by non-negative monotonic hull of a polynomial of degree N. This enables us to transform the seller's problem into a much simpler optimization problem over Nvariables. The optimal mechanism is found by choosing the coefficients of the polynomial subject to a resource constraint. We show that knowledge of the first moment does not guarantee strictly positive revenue for the seller, characterize the solution for the cases of two moments and derive some characteristics of the solution for the general case.

Vinicius Nascimento Carrasco, Humberto Moreira, Paulo Klinger Monteiro, Vitor Luz, Nenda Kos.


Mid-auction information acquisition

Economic Theory

V 65, N 3, P 751–780, 26/04/2018

An English auction is studied in which bidders can acquire information during the bidding process, allowing for heterogeneity both in ex-ante private information and the cost of information acquisition. The best response has a simple characterization where the optimal information acquisition time is unaffected by the other bidders’ strategies. We prove the existence of an equilibrium in a novel way by characterizing it as a fixed point in the space of bid distributions rather than the space of bid functions. Furthermore, we show that when bidders have homogeneous ex-ante private information about valuations: (1) The English auction generates more revenue than the Vickrey auction when the number of bidders is sufficiently large; and (2) the English auction is more efficient than the Vickrey auction when the information acquisition cost are relatively small. We present numerical simulations that show that these effects can be large. Our findings provide an additional explanation for the popularity of the English auction, even in settings where the bidders’ valuations are independent.

Leonardo Rezende.


Approximating multisector New Keynesian models

Economics Letters

V 163, P 193-196, 06/04/2018

A three-sector model with a suitably chosen distribution of price stickiness can closely approximate the response to aggregate shocks of New Keynesian models with a much larger number of sectors, allowing for their estimation at much reduced computational cost.

Carlos Viana de Carvalho, Fernanda Feitosa Nechio.


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