03. Journals
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These are journal articles published in World Bank journals as well as externally by World Bank authors.
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Publication
Persistent Misallocation and the Returns to Education in Mexico
(Published by Oxford University Press on behalf of the World Bank, 2020-06)Over the last two decades, Mexico has experienced macroeconomic stability, an open trade regime, and substantial progress in education. Yet average workers’ earnings have stagnated, and earnings of those with higher schooling have fallen, compressing the earnings distribution and lowering the returns to education. This paper argues that distortions that misallocate resources toward less-productive firms explain these phenomena, because these firms are less intensive in well-educated workers compared with more-productive ones. It shows that while the relative supply of workers with more years of schooling has increased, misallocation of resources toward less-productive firms has persisted. These two trends have generated a widening mismatch between the supply of, and the demand for, educated workers. The paper breaks down worker earnings into observable and unobservable firm and individual worker characteristics, and computes a counterfactual earnings distribution in the absence of misallocation. The main finding is that in the absence of misallocation average earnings would be higher, and that earnings differentials across schooling levels would widen, raising the returns to education. A no-misallocation path is constructed for the wage premium. Depending on parameter values, this path is found to be rising or constant, in contrast to the observed downward path. The paper concludes arguing that the persistence of misallocation impedes Mexico from taking full advantage of its investments in the education of its workforce. -
Publication
Gender, Informal Employment and Trade Liberalization in Mexico
(Published by Oxford University Press on behalf of the World Bank, 2020-06)This paper studies how import liberalization affects formal employment across gender. The theory offers a mechanism to explain how male and female formal employment shares can respond differently to trade liberalization through labor reallocation across tradable and nontradable sectors. Using Mexican data over the period 1993–2001, we find that Mexican tariff cuts increase the probability of working formally for both men and women within four-digit manufacturing industries. The formalization of jobs within tradable sectors is driven by large firms. Constructing a regional tariff measure, we find that regional exposure to import liberalization increases the probability of working formally in the manufacturing sector for both men and women, and especially for men. However in the service sectors, the probability of working formally decreases for low-skilled women. -
Publication
The Political Economy of Multidimensional Child Poverty Measurement: A Comparative Analysis of Mexico and Uganda
(Taylor and Francis, 2020-03-11)As part of the 2030 Agenda, much effort has been exerted in comparing multidimensional child poverty measures both technically and conceptually. Yet, few countries have adopted and used any of these measures in policymaking. This paper explores the reasons for this absence from a political economy perspective. It develops an innovative political economy framework for poverty measurement and a hypothesis whereby a country will only produce and use reliable and sustainable multidimensional child poverty (MDCP) measures if and only if three conditions coalesce: consensus, capacity and polity. We explore this framework with two relevant case studies, Mexico and Uganda. Both countries satisfy the capacity condition required to measure MDCP but only Mexico satisfies the other two conditions. Our proposed political economy framework is normatively relevant because it identifies the conditions that need to change across multiple contexts before the effective adoption and use of an MDCP measure becomes more likely. -
Publication
Representativity and Networked Interference in Data-Rich Field Experiments: A Large-Scale RCT in Rural Mexico
(Published by Oxford University Press on behalf of the World Bank, 2020-02)Modern availability of rich geospatial datasets and analysis tools can provide insight germane to the design of field experiments. Design of field experiments, and in particular the choice of sampling strategy, requires careful consideration of its consequences on the external representativity and interference (SUTVA violations) of the experimental sample. This paper presents a methodology for a) modeling the geospatial and social interaction factors that drive interference in rural field experiments; and b) eliciting a set of nondominated sample options that approximate the Pareto-optimal tradeoff between interference and external representativity, as functions of sample choice. The study develops and tests the methodology in the context of a large-scale health experiment in rural Mexico, involving more than 3,000 pregnant women and 600 health clinics across 5 states. Relevant for the practitioner, the methodology is computationally tractable and can be implemented leveraging open sourced geo-spatial data and software tools. -
Publication
Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico
(Taylor and Francis, 2020-01-31)This paper measures the employment effect of a program in Mexico that granted firms wage subsidies during the recent economic crisis. I use monthly administrative data at the industry level, along with Euclidean distance matching to construct groups of eligible and ineligible durable goods manufacturing industries that display statistically identical preprogram trends in employment. Difference-in-difference results show a positive but not statistically significant effect of the wage subsidies on employment during the program’s eight-month duration. The size of the effect increases to 18 per cent after the program ended and the results indicate that employment after the program recovered faster in eligible industries than in ineligible industries. Additional analysis suggests that the program did not incentivize firms to retain workers with job-specific skills as originally intended. Instead, the payment of subsidy funds, which only happened towards the end of the program, seems to have provided liquidity for hiring back workers.