Office of the Chief Economist Latin America and the Caribbean Region
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Fields of Specialization
Innovation, Labor Economics, Trade, Productivity, Private Sector Development, Financial Sector, Spatial economics
Office of the Chief Economist Latin America and the Caribbean Region
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Last updated October 3, 2023
William F. Maloney is Chief Economist for the Latin America and Caribbean (LAC) region. Mr. Maloney, a U.S. national, joined the Bank in 1998 as Senior Economist for the Latin America and Caribbean Region. He held various positions including Lead Economist in the Office of the Chief Economist for Latin America, Lead Economist in the Development Economics Research Group, Chief Economist for Trade and Competitiveness and Global Lead on Innovation and Productivity. He was most recently Chief Economist for Equitable Growth, Finance and Institutions (EFI) Vice Presidency. From 2011 to 2014 he was Visiting Professor at the University of the Andes and worked closely with the Colombian government on innovation and firm upgrading issues. Mr. Maloney received his PhD in Economics from the University of California Berkeley (1990), his BA from Harvard University (1981), and studied at the University of the Andes in Bogota, Colombia (1982-83). His research activities and publications have focused on issues related to international trade and finance, developing country labor markets, and innovation and growth, including several flagship publications about Latin America and the Caribbean.He has published in academic journals on issues related to international trade and finance, developing country labor markets, and innovation and growth as well as several flagship publications of the Latin American division of the Bank, including Informality: Exit and Exclusion; Natural Resources: Neither Curse nor Destiny and Lessons from NAFTA, Does What you Export Matter: In Search of Empirical Guidance for Industrial Policy. Most recently, he published The innovation paradox: Developing Country Capabilities the Unrealized Potential of Technological Catch-Up and Harvesting Prosperity: Technology and Productivity Growth in Agriculture as part of the World Bank Productivity Project.
Publication Search Results
Now showing 1 - 10 of 28
The Distribution of Income Shocks during Crises : An Application of Quantile Analysis to Mexico, 1992-95(Washington, DC: World Bank, 2004-05) Maloney, William F. ; Cunningham, Wendy V. ; Bosch, MarianoMoving beyond the simple comparisons of averages typical of most analyses of household income shocks, this article employs quantile analysis to generate a complete distribution of such shocks by type of household during the 1995 crisis in Mexico. It compares the distributions across normal and crisis periods to see whether observed differences were due to the crisis or are intrinsic to the household types. Alternatively, it asks whether the distribution of shocks during normal periods was a reasonable predictor of vulnerability to income shocks during crises. It finds large differences in the distribution of shocks by household types both before and during the crisis but little change in their relative positions during the crisis. The impact appears to have been spread fairly evenly. Households headed by people with less education (poor), single mothers, or people working in the informal sector do not appear to experience disproportionate income drops either in normal times or during crises.
Publication(World Bank, Washington, DC, 2014-03) Maloney, William F. ; Sarrias, MauricioUsing detailed survey data on management practices, this paper uses recent advances in unconditional quantile analysis to study the changes in the within country distribution of management quality associated with country convergence to the managerial frontier. It then decomposes the contribution of potential explanatory factors to the distributional changes. The United States emerges as the frontier country, not because of better management on average, but because its best firms are far better than those of its close competitors. Part of the process of convergence to the frontier across the development process represents a trimming of the left tail, much is movement of the central mass and, for rich countries, it is actually the best firms that lag the frontier benchmark. Among potential explanatory variables that may drive convergence, ownership and human capital appear critical, the former especially for poorer countries and that latter for richer countries suggesting that the mechanics of convergence change across the process. These variables lose their explanatory power as firm and average country management quality rises. Hence, once in the advanced country range, the factors that improve management quality are less easy to document and hence influence.
Publication(World Bank, Washington, DC, 2003-01) Maloney, WilliamThe author develops a view of the informal sector in developing countries primarily as an unregulated micro-entrepreneurial sector and not as a disadvantaged residual of segmented labor markets. Drawing on recent work from Latin America, he offers alternative explanations for many of the characteristics of the informal sector customarily regarded as evidence of its inferiority.
Publication(World Bank, Washington, DC, 2001-12) Maloney, William F.Emergency programs are designed to soften the impact of economic crises-income shocks experienced by an entire community or country-on consumption and human capital accumulation. Of particular concern are poor people: as a result of inadequate savings or inadequate access to credit or insurance markets, the poor are unable to draw on resources from better times to offset a loss in income today. Further, the systemic nature of the shocks means that risk cannot be effectively pooled through local informal insurance mechanisms. Emergency interventions have included social funds, workfare programs, training programs, conditional transfers (linked to health center visits or children's school attendance, for example), and traditional direct, unconditional transfers in kind (such as communal tables or targeted food handouts). The author highlights some conceptual problems in choosing among these options and evaluating one program of a certain type relative to another. It argues that most such interventions can be thought of as containing both a transfer and an investment component and that their evaluation as emergency programs needs to more explicitly incorporate the intertemporal nature of their design. More specifically, the mandated investments in physical or human capital will benefit the poor, but only in the future-after the crisis-and their implementation diverts resources from alleviating present hardship. This needs to be reflected in the discount factor used to evaluate these investments. Maloney argues that the way emergency programs are financed, particularly the way the burden is shared between central and municipal governments, also has important implications for the criteria for evaluation. The analysis suggests that most conventional means of evaluating projects-net present value at market discount rates, labor intensity, cost per job created-may not be relevant or are at least ambiguous in the context of emergency programs. As a result, policymakers are left with few "hard" indicators with which to evaluate such programs. Maloney argues for an approach in which the policymaker weighs the appropriateness of deviations from the theoretically "ideal" benchmark program, which delivers a "smart" transfer costlessly to the target beneficiary, and discusses the arguments for or against these deviations. The modest goal of the proposed approach is to clarify the key issues and provide more solid grounding for the necessarily subjective judgment calls that policymakers will inevitably have to make.
Publication(World Bank, Washington, DC, 2002-02) Fiess, Norbert M. ; Fugazza, Marco ; Maloney, WilliamThis paper works at the interface of the literature exploring the raison d'etre of the informal labor market and that explaining the real exchange rate appreciations occurring in many Latin American countries during periods of reform. The authors first build a small country-Australian style model where the informal sector is seen as an unregulated non-tradables sector, augmented by heterogeneity in entrepreneurial ability and capital adjustment costs. They then examine the behavior of the model with and without a formal sector rigidity. It shows that the co-movements of relative formal/informal incomes, formal/informal sector size, and the real exchange rate can offer insight into the level of distortion in the labor market and the source of exchange rate fluctuations. The paper then explores time series data from Brazil, Colombia and Mexico using multivariate co-integration techniques to establish what "regime" each country is in at various periods of time. Mexico appears to be relatively undistorted and the 1987-92 appreciation appears to be largely a function of a boom in the non-tradables sector rather than wage inertia. In spite of a secular expansion of the informal sector there is little evidence of dualism or of a rigidity driven appreciation of the Real, from 1993-1996. Post 1995 Colombia corresponds to a classic segmented labor market and an appreciation partly driven by labor market rigidities. Graphical analysis suggests that neither the Argentine appreciation (1988-1992) or the celebrated Chilean appreciation (1975-1982) were driven by inertial forces
Publication(World Bank, Washington, DC, 2001-08) Fajnzylber, Pablo ; Maloney, William F.The authors present the first comparable dynamic panel estimates of labor demand elasticity, using data from Chile, Colombia, and Mexico. They examine the benefits, and limits of the Arellano, and Bond GMM in differences estimator, and the Blundell, and Bond GMM system estimator. They also explore the limitations of such measures for diagnosing flexibility in the labor market. Even accounting for the large variance induced by different estimation techniques, one probably cannot say much about the flexibility of different labor markets based on comparisons of the estimated elasticity of demand. Colombia, for example, which has severe restrictions on firing workers, has much higher long-run wage elasticity than Chile, which has no such restrictions. Three factors make such comparisons difficult: 1) Elasticity differ greatly across industries, so the composition of industry in each country probably affects the aggregate elasticity. Estimates are extremely dependent on the estimation approach, and specification. 2) Even for specific industries, the elasticity of labor demand differs greatly across countries. And the authors find no common pattern of country rankings across industries, which suggests that those differences cannot be attributed solely to systematic characteristics of the countries' labor markets. 3) Estimates for Chile over fifteen years, suggest substantial, and significant variations in elasticity over time. So comparisons across countries depend not only on the industries involved, but also on the sample periods of time used. Estimates change greatly, if not secularly, with sample period.
Publication(World Bank, Washington, DC, 2001-08) Fajnzylber, Pablo ; Maloney, William F. ; Ribeiro, EduardoThere are increasing fears that trade reform - and globalization generally - will increase the uncertainty the average (especially less skilled) worker faces. If product markets become more competitive and the access to foreign inputs is increased, will demand for workers among existing firms become more elastic? Will labor markets become more volatile because bad shocks to output will translate into greater impacts on wages and employment? So far the literature on this question has focused almost entirely on labor demand within continuing firms. But much of the movement in the job market arises from the entry and exit of firms. The authors show that firms entering and exiting a market contribute almost as much to employment changes as firms continuing in a market. In several samples, firms entering and exiting affected the net change in-positions more than the expansion of continuing plants did, although contributions varied greatly across the business cycle and period of adjustment. Estimates of labor demand elasticities of entering and exiting firms were surprisingly similar in Chile and Colombia and somewhat higher than elasticities for firms that survived. Estimates of the effect of trade liberalization offer only ambiguous lessons on trade reform's probable impact on these elasticities. The data suggest that in Chile greater exchange rate protection does reduce the wage-employment elasticity of entering and exiting plants, but the results are reversed in Colombia's case. Moreover, in Colombia higher import penetration lowers the elasticity of labor demand and in Chile higher tariffs increase it. These findings, combined with very ambiguous results from probit regressions on the determinants of plant exit, suggest that circumspection is warranted in asserting that trade liberalization will increase the wage elasticity of labor demand.
Publication(World Bank, Washington, DC, 2001-04) Maloney, William F. ; Nunez, Jairo ; Cunningham, Wendy ; Fiess, Norbert ; Montenegro, Claudio ; Murrugarra, Edmundo ; Santamaria, Mauricio ; Sepulveda, ClaudiaThe authors provide an overview of minimum wage levels in Latin America and their true impact on the distribution of wages, using both numerical measures and kernal density plots for eight countries (Argentina, Bolivia, Brazil, Chile, Colombia, Honduras, Mexico, and Uruguay). They especially try to identify "numeraire" effects--where the minimum is used as a reference higher in the wage distribution--and "lighthouse" effects--where it influences wage setting in the unregulated or "informal" sector. Their main findings: First, statutory minimum wages are often misleading, and graphical methods may be more reliable. Second, the minimum wage's effect on wage setting extends far beyond what is usually considered and probably beyond the effect in industrial countries. Using panel employment data from Colombia, where minimum wages seem high and binding, the authors quantify the minimum wage's effects on wages and on the probability of becoming unemployed. The Colombian case confirms the evidence offered by kernal density estimates: 1) The minimum wage can have an important impact on wage distribution in the neighborhood of the minimum wage. 2) The effects echo up the wage distribution in a clear demonstration of the "numeraire" effect. That this effect is stronger in Latin America than in the United States suggests that the minimum wage induces further-reaching rigidities in the labor market. The trade-off between any possible effect on poverty and reduced flexibility is likely to be more severe in countries where this is the case. The effects on employment, and unemployment, are substantial. 3) Informal salaries wages are also affected, confirming the graphical evidence of strong lighthouse effects. Self-employment earnings are not, however, confirming that the minimum wage is not simply serving as a measure of inflationary expectations.
Publication(World Bank, Washington, DC, 2008-06) Bosch, Mariano ; Maloney, WilliamThis paper analyzes the cyclical properties of worker flows in Brazil and Mexico, two important developing countries with large unregulated or informal sectors. It generates three stylized facts that are critical to the accurate modeling of the sector and which suggest the need to rethink the approaches to date. First, the unemployment rate is countercyclical essentially because job separations of informal workers increase dramatically in recessions. Second, the share of formal employment is countercyclical because of the difficulty of finding formal jobs from inactivity, unemployment and other informal jobs during recessions rather than because of increased separation from formal jobs. Third, flows from formality into informality are not countercyclical, but, if anything, pro-cyclical. Together, these challenge the conventional wisdom that has guided the modeling the sector that informal workers are primarily those rationed out of the formal labor market. They also offer a new synthesis of the mechanics of the cyclical adjustment process. Finally, the paper offers estimates of the moments of worker flows series that are needed for calibration.
Publication(World Bank, Washington, DC, 2007-10) Bosch, Mariano ; Goni, Edwin ; Maloney, WilliamThis paper studies gross worker flows to explain the rising informality in Brazilian metropolitan labor markets from 1983 to 2002. This period covers two economic cycles, several stabilization plans, a far-reaching trade liberalization, and changes in labor legislation through the Constitutional reform of 1988. First, focusing on cyclical patterns, the authors confirm that for Brazil, the patterns of worker transitions between formality and informality correspond primarily to the job-to-job dynamics observed in the United States, and not to the traditional idea of the informal queuing for jobs in a segmented market. However, the analysis also confirms distinct cyclical patterns of job finding and separation rates that lead to the informal sector absorbing more labor during downturns. Second, focusing on secular movements in gross flows and the volatility of flows, the paper finds the rise in informality to be driven primarily by a reduction in job finding rates in the formal sector. A small fraction of this is driven by trade liberalization, and the remainder seems driven by rising labor costs and reduced flexibility arising from Constitutional reform.