SBE40: 40TH MEETING OF THE BRAZILIAN ECONOMETRIC SOCIETY
PROGRAM FOR TUESDAY, DECEMBER 11TH
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13:30-15:00 Session 1A: Macro 1
Location: Capri 3
13:30
Innovation Coordination Failures and Endogenous Productivity: On the dynamic effect of misallocation

ABSTRACT. Several papers have shown that misallocation of resources among heterogeneous firms can have damaging consequences for countries’ total factor productivity. The present work studies the impact of these distortions when they affect not only the present productivity, but also the dynamics of future productivity, in an environment where agent decisions can generate coordination failures. This analysis will be carried out from a general equilibrium model of heterogeneous firms with partially endogenous productivity, in which firms have the ability to affect their future productivity by means of risky experiments, which take the form of productivity shocks, and coordination failures are generated from a complementarity of demand. Equilibrium analyses state the boundary conditions for extreme scenarios, with pure strategy, in which none or all firms invest in innovation, or for an intermediary scenario, with mixed strategies. Those conditions, however, are sensitive to aggregate and productivity-dependent distortions, suggesting that the current causes of misallocation of resources may carry long-lasting consequences to the growth path of TFP as well.

14:00
The role of resource misallocation in structural change

ABSTRACT. We develop a multi-sector model of growth to explain the distinct patterns of structural change in manufacturing sectors in industrialized countries and those in developing and emerging industrial countries. To this end, we include a redistribution mechanism generated by a government because this mechanism affects an economy’s relative prices and resource allocation. This mechanism can imply changes in the production structure or the perpetuation of structures harmful to economic growth. We also demonstrate that sufficient conditions for the coexistence of structural change and unbalanced aggregate growth in this environment impose fewer restrictions on the parameters than they do in models without resource misallocation. Moreover, using micro-founded parameters, our numerical results are consistent with the observed data.

14:30
Geographic discontinuity of a macroprudencial policy: Evidence from Brazilian municipalities

ABSTRACT. This paper analyses the effects of changing the upper bound limit of a eligible real estate for a conforming housing loan with different values across Brazilian States on housing market. Using real estate loan level data we compare housing prices on similar municipalities around the twodimension discontinuity border of the States with distinct limits for this loan. We found that housing price in higher-limit region was temporally 13% larger than housing prices in lower-limit region six months after first changing the law. After that, there is also evidence of distinct Loan-to- Value ratios beyond those regions. However, this change does not affect any housing market outcome for lower class households.

13:30-15:00 Session 1B: Macro 2
Location: Capri 4
13:30
Nowcasting Brazilian GDP A Performance Assessment of Dynamic Factor Models

ABSTRACT. This work compares Dynamic Factor Models’ forecasts for Brazilian GDP. Our approach is labeled nowcasting since it is short-term forecasting that takes into account mixed frequencies and can handle missing data in real-time. We implement three models: the first is based on the Principal Components Analysis; the second employs a two-step estimation method with quarterly inputs; the last is similar to the former but uses monthly series. A realtime out-of-sample exercise is proposed to assess the performance of these models. A dataset is created for each day within 27 quarters - from the fourth quarter of 2010 up to the second quarter of 2017. For recent periods, the nowcasts estimated perform better than the average predictions of Focus Survey, a bulletin organized by the Brazilian Central Bank. We also show evidence that the average of GDP forecasts from this survey may be biased.

14:00
Employment Cyclicality by Firm Size, Wage and Productivity in Brazil

ABSTRACT. The important debate about how economic fluctuations affect employment reallocation in heterogeneous businesses is currently open in the literature. This debate is relevant as it matters for the understanding of the labor market dynamics, and for devising labor policies that aim at dampening employment fluctuations. The theoretical literature suggests that job flows reallocate workers from low productivity to high productivity firms and often this pattern is tested assuming that firm size, wages and productivity are positively related. This paper constructs a unique monthly linked employer-employee dataset and contributes to the debate by providing empirical evidence on the cyclicality of employment in heterogeneous manufacturing firms in Brazil. Results produced by classifying firms by employment size, wage or total factor productivity show different correlations between employment growth rates and unemployment, which implies that the relationship between these variables is not as strong as suggested in some influential studies. Hence, a more direct productivity measure should be used to test firm productivity job ladder. When total factor productivity is used to rank firms, results suggest that employment in high productivity firms is more cyclically sensitive to unemployment. Besides, the VAR impulse response analysis suggests that workers move up the productivity ladder by moving from new firms with low productivity to old firms with high productivity.

14:30
Modeling How Macroeconomic Shocks Affect Regional Employment: Analyzing the Brazilian Formal Labor Market using the Global VAR

ABSTRACT. Assessing linkages across different regions and how macroeconomic shocks spread out across regions is not an easy task. In this study we address this problem using a global vector autoregressive methodology that deals with the curse of dimensionality in an ingenious form. Focusing on the Brazilian labor market, identified and quantified how a shock in an aggregate economic activity spreads out regionally and throughout time. Another novelty of our work is the use of information collected by the Brazilian Bureau of Geography and Statistics to measure how regions are linked by analyzing infrastructure linkages of Brazilian municipalities in terms of airports, roads, ports, education, health, and tourism activities. Interdependence among regions is measured not only by closeness but also by considering economic linkages. In terms of regional sensitivity to macroeconomic shocks, we provide evidence that these shocks tend to cause stronger effects on the South, Southeast, and Midwest regions than the Northeast and North regions. This conclusion is in line with the idea that the formal labor market is better developed in the former regions than the latter. The South, Southeast, and Midwest regions in Brazil have better economic and social indicators.

13:30-15:00 Session 1C: Finance 1
Location: Capri 5
13:30
How cash holdings affect the profitability of banking firms?

ABSTRACT. Using commercial banks worldwide, we examine the effect of cash holdings on bank profitability. Unlike previous studies, we examine a non-linear relation between these two variables. Regression analysis is built on an unbalanced panel data set comprising 1,811 banks in 12 countries over the period 2000-2017. The empirical data are collected from Capital IQ, and a comprehensive set of banking characteristics is examined. We consider as a proxy for banks profitability the return on equity and the return on assets. Our results show that there is a non-monotonic relationship between cash holdings level and bank profitability, which indicates that banks have an optimal cash holdings level that maximizes their profitability. Also, we show that banks in emerging markets (BRICS) hold more cash than banks in developed countries (G7). Also, our results reveal an increase in the banks' cash holdings after the 2008 financial crisis. This happens because cash funds held by banks over and above the Federal Reserve’s requirements have grown dramatically since the financial crisis in the US in 2008. Holding excess reserves seems now much more attractive to banks because the cost of not doing so can be higher. Furthermore, a robustness check of our results confirms that effect of cash holdings on bank performance is more persistent for banks in G7 group, which includes the US.

14:00
Does control concentration affect board structure? International evidence

ABSTRACT. We investigate whether the wedge of control a proxy for the controlling shareholder's expropriation incentive affects the number of internal and the number of external positions each firms' board of director has. We studied 4.600 firms from 20 countries in 2013 and found that when controlling shareholders have higher wedge of control they select board members with less internal positions and with more external positions. We interpret this result as evidence supporting the monitoring incentive hypothesis, which suggests that these shareholders prefer a governance structure more shareholder-friendly, probably to keep other private benefits of control on the long-run.

14:30
Dotcom Extreme Underpricing

ABSTRACT. We conjecture that the Dotcom extreme underpricing resulted from the emergence of a large cohort of firms racing for market leadership (mostly through acquisitions and venture capital-sponsorship). Long-run quality of shares (e.g., price performance, broad institutional ownership basis, analysts’ coverage, and liquidity) was part of their strategy. In the face of overvaluation, to protect shares’ long-run quality, these issuers consented to extreme underpricing. Consistent with our conjecture, we find that extreme underpricing is related to acquisitions and VC-sponsorship and market overvaluation. These dimensions also fully explain the high mean underpricing. We take advantage of extreme underpricing to build evidences contrary to competing explanations.

13:30-15:00 Session 1D: Special Session - REAP Micro Aplicada
Location: Capri 1
13:30
Low birth weight and infant mortality: Evidence from Brazil and Chile
14:00
Pre-Hospital Care: Effects of UPA 24hs on Hospitals and Patient Outcomes
14:30
The Intergenerational Payday Effect
15:00-15:15Coffee Break
15:15-16:45 Session 2A: Health and Impact Evaluation
Location: Capri 4
15:15
Can Workforce Recruitment Programs affect Local Labor Markets? Evidence from a Physician Program

ABSTRACT. In this paper, we estimate the effects of a large-scale physician recruitment program on employment and wages of local physicians. Under this program, the Brazilian federal government directly recruit, finance, and allocate physicians across municipalities. Our identification strategy combines the program’s intensity across municipalities with the timing of the program in a difference-in-differences framework. Our estimates indicate that the program significantly reduces local physician employment and earnings. Since the vast majority of recruited physicians come from abroad and are financed by the central government, these effects are likely the result of changes in local governments’ hiring decisions. These findings provide suggestive evidence that federal employment grants can distort the behavior of local governments and affect labor market prospects of incumbent workers.

15:45
Assessing the impact of More Doctors Program on health care indicators

ABSTRACT. This paper aims to assess the short run effects of the “More Doctors” Program, launched by the Brazilian federal government in 2013. Using difference-in-difference approach with municipal data collected between 2010 and 2015, we confirm that MDP has two correlated impacts. First, it has increased health service attendance on treated municipalities. We document that appointments, consults, referrals, and home visits have increased by 5.9%, 9.4%, 12.3%, and 29.7%. Second, we find a negative impact on hospitalization. We argue that intensification on health service access have reduced general hospitalization (4.6%). However, it does not seem to have been able to reduce mortality in the municipalities, in line with Carrilo and Feres (2017) and Fontes et al. (2017). We argue that increase in referrals and appointment with specialists can be interpreted as quality improvement, since a more precise diagnostic, can reduce hospitalization due to faster health recovery without an impact on mortality.

16:15
Cash and Care: Conditional Cash Transfers and Birth Outcomes

ABSTRACT. The objective of this paper is to evaluate the impacts of the introduction of a cash transfer for pregnant women in the design of the Bolsa Família Program (BFP) on infant health. In particular, we focus on the effects on birth weight and on the incidence of low birth weight, but we also assess the impacts on pregnancy outcomes such as the incidence of preterm births and prenatal care. The new benefit consists of nine monthly transfers which start to be paid when the woman is identified as pregnant by the health management system of the BFP, regardless of the stage of pregnancy at the moment of the identification. The empirical strategy explores the fact that when the transfer was implemented eligible women at different stages of pregnancy were exposed to different income shocks before giving birth. Using administrative data from the BFP and from the Brazilian Ministry of Health, we create links between benficiary women and their children’s natality outcomes. The main results show that the transfer had a positive impact on birth weight and reduced significantly the likelihood of low birth weight. We also find that higher exposures to the transfer during pregnancy reduced the incidence of preterm births. While we don’t find significant impacts on the number of prenatal visits, the results show that the transfer reduced the likelihood of delayed prenatal care.

15:15-16:45 Session 2B: Econometrics 1
Location: Capri 3
15:15
Maximum Likelihood Estimation of a TVP-VAR

ABSTRACT. This paper proposes a vector autoregression with time-varying coefficients and multivariate stochastic volatility which can be estimated in one step by maximum likelihood. The coefficients are assumed to follow heteroscedastic random walks and the volatility of the system is modelled as a Wishart process, increasing the flexibility in describing the behavior of stochastic covariances. Exploiting the conjugacy between Normal, Wishart and multivariate beta distributions, filtering formulas for tracking the latent states, as well as an expression for the likelihood function, are derived in closed form.

15:45
Distributional Counterfactual Analysis with (common) Deterministic trend units

ABSTRACT. The goal of this paper is to extend the counterfactual methodologies, in particular, Carvalho et. al (2018), by considering the estimation of quantile counterfactuals in the presence of trend units. We derive an asymptotically normal test statistics for the quantile intervention effect and for the distribution effect as a whole. As a by-product, we show the consistency of the quantile regression under heterogeneity and temporal dependence. More importantly, the consistency is obtained without relying on common assumptions of compactness and uniform convergence of the objective function. In fact due to the deterministic trend the objective function fails to be stochastically equicontinuous, which provided that the parameter space is totally bounded, is necessary for uniform convergence. Our procedure is illustrated in a detailed simulation experiment as well as in an empirical application in Corporate Finance.

16:11
Testing jump spillovers without testing for jumps

ABSTRACT. This paper develops statistical tools for testing conditional independence among the jump components of the daily quadratic variation, which we estimate using intraday data. To avoid sequential bias distortion, we do not pretest for the presence of jumps. If the null is true, our test statistic based on daily integrated jumps weakly converges to a Gaussian random variable if both assets have jumps. If instead at least one asset has no jumps, then the statistic approaches zero in probability. We show how to compute asymptotically valid bootstrap-based critical values that result in a consistent test with asymptotic size equal to or smaller than the nominal size. Empirically, we study jump linkages between US futures and equity index markets. We find not only strong evidence of jump cross-excitation between the SPDR exchange-traded fund and E-mini futures on the S&P 500 index, but also that integrated jumps in the E-mini futures during the overnight period carry relevant information.

15:15-16:45 Session 2C: Political Economy
Location: Capri 5
15:15
Popularity shocks and political selection

ABSTRACT. We observe that popularity shocks are crucial for electoral accountability beyond their effects on voters’ behaviors. By focusing on Brazilian politics, we show that the disclosure of audit reports on the (mis)use of federal funds by local administrators affects the type of candidates who stand for election. When the audit finds low levels of corruption, the parties supporting the incumbent select less-educated candidates. On the contrary, parties pick more-educated candidates when the audit reveals a high level of corruption. These effects are stronger in municipalities that have easier access to local media.

15:45
To the Victor Belongs the Spoils? Party Membership and Public Sector Employment in Brazil

ABSTRACT. We analyze how political discretion affects the selection of government workers, using individual-level data on political party membership and matched employer-employee data on the universe of formal workers in Brazil. Exploiting close mayoral races, we find that winning an election leads to an increase of over 40% in the number of members of the winning party working in the municipal bureaucracy. Employment of members of the ruling party increases relatively more in senior positions, but also expands in lower-ranked jobs, suggesting that discretionary appointments are used both to influence policymaking and to reward supporters. We find that party members hired after their party is elected tend be of similar or even higher quality than members of the runner-up party, contrary to common perceptions that political appointees are less qualified. Moreover, the increased public employment of members of the ruling party is long-lasting, extending beyond the end of the mayoral term.

16:15
An evaluation of the policy response to the recent water crisis in São Paulo, Brazil: A political budget cycles interpretation
SPEAKER: David Grover

ABSTRACT. The city of São Paulo, Brazil experienced a major drought event during 2014-15. The authorities responded with two behavior-based water conservation instruments designed to promote water conservation among households, a financial reward and a financial penalty. This paper evaluates how effective these instruments were at inducing household water conservation behavior, using water consumption data for a sample of households that is representative of the 11 million-inhabitant municipality of São Paulo. Evidence is found that the financial penalty was effective but no evidence is found that the financial reward was effective. New to the water economics literature, these findings are interpreted against the unusual political-electoral backdrop that characterized this water crisis, namely the occurrence of the drought in a general election year. The seemingly ineffective financial reward-based instrument was implemented in the months before the election and the effective financial penalty-based instrument was implemented after the election. Political budget cycle theory is used to interpret the results of the instrument effectiveness tests, illustrating in a new way how political economy forces can influence water conservation instrument design.

15:15-16:45 Session 2D: Special Session - REAP Macro Aplicada
Location: Capri 1
15:15
Labor Earnings Dynamics with a Large Informal Sector
15:45
Health Insurance and Labor Markets
16:15
Trade and Informality in the Presence of Labor Market Frictions and Regulations
17:00-18:30 Session 3: Machine Learning Mini-course 1/2
Location: Capri 1
17:00
Introdução ao Aprendizado de Máquina