Informality is widespread in most developing countries. In Latin America, 50 percent of salaried employees work informally. Three stylized facts characterize informality: 1) small firms tend to operate informally while large firms tend to operate formally; 2) unskilled workers tend to be informal while skilled ones have formal jobs; 3) Ceteris paribus, secondary workers are less likely to operate formally than primary workers. We develop a model that account for all these facts. In our model both heterogeneous firms and workers have preferences over the sector they operate and choose optimally whether to function formally or informally. There are two labor markets, one formal and the other informal, and both firms and workers act unconstrained in them. By contrast, a prominent feature of the pre-existing literature is the idea that worker's decisions play no role in determining the equilibrium of the economy. Using our model, we show that an increase in the participation of secondary workers would tend to raise the level of informality in the economy. This effect partially accounts for the increases in informality seen in Latin America over the past two decades.
The decision to allocate policy jurisdictions to different levels of government is related to a number of trade-offs between the advantages and disadvantages of centralized versus decentralized provision of public services. A trade-off central to many discussions is that between the internalization of externalities under centralization versus an "accountability" advantage of decentralization. In this paper we formalize this trade-off in the context of a class of principal-agent models known as common agency. Copyright 2007 Blackwell Publishing, Inc..
a b s t r a c tWhen the owner of an object sells it through an auction run by an agent of hers, corruption may appear. In a first-price auction, corruption can make honest bidders more or less aggressive, or their behavior can remain unchanged. We identify sufficient conditions for each of the three possibilities. We analyze the effects of corruption on efficiency, bidders' welfare and expected revenue. Our results apply as well to the situation-unrelated to corruption-where one of the bidders is granted a right of first refusal.
Collective action clauses (CACs) are provisions specifying that a supermajority of bondholders can change the terms of a bond. We study how CACs determine governments' fiscal incentives, sovereign bond prices, and default probabilities in environments with and without contingent debt and IMF presence. We claim that CACs are likely to be an irrelevant dimension of debt contracts in current sovereign debt markets because of the variety of instruments utilized by sovereigns and the implicit IMF guarantee. Nonetheless, under a new international bankruptcy regime like that recently proposed by the IMF, CACs can increase significantly the cost of borrowing for sovereigns, contrary to what is suggested in previous empirical literature. D
a b s t r a c tWhen the owner of an object sells it through an auction run by an agent of hers, corruption may appear. In a first-price auction, corruption can make honest bidders more or less aggressive, or their behavior can remain unchanged. We identify sufficient conditions for each of the three possibilities. We analyze the effects of corruption on efficiency, bidders' welfare and expected revenue. Our results apply as well to the situation-unrelated to corruption-where one of the bidders is granted a right of first refusal.
There are a large number of cases where corruption has been discovered when investigating levels of consumption that appear to be hard to justify. The informativeness of an agent's level of consumption depends on his legal income and initial level of wealth, as conspicuous consumption by wealthy agents leads to little updating of the principal's belief about their honesty. This introduces a tendency to prefer poor agents as they are easier to monitor. More generally, we describe the basic problem of choosing agents and monitoring consumption with the aim of reducing corruption, and discuss features of the practical applications.
Informality is widespread in most developing countries. In Latin America, 50 percent of salaried employees work informally. Three stylized facts characterize informality: 1) small firms tend to operate informally while large firms tend to operate formally; 2) unskilled workers tend to be informal while skilled ones have formal jobs; 3) Ceteris paribus, secondary workers are less likely to operate formally than primary workers. We develop a model that account for all these facts. In our model both heterogeneous firms and workers have preferences over the sector they operate and choose optimally whether to function formally or informally. There are two labor markets, one formal and the other informal, and both firms and workers act unconstrained in them. By contrast, a prominent feature of the pre-existing literature is the idea that worker's decisions play no role in determining the equilibrium of the economy. Using our model, we show that an increase in the participation of secondary workers would tend to raise the level of informality in the economy. This effect partially accounts for the increases in informality seen in Latin America over the past two decades.
Abstract:The health landscape in Latin America and the Caribbean is changing quickly.The region is undergoing a demographic and epidemiological transition in which health problems are highly concentrated on noncommunicable diseases (NCDs). In light of this, the region faces two main challenges: (1) develop cost-effective policies to prevent NCD risk factors, and (2) increase access to quality healthcare in a scenario in which a large share of the labor force is employed in the informal sector. This paper describes both alternative interventions to expand health insurance coverage and their tradeoff with labor informality and moral hazard problems. The paper also focuses on obesity as a case example of a NCD, and emphasizes how lack of knowledge along with self-control problems would lead people to make suboptimal decisions related to food consumption, which may later manifest in obesity problems. Keywords IntroductionThe developing world, and in particular Latin America and the Caribbean (LAC), has experienced both a secular decline in mortality and significant improvements in the health of its population over the last 200 years. As we start the 21st century, a key observation is that the pattern and nature of mortality and morbidity has changed over recent decades and continues changing today. Health systems in developing countries are facing major challenges mainly because of growing epidemiological diversity as a consequence of economic development, technological change in medicine, and population aging.Although LAC is not completely free of infectious diseases, is well advanced in its demographic and epidemiological transitions, with health problems highly concentrated on noncommunicable diseases (NCDs). People in the region are equally likely to die prematurely from just one NCD than from all communicable diseases combined. Half of years of life lost in the region, as well as the leading causes of mortality and morbidity, are attributable to NCDs (Anderson et al. 2009). Furthermore, there is little doubt that the levels of NCDs will substantially increase in the near future. It is predicted that by 2020, NCDs will cause 7 of every 10 deaths in developing countries (Boutayeb 2006). Two of the factors believed to be central drivers of this trend are aging populations and the stark and simultaneous increase in rates of obesity worldwide (WHO 2013a).NCDs, which are characterized by shared risk factors, multi-morbidity, and chronicity, pose several challenges for the organization of healthcare. In order to address these challenges, policymakers must define a health policy frontier that identifies the primary interventions according to current health priorities. Taking into account where LAC stands in term of both its demographic and ezpidemiological transition, the health 3 policy frontier in the region must include (1) public health policies that reduce the risk factors that cause NCDs by promoting healthy behavior; and (2) health insurance programs that offer households access to quality healthcare at costs t...
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