On the Welfare Cost of Economic Fluctuations in Developing Countries*

Pallage, Stéphane; Robe, Michel A.

doi:10.1111/1468-2354.t01-2-00085

Cited by 213 publications

(148 citation statements)

References 32 publications

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“…It is interesting to point out that our conservative estimates are similar to the welfare costs of rare disasters estimated by Barro (2006). Even neglecting transition and investment effects and without considering risk aversion, our welfare estimates of output collapses are larger than the standard welfare costs of eliminating fluctuations in consumption in developing countries, which according to Pallage and Robe (2003) are equivalent to around 0.34 percent of permanent consumption in developing countries. 24 TFP reduction is a pure welfare cost, permanent in the case of TFP destruction and transitory if TFP eventually recovers after a transition.…”

Section: The Costs Of Productivity Lossessupporting

confidence: 55%

Output collapses and productivity destruction

2010

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. This paper may be freely reproduced provided credit is given to the Research Department, InterAmerican Development Bank. Terms of use: Documents inThe Research Department (RES) produces a quarterly newsletter, IDEA (Ideas for Development in the Americas), as well as working papers and books on diverse economic issues. To obtain a complete list of RES publications, and read or download them please visit our web site at: http://www.iadb.org/res. 3 Abstract *This paper analyzes the long-run relationship between output collapses-defined defined as GDP falling substantially below trend-and total factor productivity (TFP), using a panel of 71 developed and developing countries during the period 1960-2003 to identify episodes of output collapse and estimate counterfactual post-collapse TFP trends. Collapses are concentrated in developing countries, especially African and Latin American, and were particularly widespread in the 1980s in Latin America. Overall, output collapses are systematically associated with long-lasting declines in TFP. The paper explores the conditions under which collapses are least or most damaging, as well as the type of shocks that make collapses more likely or severe, and additionally quantifies the welfare cost associated with output collapses. JEL Classification: F43, O40

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Section: The Costs Of Productivity Lossessupporting

confidence: 55%

Output collapses and productivity destruction

2010

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“…Pritchett 2000, Koren andTenreyro 2007). There is limited evidence on the welfare costs of income volatility in developing countries (Pallage and Robe 2003). These welfare costs are likely to be high for two reasons.…”

Section: Motivation and Summarymentioning

confidence: 99%

Fatal fluctuations? Cyclicality in infant mortality in India

Bhalotra

2010

Journal of Development Economics

188

162

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Fatal Fluctuations? Cyclicality in Infant Mortality in IndiaSonia Bhalotra D I S C U S S I O N P A P E R S E R I E S ABSTRACT Fatal Fluctuations? Cyclicality in Infant Mortality in India *This paper investigates the impact of macroeconomic shocks on infant mortality in India and investigates likely mechanisms. A recent OECD-dominated literature shows that mortality at most ages is pro-cyclical but similar analyses for poorer countries are scarce, and both income risk and mortality risk are greater in poor countries. This paper uses individual data on infant mortality for about 150000 children born in 1970-1997, merged by birth-cohort with a state panel containing information on aggregate income. Identification rests upon comparing the effects of annual deviations in income from trend on the mortality risks of children born at different times to the same mother, conditional upon a number of state-time varying covariates including rainshocks. I cannot reject the null that income shocks have no effect on mortality in urban households, but I find that rural infant mortality is counter-cyclical, the elasticity being about -0.46. This is despite the possibility that relatively high risk women avert birth or suffer fetal loss in recessions. It seems related to the fact that women's participation in the (informal) labour market increases in recessions, presumably, to compensate a decline in their husband's wages. Consistent with this but, in contrast to results for richer countries, antenatal and postnatal health-care decline in recessions. These effects are reinforced by pro-cyclicality in state health and development expenditure. Another interesting finding that is informative about the underlying mechanisms is that the effect of aggregate income on rural mortality is driven by non-agricultural income.JEL Classification: I12, J10, O49

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“…Nevertheless, the research on firm growth effects of exchange rate uncertainty has been much limited with an exclusive focus on publicly traded firms located mostly in developed countries despite substantial structural differences between developed and developing countries, and between publicly traded and non-traded firms. The lack of research on developing country experiences is especially surprising given that developing countries face higher levels of exchange rate uncertainty with stronger negative welfare effects than developed countries (Pallage and Robe, 2003). The exclusive focus on the publicly traded firms is also striking because of the structural differences between publicly traded and non-traded firms, and the low market capitalization rates in developing countries that limit sample sizes substantially.…”

Section: Introductionmentioning

confidence: 99%

Growth under exchange rate volatility: Does access to foreign or domestic equity markets matter?

Demir

2013

Journal of Development Economics

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Employing a matched employer-employee dataset, this paper explores the effects of exchange rate volatility on the growth performances of domestic versus foreign, and publicly traded versus non-traded private manufacturing firms in a major developing country, Turkey. The empirical results using dynamic panel data estimation techniques and comprehensive robustness tests suggest that exchange rate volatility has a significant growth reducing effect on manufacturing firms. However, having access to foreign, and to a lesser degree, domestic equity markets is found to reduce these negative effects at significant levels. These findings continue to hold after controlling for firm heterogeneity due to differences in export orientation, external indebtedness, profitability, productivity, size, industrial characteristics, and time-variant institutional changes.

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On the Welfare Cost of Economic Fluctuations in Developing Countries*

Cited by 213 publications

References 32 publications

Output collapses and productivity destruction

Output collapses and productivity destruction

Fatal fluctuations? Cyclicality in infant mortality in India

Growth under exchange rate volatility: Does access to foreign or domestic equity markets matter?

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