What Feeds on What? Networks of Interdependencies between Culture and Institutions

We propose a methodology inspired by ecology to map the complex interdependencies between cultural and institutional factors - controlling for other socioeconomic and structural characteristics. We characterize interdependencies as asymmetric symbiotic relations, distinguishing between ‘hosts’ that nurture other factors and ‘symbionts’ that reversely feed on the former. We use correlation network analysis to compute a map of multiple such interdependencies for Brazil, which has a vast territory, internally diversified historical paths and a multilevel governance structure. We set the empirical analysis at the municipality level and find that institutional factors tend to be symbionts, whereas cultural factors tend to be hosts. However, our results also show that institutions assume multiple roles within a complex network of interdependencies, often becoming themselves habitat for others or transmittors of indirect effects.

  • Nadia von Jacobi Department of Economics and Management, University of Trento
  • Vito Amendolagine Department of Economics, University of Foggia

SITES Working Papers 11

Households’ liquidity preference, banks’ capitalization and the macroeconomy: a theoretical investigation

In this paper we build a simple model on the role of liquidity preference in the determination of economic performance. We postulate, for the sake of the argument, a purely “horizontalist” environment, i.e., a world of endogenous money where the central bank is able to fix the interest rate(s) at a level of its own willing. We show that even in such a framework liquidity preference, while obviously not constituting anymore a theory for the determination of the interest rate, continues to be a key element for the determination of both the level and evolution over time of aggregate income and capital accumulation. In our model, this happens because of the working of a mechanism so far unexplored in the literature, i.e., the endogenous variations of banks’ policy of profits’ distribution in response to changes in the liquidity preference of the public.

  • Marco Missaglia University of Pavia
  • Alberto Botta University of Greenwich

SITES Working Papers 10

What Causes Juvenile Crime? A Case-Control Study

This work analyses the causes of juvenile crime within a case-control study undertaken in the Italian regions of Veneto and Sicily. We show that family background matters. Parents’ education and family income have no effect on crime rates in the Veneto region but are significant risk factors in Sicily. Dropping out of school substantially increases the probability that an adolescent is involved in crime activities. Poor parental relations with children or living in a broken family significantly raises the odds to be in conflict with the law.

  • Elena Dalla Chiara Interdepartmental Center of Economic Documentation (CIDE), University of Verona
  • Federico Perali Department of Economics and CHILD, University of Verona

SITES Working Papers 9

The Shadow Wage of Child Labor: An application to Nepal

This paper describes a new method to estimate shadow wages and to identify the shadow contribution of child labor. Our approach allows to perform a direct test for recursivity by comparing the estimated shadow wages with the market wage. This is a novel option to test for non-separability that adds to the traditional indirect tests based on restriction on production decisions or on consumption choices. Our innovative identification strategy is not specific to child labor but can also be used to identify the gender specific shadow wage of women and men. The estimated shadow wages, in the context of the Nepalese rural economy, are meaningful. Based on the evidence of our direct test for separability, we conclude that the separable representation of the farm households is not consistent with the Nepalese data. We further provide an estimate of the contribution of child labor to household income both at the household and national level. A set of simulations highlights the role that child labor plays in insuring household subsistence and how it affects Nepalese income distribution

  • Elisa Meneghello University of Verona
  • Martina Menon Department of Economics, University of Verona
  • Federico Perali Department of Economics, University of Verona
  • Furio Rosati University of Rome Tor Vergata

SITES Working Papers 8

Internationally Linked Firms and Productivity in Pakistan: A Look at the Top End of the Distribution

This paper examines productivity drivers for Pakistani publicly listed firms over 2012–17, with a focus on policy and outcome measures of integration in upstream sectors. We find that increased import duties on intermediates, and reduced FDI in upstream services, are associated with reduction in productivities downstream. Gains from lower input tariffs accrue to firms that cannot secure duty exemptions — domestic-oriented firms and smaller exporters. Gains from upstream services FDI accrue mostly to firms that are further from the productivity frontier. Our results suggest that productivity growth in Pakistan would benefit from increased exposure of upstream sectors to global markets.

SITES Working Papers 7

Relational Well-being and the Many Dimensions of Poverty in Italy

This study measures the many dimensions of poverty accounting for both the material and non-material dimensions of well-being. We are interested in learning whether an individual who is poor in the monetary dimension is also poor under a relational point of view, an especially relevant aspect in pandemic times. The monetary dimension alone, while often significantly correlated to other non-monetary aspects of well-being, is not sufficient to fully describe the non-material dimensions of need. Not all goods and services that are important to people are obtained from the market, such as relational goods. The use of a unique dataset that integrates the different dimensions contributing to quality of life permits estimating poverty for different types of income by adding wealth (current income), the value of domestic production (extended income) and the value of leisure (full income) to disposable income. These measures have been corrected to account for differences in household composition and in the cost of living and quality of services across regions. The study shows that the ability to produce domestic and relational goods, after taking the monetary dimensions in due account, are very important factors that redraw the map of poverty in Italy, especially in view of the North-South divide. These new traits require a radical rethinking of traditional policies to fight poverty.

SITES Working Papers 6

Exposure to climate shocks, poverty and happiness: the ”three little pigs” effect

We evaluate the impact of climate shocks on household subjective wellbeing on a sample of farmers in a Small Island Developing State (SIDS) of the Pacific (the Solomon Islands). We find that both subjective (self-assessed exposure to climate shocks) and objective (past cumulative extended dry spells) environmental stress indicators significantly reduce respondent’s subjective wellbeing. Using the compensating surplus approach we calculate that this loss requires several years of crop income to be compensated. Subjective wellbeing is more severely impacted for farmers with poor dwellings (ie. with thatch walls, consistently with the well known Disney tale), below median income or durable asset and for farmers living more isolated and not being members of formal agricultural associations. Farmers hit by climate shocks experienced in significantly higher proportion nutrition problems in their households. These findings support the hypothesis of the strong interdependence between environmental and social shocks.

SITES Working Papers 5

Population ageing and labor market frictions. An OLG model applied to Lebanon

We evaluate the effects of population ageing on the macroeconomic evolution of the Lebanese economy and on the financial sustainability of its major pension schemes. We use an OLG model with labor market frictions in the as in de la Croix et al. (2013). Individuals are differentiated by age, gender, and education and choose the sector of activity, which implies that the size of the informal sector is endogenous. We assess the long-run implications of population ageing and show that the public sector pension scheme is unsustainable while the private sector scheme is insufficient to ensure decent living standards for the elderly. Finally, we evaluate the effects of two pension reforms; in the first one we propose a mix of measures aiming at guaranteeing the sustainability of the public sector scheme; in the second one we propose some measures aiming at increasing the size of the private sector scheme.

SITES Working Papers 3

(In)Efficient Bargaining in the Family

This paper describes how families bargain to reach an agreement recognizing that the negotiation process is costly and often difficult. Our focus is not only on the efficient outcomes of the decision process but also on the bargaining process. We propose an evolutionary bargaining approach that identifies who is willing to make a concession depending on the perceived cost of bargaining failure. The theoretical analysis extends the original Nash-Harsanyi cardinal representation to ordinal preferences and rationalizes agreements that can be inefficient. Implications for efficiency and income distribution are discussed. We illustrate the usefulness of our theory in an empirical application.

SITES Working Papers 2

Children’s Resources and Poverty: A Collective Consumption Evidence from Ethiopia

We estimate a collective complete demand system model to recover children’s resource shares and analyze their poverty. Identification of the sharing rule between children and adults relies on private assignable goods and distribution factors. Based on Ethiopian LSMS-ISA data for two subsamples of families with children (married male-headed and single female-headed), we observe inequalities in intrahousehold resource allocation and well-being. We find that children command fewer household resources and are poorer than adults, worsening with the number of children. Resource allocation is affected by parental differences in education and age, child education, proportions of female children and women, and the number of non-biological children. Single mothers not only are more altruistic to their children but also avoid higher child poverty than married male heads. However, this seems to disappear when the number of children increases. Unlike the general belief that poor children live only with poor adults and households, our estimates show non-poor families and adults also host poor children. Regional and rural-urban disparities exist. Further, traditional poverty measures, which ignore intrahousehold resource allocation, understate child (and adult) poverty. Findings have implications for fertility, gender, targeting, and spatial redistribution issues.

SITES Working Papers 1