In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-ma... more In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers, notably US shale oil, out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors that can rationalize such a ���regime switch�� by OPEC. These include: (i) the growth of US shale oil production; (ii) the slowdown of global oil demand; (iii) reduced cohesiveness of the OPEC cartel; (iv) production ramp-ups in other non-OPEC countries. We show that these qualitative predictions are broadly consistent with oil market developments during 2014-15. The model is calibrated to oil market data; it predicts accommodation up to 2014 and a market-share strategy thereafter, and explains large oil-price swings as well as realistically high levels of OPEC output.
ANALYSIS: The concept of focusing on bottlenecks -pressure points where a process is held up by i... more ANALYSIS: The concept of focusing on bottlenecks -pressure points where a process is held up by incapacity or inefficiency has been applied in business, logistics and economics. It is consistent with formal orthodox economic models and is also being applied to development policy. 'Binding constraint' is standard economics parlance, but a group of distinguished economists at Harvard University advances the use of what they call a 'diagnostics approach' to identifying the bottlenecks to economic growth on a case-by-case basis. Perhaps the most instructive aspect of this approach is what it is not: it is not a laundry list of problems and desires. Targeting limited resources -financial or administrative -at key problems is the rationale for the diagnostics approach.
bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su r... more bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Produced by the Research Support Team
There has been a widely accepted belief that certain labor market institutions, includ-ing high t... more There has been a widely accepted belief that certain labor market institutions, includ-ing high taxation and generous benefits, can lead to low employment and/or high unemployment. To what extent do such priors about tax wedges and unemployment benefits apply to the new members of the EU? Principal Component Analysis (PCA) suggests the new members share similar characteristics to each other and should be grouped separately from the rest of Europe. There are statistically significant differences in the medians of unemployment benefits and the labor market outcomes of the less productive workers, but insignificant differences in prime-age outcomes and tax wedges. Within the new members, our non-parametric analysis finds tax wedges and the duration of benefits (not the replacement ratio) are associated with poor labor market outcomes, but the evidence is weak.
There has been a widely accepted belief that certain labor market institutions, including high ta... more There has been a widely accepted belief that certain labor market institutions, including high taxation and generous benefits, can lead to low employment and/or high unemployment. To what extent do such priors about tax wedges and unemployment benefits apply to the new members of the EU? Principal Component Analysis (PCA) suggests the new members share similar characteristics to each other and should be grouped separately from the rest of Europe. There are statistically significant differences in the medians of unemployment benefits and the labor market outcomes of the less productive workers, but insignificant differences in primeage outcomes and tax wedges. Within the new members, our non-parametric analysis finds tax wedges and the duration of benefits (not the replacement ratio) are associated with poor labor market outcomes, but the evidence is weak.
Free trade agreements (FTAs) lead to a rise in bilateral trade even if the signatories include de... more Free trade agreements (FTAs) lead to a rise in bilateral trade even if the signatories include developing countries. Furthermore, the percentage increase in bilateral trade is higher for South-South agreements than for North-South agreements. the results are robust across a number of gravity model specifications in which we contrl for the endogenity of FTAs (with bilateral fixed effects) and also take account of multilateral resistance in both estimation (with country-fixed effects) and compartive statics (analytically). Our analystical model shows that multilateral resitance dampens the imapct of FTAs on trade by less in South-South agreements than in North-South agreements, which accentuates the difference implied by our gravity model coefficients, and that this difference gets larger as the number of signatories rises. For example, allowing for lags and multilateral resistance, a four-country North-South agreement rasies bilateral trade by 53% while the analogous South-South impa...
Unlike some other parts of the world, neighbouring countries in sub-Saharan Africa do not generat... more Unlike some other parts of the world, neighbouring countries in sub-Saharan Africa do not generate large spillovers over and above the rest of the region, whether we de ne neighbours in terms of borders or distance. Broader regional e¤ects dominate on the continent. South Africa can account for part of this, but the regional e¤ects appear to be driven by the resource-rich countries, where a 1% point rise in their GDP per capita is associated with a 0.36% point rise in the rest of the continent. Therefore, the appropriate use of natural wealth could generate positive growth externalities for other countries.
A typical person in sub-Saharan Africa is a long way from world markets and is further from world... more A typical person in sub-Saharan Africa is a long way from world markets and is further from world markets now than in 1980. This partly reflects slower growth within Africa than for the world as a whole. Despite slower growth in Africa, African exports have become increasingly regionalized. By 2005, a country in Africa typically exported more than twice as much to a country in its own region as would be expected based on economic size and bilateral distance. This regionalization was not present in the early 1980s and has become stronger over time. We find evidence of positive neighbourhood effects through exports, but sub-Saharan countries benefit less from growth in their own region than this typical relationship indicates. Given the small share of exports destined to their neighbours, low-income countries in sub-Saharan Africa experience relatively modest export growth from growth in the region. These factors imply that African countries are unlikely to pull each other out of pove...
Drawing on a new and comprehensive measure of logistics quality, our gravity model suggests logis... more Drawing on a new and comprehensive measure of logistics quality, our gravity model suggests logistics in the exporting and partner-country can have an important impact on bilateral exports. A one standard deviation improvement in the exporter’s logistics quality, which for example would improve Gabon to the level of Guinea, would raise exports by almost 60%. Landlocked countries’ exports depend on their neighbours’ logistics, but their own logistics quality is not as important as for other countries. We also find that logistics act to reduce the trade effects of distance, but without eliminating them.
Topics in Middle Eastern andNorth African Economies, 2015
We quantify the extent to which public-sector employment crowds out private- sector employment us... more We quantify the extent to which public-sector employment crowds out private- sector employment using specially assembled datasets for a large cross-section of developing and advanced countries, and discuss the implications for countries in the Middle East, North Africa, Caucasus and Central Asia. These countries simultaneously display high unemployment rates, low private-sector employment rates and high proportions of government-sector employment. Regressions of unemployment rates on public-sector employment point to full crowding out. This means that high rates of public employment, which incur substantial fiscal costs, do not reduce overall unemployment rates.
In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-ma... more In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers, notably US shale oil, out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors that can rationalize such a ���regime switch�� by OPEC. These include: (i) the growth of US shale oil production; (ii) the slowdown of global oil demand; (iii) reduced cohesiveness of the OPEC cartel; (iv) production ramp-ups in other non-OPEC countries. We show that these qualitative predictions are broadly consistent with oil market developments during 2014-15. The model is calibrated to oil market data; it predicts accommodation up to 2014 and a market-share strategy thereafter, and explains large oil-price swings as well as realistically high levels of OPEC output.
ANALYSIS: The concept of focusing on bottlenecks -pressure points where a process is held up by i... more ANALYSIS: The concept of focusing on bottlenecks -pressure points where a process is held up by incapacity or inefficiency has been applied in business, logistics and economics. It is consistent with formal orthodox economic models and is also being applied to development policy. 'Binding constraint' is standard economics parlance, but a group of distinguished economists at Harvard University advances the use of what they call a 'diagnostics approach' to identifying the bottlenecks to economic growth on a case-by-case basis. Perhaps the most instructive aspect of this approach is what it is not: it is not a laundry list of problems and desires. Targeting limited resources -financial or administrative -at key problems is the rationale for the diagnostics approach.
bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su r... more bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Produced by the Research Support Team
There has been a widely accepted belief that certain labor market institutions, includ-ing high t... more There has been a widely accepted belief that certain labor market institutions, includ-ing high taxation and generous benefits, can lead to low employment and/or high unemployment. To what extent do such priors about tax wedges and unemployment benefits apply to the new members of the EU? Principal Component Analysis (PCA) suggests the new members share similar characteristics to each other and should be grouped separately from the rest of Europe. There are statistically significant differences in the medians of unemployment benefits and the labor market outcomes of the less productive workers, but insignificant differences in prime-age outcomes and tax wedges. Within the new members, our non-parametric analysis finds tax wedges and the duration of benefits (not the replacement ratio) are associated with poor labor market outcomes, but the evidence is weak.
There has been a widely accepted belief that certain labor market institutions, including high ta... more There has been a widely accepted belief that certain labor market institutions, including high taxation and generous benefits, can lead to low employment and/or high unemployment. To what extent do such priors about tax wedges and unemployment benefits apply to the new members of the EU? Principal Component Analysis (PCA) suggests the new members share similar characteristics to each other and should be grouped separately from the rest of Europe. There are statistically significant differences in the medians of unemployment benefits and the labor market outcomes of the less productive workers, but insignificant differences in primeage outcomes and tax wedges. Within the new members, our non-parametric analysis finds tax wedges and the duration of benefits (not the replacement ratio) are associated with poor labor market outcomes, but the evidence is weak.
Free trade agreements (FTAs) lead to a rise in bilateral trade even if the signatories include de... more Free trade agreements (FTAs) lead to a rise in bilateral trade even if the signatories include developing countries. Furthermore, the percentage increase in bilateral trade is higher for South-South agreements than for North-South agreements. the results are robust across a number of gravity model specifications in which we contrl for the endogenity of FTAs (with bilateral fixed effects) and also take account of multilateral resistance in both estimation (with country-fixed effects) and compartive statics (analytically). Our analystical model shows that multilateral resitance dampens the imapct of FTAs on trade by less in South-South agreements than in North-South agreements, which accentuates the difference implied by our gravity model coefficients, and that this difference gets larger as the number of signatories rises. For example, allowing for lags and multilateral resistance, a four-country North-South agreement rasies bilateral trade by 53% while the analogous South-South impa...
Unlike some other parts of the world, neighbouring countries in sub-Saharan Africa do not generat... more Unlike some other parts of the world, neighbouring countries in sub-Saharan Africa do not generate large spillovers over and above the rest of the region, whether we de ne neighbours in terms of borders or distance. Broader regional e¤ects dominate on the continent. South Africa can account for part of this, but the regional e¤ects appear to be driven by the resource-rich countries, where a 1% point rise in their GDP per capita is associated with a 0.36% point rise in the rest of the continent. Therefore, the appropriate use of natural wealth could generate positive growth externalities for other countries.
A typical person in sub-Saharan Africa is a long way from world markets and is further from world... more A typical person in sub-Saharan Africa is a long way from world markets and is further from world markets now than in 1980. This partly reflects slower growth within Africa than for the world as a whole. Despite slower growth in Africa, African exports have become increasingly regionalized. By 2005, a country in Africa typically exported more than twice as much to a country in its own region as would be expected based on economic size and bilateral distance. This regionalization was not present in the early 1980s and has become stronger over time. We find evidence of positive neighbourhood effects through exports, but sub-Saharan countries benefit less from growth in their own region than this typical relationship indicates. Given the small share of exports destined to their neighbours, low-income countries in sub-Saharan Africa experience relatively modest export growth from growth in the region. These factors imply that African countries are unlikely to pull each other out of pove...
Drawing on a new and comprehensive measure of logistics quality, our gravity model suggests logis... more Drawing on a new and comprehensive measure of logistics quality, our gravity model suggests logistics in the exporting and partner-country can have an important impact on bilateral exports. A one standard deviation improvement in the exporter’s logistics quality, which for example would improve Gabon to the level of Guinea, would raise exports by almost 60%. Landlocked countries’ exports depend on their neighbours’ logistics, but their own logistics quality is not as important as for other countries. We also find that logistics act to reduce the trade effects of distance, but without eliminating them.
Topics in Middle Eastern andNorth African Economies, 2015
We quantify the extent to which public-sector employment crowds out private- sector employment us... more We quantify the extent to which public-sector employment crowds out private- sector employment using specially assembled datasets for a large cross-section of developing and advanced countries, and discuss the implications for countries in the Middle East, North Africa, Caucasus and Central Asia. These countries simultaneously display high unemployment rates, low private-sector employment rates and high proportions of government-sector employment. Regressions of unemployment rates on public-sector employment point to full crowding out. This means that high rates of public employment, which incur substantial fiscal costs, do not reduce overall unemployment rates.
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Papers by Alberto Behar