A vast literature has sought to explain large cross-country differences in fertility rates. Incom... more A vast literature has sought to explain large cross-country differences in fertility rates. Income, mortality, urbanization, and female labour force participation, among other socioeconomic variables, have been suggested as explanatory factors for the differences. This paper points out that cross-country differences in fertility rates have fallen very rapidly over the past four decades, with most countries converging to a rate just above two children per woman. This absolute convergence took place despite the limited (or absent) absolute convergence in other economic variables. The rapid decline in fertility rates taking place in developing economies stands in sharp contrast with the slow decline experienced earlier by more mature economies. The preferred number of children has also fallen, suggesting a shift to a small-family norm. The convergence to replacement rates will lead to a stable world population, reducing environmental concerns over explosive population growth. In this p...
We review the contribution of “The Log of Gravity” (Santos Silva and Tenreyro, Rev Econ Stat 88:6... more We review the contribution of “The Log of Gravity” (Santos Silva and Tenreyro, Rev Econ Stat 88:641–658, 2006), summarize the main results in the ensuing literature, and provide a brief review of the state-of-the-art in the estimation of gravity equations and other constant-elasticity models.
acknowledges financial support from the Luverlhume Fellowship. Koren acknowledges financial suppo... more acknowledges financial support from the Luverlhume Fellowship. Koren acknowledges financial support from the European Research Council (ERC) starting grant 313164. Tenreyro acknowledges financial support from the ERC starting grant 240852. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. Lisicky is a salaried official of the European Commission. The content of this article does not reflect the official opinion of the European Union. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
Abstract—Although economists have long been aware of Jensen’s in-equality, many econometric appli... more Abstract—Although economists have long been aware of Jensen’s in-equality, many econometric applications have neglected an important implication of it: under heteroskedasticity, the parameters of log-linearized models estimated by OLS lead to biased estimates of the true elasticities. We explain why this problem arises and propose an appropri-ate estimator. Our criticism of conventional practices and the proposed solution extend to a broad range of applications where log-linearized equations are estimated. We develop the argument using one particular illustration, the gravity equation for trade. We find significant differences between estimates obtained with the proposed estimator and those ob-tained with the traditional method. I.
Crops are often modelled as homogenous products that are exchanged in perfectly competitive marke... more Crops are often modelled as homogenous products that are exchanged in perfectly competitive markets. While this may be true of world commodity markets, smallholder farmers face high trade barriers in selling their crops at home and abroad. Selling to agribusinesses with better intermediation technologies can enable smallholder farmers to overcome these barriers. This has provided a rationale for policies encouraging agribusinesses. We document the reliance of farmers on intermediaries and find that farmers selling to agribusinesses differ systematically from others. We incorporate these stylised facts into a flexible theoretical framework to study the aggregate and distributional consequences of the rise of agribusinesses. The rise of agribusinesses brings productivity gains to farmers, but it also skews the distribution of buyers of farm produce towards larger firms with greater buyer power. Taking the theory to data, we quantify behind-the-border barriers to trade embedded in a na...
When the world price of a crop increases, how do the incomes of the crop’s farmers in a developin... more When the world price of a crop increases, how do the incomes of the crop’s farmers in a developing country change? This paper investigates the distributional gains stemming from changes in agricultural world prices. Agricultural markets in developing countries are often characterized by the presence of a large number of small farmers who sell their produce to one or few big companies with significant monopsony or oligopsony power. We develop a flexible theoretical framework that captures this market structure and allows us to examine the impact of international trade on the incomes of farmers, agribusiness and traders in developing countries. The model highlights the conditions under which small farmers benefit (or lose) from increases in the world price of their crops. Using household-level panel data from Kenya, we empirically study the magnitude of the trickle-down effect of world price changes on the incomes of farmers. Farmers benefit from quality spillovers when selling throug...
Rapid population growth in developing countries in the middle of the 20th century led to fears of... more Rapid population growth in developing countries in the middle of the 20th century led to fears of a population explosion and motivated the inception of what effectively became a global population-control program. The initiative, propelled in its beginnings by intellectual elites in the United States, Sweden, and some developing countries, mobilized resources to enact policies aimed at reducing fertility by widening contraception provision and changing family-size norms. In the following five decades, fertility rates fell dramatically, with a majority of countries converging to a fertility rate just above two children per woman, despite large cross-country differences in economic variables such as GDP per capita, education levels, urbanization, and female labor force participation. The fast decline in fertility rates in developing economies stands in sharp contrast with the gradual decline experienced earlier by more mature economies. In this paper, we argue that population-control p...
A vast empirical literature has documented delayed and persistent effects of monetary policy shoc... more A vast empirical literature has documented delayed and persistent effects of monetary policy shocks on output. We show that this finding results from the aggregation of output impulse responses that differ sharply depending on the timing of the shock. When the monetary policy shock takes place in the first two quarters of the year, the response of output is quick, sizable, and dies out at a relatively fast pace. In contrast, output responds very little when the shock takes place in the third or fourth quarter. We propose a potential explanation for the differential responses based on uneven staggering of wage contracts across quarters. Using a dynamic general equilibrium model, we show that a realistic amount of uneven staggering can generate differences in output responses quantitatively similar to those found in the data. (JEL E23, E24, E58, J41)
A vast literature has sought to explain large cross-country differences in fertility rates. Incom... more A vast literature has sought to explain large cross-country differences in fertility rates. Income, mortality, urbanization, and female labour force participation, among other socioeconomic variables, have been suggested as explanatory factors for the differences. This paper points out that cross-country differences in fertility rates have fallen very rapidly over the past four decades, with most countries converging to a rate just above two children per woman. This absolute convergence took place despite the limited (or absent) absolute convergence in other economic variables. The rapid decline in fertility rates taking place in developing economies stands in sharp contrast with the slow decline experienced earlier by more mature economies. The preferred number of children has also fallen, suggesting a shift to a small-family norm. The convergence to replacement rates will lead to a stable world population, reducing environmental concerns over explosive population growth. In this p...
We review the contribution of “The Log of Gravity” (Santos Silva and Tenreyro, Rev Econ Stat 88:6... more We review the contribution of “The Log of Gravity” (Santos Silva and Tenreyro, Rev Econ Stat 88:641–658, 2006), summarize the main results in the ensuing literature, and provide a brief review of the state-of-the-art in the estimation of gravity equations and other constant-elasticity models.
acknowledges financial support from the Luverlhume Fellowship. Koren acknowledges financial suppo... more acknowledges financial support from the Luverlhume Fellowship. Koren acknowledges financial support from the European Research Council (ERC) starting grant 313164. Tenreyro acknowledges financial support from the ERC starting grant 240852. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. Lisicky is a salaried official of the European Commission. The content of this article does not reflect the official opinion of the European Union. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
Abstract—Although economists have long been aware of Jensen’s in-equality, many econometric appli... more Abstract—Although economists have long been aware of Jensen’s in-equality, many econometric applications have neglected an important implication of it: under heteroskedasticity, the parameters of log-linearized models estimated by OLS lead to biased estimates of the true elasticities. We explain why this problem arises and propose an appropri-ate estimator. Our criticism of conventional practices and the proposed solution extend to a broad range of applications where log-linearized equations are estimated. We develop the argument using one particular illustration, the gravity equation for trade. We find significant differences between estimates obtained with the proposed estimator and those ob-tained with the traditional method. I.
Crops are often modelled as homogenous products that are exchanged in perfectly competitive marke... more Crops are often modelled as homogenous products that are exchanged in perfectly competitive markets. While this may be true of world commodity markets, smallholder farmers face high trade barriers in selling their crops at home and abroad. Selling to agribusinesses with better intermediation technologies can enable smallholder farmers to overcome these barriers. This has provided a rationale for policies encouraging agribusinesses. We document the reliance of farmers on intermediaries and find that farmers selling to agribusinesses differ systematically from others. We incorporate these stylised facts into a flexible theoretical framework to study the aggregate and distributional consequences of the rise of agribusinesses. The rise of agribusinesses brings productivity gains to farmers, but it also skews the distribution of buyers of farm produce towards larger firms with greater buyer power. Taking the theory to data, we quantify behind-the-border barriers to trade embedded in a na...
When the world price of a crop increases, how do the incomes of the crop’s farmers in a developin... more When the world price of a crop increases, how do the incomes of the crop’s farmers in a developing country change? This paper investigates the distributional gains stemming from changes in agricultural world prices. Agricultural markets in developing countries are often characterized by the presence of a large number of small farmers who sell their produce to one or few big companies with significant monopsony or oligopsony power. We develop a flexible theoretical framework that captures this market structure and allows us to examine the impact of international trade on the incomes of farmers, agribusiness and traders in developing countries. The model highlights the conditions under which small farmers benefit (or lose) from increases in the world price of their crops. Using household-level panel data from Kenya, we empirically study the magnitude of the trickle-down effect of world price changes on the incomes of farmers. Farmers benefit from quality spillovers when selling throug...
Rapid population growth in developing countries in the middle of the 20th century led to fears of... more Rapid population growth in developing countries in the middle of the 20th century led to fears of a population explosion and motivated the inception of what effectively became a global population-control program. The initiative, propelled in its beginnings by intellectual elites in the United States, Sweden, and some developing countries, mobilized resources to enact policies aimed at reducing fertility by widening contraception provision and changing family-size norms. In the following five decades, fertility rates fell dramatically, with a majority of countries converging to a fertility rate just above two children per woman, despite large cross-country differences in economic variables such as GDP per capita, education levels, urbanization, and female labor force participation. The fast decline in fertility rates in developing economies stands in sharp contrast with the gradual decline experienced earlier by more mature economies. In this paper, we argue that population-control p...
A vast empirical literature has documented delayed and persistent effects of monetary policy shoc... more A vast empirical literature has documented delayed and persistent effects of monetary policy shocks on output. We show that this finding results from the aggregation of output impulse responses that differ sharply depending on the timing of the shock. When the monetary policy shock takes place in the first two quarters of the year, the response of output is quick, sizable, and dies out at a relatively fast pace. In contrast, output responds very little when the shock takes place in the third or fourth quarter. We propose a potential explanation for the differential responses based on uneven staggering of wage contracts across quarters. Using a dynamic general equilibrium model, we show that a realistic amount of uneven staggering can generate differences in output responses quantitatively similar to those found in the data. (JEL E23, E24, E58, J41)
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Papers by Silvana Tenreyro