About the Editors .............................................. ix
About the Contributors ......................................... xi
Abbreviations and Acronyms ................................... xiii
1 Overview ..................................................... 1
Norman V. Loayza and Luis Servén
2 Product Market Regulation and Macroeconomic Performance:
A Review of Cross-Country Evidence .......................... 23
Fabio Schiantarelli
3 Regulation and Macroeconomic Performance .................... 65
Norman V. Loayza, Ana María Oviedo, and Luis Servén
4 Regulation and Microeconomic Dynamics ...................... 119
Norman V. Loayza, Ana María Oviedo, and Luis Servén
5 Informality in Latin America and the Caribbean ............. 157
Norman V. Loayza, Luis Servén, and Naotaka Sugawara
6 Slow Recoveries ............................................ 197
Raphael Bergoeing, Norman V. Loayza, and Andrea Repetto
7 Market Reforms, Factor Reallocation, and Productivity
Growth in Latin America .................................... 225
Marcela Eslava, John Haltiwanger, Adriana Kugler, and
Maurice Kugler
Index ......................................................... 265
Figures
1.1 Regulation around the World ................................ 6
1.2 Regulation in Latin America ................................ 7
1.3 GDP per Capita vs. Regulation Indices ...................... 8
1.4 Overall Regulation and Growth .............................. 9
1.5 Overall Regulation and Volatility .......................... 9
1.6 Labor Productivity Growth and Firm Turnover ............... 11
1.7 Latin America: Size of Informality ........................ 14
1.8 Informality and Its Basic Determinants: Informality
Measured by the Schneider Shadow Economy Index ............ 16
1.9 Severity of Recessions and Regulatory Burden: Cross-
Country Relationships ..................................... 17
3.1 Regulation around the World ............................... 78
3.2 GDP per Capita vs. Regulation Indices ..................... 79
3.3 Growth of GDP per Capita vs. Regulation Indices ........... 83
3.4 Volatility of Output Gap vs. Regulation Indices ........... 84
4.1 Regulation Indices, Average per Region ................... 124
4.2 Firm Turnover in Latin America and OECD Countries ........ 126
4.3 Labor Productivity Growth Decomposition .................. 128
4.4 Labor Productivity Growth and Firm Turnover .............. 131
5.1 Size of Informality in Latin America, Various Measures ... 160
5.2 Informality and Basic Determinants ....................... 171
5.3 Predicted and Actual Levels of Informality ............... 177
5.4 Differences in Informality between Latin American
Countries and Chile ...................................... 180
5.5 Explanation of Differences in Informality between
Latin American Countries and Chile ....................... 181
6.1 Regulation Index by Region ............................... 203
6.2 Severity of Recessions and Regulatory Burden ............. 204
6.3 Impulse Response for Macro Variables ..................... 216
6.4 Impulse Response for Cut-Off Level ....................... 216
6.5 Impulse Response for Job Creation and Destruction
Rates .................................................... 217
6.6 Slow Recovery—Exercise 1 (normalized output level) ....... 218
6.7 Slow Recovery—Exercise 2 (normalized output level) ....... 218
7.1 Hypothetical Adjustment Functions, Different Types
of Adjustment Costs ...................................... 232
7.2 Institutions Index—Latin American Countries, 1985-99 ..... 235
7.3 Colombia: Estimated White Collar Employment Adjustment
Function at Different Levels of Institutions Index ....... 238
7.4 Colombia: Estimated Blue-Collar Employment Adjustment
Function at Different Levels of Institutions Index ....... 238
7.5 Colombia: Estimated Capital Adjustment Function at
Different Levels of Institutions Index ................... 239
7.6a Estimated White-Collar Employment Adjustment Function
at 1985 Levels of Institutions for Brazil, Chile,
Colombia, and Uruguay .................................... 243
7.6b Estimated White-Collar Employment Adjustment Function
at 1998 Levels of Institutions for Brazil, Chile,
Colombia, and Uruguay .................................... 243
7.7a Estimated Blue-Collar Employment Adjustment Function at
1985 Levels of Institutions for Brazil, Chile,
Colombia, and Uruguay .................................... 244
7.7b Estimated Blue-Collar Employment Adjustment Function at
1998 Levels of Institutions for Brazil, Chile,
Colombia, and Uruguay .................................... 244
7.8a Estimated Capital Adjustment Function at 1985 Levels of
Institutions for Brazil, Chile, Colombia, and Uruguay .... 245
7.8b Estimated Capital Adjustment Function at 1998 Levels of
Institutions for Brazil, Chile, Colombia, and Uruguay .... 245
Tables
3.1 Summary Statistics of Regulation Indices by Region ........ 74
3.2 Correlation Coefficients between Regulation Indices ....... 76
3.3 Economic Growth and Burden of Regulation: Basic
Specification, 1990-2003 .................................. 85
3.4 Macroeconomic Volatility and Burden of Regulation: Basic
Specification, 1990-2003 .................................. 86
3.5 Economic Growth and Burden of Regulation: Governance
Interactions, 1990-2003 ................................... 88
3.6 Macroeconomic Volatility and Burden of Regulation:
Governance Interactions. 1990-2003 ........................ 90
3.7 Economic Growth and Burden of Regulation: Accounting for
Endogeneity and Governance Interactions, 1990-2003 ........ 92
3.8 Macroeconomic Volatility and Burden of Regulation:
Accounting for Endogeneity and Governance Interactions,
1990-2003 ................................................. 94
4.1 Labor Productivity and Firm Dynamics ..................... 130
4.2 Firm Turnover and Regulation ............................. 133
4.3 Labor Productivity and Regulation ........................ 137
4.4 Within Component of Labor Productivity and Regulation .... 138
4.5 Between Component of Labor Productivity and Regulation ... 141
4.6 Net Entry Component of Labor Productivity and
Regulation ............................................... 143
5.1a The Effect of Informality on Economic Growth,
Controlling for GDP per Capita ........................... 164
5.1b The Effect of Informality on Economic Growth,
Controlling for Government Expenditure/GDP ............... 165
5.2a The Effect of Informality on Poverty, Controlling for
GDP per Capita ........................................... 167
5.2b The Effect of Informality on Poverty, Controlling for
Government Expenditure/GDP ............................... 168
5.3: Determinants of Informality .............................. 176
6.1 Severity of Recessions and the Burden of Regulations ..... 205
6.2 Parameterization ......................................... 215
6.3 Simulated Slow Recovery Indicators ....................... 220
7.1 White-Collar Labor, Blue-Collar Labor, and Capital
Adjustment Functions ..................................... 236
7.2 Models of Fundamentals ................................... 249
7.3 Summary Statistics of Simulated Fundamentals for Latin
American Countries ....................................... 250
7.4 Standard Deviations of White-Collar Labor, Blue-Collar
Labor, and Capital Shortages, before and after 1990 ...... 252
7.5 Decomposition of Aggregate Productivity under
Counterfactual Factor Demands ............................ 255
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