Office of the Chief Economist, Latin America and the Caribbean

We invite you to discover our research work on poverty, trade, education and many other key issues for the future of Latin America and the Caribbean. Our team has been dedicated to examining the complex relationships between these critical issues, and our findings have shed new light on how they intersect and impact each other. Through our research, we aim to inform policy decisions and inspire action to improve the lives of those affected by poverty, enhance trade opportunities, and increase access to quality education. 

LACademia: Seeking the Most Innovative Research Relevant to the Region

The LACademia identifies and shares the findings of the most innovative policy-relevant research on the Latin America and the Caribbean region from across the World Bank Group. Papers submitted to the LACademia should make a significant contribution to our understanding of the policy questions facing the Latin America and the Caribbean region.

Awarded in FY24

In the 2024 edition, three papers stood out for innovativeness, rigorous methodology, and policy relevance.

• Best Innovative Policy Database Award

Title: Measuring Green Jobs: A New Database for Latin America and other Regions 
Authors: Hernan Winkler, Vincenzo Di Maro, Kelly Montoya, Sergio Olivieri, and Emmanuel Vazquez

A growing body of literature investigates the labor market implications of scaling up “green” policies. Since most of this literature is focused on developed economies, little is known about the labor market consequences for developing countries. This article contributes to filling this gap by providing new stylized facts on the prevalence of green occupations and sectors across countries at varying levels of economic development. Green occupations are defined using O*NET, and green sectors are those with relatively lower Greenhouse Gas Emissions (GHGE) per worker. It offers an initial assessment of how the implementation of green policies—aimed at expanding green sectors and strengthening the relative demand for green skills—may affect workers in developing economies. It finds that the share of green jobs is strongly correlated with the level of GDP per capita across countries. When controlling for unobserved heterogeneity, a one percent increase in GDP per capita is associated with a 0.4 and 4.1 percentage point increase in the share of new and emerging, and enhanced skills green jobs, respectively. The article then focuses on Latin America and finds that only 9 percent of workers have a green job with respect to both occupation and sector. Within countries, it finds that workers with low levels of income and education are more likely to be employed in non-green sectors and occupations, and to lack the skills for a greener economy. This evidence suggests that complementary policies are needed to mitigate the potential role of green policies in widening income inequality between and within countries. 

• Best Policy Relevant Paper Award

Title: Who Bears the Burden of Fuel Taxation in Latin America and the Caribbean countries?
Authors: Ruth Llovet Montañés and Carolina Mejía-Mantilla

This paper assesses the short-term welfare and distributional impacts of fuel taxation, encompassing the broad range of fiscal policies that increase the price of fossil fuels relative non-fuel energy sources, in Latin America and Caribbean countries (Brazil, Jamaica, Mexico, Paraguay, Peru, and Uruguay). The study explores the differential impacts of taxes across fuel types, as well as the effects of standardized fuel tax reforms aligned with countries’ environmental and fiscal objectives, by expanding fiscal incidence analytical tools. In the short term, fuel tax reforms cause a modest but negative income shock for most households, resulƟng in a slight increase in poverty and a decline of the middle class. Although these taxes are mostly paid by wealthier households, they disproportionately affect the less well-off, particularly when comparing LPG taxes to gasoline taxes, which tend to be distributionally neutral or even progressive. These patterns explain why reforms that simply align tax rates with fuels’ carbon content result in income losses for households at the bottom of the distribution, whereas they benefit those at the top. Despite diesel not being directly purchased by most households, diesel taxes have a general inflationary effect, whose impact can be as large as that of other fuels extensively used by households. Compensation through exisƟng social protection programs can help offset the negative impacts on the less well-off but do very little for other affected population groups. 

• Best Policy Research Methods Award

Title: What makes a program good? Evidence from short-cycle higher education programs in five developing countries
Authors: Lelys Dinarte-Diaz, Maria Marta Ferreyra, Sergio Urzua, and Marina Bassi

Short-cycle higher education programs (SCPs) can play a central role in skill development and higher education expansion, yet their quality varies greatly within and among countries. In this paper, we explore the relationship between programs’ practices and inputs (quality determinants) and student academic and labor market outcomes. We design and conduct a novel survey to collect program-level information on quality determinants and average outcomes for Brazil, Colombia, Dominican Republic, Ecuador, and Peru. Categories of quality determinants include training and curriculum, infrastructure, faculty, link with productive sector, costs and funding, and practices on student admission and institutional governance. We also gather administrative student-level data on higher education and formal employment for SCP students in Brazil and Ecuador and match it to survey data. Using machine learning methods, we select the quality determinants that predict outcomes at the program and student levels. We show that specific quality determinants may favor academic and labor market outcomes. Two practices predict improvements in all labor market outcomes in Brazil and Ecuador—teaching numerical competencies and providing job market information—and one practice—teaching numerical competencies—additionally predicts improvements in labor market outcomes for all survey countries. Since quality determinants account for 20–40 percent of the explained variation in student-level outcomes, quality determinants might have a role shrinking program quality gaps. These findings have implications for the design and replication of high-quality SCPs, their regulation, and the development of information systems.

Awarded in FY23

Title: Competition and Productivity: Evidence from Peruvian Municipalities
Authors: Marc Schiffbauer, James Sampi and Javier Coronado

This paper uses new data on the removal of local, sector-specific barriers to firm entry across 1,800 municipalities in Peru to estimate the impact on firm productivity and markups. New legislation in 2013 strengthened the national competition authority’s mandate to enforce the elimination of local entry barriers, providing a quasi-experimental setting to identify the impact of competition on productivity within the controlled institutional environment of a single country. We find that the elimination of local entry barriers boosted productivity, pointing to the critical role of subnational market entry barriers in explaining countries’ laggard productivity performances despite liberalized national regulatory environments.

Title: Local Infrastructure and the Development of the Private Sector: Evidence from a Randomized Trial
Authors: Leonardo Iacovone, Craig McIntosh, Daniel Rogger and Luis F. S anchez-Bayardo 

We study how local public infrastructure investment e ects neighborhood economies. By tracking the impacts of US$68million of randomized investments in Mexican municipalities, we document how government investment leads to sustained in- creases in the size, employment, and pro tability of treated private-sector companies. Within the first few years of investment, wages rise to compensate for higher costs of living, ineficient firms die, and more eficient firms grow faster. Over the subsequent decade firms continue to grow at an increased rate in terms of their capital stock, employment, and pro tability, suggesting durable improvements in local demand and the structure of the private sector. Our results provide novel evidence of the linkages between government investment, small business growth, and the dynamics of local economies.

Title: Investing in Digital Technology to Increase Market Access for Smallholder Farmers: Experimental Evidence from Rural Guatemala
Authors: Angela R. Lopez, Viviana M.E. Perego and Javier Romero

Smallholder farmers in developing countries face information barriers that hinder market opportunities and business productivity. This paper evaluates the impact of a digital information campaign aimed at addressing the lack of market access and information faced by smallholders in Western Guatemala during the COVID-19 pandemic. The intervention focused on providing information about a new market opportunity—the national School Feeding Program (SFP)—which purchases half of schools’ food from local family farming by law. Results from a Randomized Controlled Trial in 252 villages indicate that the intervention increased business-related knowledge about the SFP, especially for households not typically reached by extension programs. This led to increases in the prices received by farmers and the likelihood of selling their products. However, farmers are not more likely to join the SFP due to product mismatches, production capacity, and institutional trust, calling for better alignment of the SFP with local market conditions. Instead, the gains appear to occur in the traditional market. Consistently, the effects on prices and sales were driven by areas with lower incidence of COVID-19 cases, where farmers were more able to sell in the traditional market and less likely to join the SFP. On the other hand, the SFP became a more appealing alternative in areas with higher incidence of COVID-19. Overall, this study highlights that digital technology can be used to increase market access in rural areas and enhance the status of smallholder farmers in the business sphere.