Instituto de Economía
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Browsing Instituto de Economía by Subject "01 No poverty"
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- ItemDynamics of crime and inequality(2023) Aylwin Trischler, Alberto José; Janiak, Alexandre; Aguirre Rigo-Righi; Pontificia Universidad Católica de Chile. Instituto de EconomíaIn this work, we examine the causal relationship between crime and inequality and explore potential policy options to reduce inequality and crime. To achieve this, we propose a general equilibrium heterogeneous agent model for crime, with incomplete markets, as well as search and matching frictions to characterize the crime dynamics. In it, agents choose to behave as model citizens or engage in opportunistic crime. The model provides an endogenous wealth distribution that turns out to be crucial in all of the agents decisions. Crime can be seen as an outside option for agents in the face of poor lawful economic choices. As a result, increasing security increases income and wealth inequality. Rising income inequality generates an increase in the level of crime, up to the point that inequality is so high that a share of prospective criminals prefer a lower income in exchange of less risk. These findings put inequality as one of the main determinants of crime in a society. Additionally, we assess the impacts of four policy measures on crime and inequality: labor taxation, direct transfers, imprisonment sentence length, and imprisonment consumption level. We compute optimal policy schemes under different assumptions.
- ItemEssays in long-term economic development(2023) Huaroto de la Cruz, César; Gallego Yáñez, Francisco; Pontificia Universidad Católica de Chile. Instituto de EconomíaResearch in Development Economics has been, until the last two decades, ahistorical in its focus. Fortunately, this has changed, and there is increasing interest in understanding the deep roots behind economic development. In this thesis, I aim to contribute to this branch of the literature by studying the consequences of two historical events in long-term economic development in Peru. In the first chapter, we study the persistent effect on social unrest of the Mining Mita— a colonial forced labor and migration institution that affected indigenous communities in Peru between 1573 to 1811. Using a geographical regression discontinuity design for identification, we provide causal evidence that Mita areas have experienced higher levels of social unrest since the end of the 18th century. We present a conceptual rationale with historical and causal evidence indicating that at least part of the roots of such persistence is cultural. Specifically, people living in Mita districts identify more with the indigenous groups and indigenous institutions, are more likely to speak native languages, are less likely to migrate, and have different beliefs about development and democracy. In the second chapter, I study the effect of fighting a foreign invasion via self-organized resistance on nation-building in a developing country during the nineteenth century. I use the case of the Sierra Campaign, the last stage of the Pacific War (1879-1884, between Peru and Chile), where local indigenous communities in Peru fought a guerrilla war against the Chilean army. The experience reduced indigenous ethnic self-identification but increased political participation, democratic values, and civic capital. Finally, it also increased economic development in the long run, suggesting that war can foster development by reducing social fragmentation.
- ItemEssays on Sudden Stops in Capital Inflows: Determinants and Optimal Responses(2025) Gatty Sangama, Andrés; Kohn, David; Pontificia Universidad Católica de Chile. Instituto de EconomíaSudden stops in capital inflows are disruptive and costly events that can cause redistributive effects. In the first chapter, I explore the role of inequality in the design of optimal capital controls. To do so, I set up a small open production economy model with collateral constraints and two types of agents that are heterogeneous in income and borrowing capacities. I use the model to study the response of the economy to exogenous shocks that produce a tightening of the collateral constraint and sudden stops (reversals in the current account). I then solve the constrained solution of a Social Planner’s problem, which aims to avoid sudden stops and achieve redistribution. I find that inequality implies differentiated capital controls between high income and low income agents. While in normal times taxes are higher for high income households to prevent overborrowing, the planner allows low income households to borrow more to enable some redistribution. When the economy faces a sudden stop, taxes for all agents are reduced to nearly zero. Then, I design a uniform, constant capital control that allows achieving this optimal outcome. In the second chapter, I investigate the effect of extreme natural disasters on sudden stops in capital inflows (current account reversals), both empirically and quantitatively. Using a cross-country quarterly dataset, I find that the occurrence of a disaster increases the probability of a sudden stop in Emerging Economies. On average, during a disaster, in addition to a cut-off in capital inflows, these economies experience a contraction in output and other components of demand. I then extend a standard Real Business Cycle (RBC) model with collateral constraints to incorporate extreme natural disasters and examine their interaction with sudden stops. The model successfully replicates the patterns observed in the data and shows that the risk of sudden stops increases during natural disasters due to capital destruction and productivity loss. In ddition, the model captures a fact also observed in the data, sudden stops tend to be more severe when they coincide with natural disasters.
- ItemUnconventional monetary policy and household heterogeneity: evidence from QE shocks(2024) Rosende Jürgensen, Francisco Javier; Vicondoa Ramos, Alejandro Martín; Turén, Javier; Pontificia Universidad Católica de Chile. Instituto de EconomíaThis paper examines the heterogeneous effects of Large-Scale Asset Purchases (LSAP) on household consumption, assets, and liabilities across different income cohorts using a Smooth Local Projections (SLP) approach. We find that high-income households experience an immediate and significant increase in consumption, while low-income families initially reduce consumption but show a delayed increase starting six quarters after the shock.We identify two primary channels through which LSAP shocks operate. First, a valuation effect on financial assets benefits high-income households with substantial wealth and sufficient liquidity to respond to the shock. Second, a real activity channel, where decreasing unemployment from heightened economic activity contributes to increased consumption among low-income households after a year and a half.Additionally, we propose that heightened prepayment and refinancing activity may explain the initial decline in consumption among low-income households.These findings highlight the differentiated impacts of LSAP shocks on various household groups and offer insights into the mechanisms driving these responses, drawing comparisons to conventional monetary policy shocks.