Please join the REAL/PUCRS Fall virtual seminar
on Friday, October, 23, 2020 from 9-10 a.m. CST
Join Zoom Meeting by clicking here
Meeting ID: 997 1523 2314
Professor, London School of Economics, United Kingdom
"The Impact of Chinese FDI in Africa: Evidence From Ethiopia"
We exploit exogenous variation in China’s export taxes to investigate the impact of Chinese foreign direct investment (FDI) in Ethiopia. Higher sector-specific export taxes in China lead to more Chinese FDI in Ethiopian districts specialized in those sectors. Combining this variation with the universe of FDI projects and the census of manufacturing firms in Ethiopia, we observe highly heterogeneous effects. Domestic firms competing with Chinese FDI reduce their sales, investment and inputs, as output prices drop. Firms operating in upstream and downstream sectors expand their sales, investment and inputs. To study the short and medium run aggregate impact of Chinese FDI on local economic activity, we build a 20-year district panel combining night lights data from two satellites through a machine-learning algorithm. Chinese FDI leads to no instantaneous impact on local growth, but significant and persistently positive effects in the medium run.
Professor, Faculty of Economics and Administration, Catholic University of the North, Chile
"Subnational Crowding Out and Mining Localities: Does the Level of Local Provision of Public Goods Matter?"
In spite of the resource curse provides evidence on the national crowding out generated by mining resource windfalls, little attention has been put on the subnational crowding. This gap is a problem because these windfalls should cover the negative externalities widely spread on these communities. Additionally, these communities have different fiscal responsibilities forced by the environmental, economic, and social costs generated by the mining industry, becoming them in a group of municipalities hardly comparable with the rest of local communities. This article estimates the subnational crowd out of mining resource windfalls on local tax collection according to the different levels of fiscal responsibility using the case of Chile. We employ a panel data for 322 Chilean municipalities between 2008 to 2019 to attribute causality derived from an exogenous rule to assign the mining windfalls in Chile. Our results confirm the crowding out hypothesis, although with different magnitudes: First, per each dollar increase in mining taxes results in a 0.2 US$ decrease in residential property tax. Second, this subnational crowding out doubles in the municipalities with high level of fiscal responsibility, namely 1.0 US$ increase in mining taxes crowd out 0.4US$ in nonresource revenue. Finally, the results for municipalities categorized with low-level in fiscal responsibility not significant. These results call for local policies that take into account the fiscal capacity of the municipalities to effectively disincentive undesirable behavior derived from extra resource revenues.