More Brazil

Besides the three articles in the American Economic Journal: Applied Economics, Brazilian data also appears in the latest issue of the American Economic Review.

“Trade Liberalization and Regional Dynamics”
Rafael Dix-Carneiro, Brian K. Kovak

We study the evolution of trade liberalization’s effects on Brazilian local labor markets. Regions facing larger tariff cuts experienced prolonged declines in formal sector employment and earnings relative to other regions. The impact of tariff changes on regional earnings 20 years after liberalization was three times the effect after 10 years. These increasing effects on regional earnings are inconsistent with conventional spatial equilibrium models, which predict declining effects due to spatial arbitrage. We investigate potential mechanisms, finding empirical support for a mechanism involving imperfect interregional labor mobility and dynamics in labor demand, driven by slow capital adjustment and agglomeration economies. This mechanism gradually amplifies the effects of liberalization, explaining the slow adjustment path of regional earnings and quantitatively accounting for the magnitude of the long-run effects.

Brazil in the ‘AEJ: Applied’

The October 2017 issue of the American Economic Journal: Applied Economics includes three articles with Brazilian data. Here are their abstracts.

“The Use of Violence in Illegal Markets: Evidence from Mahogany Trade in the Brazilian Amazon”
Ariaster B. Chimeli, Rodrigo R. Soares

We provide evidence on the effect of market illegality on violence. Brazil was historically the main exporter of mahogany. Starting in the 1990s, trade was restricted and eventually prohibited. We build on previous evidence that mahogany trade persisted after prohibition and document relative increases in violence in areas with natural occurrence of mahogany. We show that as illegal activity receded in the late 2000s so did the relative increase in violence. We describe an experience of increase in violence following the transition of a market from legal to illegal and contribute to the evaluation of prohibition policies under limited enforcement.

“Human Capital Persistence and Development”
Rudi Rocha, Claudio Ferraz, Rodrigo R. Soares

This paper documents the persistence of human capital over time and its association with long-term development. We exploit variation induced by a state-sponsored settlement policy that attracted immigrants with higher levels of schooling to particular regions of Brazil in the late nineteenth and early twentieth century. We show that one century after the policy, municipalities that received settlements had higher levels of schooling and higher income per capita. We provide evidence that long-run effects worked through higher supply of educational inputs and shifts in the structure of occupations toward skill-intensive sectors.

“Persuasion: A Case Study of Papal Influences on Fertility-Related Beliefs and Behavior”
Vittorio Bassi, Imran Rasul

We study the persuasive impacts of non-informative communication on the short-run beliefs and long-run behavior of individuals. We do so in the context of the Papal visit to Brazil in October 1991, in which persuasive messages related to fertility were salient in Papal speeches during the visit. We use individual’s exposure to such messages to measure how persuasion shifts short-run beliefs such as intentions to contracept and long-term fertility outcomes such as the timing and total number of births. To measure the short-run causal impact of persuasion, we exploit the fact the Brazil 1991 DHS was fielded in the weeks before, during, and after the Papal visit. We use this fortuitous timing to identify that persuasion significantly reduced individual intentions to contracept by more than 40 percent relative to pre-visit levels, and increased the frequency of unprotected sex by 30 percent. We measure the long-run causal impacts of persuasion on fertility outcomes using later DHS surveys to conduct an event study analysis on births in a five-year window on either side of the 1991 Papal visit. Estimating a hazard model of fertility, we find a significant change in births 9 months post-visit, corresponding to a 1.6 percent increase in the aggregate birth cohort. Our final set of results examine the very long-run impact of persuasion and document the impacts to be on the timing of births rather than on total fertility.

(Via Claudio Ferraz.)

Death wishes: Brazil and Japan

From the Economist:

Death wishes

In America and Japan not burdening families with the costs of care was the highest-ranked priority, cited as extremely important by 54% and 59% respectively. (The Japanese may be worrying about the cost of funerals, which can easily reach ¥3m, or $27,000.) A third of Italians emphasised having loved ones around them. Brazil was the only country where more people said they would put extending life ahead of reducing pain and stress than the other way around.

Japan: where people live the most and do not really care about it. Brazil is the opposite.

It actually makes sense. Japanese people take a long life for granted.

Republicans, Democrats and ‘the true underlying political economy of deficits’

Kenneth Rogoff:

It is a post-financial-crisis myth that austerity-minded conservative governments always favor fiscal prudence, while redistribution-oriented progressives view large deficits as the world’s biggest free lunch. This simplistic perspective, while perhaps containing a grain of truth, badly misses the true underlying political economy of deficits.

The fact is that whenever one party has firm control of government, it has a powerful incentive to borrow to finance its priorities, knowing that it won’t necessarily be the one to foot the bill. So expect US President-elect Donald Trump’s administration, conservative or not, to make aggressive use of budget deficits to fund its priorities for taxes and spending.

The most accurate framework for thinking about government budget deficits in democracies was proposed in the late 1980s by the Italian scholars Alberto Alesina and Guido Tabellini, more or less simultaneously with two Swedes, Torsten Persson and Lars Svensson. While their approaches differ slightly in detail, the basic idea is the same: You give money to your friends while you can. If there is less money to go around later, when the opposition party gets its turn in power, well, that’s just too bad.

One only has to recall recent US economic history to confirm the insight of the Italian/Swedish model — and to see the absurdity of claims that Republicans always aim to balance the budget while Democrats always try to spend beyond the country’s means.

Prison massacres in Brazil

Great analysis by Benjamin Lessing on the Monkey Cage:

Brazil’s prison gangs wield immense power on the streets, and driving the violence is a dynamic of competitive expansion. After dominating and transforming the criminal underworlds of their respective home states in the 1990s, the PCC and the CV are now colonizing prisons, urban peripheries and trafficking corridors throughout the country. The scramble for Brazil’s criminal markets is on.


Street criminals can have many reasons to obey prison-gang rules. The most important is probably the one a Rio trafficker gave me: “Whatever you do on the outside, you have to answer for on the inside.” Moreover, the likelier you are to go to prison, the stronger your incentives to stay friendly with the gang that runs the place. This means that higher incarceration rates and anti-gang crackdowns can actually increase prison gangs’ influence over street-level actors (as I argue in this Monkey Cage post and a forthcoming paper).

This influence, David Skarbek shows, allows prison gangs in Southern California to govern otherwise unruly and violent urban drug markets, increasing overall profits and taxing the surplus. Indeed, from Los Angeles to Rio, prison gangs’ projection of power has transformed retail drug markets. These are usually fragmented, because it is difficult for one organization to control much turf. Mass incarceration solves this elegantly, arresting street criminals and physically confining them where prison gangs can easily reward obedience and punish defection.


The CV originally spread when officials unwisely dispersed its leaders among Rio’s prisons. PCC leaders have also been transferred to or arrested in other states, where they invariably founded local chapters. Conversely, some local copycat prison gangs were founded by inmates who spent time in PCC-controlled prisons in São Paulo.

It is probably better than most articles published about the massacres in Brazilian media. (I say “probably” because I admit I have not been following the coverage thoroughly.)

‘Burke was right’

Larry Summers, about Davos:

Edmund Burke famously cautioned that “the only thing necessary for the triumph of evil is for good men to do nothing.” I have been reminded of Burke’s words as I have observed the behavior of US business leaders in Davos over the last few days. They know better but in their public rhetoric they have embraced and enabled our new President and his policies.

Japan and the ‘Galapagos syndrome’

In the Japan Times, William Pesek asks: “Can Spotify crack CD-loving Japan?

The compact disc is still king for Japan’s 127 million people. Tower Records locations still thrive in cities around the nation, presenting quite a paradox. Japanese consumers proudly count themselves among the perennial early adopters of new technologies like robots, and yet cling to mediums going the way of the eight-track tape and mini disc (even fax machines are still wildly popular). As the CD goes virtually extinct and digital downloads thrive everywhere else, they account for about 80 percent of Japanese sales.

This uniqueness is a microcosm of challenges facing the economy. Like many outside disrupters — including Uber and Airbnb — Japan’s protectionist business climate is an incredibly tough nut to crack. Such advancements are greeted with great suspicion in a market prone to the “Galapagos syndrome.” The advent of Netflix and Hulu, for example, barely dented the video-rental market as chains like Tsutaya thrive. Japan has barely been touched by budget airlines, never mind the apps economy shaking up the West. Spotify can provide an earful on that after years of painstaking licensing negotiations.

Artists may have few qualms, of course. Taylor Swift and her ilk can give you earfuls about streaming slashing royalties. Japan’s homegrown pop idols, which massively outsell Western acts, in theory are pulling in comparatively more cash. David Bowie saw this coming as far back at the mid-1990s, warning that the internet would impede artists’ ability to monetize the music and recalibrated accordingly.

Who knows? Japanese people may be willing to pay for a Spotify (or Line Music, or Apple Music) subscription while still buying CDs.

Mount Stupid

This beautiful SMBC’s chart helps to explain at least three things:

  1. Why I say so much stupid stuff;

  2. Why I write way less than I would like to;

  3. Why opinion journalism in Brazil is so weak.

Mount Stupid, Saturday Morning Breakfast Cereal (SMBC)

Media criticism in Brazil

There is a lack of non-partisan media criticism in Brazil. What we usually see are opinions from people dissatisfied with the treatment that publications give to certain parties or persons, not with the quality of their journalism.

This gap also exists in the mainstream media, as Alberto Dines, co-founder of Observatório da Imprensa (“press observatory”), a media criticism website, likes to remind. It is a pity. The most prestigious publications would be, in theory, the ideal places for non-partisan criticism and coverage.

On January 28th, we had a surprise. Folha de S.Paulo, the most important newspaper in Brazil, published an article questioning the quality of journalism in the country. The hook was a cover story of Época, a weekly magazine.

As I’ll argue below, there’s not much meat to Época’s cover story. It appears that its reporters tried very hard to uncover something incriminating, but found only vague implications. Under normal conditions, most magazines might refrain from printing such an inflammatory cover without any proof of wrongdoing. But conditions are far from normal in Brazil at the moment. Suspicion of politicians — and of Rousseff’s government especially — now runs so deep that almost any implication can stick.

Seen this way, the cover may tell us more about the polarization of Brazil’s media and political landscape than it does about Rousseff’s ex-husband.

I did not translate that, the article was actually written in English. Because, sadly, it was not exactly a work from Folha, but from one of its blogs, From Brazil, edited by journalist Vincent Bevins. And the text’s author, Alex Cuadros, is not a member of Folha’s staff — he is a former Bloomberg Businesweek reporter and now works as a freelancer.

That is what it took for a text so hard on journalism — and which actually name names — to be published on the website of Brazil’s most influential newspaper. In other words, there is nothing new in the world of Brazilian press.

As for the piece itself, I have only one note for now. Cuadros writes:

It has long been an article of faith on Brazil’s left that the establishment media — Veja, Época, the Globo media group, and newspapers such as Folha de S.Paulo — are in league to undermine Lula, Rousseff, and their Workers Party. This is an exaggeration. While it’s true that these outlets generally lean to the right of Brazil’s political spectrum (if we define the center according to electoral outcomes since 2000), for the most part their reporting is responsible. Sometimes, it is crucial. In 2012, for example, O Estado de S. Paulo reported on the massively inflated price of a Petrobras refinery in the U.S. — long before Car Wash would uncover signs of embezzlement in the project.

Also, scoops from the establishment media have often exposed scandals involving the current opposition. Perhaps most famously, in a 1997 front-page story, Folha exposed the congressional vote-buying that paved the way for a constitutional amendment to allow President Fernando Henrique Cardoso, Lula’s longtime rival, to run for reelection. (The scandal was never officially investigated.)

But stories like the one I’ve mentioned from Veja, by making spurious leaps based on trumped-up evidence, undermine the credibility of the entire media. Rather than illuminating, they obfuscate, and serve to deepen the already extreme polarization of politics here.

I do not know if he noticed, but the two positive examples he gives are from daily papers, and the two big targets of his attacks are weeklies. Although we can find many errors from the former and big scoops from the latter, I think that makes for a good illustration of the work of the main news publications in Brazil in the last years. Newspapers in general have done a better and more balanced job, while magazines have been using their more analytical and interpretive approach (if not opinionated) to distort the facts at will.

Finally, an anecdote. After the article appeared, Diego Escosteguy, Época’s editor-in-chief, unfollowed Cuadros on Twitter. Ouch. That hurt.

Racial map of Brazil

Pata, an data visualization agency, made an interactive map of racial distribution in Brazil.

What you are seeing is an interactive map of racial distribution in Brazil. Through it you can see the geographic distribution, population density, and racial diversity of the Brazilian people. Each dot on the map represents one person. The location and color of the dots are based on the IBGE (Brazilian Institute of Geography and Statistics) Census 2010, available online; each color on the map represents one of race options possible in that census.

The map was created by us from Pata; the inspiration and the basis of the code used to generate the map came from Dustin Cable, a former researcher at the Cooper Center for Public Service at the University of Virginia, and author of a racial map of the United States . He, in turn, was inspired by Brandon Martin-Anderson from the MIT Media Lab, and Eric Fischer, mapmaker/programmer.

More information here.

The US racial map can be viewed on this page.

Brazil’s weird justice

In Brazil, “the courts treat suspects too harshly, and convicts too leniently,” says the Economist:

Gratifying as it may be to see billionaires behind bars, some lawyers are troubled by Mr Moro’s penchant for locking up suspects before they go on trial. Most are loth to challenge a charismatic judge. Those who publicly object tend to work for one of the innumerable defence teams. All 11 directors of the comically named but serious Institute for the Defence of the Right to Defence are thus employed. Heloisa Estellita, a professor of criminal law at the Fundação Getulio Vargas Law School in São Paulo, is one of the few public critics of Mr Moro’s methods who is independent. She thinks he has wrongly “used pre-trial detention to extract plea bargains”. […]

Pre-trial detention should not be used to browbeat them into co-operating with investigations or to signal the gravity of the charges they face. The Lava Jato inquisitors deny they are doing this, but readers of Blackstone’s report will wonder. Timothy Otty, its lead author, has written human-rights opinions on behalf of Abdullah Ocalan, a Kurdish separatist leader, and detainees at the American prison in Guantánamo Bay. “Just as it was wrong to jettison the protection of liberty and right to fair trial as part of the war on terror, so it would be wrong in the fight against corruption,” says Mr Otty. […]

However, “the law can be as weirdly indulgent as it is harsh,” says the periodical. “Convicts are entitled to go home while they exhaust their appeals,” and that can take years.

Many critics of the system, including Mr Moro, think convicts should have to file appeals from their jail cells. That would make sense. So would an overhaul of the criminal code which left at liberty people presumed innocent and guaranteed them a fair trial.

Frei Betto, by the way

In the interview Frei Betto gave Folha de S.Paulo, the best passages are not about Dilma, but on José Dirceu and religion, especially when he uses “by the way”.

If it is true that him [José Dirceu] has so many millions in his account, I cannot understand how he could promote the kitty [to pay the mensalão fine]. By the way, I have friends who contributed to the kitty. They are extremely outraged. They feel aggrieved. […]

Well, many religious schools are mere school companies. By the way, the most corrupt politicians in Brazil studied all in religious schools. One wonders: what the hell did they do, what kind of evangelisation was that?

Harm reduction

The Brazilian government had no time to prepare the market for the reduction of the target for the primary fiscal surplus (the budget balance before interest payments) from 1.2 per cent of gross domestic product to 0.15 per cent. The harm-reduction efforts apparently include increasing the media exposure of the finance minister, Joaquim Levy.

In the past last few weeks, he was interviewed by Fernando Dantas, for Agência Estado, and by Miriam Leitão, for her programme on GloboNews. The minister also wrote an article for Folha de S.Paulo (English version here).

Mr Levy cautiously tries to show some optimism and sends messages to the Congress — with no explicit attacks.

Sergio Fausto: past, present and future of the PSDB

In an article for Folha de S.Paulo, political scientist Sergio Fausto presents a good summary of the past, the present and the future of the PSDB, the main opposition party in Brazil.

During Lula’s mandate [2003-2010], there is no doubt that the PSDB was wrong trying to avoid being connected to the supposedly cursed inheritance left by the Fernando Henrique Cardoso government [1995-2002]. The party committed several times the mistake of giving up a constituent part of its identity […].

Basically, the PSDB did not have conviction that the Cardoso government, despite the crisis and the unsatisfactory results in terms of growth and employment, represented a significant advancement for the country and constituted an asset and not a liability to the party, not only in a retrospective view, but also in a perspective of the future.

The scenario faced by the PT today has some similarities. After the elections and especially this year, with the effects of the crisis more evident, it has been hard to see members of the party defending the first term of Dilma Rousseff. In addition, a fraction of the PT believes that the party or the government mimics the PSDB by committing “the mistake of giving up a constituent part of its identity”.

There is at least one significant difference: it will probably be much harder for the PT to convince the population (and perhaps even itself) that the Dilma government, “despite the crisis and the unsatisfactory results in terms of growth and employment”, will have represented “a significant advancement for the country”.

To stablish a qualified dialogue with this network [of potential PSDB supporters] implies not only to democratise the party internally, but also to define more clearly the place of the PSDB in the ideological map of the country. For that, the party cannot forget it built its history in the progressive and viscerally democratic camp. Forgetting its DNA might seem tempting in the face of the conservative tendencies on the rise in the Brazilian society, but that would represent the irremediable loss of its character and its transformation into a party like any other.

More than a provocation to the most conservative fraction of the PSDB, that message is a warning to his progressive colleagues of the party. “We cannot lose our character.”