Ernesto Schargrodsky

Water for Life: The Impact of the Privatization of Water Services on Child Mortality

While most countries are committed to increasing access to safe water and thereby reducing child mortality, there is little consensus on how to actually improve water services. One important proposal under discussion is whether to privatize water provision. In the 1990s Argentina embarked on one of the largest privatization campaigns in the world, including the privatization of local water companies covering approximately 30 percent of the country’s municipalities. Using the variation in ownership of water provision across time and space generated by the privatization process, we find that child mortality fell 8 percent in the areas that privatized their water services and that the effect was largest (26 percent) in the poorest areas. We check the robustness of these estimates using cause‐specific mortality. While privatization is associated with significant reductions in deaths from infectious and parasitic diseases, it is uncorrelated with deaths from causes unrelated to water conditions.

Do Police Reduce Crime? Estimates Using the Allocation of Police Forces After a Terrorist Attack

An important challenge in the crime literature is to isolate causal effects of police on crime. Following a terrorist attack on the main Jewish center in the city of Buenos Aires, Argentina, in July 1994, all Jewish institutions (including schools, synagogues, and clubs) were given 24-hour police protection. Thus, this hideous event induced a geographical allocation of police forces that can be presumed to be exogenous in a crime regression. Using data on the location of car thefts before and after the terrorist attack, we find a large deterrent effect of observable police presence on crime. The effect is local, with little or no appreciable impact outside the narrow area in which the police are deployed.

The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires

Abstract We study the prices paid for basic inputs during a crackdown on corruption in the public hospitals of the city of Buenos Aires, Argentina, during 1996–97. We find a well‐defined, negative effect on the measures used to capture corruption. Prices paid by hospitals for basic, homogeneous inputs decrease by 15 percent during the first 9 months of the crackdown. After this period prices increase, but they are still 10 percent lower than those prevailing before the crackdown. Relative to the precrackdown period, higher wages play no role in inducing lower input prices when audit intensity can be expected to be maximal (during the first phase of the crackdown) but have a negative and well‐defined effect when audit intensity takes intermediate levels (the last phase of the crackdown). Controlling for fixed effects, we find that the wage elasticity of input prices exceeds .20. These results are consistent with the standard model of bribes of Gary Becker and George Stigler.

Evaluating the Impact of School Decentralization on Education Quality

An important piece of the major fiscal and structural reforms undertaken in Argentina in the early 1990´s was the decentralization of education services from the federal government to the provincial governments. The theoretical literature does not find absolute superiority of centralization or decentralization in the provision of public services. We evaluate empirically the effect of the decentralization of secondary schools in Argentina on education quality. Our results suggest that, on average, decentralization improved the performance of public school students in test scores. We also explore whether the effect of decentralization depends on province characteristics. We find that the effect is positive when schools are transferred to fiscally ordered provinces, but negative when provinces run significant fiscal deficits.

Financial Dollarization and Debt Deflation under a Currency Board

In the late currency board years, Argentina faced a real exchange rate adjustment through price deflation amidst growing devaluation expectations. Using a firm-level panel database to analyze the incidence of these factors on the currency composition of private debt and on firms’ performance, we find that widespread debt dollarization showed no relationship with the firms’ production mix or the ever-changing probability of a nominal devaluation. While relative price changes favored export-oriented firms with the expected impact on sales, earnings and investment, increases in devaluation expectations elicited only a marginal differential response in investment from more financially dollarized firms. Our findings provide support to two criticisms faced by the Argentine currency board in recent years, namely, that by fueling beliefs in an implicit guarantee it stimulated across-the-board debt dollarization, and that it could not fully isolate the economy from real shocks, as the feared balance sheet effect was replaced by a gradual but equally deleterious debt deflation effect.

Banking regulation and competition with product differentiation

Abstract The main motivation for prudential regulation is to increase the solvency of the banking sector. However, it is usually understood that tighter regulation also leads to more concentration and higher spreads. Thus, these prudential measures are seen as implying a trade-off between solvency and competition. In this paper we argue that this trade-off does not necessarily exist. We present a model in which tighter capital requirements lead banks to choose a lower degree of product differentiation, potentially inducing more intense competition and lower spreads. The model is motivated by the recent evolution of the Argentine banking sector.

Buying Less but Shopping More: The Use of Nonmarket Labor during a Crisis

Households allocating time between market and non-market uses should respond to income variations by adjusting the time devoted to shopping search and other home production activities. In this paper, we exploit high-frequency household expenditure data to examine the use of changes in shopping intensity as a method of mitigating the effects of the 2002 Argentine economic crisis. Although the total quantity and real value of goods purchased fell during the crisis, consumers are found to be doing more shopping search. This increase in shopping is shown to enable households to seek out lower prices and locate substitutes, allowing a given level of expenditure to buy more goods. The magnitude and prevalence of these effects suggest that this non-market use of labor can be an important coping strategy for households during a recession.

The Costs and Benefits of Privatization in Argentina: A Microeconomic Analysis

Since the beginning of the 1980s, the world has undergone a major shift in thinking about the appropriate economic role of the state. Privatization of state-owned enterprises (SOEs) has been at the heart of this change. The track record on privatization, however, is still very limited. This holds true for Argentina, which undertook an extensive privatization effort. But has it improved the welfare of Argentine workers and consumers? How has the transfer of local water and sewerage firms to private hands impacted health indicators such as child mortality? Given the massive layoffs involved, have post-privatization gains in profitability come at the expense of workers? Analyzing data for both financial and non-financial firms, this paper answers these and other questions to set the record straight on privatization in Argentina.

Land Property Rights and Resource Allocation

AbstractIn this paper, we review the most significant empirical literature on the causal effects of land property rights. The literature indicates that secure property rights boost investment in both rural and urban areas. These effects, however, do not appear to be the result of improved credit conditions. In rural areas, clear land rights also lead to increases in productivity and farm earnings. In contrast, for urban areas, the evidence for an effect on earnings is mixed. We find little empirical evidence to suggest that land-titling programs enhance the development of land markets. Finally, some evidence suggests that land titling induces changes in household structure that foster human capital accumulation and may help to increase the incomes of future generations.

Using a Terrorist Attack to Estimate the Effect of Police on Crime

An important challenge in the crime literature is to isolate significant causal effects of police on crime. Following a terrorist attack on the main Jewish center in the city of Buenos Aires, Argentina, in July 1994, all Jewish and Muslim institutions (including schools, synagogues, mosques, cemeteries and clubs) were given 24-hour police surveillance. Thus, this hideous event induced a geographical allocation of police forces that can be presumed exogenous in a crime regression. Using data on the location of all car thefts in three large neighborhoods before and after the terrorist attack, we find a large negative effect of observable police on crime. The effect is local, so that the costs of police presence are almost seven times larger than the benefits in terms of lower car thefts.