Luisa R. Blanco

Long Live Democracy: The Determinants of Political Instability in Latin America

Abstract We investigate the underlying causes of political instability in a panel of 18 Latin American countries from 1971–2000. We test whether regime type, regime durability, factionalism, income inequality, ethnic diversity, ethnic discrimination, regional spillover effects, urban growth and macroeconomic variables matter for instability. We find several important results: (1) democracy has a significant negative effect on instability that is robust to several alternative specifications; (2) factionalised political systems experience higher instability; (3) income inequality, ethnic fractionalisation, and urban growth have important nonlinear effects on instability; and (4) of the macroeconomic variables we study, only openness to trade has a significant negative effect on instability.

The Impact of FDI on CO2 Emissions in Latin America

This paper uses panel Granger causality tests to study the relationship between sector-specific foreign direct investment (FDI) and CO2 emissions. Using a sample of 18 Latin American countries for the period 1980–2007, we find causality running from FDI in pollution-intensive industries (“the dirty sector”) to CO2 emissions per capita. This result is robust to controlling for other factors associated with CO2 emissions and using the ratio of CO2 emissions to GDP. For other sectors, we find no robust evidence that FDI causes CO2 emissions.

Explaining the Rise of the Left in Latin America

Latin American politics has taken a left turn in the past decade, with an increasing number of chief executives hailing from left-of-center parties. We investigate the political and socioeconomic factors explaining political ideology of the chief executive in a sample of one hundred elections taking place between 1975 and 2007 in eighteen Latin American countries. We find that the commodity booms in agricultural, mining, and oil are positively and significantly related to the probability that a country will have a chief executive from a left-of-center political party. However, for oil exports, we observe that this effect holds only for Venezuela. We also show that past political discrimination and government crises are positively and significantly associated with a move to more left-wing chief executives. Openness to trade and having a president from the right in the previous presidential term negatively affects the probability of having a more liberal president, although the effect of trade openness disappears when the incumbent president is a conservative. We also find that when a government crisis occurs during a term with a president from the right, the probability of having a president from the left in the following term increases significantly.

Are Tax Havens Good Neighbours? FDI Spillovers and Developing Countries

Abstract This paper investigates the impact of tax havens on non-tax haven countries in terms of foreign direct investment (FDI). We analyze the importance of agglomeration effects by including FDI inflow levels in tax havens and capture geographic spillovers by measuring proximity to the nearest tax haven. Our analysis yields several interesting findings. First, using panel data for 142 countries, we find evidence of positive spillovers from tax havens to nearby developing countries, but not to nearby developed countries. Second, restricting our panel to developing countries, we find the positive effect of tax haven FDI on developing countries to be robust. Third, we find that geographic distance matters for financial flows: developing countries which are the closest to a nearby tax haven benefit the most in terms of FDI inflows. This result is robust to accounting for spatial interdependence of FDI.

Equity Commitment under Uncertainty: A Hierarchical Model of Real Option Entry Mode Choices

We develop a hierarchical model of real option entry mode choices under environmental uncertainty and test predictions using a unique sample of U.S. companies expanding in the countries of Latin America and the Caribbean between 1980 and 2005. Our results, based on a probit estimation with sample selection, show that country risk has a significant and negative effect at the primary level of the hierarchy. Sensitivity analysis further distinguishes between which entry modes dive our main results. Taken collectively, our findings suggest that prior acquisition experience, marketing intensity, size, as well as a higher proportion of specific or intangible assets, are key attributes for managers to consider when structuring foreign investments as a portfolio of options. Moreover, we find that international investment experience moderates the extent to which firm capabilities matter by weakening the predicted effects of prior acquisition experience and asset structure when firms make choices regarding equity commitment.

A Qualitative Analysis of the Use of Financial Services and Saving Behavior among Older African Americans and Latinos in the Los Angeles Area

For this study, we conducted seven focus groups in the Los Angeles area with a total of 70 participants (42 Latinos and 28 African Americans) recruited from three senior centers and a church. There was a wide variety of responses in relation to the usage of financial services among participants. We found that although some participants seem to participate more in the formal financial sector and show a higher level of sophistication when managing their finances, other participants’ use of formal financial institutions is minimal. Among African American participants, we found several instances in which individuals feel very comfortable using banks. Lower levels of participation in the formal financial sector were found among the lower income Latino participants. In relation to barriers to participate in the financial sector, supply was not an issue, but demand and behavioral factors seem more important. Overall, no participants saved very much on a regular basis. We also find that participants in general do not want to ask their children for money, and also do not want to save and accumulate wealth to leave to their children.

Competition between Tax Havens: Does Proximity Matter?

We study whether proximity to the nearest tax haven affects FDI and the number of American affiliates in a tax haven. Our results show that distance to the nearest tax haven is positively related to FDI inflows and the number of American affiliates in tax havens. These findings suggest that there is harmful competition between tax havens. We also find evidence of positive spillovers: the number of American affiliates in a tax haven is positively related to the number of affiliates in its closest neighboring tax haven. This suggests the presence of agglomeration benefits given there is an affiliate in a nearby tax haven.

Are Tax Havens Good Neighbors? An LDC Perspective

Tax competition and spillover models offer ambiguous predictions of tax haven impacts on non-tax havens. The implications of tax havens for less developed countries (LDCs), in particular, are not well understood and are little studied. This paper investigates the impact of tax havens on foreign direct investment (FDI) in non-tax haven LDCs. We investigate spillover and agglomeration factors by including measures of proximity to the nearest tax haven and the level of FDI inflows in the nearest tax haven. Employing cross sectional data of 115 LDCs from 1990 to 2006, we find evidence of spillovers from tax havens to nearby LDCs. FDI inflows in LDCs are positively and significantly related to FDI inflows in the nearest tax haven. Geographic diffusion has nuanced effects. LDCs at a medium distance to the nearest tax haven have higher levels of FDI than LDCs that are close to a tax haven. On the other hand, LDCs at a medium distance to a tax haven are less influenced by FDI spillovers compared with LDCs at closer proximity. Taken together, our results suggest that tax havens make good regional neighbors, but not good immediate neighbors for LDCs. These findings are robust to several model specifications, including one with spatially correlated error terms..

The (Non) Effect of Natural Resource Dependence on Capital Accumulation in Latin America

In a simultaneous model of human and physical capital accumulation for 18 Latin American countries from 1975 to 2004, we show that overall resource dependence is not significantly related to physical and human capital. Disaggregating the natural resource variable into subcategories, we find that petroleum export dependence is associated with higher physical capital and lower human capital, while agricultural export dependence is associated with lower levels of physical capital. All of these effects are quantitatively small, however, casting doubt on the idea that the region suffers from a resource curse in terms of capital accumulation.

Retirement Planning Among Hispanics: In God’s Hands?

ABSTRACT We conducted a qualitative study on retirement preparedness among middle-aged and older low-income Hispanics in Los Angeles. Data were derived from four focus groups conducted in the greater Los Angeles area. Findings demonstrate how behavioral and cultural factors—family experiences, religiosity, and denial of retirement—explain the lack of savings and preparedness for retirement. Findings also indicate that the majority of participants want to be economically independent and to keep working until they are unable to do so. Participants helped their parents financially but did not feel comfortable asking their own children for help. Instead, participants placed their survival in retirement “in God’s hands.”