Martin Gonzalez-Eiras

The Impact of Electricity Sector Privatization on Public Health

This paper uses provincial-level data for Argentina to test for the causal relationship between electricity distribution and health. It examines the impact of privatization on two output measures: incidence of low birth weight and child mortality rates caused by food poisoning. Privatization improves service coverage which, through the use of refrigerators, may improve nutritional intake. Privatization also results in a reduction in the frequency of interruptions, and thus may reduce the likelihood of food poisoning. Though the evidence indicates that privatization reduced the frequency of low birth weight and child mortality rates caused by food poisoning, the results are not strong enough to inform the policy debate with respect to the benefits of privatization for the welfare of the poor.

The Effect of Contingent Credit Lines on Banks' Liquidity Demand

I analyze the effect of contingent credit lines on banks liquidity demand in Argentina. These lines provide insurance to systemic risk by enhancing the Central Banks ability to act as a lender of last resort in the event of a crisis. Theory predicts that commercial banks with limited access to international capital markets should reduce their holdings of liquid assets after the announcement of the contingent credit lines. This prediction is tested by means of a difference-in-differences regression, with domestic banks as the treatment group and foreign-owned banks as the control group. The results show that domestic banks significantly reduced their liquidity holdings, the adjustment taking place in two quarters.

Fiscal Federalism, Grants, and the U.S. Fiscal Transformation in the 1930s

We propose a theory of tax centralization and intergovernmental grants in politico-economic equilibrium. The cost of taxation differs across levels of government because voters internalize general equilibrium effects at the central but not at the local level. The equilibrium degree of tax centralization is determinate even if expenditure-related motives for centralization considered in the fiscal federalism literature are absent. If central and local spending are complements, intergovernmental grants are determinate as well. Our theory helps to explain the centralization of revenue, introduction of grants, and expansion of federal income taxation in the U.S. around the time of the New Deal. Quantitatively, the model can account for the postwar trend in federal grants, and a third of the dramatic increase in the size of the federal government in the 1930s.