Center for Global Management

EVALUATING THE BENEFITS IN THE MEDIUM- AND LONG-RUN OF A CONDITIONAL CASH TRANSFER PROGRAM IN URUGUAY
(2021-22)

Matias Giaccobasso

Ph.D. student in global economics and management (entered 2017) (continuation of 2019-20 award)

Governments spend billions of dollars on policies aimed to reduce poverty and inequality. Since the late 1990s, low- and middle-income countries have made extended use of conditional cash transfer (CCT) programs as anti-poverty policy tools. Because they consist of relatively large amounts of cash transferred to poor households and target a large fraction of the population, CCTs are usually expensive investments for governments that typically have tight budget constraints. High-quality empirical evidence about the costs and benefits of public policies should be a key input for decision makers when deciding to implement, continue or eliminate a policy. Unfortunately, this type of evidence is usually unavailable for developing countries, and it is even scarcer if the medium- and long-run consequences want to be assessed. This impairs the quality of the management of public funds, which is particularly critical in contexts where budget constraints are tight and public sector deficits are common. The effectiveness of CCTs has been a controversial topic both within scholars and policy circles.

Giaccobasso’s research seeks to contribute to fill this gap by providing high-quality evidence about the medium- and long-run effects of a particular CCT program in Uruguay and addresses the question, “Do CCTs improve the welfare of the next generation?” The CCT program that is the focus of this research is PANES/AFAM-PE, a large-scale, nationwide CCT program that has been implemented by the Uruguayan government since 2005. The time period under review is 2005-2017, during which time the program reached more than 350,000 households. The program consists of a cash transfer that represents on average one-third of the household income. Participant households must satisfy school attendance, regular health checks and per-capita income requirements. Giaccobasso’s research examines the medium- and long-run effects of this CCT program on several outcomes during the early adulthood of individuals who benefited from the program during their childhood. The outcomes include teenage fertility, enrollment in the education system (secondary and tertiary), labor market insertion and welfare participation, measured up to 15 years after the program was implemented. These outcomes are strongly correlated with poverty and opportunities for mobility, and therefore speak directly to the long-run goal of CCTs. Understanding the effects of these outcomes is key to assessing whether this type of policy is effective and one that governments should continue implementing.

The CGM’s support, a continuation of the 2019-20 award, has provided a significant contribution to the progress of Giaccobasso’s research. Since that time, he has analyzed a combination of administrative records from different government agencies. More recently, Giaccobasso gained access to new data sets. Funding was assigned to research assistance services provided by the NGO Fundacion para el Apoyo a la Facultad de Ciencias Económicas y de Administracion (FAFCEA) to clean, enter and prepare this new data for analysis. These services were key to making progress on this research.

Findings from this project will be of great business and management relevance. Giaccobasso’s research addresses real-world management practices. In particular, new evidence could improve the quality of information and decision-making process in the public sector and contribute to the goal of advancing global management thinking from a public policy perspective. This research is part of Giaccobasso’s doctoral dissertation and will form the basis of his job market paper at the end of the year. He will also be submitting a final paper to various top economics journals and publications.
 

YOU ARE NOT WELCOME: CAUSES AND EFFECTS OF NATIONALISTIC SENTIMENT TOWARDS FOREIGN FIRMS (2020-21)

Pedro Makhoul

Ph.D. student in strategy (entered 2017) (continuation of 2019-20 award)

Over the past few years, there has been a significant rise in populism and nationalistic narratives around the globe. For companies looking to expand or increase operations overseas, this is one more obstacle to overcome. Nationalistic rhetoric fosters the idea of “us versus them” and thus makes it harder for both trade relationships (imports and exports) and foreign firms operating overseas (multinationals) to function properly. Management scholars have long discussed the idea that foreign firms trying to do business abroad experience some disadvantages vis-à-vis domestic firms. This concept is known as “liability of foreignness” (LOF), and its sources can be broadly categorized into two types; namely, the costs associated with an unfamiliar environment hazard and the costs related to a discrimination hazard.

Pedro Makhoul’s research seeks to contribute to the discrimination hazard and mergers and acquisitions (M&A) literature in three main ways: first, by directly measuring the nationalistic sentiment across four U.S. states using experimental methodology to quantify the anti-foreign sentiment in each of these locations; second, by understanding how public opinion influences real business outcomes when it comes to the context of foreign acquisitions; and third, through an enhanced understanding of the origins of nationalistic sentiments and where anti-foreign sentiment stems from.

The CGM’s support, a continuation of the 2019-20 award, has provided a significant contribution to the progress of Makhoul’s research. Last year, the experimental component was approved by UCLA’s Institutional Review Board (which reviews the conduct of research using human subjects), and much of the data collection on the four states (California, Massachusetts, Minnesota and New York) as well as immigration and M&A data gathering was completed. Funding over the two years has been paramount in kick-starting the experimental part of the research. Funding has been used to distribute surveys and collect large sample data through online survey platforms, such as Amazon’s Mechanical Turk and Lucid, and enabled Makhoul to explore regional variation within the U.S. and draw inferences.

Preliminary regressions show a statistically significant difference between the implicit valuation of acquisitions made by foreign versus domestic firms (foreign firms appear to pay a larger premium to acquire U.S. firms). Preliminary findings from online experiments also suggest there is heterogeneity both within and across states on the likelihood of an individual choosing to veto a foreign acquisition of a U.S. firm. Furthermore, the data suggests that immigration patterns from the mid-19th century play a role in shaping people’s perceptions to this day.

Findings from this project are of great business and management relevance. Makhoul’s research addresses fundamental questions for companies seeking to expand operations abroad; namely, what are the costs and disadvantages of doing business abroad and entering foreign markets, and how will these barriers affect operations and profits? This research is part of Makhoul’s doctoral dissertation and will form the basis of his job market paper at the end of the year. He will also be submitting the paper to various top economic and strategy journals and publications.

A SIMPLE, CONSISTENT AND ACCURATE MEASUREMENT AND MODEL OF CHINA’S G.D.P.
(2020-21)

William Yu

lecturer of global economics and management and economist, UCLA Anderson Forecast

While William Yu has an extensive understanding of the world’s second largest economy, he also recognizes the need for a more accurate measurement of China’s gross domestic product (GDP). Currently, estimates rely only on data from the Chinese government. While the World Bank, International Monetary Fund and United Nations need to rely on China’s official statistics, some organizations have switched to looking at alternative indicators, such as China’s purchasing managers indices (PMIs). The goal of Yu’s research is to develop a simple, consistent and more accurate measurement of the aggregate economic activities of China, on a quarterly basis, that incorporates additional variables and datasets and provides a supporting theoretic framework to more accurately forecast China’s GDP in the future.

Yu’s research includes an examination of data from the National Bureau of Statistics of China and a study of China’s international trade data to enable an analysis of imports and exports over time and a comparison of the correlation between international trade and GDP growth. His model will incorporate data from various PMIs, including the Caixin China General Services PMI. Financial statements of public Chinese companies will be reviewed to shed light on production and consumption. Pollution and satellite image data will also be considered. Yu’s model will also factor in the importance of these variables and place a weight on them to calculate the coefficient of their contributions to China’s GDP growth.

Funding from the CGM was used to hire Cara Rose Keogh, a rising senior and double major in business economics and Chinese, who is providing research assistance and support. Keogh is conducting a literature review of the Chinese economy and its measurement of GDP; searching relevant reports and datasets; and collecting, organizing and managing the data. Yu also plans to use funding to purchase proprietary datasets that will further assist with measuring and assessing China's economic activities.

Findings from this research will be of great interest to global leaders and businesses around the world. The estimated GDP growth generated by this model will be published by the Anderson Forecast and used by its economists. Yu is also preparing a working paper that will form the basis of submissions to top economic journals and publications.