Research
Working papers and publications on development economics, public policy, big data, and machine learning.
2024
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Firm Regulatory Compliance and Board Oversight: Does Sending Reports to Colombian Non-Profit Institutions Work?Eduard F. Martínez-González and Cesar Mantilla2024Working PaperAround 500 million people worldwide access financial services through non-profit financial institutions. In Colombia, the number of such institutions grew by 20% between 2017 and 2023; however, compliance with mandatory reporting to the national regulatory authority declined by up to 17 percentage points. We conducted an email-based randomized intervention involving over 4,600 institutions, in which we varied its personalized content between informative and deterrent (i.e., an infographic summary or a checklist of financial risk warnings) and the message recipient (i.e., the manager alone, or the manager and the board of directors). Using administrative panel data from 2019 to 2024 and a Difference-in-Differences identification strategy, we estimate the causal effects of the intervention on reporting behavior. We find that emails addressed to the board of directors significantly increase compliance. Among institutions lacking contact information for the board, we randomized only the content and find that informative messages improve compliance, while deterrent messages do not. These findings highlight the importance of enhancing the visibility and role of board directors in contexts where regulatory enforcement is weak.
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Coca-Based Local Growth and its Socio Environmental Impacts in ColombiaEduard F. Martínez-González, Lucas Marín Llanes, Manuel Fernández, and 2 more authors2024Working PaperIllegal economies are commonly viewed as barriers to development and sources of violence. This study challenges that view by showing that illegal markets can generate broader economic and social benefits without necessarily increasing violence. We examine the economic and socio-environmental impacts of the 2010s coca cultivation surge in Colombia using a difference-in-differences strategy that leverages a policy announcement that created incentives to expand coca cultivation in some municipalities, combined with nighttime lights as a proxy for economic activity. We find that the coca boom increased annual municipal GDP by 2.8% to 10.5%, with an estimated GDP multiplier of 1.45. Despite a 250% rise in coca cultivation, we find no evidence of increased violence. Suggestive evidence indicates improvements in youth educational outcomes. However, the income shock did not lead to higher tax revenues. Moreover, the economic expansion raised deforestation rates by 77.5%, underscoring the long-term environmental costs of the coca boom.
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Land Rights and Roads: Understanding the Long Impact of Property Rights and Rural Infrastructure on Illicit CropsEduard F. Martínez-González, María del Pilar López-Uribe, and Juan Carlos Muñoz-Mora2024Working PaperThis paper examines the long-term impact of property rights on illicit economies, particularly in contexts characterized by limited institutional capacity. We focus on a property rights formalization program implemented in regions with high exposure to illicit crops in Colombia. We use administrative records of land titled by the program and high-resolution satellite imagery to identify changes in the area under coca cultivation at the level of one-square-kilometer grids in areas exposed to the program. Using an event study model, we found that in grids with at least one titled land, the reduction in the planted area with illicit crops is immediate but does not last over time. Although survey data show increased request and approval credits, we did not find a consistent effect on long-term investment and economic activity in areas exposed to the program. In this sense, we test the effect of the interaction of tenure land and market access on illicit crop reduction. Results show that grids with land tenure and road infrastructure provision reduce illicit crops between 16.2% and 22.6%.
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Losing the Lottery: Household Financial Shocks and CrimeEduard F. Martínez-González2024Working Paper (Job Market Paper)This study delves into the ramifications of negative economic shocks on criminal activities. I collected criminal records and administrative records of more than 160,000 investors affected by the closure of a Colombian informal financial institution in 2008. I employed a regression discontinuity design, exploiting the serendipitous timing of deposit expiration dates relative to the institution’s shutdown to dissect the shock’s effects at an individual level. The results reveal an increase of 0.5% in the number of total criminal records, 0.26% in property crimes, and 0.17% in violent crimes. This could be attributed to the loss of well-being due to the depletion of savings or a significant portion of their capital, thereby reducing the opportunity cost of engaging in crime. However, individuals with pre-existing deposits experienced a diminished effect, with a decrease of 0.2%, resulting in a net increase of 0.3% in crime. This suggests that access to savings and the ability to withdraw funds can mitigate the financial repercussions of an economic shock.
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Operational Capacity and Prudential Regulation: A Segmentation Study in Credit UnionsEduard F. Martínez-González2024Working PaperSegmentation is a fundamental concept in economics, defined as the grouping or classification of agents with homogeneous characteristics and/or capabilities. This document develops a segmentation exercise in Credit Unions (CUs) based on their operational capacity and presents a socioeconomic and financial characterization of each cluster. To identify the segments of the cooperatives, the k-means clustering algorithm was applied. The characterization of each segment was conducted using administrative records with the individual deposit and credit accounts of 3.8 million people associated with the CUs supervised by the Superintendency of the Solidarity Economy. The results suggest the need for a differentiated regulatory approach due to significant variations in operational capacity, technology adoption, risk management, and credit policies.
2022
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Restrictions on Urban Mobility and Crime: Evidence from Motorcycle Bans in ColombiaEduard F. Martínez-González, Michael Weintraub, and Leonardo Bonilla2022Working PaperIn many low- and middle-income countries, motorcycles are the most commonly used means of transportation. Beyond their many legal uses, motorcycles are also widely used to commit crimes. While motorcycle restrictions to reduce crime have been adopted in at least 16 countries, we do not know if they are effective. We evaluate the impact of three motorcycle bans in Colombia: ban male passengers, ban any passengers (regardless of sex), and ban motorcycles outright. To identify causal effects on crime, we estimate difference-in-differences models that exploit spatial and temporal variation in the implementation of these measures using georeferenced crime data. In four cases we find no crime reduction effects of these policies. Even when we do identify such effects, they tend to be associated with spatial displacement of crime of equal magnitude, or the results are not robust to different model specifications. Given the high costs of ensuring compliance with these measures, and the costs they impose on ordinary citizens, local authorities should seek out other alternatives to improve citizen security.
2021
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Payroll Taxes, Wage Rigidities and Youth Unemployment: Evidence from Colombian Labor MarketEduard F. Martínez-González and Danilo Aristizabal2021Working PaperThis paper studies the effect on youth employment of a payroll tax cut for new hires young workers under the age of 28 in Colombia. We exploit differential degrees of exposure to wage rigidities to identify the effect. We measure an individual’s exposure to wage rigidities as the distance, in the city in which the individual lives, from the median salary by educational level with respect to the minimum wage. We have two different treatment groups and use a difference-in-difference model. The effect of reduced payroll taxes is asymmetric for youth who earn below and above the minimum wage. Reducing payroll taxes increased youth labor participation, rather than reducing informality.
2020
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School Education for Inclusion and Social Transformation in the Colombian CaribbeanEduard F. Martínez-González and Leonardo Bonilla2020DTSER-BANREP Working Paper 263The Caribbean Region of Colombia is particularly behind in terms of school coverage and quality. This paper proposes a set of policies that provide a big push to the public education system and allow closing the gap by 2030. Policies are organized into four categories: Preschool education, full-day schooling, teacher training and institutional capacity. The total cost of the intervention is estimated at 6,274 million dollars over 12 years, of which 2,114 correspond to investments and 4,160 to the additional recurrent expenditures of the education system.