Estimados Académicos y Académicas FEN,

Les extendemos la invitación al seminario que organiza el Departamento de Economía, titulado "The economic impact of new regions: Evidence from Chile".

Expone: Dany Jaimovich , Profesor asociado, Faculta de Economía y Negocios, Universidad de Talca

Co-autor: Roberto Herrera.

Abstract: A usual strategy to increase decentralization is to create new administrative units that can deliver public services to a smaller and more homogeneous population. Nevertheless, fragmented territories do not take advantage of economies of scale in the administration of resources and the provision of large-scale public goods, and may create local elite capture of resources. Accordingly, previous studies have found mixed results in the analysis of the split of municipalities, regions, states, and districts worldwide. In this study, we analyze the creation of two new regions in Chile, a very centralized non-federal country. We use the synthetic control method to analyze the economic impact of the split of two large regions in 2008. Our results indicate that the two treated regions have different effects. In one region, Los Lagos, the regional GDP per capita grew an additional 12\% due to the split, while in the other region, Tarapacá, there was a, not significant, decrease.  Desegregated data by economic sectors suggests that the effects are mainly driven by services and manufacturing. We explore potential channels for these opposite effects. Our results indicate an increase in investments by the regional government of Los Lagos, while in Tarapacá the increase is only by investments of the central government in the region. These results support the idea that investments by local authorities may be more closely aligned with the demands of the local population.  The result is confirmed using municipal data, finding that only municipalities in Los Lagos had a large increase in investments in health and education from regional funding. Our results at municipal-level also show that a pork-barrel effect partially explains why the region splinted from Tarapacá does not take advantage of the new resources for the regional administration. Elected majors in that region were rarely aligned with the central government after the treatment, receiving fewer transfers from the central and regional governments. Household-level data reveals important differences between the splinted and the remaining regions, with income growing more in the new regions, but without effects on poverty and unemployment.

El formato será presencial y el seminario se desarrollará en la Sala P-303.

Saludos cordiales,

Dirección de Investigación