Diogo Baerlocher

Diogo Baerlocher

Assistant Professor of Economics at the University of South Florida |

  • PhD Economics - University of Illinois
  • Macroeconomic Development & Public Economics

    • Publications



    Working Paper


    Abstract: This paper constructs two models of financial exclusion to assess the welfare costs of inflation. In the first, inflation costs are measured within a classical endowment economy. The second includes a production sector and costly credit. Both models are calibrated to account for inflation costs in a high-inflation economy (developing country) and in a low-inflation economy (developed economy). In an endowment economy, when inflation is reduced from 1.5% to zero in a developed economy, the welfare costs for agents with (without) financial access are 0.38% (0.43%) consumption equivalent variation (CEV). In a model with costly credit, the welfare costs for agents with (without) financial access are 0.87% (1.3%) CEV. For developing countries, when inflation is reduced from 3.2% to zero, the welfare costs for agents with (without) financial access are 0.72% (2.56%) in an endowment economy. In the costly-credit model, the welfare costs for agents with (without) financial access are 0.3% (3.1%) CEV. The main finding is that there is a substantial asymmetry in welfare costs between individuals with and without access to financial services, especially in developing countries.



    Working Paper BibTeX


    Abstract: This paper shows that there is an inverted U-shaped relationship between public employment and economic growth. The government allocates workers to the production of public goods, which reduces operational costs, increasing the number of firms in the market, and creating incentives to innovate. Conversely, large public sectors crowd out the labor market, reducing the number of firms and the incentives to innovate. An extension of the model shows that the average human capital of public workers has the same relationship with economic growth. Therefore, even countries with small public sectors can hinder economic growth by hiring many high-productivity workers. The paper also provides empirical evidence of an inverted U-shaped correlation between the share of public workers and economic growth using data from the Worldwide Bureaucracy Indicator and the Penn World Tables. Numerical exercises show that the model replicates the inverted U-shaped relationship between public employment and economic growth found in the data.


    Presentations: Southern Economic Association Annual Meeting (2020) | BCAM VI: Online Workshop on Public Employment (2020) | University of South Florida (2019) | University of Windsor (2019) | Kenyon College (2019) | University of Wisconsin Whitewater (2019)



    Working Paper BibTeX


    Abstract: Borrowing from the demographic dividend literature, this paper examines whether there is a gender bonus, namely an increase in the average living standard associated with increases in female labor force participation (FLFP) rates. Translating a per worker production function into a per capita one, it derives a linear dynamic model, the coefficient of which can be used to test for the existence of a gender bonus, and the reasons for this bonus. Using an international panel and applying a system GMM approach, it finds a positive and statistically significant effect of the growth of FLFP on economic growth and a positive but not statistically different from zero effect of the initial FLFP on economic growth. Importantly, we cannot reject the hypothesis that either of these effects is merely an accounting effect, namely a consequence of having more workers in the economy and more aggregate output. It finds no support for a secondary bonus through education or population growth.



    Working Paper BibTeX


    Abstract: This paper provides evidence of alignment effects between the executive and the legislative branches of the central government. We rely on detailed data on Brazilian intergovernmental grants whose allocations are determined by legislators. The executive branch cannot interfere with the destinies or volumes of grants, but it can control the transfer pace. We group the data into municipalities and estimate the effects of the share of aligned legislators associated with a municipality on the average time to receive grants. We show that legislators politically aligned to the executive branch transfer resources to their constituencies nine months faster than unaligned legislators. To achieve a causal interpretation of these results, we rely on exogenous variations in the shares of elected aligned legislators caused by the phased-in introduction of electronic voting. Our findings regarding how political alignment affects the speed of transfer are consistent across different periods and alternative definitions of the dependent variable.


    Presentations: Southern Economic Association Annual Meeting (2020)



    Working Paper BibTeX


    Abstract: In this paper we seek to understand the recent dynamics of the Brazilian housing market, which experienced a significant growth in recent years. In particular, we assess the effects of aggregate productivity and monetary policy shocks on housing market variables. Moreover, we also investigate the effects of shocks to housing prices that are orthogonal to business cycle movements. We use a SVAR approach with sign restriction backed by a Dynamic Stochastic General Equilibrium (DSGE) model estimated for Brazil. The empirical results show that the housing market responds positively to aggregate productivity shocks, while a contractionary monetary policy shock depress housing output, demand and prices. Additionally, we find monetary policy as an important source of variation in housing prices and financing, while productivity shocks explain a substantial share of housing production movements. We also show that the behavior of housing prices is mostly driven by shocks to housing prices that are orthogonal to business cycles movements.



    Working Paper Replication Files BibTeX


    Abstract: Exploiting heterogeneity across Brazilian micro-regions over the 1970–2000 period, this paper examines whether the demographic dividend extends beyond a pure accounting effect. Using a Sys-GMM approach, it finds evidence that changes in age structure have only pure accounting effects after controlling for human capital. Therefore, in the case of Brazilian micro-regions, there is a second demographic dividend, which is associated with education. This second dividend is the far more important of the two dividends in terms of economic growth. In a counterfactual exercise, we show that the accounting effect is responsible for less that 10% of the income gap between the poorest and richest regions in Brazil.