Dollarization brought price stability and higher economic growth to Ecuador. Nevertheless, unemployment remained stubbornly high. Two opposing forces explain this result: sustained growth led to higher labor demand but price stabilization triggered substitution effects by cheaper intermediate...

Dollarization brought price stability and higher economic growth to Ecuador. Nevertheless, unemployment remained stubbornly high. Two opposing forces explain this result: Sustained growth led to higher labor demand but price stabilization triggered substitution effects by cheaper intermediate...

This paper studies how initial conditions affect the outcome of reform using the case of trade liberalization as an example. The paper illustrates empirically and theoretically the seemingly paradoxical case of larger impact of reform when initial conditions are poorer.

We reexamine the association between poverty, the middle class, and institutional outcomes using a newly developed cross-country panel dataset containing detailed information on the distribution of income and expenditure. When the size of the middle class increases (measured as the proportion of...