Leo Feler
Ph.D. Candidate in Economics
Research Interests
Urban Economics, Applied Microeconomics, and Economic Development
My current research focuses on how the restructuring of Brazil’s banking system affects the viability of its cities. This project seeks to assess the factors that determine whether a city is politically and financially favored, how favored treatment affects city development, whether certain cities remain viable after favoritism is withdrawn, and how the system of cities adjusts toward equilibrium once market forces are allowed to operate fully.
Research
“What Happens to Local Economies When State-Owned Banks are Privatized? Evidence from Brazil” (Job Market Paper) [Click to download]
State-owned banks are predominant across small cities in Brazil and lend disproportionately more than private-sector banks. This paper examines what happens to local economies when state-owned banks are privatized and the favored lending they provide is eliminated. Once state-owned banks are privatized, the results suggest they close branches and reallocate lending away from small cities in favor of large cities. With the decline in lending, small cities lose high-skilled workers, industrial workers, and population. They become relatively more intense in agriculture and low-skilled production. The decline in high-skilled employment and increase in low-skilled employment is consistent with a theory where low-skilled labor and capital are substitutes and high-skilled labor and capital are complements in production. In cities where state bank privatization does not occur, there is little change in economic trends, which provides a counterfactual for the effects experienced in small privatizing cities. The de-industrialization and reallocation of economic activity away from small privatizing cities is larger for cities that had state bank branches for longer periods of time.
“Exclusionary Policies in Urban Development: Under-Servicing Migrant Households in Brazilian Cities” (with Vernon Henderson) [Click to download]
Localities in developed countries often enact regulations to restrict supply and raise the price of housing, deterring low-income households from moving in. In developing countries, formal sector supply restrictions lead to informal housing sectors not governed by these restrictions. To deter low-income migrants, localities in developing countries withhold public services to the informal sector, where low-income migrants live, creating a disincentive for them to enter. Using a large sample of Brazilian localities, we examine migration and exclusion, focusing on the public provision of water to small houses in which migrants are likely to live. Withholding water connections reduces the growth rate of low-education households; but, perhaps because of negative externalities, it also reduces the growth rate of high-education households. In terms of service provision, in the pre-democracy era in Brazil, while richer localities provided more servicing to migrant housing (a wealth effect) and larger localities provided more servicing (a scale effect), being both rich and large was associated with reduced servicing, which we interpret as an intention to deter in-migration. Such effects are not found for non-migrant housing or during the democratic era.
“Political Determinants of State Bank Branching and Lending in Brazilian Cities” (In Progress)
This paper studies how locations of state bank branches and how state bank lending are determined across cities in Brazil. Prior to 1964, state bank branches are predominantly in the largest cities and in cities with the highest agricultural production. During dictatorship, from 1964 until 1985, state bank branches expand into “strategic” cities. Seeking to promote industrialization, dictatorship favored cities near the major urban centers that were thought to have significant industrial potential. Predictors of favored cities are proximity to highways, railways, and ports in Brazil’s Southeast region and working-age population in the cities’ surrounding areas. After 1985, with democratization, predictors of favored cities are whether the cities’ mayors and the state governor are of allied political parties, whether cities experienced an adverse shock (e.g., drought or other adverse weather conditions), and whether cities have any other type of banking presence. Even if a city has a state bank branch, it may not always receive favored lending. From data on lending between 1989 and 1997, it appears that if state governors are industrialists (as measured by their home cities’ employment share in industry versus agriculture), then the more industrialized cities with state bank branches receive disproportionate lending, whereas if state governors are agriculturalists, then the agricultural cities with state bank branches receive disproportionate lending.