Editor's Summary

This volume of Economía consists of four papers. One paper studies a quasi-natural experiment of lengthening the school days in Argentina. The other three papers examine sovereign debt crises, currency crises, and pricing issues in subnational debts.

The first paper is titled "Do Longer School Days Have Enduring Educational, Occupational or Income Effects?" by Juan J. Llach, Cecilia Adrogué, and María Elina Gigaglia. They study a very interesting event in which school days were increased for about a half of the students in the city of Buenos Aires. The paper starts by describing the context in which the policy reform takes place. For most of the twentieth century, Argentina had a public system of education in which primary school was compulsory and access was universal. To improve the quality of the education system during the 1960s, about 50 percent of the students participated in schools that increased their school day to a double shift. This paper studies the consequences for educational quality and subsequent occupation and income among participants in this program.

The paper interviews 380 individuals forty years after their graduation (1977). A key aspect of the paper—indeed the identifying assumption—is that individuals were selected into the different school systems mostly by their location, and only after that criteria had been fulfilled did the schools choose students by their socioeconomic status. This is important because they compare the outcomes of interest between those that were in the different systems; hence if selection occurred on the basis of ability, their results might be biased. The other weakness of the paper is that the data comes from a survey, a methodology that is always subject to collection problems.

In the end, the policy experiment is very interesting, the question of extending the school days is of crucial relevance to the region, and the results are quite surprising. They show that graduation rates of the double-shift schools increase. However, their data for the effects of double shifts on tertiary education are inconclusive, and they find almost no impact on income, employment, and other longer-term outcomes. In the words of the authors, their results "suggest that the content and learning quality in DS [double shift] schools was not too good." In the end, as with most policies related to educational attainment, the double shift was very effective in with regard to participation but less so with regard to quality.

Our second paper, "Credit Ratings in the Presence of Bailout: The Case of Mexican Subnational Government Debt" by Fausto Hernández-Trillo and Ricardo Smith-Ramírez, studies the puzzling behavior of credit rating agencies in rating subnational debts in Mexico. In Mexico some of the subnational governments are in a permanent state of default, and some have been continuously bailed out. Surprisingly, this debt is usually rated investment grade. In this context, it is fair to ask, what are the credit rating agencies really rating? Are they truly assessing the financial soundness of the subnational government, or rather are they just computing the probability of repayment—which includes the bailout. This is the question addressed by the paper.

The authors study how political and economic factors affect the rating. The motivation for studying financial and economic factors determining the rating is obvious. The reason why political factors were included as well is because bailouts are the outcome of a political negotiation. Therefore, they study whether the rating is affected by political factors that are likely to influence the likelihood of a bailout, such as the political party in power and the size of the subnational government.

The paper not only presents an interesting question but also makes a methodological contribution. Estimating these regressions for several rating agencies at the same time is not a trivial problem. Interested readers will find the details clearly explained in this paper. Let me concentrate on the results here.

The paper shows that the larger the size of the subnational government, as measured by population, the more likely it is to receive a positive rating. This can be interpreted as the "too-big-to-fail" syndrome. Second, political affinity also improves the rating...