SEMINARIOS Y WORKSHOPS

Abstract:

We study the life cycle pattern of job displacement, including wage losses and displacement risk, in an Overlapping Generations economy with a frictionless labor market. In our model, finitely lived worker-firm pairs accumulate both firm specific and general human capital. Competition for zero tenure workers and the non contractible nature of specific capital implies that wages are higher than productivity for newly tenured workers, and lower for those with longer tenure. In the life cycle, the expected value of the firm is then hump shaped, so displacement risk is naturally u-shaped, as in the data. Our model provides novel insights regarding the empirical relationships between tenure, age, and both displacement risk and post displacement wage loss. While most of the literature uses a framework based on search frictions to study job displacement, our results suggest that the non contractible nature of specific human capital can, by itself, explain most of the empirical regularities under study

Irregular migrants from Africa and the Middle East flow into Europe along land and sea routes under the control of human smugglers. The demise of the Gaddafi regime in 2011 marked the opening of the Central Mediterranean Route for irregular border - crossing between Libya and Italy. This resulted in the immediate expansion of the global smuggling network, which produced an asymmetric reduction in bilateral distance between country pairs across the Mediterranean sea. We exploit this source of spatial and time variation in irregular migration routes to estimate the elasticity of migration intentions to illegal moving costs proxied by distance. We build a novel dataset of geolocalized time-varying migration routes, combined with cross-country survey data on individual intentions to move from Africa (and the Middle East) into Europe. Netting out any country-by-time and pair-level confounders we find a large negative effect of distance along smuggling routes on individual migration intentions. Shorter distances increase the willingness to migrate especially for youth, (medium) skilled individuals and those with a network abroad. The effect is stronger in countries closer to Libya and with weak rule of law.

What are the labor market consequences of changing the legal status of the largest immigrant group in a country? We exploit the enlargement of the European Union in 2007 to study the consequences on the Italian labor market of the permanent legalization of immigrants from Romania and Bulgaria. We use unique administrative employer-employee data covering the universe of private sector workers in Italy to study firms' responses in terms of personnel choices. We find significant effects on firm-level employment: an increase for EU07 migrants at the expense of natives, accompanied by a rise in hirings and separations for the former. The effects appear right away and persist in the following two years. We provide evidence that the findings are mainly driven by the migrants’ legal status change, rather than by the arrival of new workers in the country. We also observe a reduction in per-capita revenues and operative added value, confirming that the effects are likely to be driven by the legalization of previously undocumented workers.

We examine whether judicial review can affect political attitudes by studying how the ruling of the Spanish Constitutional Court on the Catalan Constitution affected Catalan support for secession, which doubled in the 2010-2012 period. Our identification strategy relies on the fact that the ruling occurred amid a public opinion survey. We find that the ruling led to a 20% increase in support for Catalan independence from Spain in 2010. The ruling exacerbated the preferences for decentralization (up to secession) and ignited a backlash against institutions (courts, democracy, etc). Additionally, the polarization of political attitudes depended on (endogenous) identification: the ruling strengthened Catalan identity and increased political polarization in that dimension between people with and without Catalan heritage. Polarization around this issue came at the expense of depolarization in the economic dimension. All of these results are consistent with the predictions of identity politics theories.

Does increasing the traders’ understanding of the functioning of financial markets lead to rational expectations equilibrium? We provide an answer by studying a simple exchange economy with complete markets and asymmetric information. Each trader is either a fundamentalist, who knows the probability distributions of random shocks, or a speculator trying to infer those probability distributions from asset prices. Starting with the naïve beliefs that asset prices transmit no information, the speculators learn the mapping from asset prices to probabilities through adaptive observation. Our results are that: (1) convergence to rational expectations requires that speculators have less market impact than fundamentalists; (2) convergence, when it takes place, occurs in an oscillating manner; and (3) asset prices can be more volatile than at rational expectations equilibrium when speculators display low sophistication. We characterize the necessary conditions on convergence to rational expectations equilibrium for some specific utility functions (CRRA and CARA) and discuss the evolution of wealth, through simulations.

Ineffective fundraising lowers the resources charities can use to provide goods. We combine a field experiment and a causal machine-learning approach to increase a charity's fundraising effectiveness. The approach optimally targets a fundraising instrument to individuals whose expected donations exceed solicitation costs. Our results demonstrate that machine-learning-based optimal targeting allows the charity to substantially increase donations net of fundraising costs relative to uniform benchmarks in which either everybody or no one receives the gift. To that end, it (a) should direct its fundraising efforts to a subset of past donors and (b) never address individuals who were previously asked but never donated. Further, we show that the benefits of machine-learning-based optimal targeting even materialize when the charity only exploits publicly available geospatial information or applies the estimated optimal targeting rule to later fundraising campaigns conducted in similar samples. We conclude that charities not engaging in optimal targeting waste significant resources.

This paper studies the effects of the minimum wage on the life cycle of firms. Using matched employer-employee and census data, I analyze the large increase in the federal minimum wage in Brazil between 1999 and 2010. Based on a difference-in-differences approach exploiting exposure of both firms and local labor markets to the minimum wage policy, I find that an increase in the minimum wage: (i) decreases the growth rates of small and young establishments, and (ii) increases the growth rates of old and large establishments. Moreover, establishment exit in affected regions increased following the increase of the minimum wage, although I found no effect on the entry of new firms. While traditional monopsony models cannot account for this result, a neoclassical monopsonistic model where firms face financial frictions can rationalize this finding.

Fiscal rules are a promising tool to address waste in public administration, but their effectiveness and political feasibility remain unclear, particularly in weakly institutionalized settings. We leverage exogenous variation across Colombian municipalities in exposure to a fiscal rule that limits the operating expenditures of local governments. Our difference-in-differences analysis yields three main findings. First, the fiscal rule is highly effective at reducing operating expenditures and the probability of a current deficit. Second, there is no meaningful impact on local public goods, which suggests wasteful administrative spending before the reform. Third, the fiscal consolidation does not cause a political backlash. Electoral support for the party of the incumbent mayor increases and the incidence of protests weakly decreases. These findings suggest that fiscal rules can align fiscal policy with the preferences of voters in settings, like Colombia, with weak political parties and limited career concerns for local politicians.