WORKING PAPERS:

The labor share and workers' share

Submitted

Abstract. When workers derive income from owning multiple productive factors, the labor share statistic is misleading in discussions of income distribution. Using data from the Current Population Survey (CPS) and the Survey of Consumer Finances (SCF), this paper presents new facts that have implications for how we think about the evolution of inequality in the US since the 1970s. During 1975-2019, the labor share declined by 4.1 to 6.2 points but workers' share increased by 1.5 to 4.6 points. These diverging dynamics reflect rising workers' capital income, more than compensating for labor income decline. The mechanism is increasing workers' participation in financial markets, leading to rising interest- and dividend-bearing assets held by workers. However, workers' share increased among top and bottom earners but decreased among middle-wage workers despite their rising capital income. Thus, while American workers are compensating for diminishing labor income with rising capital income, they are polarized in their ability to do so, an overlooked reflection of labor market polarization.

Science under Inquisition: the allocation of talent in early modern Europe (with E. Dewitte, F. Drago, and R. Galbiati) -- Online Appendix

Submitted

Abstract. We study the Roman Inquisition’s (1542) impact on science during the Scientific Revolution (1500s-1600s). Biographical data show a declining incidence of scientists in Inquisition-mandated states from the 1540s onward. A structural dynamic model of career and migration decisions reveals that the Roman Inquisition discouraged scientific pursuits in Italy, prompting scientists' out-migration, inhibiting their in-migration, and reducing scientific training. This led to a 23\% decline in Italian scientific scholarship during the run-up to the Industrial Revolution. Although some scientists relocated to other European states, the net impact on Europe is also negative due to the reduced number of Italian scientists overall.

Searching for the best location: neighborhood effects and neighborhood choice (with Y. Ioannides)

Submitted

Abstract. Self-selection into residential locations hampers identification of neighborhood effects. It is also an opportunity because neighborhood choices reveal preferences for the behavior and characteristics of neighbors and neighborhoods. We explore these features by means of a model in which households search, subject to search frictions, for the best location in the presence of neighborhood effects in children's education and transmission of parents' cultural identity. The ensuing relation between mobility rates and contextual characteristics is tested using geocoded micro data from the PSID, merged with contextual information from the US Census. We find, consistently with neighborhood effects theories, that households with children, but not those without, tend to leave neighborhoods whose social attributes do not favor offspring's human capital and to move into neighborhoods which instead exhibit desirable such attributes. This human capital motive appears to dominate the cultural transmission one.

College, cognitive ability, and socioeconomic disadvantage: policy lessons from the UK in 1960-2004 (with A. Ichino and A. Rustichini) -- Online Appendix

Revise&Resubmit, resubmitted

Abstract. University access has significantly expanded in OECD countries over recent decades and further growth figures prominently in political agendas. This paper studies possible consequences of historical and future expansions in a stochastic, general equilibrium Roy model where tertiary educational attainment is determined by cognitive ability and socioeconomic disadvantage. In our analysis, individual productivity depends not only on education but also directly on cognitive ability. The expansion of university access in the UK, which started in the 1960s, provides an ideal case study to draw lessons for the future. We find that this expansion led to the selection into college of progressively less talented students from advantaged backgrounds and to a flat college wage premium over time, despite education-biased technological change. The implemented policy failed to reach existing high-ability, disadvantaged students, while counterfactual meritocratic policies would have achieved that goal.

Incentive-based active labor market programs: Insights from policy experimentation in Italy (with R. Salomone)

Revise&Resubmit, resubmitted

Abstract. Two programs providing financial incentives for reemployment of workers at risk of long-term unemployment are evaluated  vis-à-vis intensive job-search assistance through policy experimentation involving about 10,000 job seekers in Italy: (i) a reemployment voucher that incentivizes specialized providers; (ii) a reemployment bonus that incentivizes job seekers directly. Results indicate that: the voucher is effective for men while the bonus works for women; each policy is no less effective than job-search assistance, but only the voucher is clearly cost effective; there are no side effects on post-treatment earnings or job duration. A one-sided job search model with endogenous search effort rationalizes these empirical findings.

Historical anti-fascism and right-wing voting in Italy (with L. Panza, M. Lecci, and E. Swee) -- Online Appendix

Revise&Resubmit, resubmitted

Abstract. We study how anti-fascism during Mussolini's dictatorship affects post-war support for right-wing parties in Italy. An anti-fascism measure is derived from the universe of recorded opponents, and newly-digitized historical data is used to resolve simultaneity between the supply of opposition and demand for repression, leveraging the random assignment of regime's Special Tribunal judges. Stronger opposition in a location weakens support for right-wing parties decades later. Our model makes predictions about underlying mechanisms, which are tested using data on collective memorialization and parental voting behavior. The main driver is social transmission of political preferences.

Structural evaluation of Italy's prison work system -- Online Appendix -- Youtube paper video (in Italian)

Under revision, new version coming soon

Abstract. This paper evaluates the impact of scarce, unskilled prisoner's jobs on recidivism, their cost-effectiveness, and allocation system using a dynamic structural model of crime and convict work, and high-quality administrative micro-data from Italy. The model is validated against a set of quasi-experimental estimates in an econometric setup that leverages in a novel way the synergy between structural and reduced-form methods. Results indicate that one additional standard deviation of work time in these prison jobs reduces re-incarceration by 2.3 percentage points (7.5%) three years of release. The driving mechanism is a "training effect" that bolsters post-release earning ability. Lower prison wages and immediate allocation to work upon incarceration would improve the average treatment effect and would enable program cost-effectiveness.

Multi-cutoff RD designs with observations located at each cutoff: problems and solutions (with M. Fort, A. Ichino, and E. Rettore)  --  Online Appendix

Under revision

Abstract. In RD designs with multiple cutoffs, the identification of an average causal effect across cutoffs may be problematic if a marginally exposed subject is located exactly at each cutoff. This occurs whenever a fixed number of treatment slots is allocated starting from the subject with the highest (or lowest) value of the score, until exhaustion. Exploiting the "within" variability at each cutoff is the safest and  likely efficient option. Alternative strategies exist, but they do not always guarantee identification of a meaningful causal effect and are less precise. To illustrate our findings, we revisit the study of Popeleches and Urquiola (2013).

The Slave Trade and the Origins of Mistrust in Africa - A replication study of Nunn and Wantchekon (AER, 2011)

Conditionally accepted, Journal of Comments and Replications in Economics 

Abstract. Nunn and Wantchekon (2011) detect a long-lasting impact of the slave trade on current trust levels across ethnic groups in Africa. They use data from Afrobarometer's wave 3 to construct trust measures. While I can perfectly replicate the original OLS and 2SLS findings in this wave starting from the same raw data, using data from more recent waves which were collected after the paper was published, I fail to replicate some of the paper's central findings. Plausible explanations are discussed.

PUBLICATIONS:

The volatility of survey measures of culture and its consequences  (with M. Bellani)

Economic Inquiry, 2024.  Replication Package.

Abstract. Measures of cultural attitudes derived from the World Values Survey are often used in economics to investigate the relation between individual culture and aggregate output. We show (i) that these measures are constructed from underlying variables that exhibit within-country volatility and time trends; and (ii) that such lack of persistence implies fragile correlations between cultural measures and output. These points are illustrated by revisiting the analyses of Tabellini (2010) and Gorodnichenko and Roland (2011).

Providing government assistance online: a field experiment on employment assistance (with G. Briscese and V. Quinn)

Journal of Policy Analysis and Management, 41(2), 2022.   Online Appendix.

Abstract. Welfare programs often consist of mandated in-person assistance services. This feature can introduce an engagement barrier for some beneficiaries. Offering some of these services online can address this problem while also reducing administrative costs. In a field experiment with about 2,700 beneficiaries of unemployment benefits, we evaluate the effectiveness of a self-directed website that supplements assistance traditionally delivered by job center staff. Tracking employment outcomes for nearly two years, we find that the intervention significantly increased job-finding rates for some groups. Towards the end of the first year, the effect is still 7 percentage points (25% higher than in the control group) for prime-age job seekers (35-50 years old) and 9 percentage points (35% higher than the control group) for women, reversing the job-finding gender gap. We discuss opportunities for governments to scale up similar low-cost interventions to assist social insurance and welfare beneficiaries online.

Cognitive and non-cognitive costs of daycare 0-2 for children in advantaged families (with M. Fort and A. Ichino)

Journal of Political Economy, 128(1), 2020.   Online Appendix.   Press coverage: The Times; Corriere della Sera.

Abstract. Exploiting admission thresholds to the Bologna daycare system, we show using RD that one additional  daycare month at age 0-2 reduces IQ by 0.5%  (4.7% of a s.d.) at age 8-14 in a relatively affluent population. The magnitude of this negative effect increases with family income. Similar negative impacts are found for personality traits. These findings are consistent with the hypothesis from psychology that children in daycare experience fewer one-to-one interactions with adults, with negative effects in families where such interactions are of higher quality. We embed this hypothesis in a model which lends structure to our RDD.

Crime and the legalization of recreational marijuana (with D. Dragone, G. Prarolo, and P. Vanin),

Journal of Economic Behavior & Organization, 159, 2019.

Abstract. We provide first-pass evidence that the legalization of the cannabis market across US states may be inducing a crime drop. Exploiting the recent staggered legalization enacted by the adjacent states of Washington (end of 2012) and Oregon (end of 2014) we find, combining county-level difference-in-differences and spatial regression discontinuity designs, that the legalization of recreational marijuana caused a significant reduction of rapes and thefts on the Washington side of the border in 2013-2014 relative to the Oregon side and relative to the pre-legalization years 2010-2012. We also find evidence that the legalization increased consumption of marijuana and reduced consumption of other drugs and both ordinary and binge alcohol.

Grandchildren and their grandparents' labor supply (with P. Rupert)

Journal of Public Economics, 159, 2018.   Press coverage: Corriere della Sera.

Abstract. Working-age grandparents supply large amounts of child care, an observation that raises the question of how having grandchildren affects grandparents’ own labor supply. Exploiting the unique genealogical design of the PSID and the random variation in the timing when the parents of first-born boys and girls become grandparents, we estimate a structural labor supply model and find a negative effect on employed grandmother’s hours of work of about 30% that is concentrated near the bottom of the hours distribution, i.e., among women less attached to the labor market. Implications for the evaluation of child care and parental leave policies are discussed.

Time-consistent immigration policy under economic and cultural externalities (with A. Bisin)

Economic Policy, 91, 2017.

Abstract. Discussions of immigration policy are typically framed in the context of their economic effects in receiving countries, notably labor market and fiscal effects. In this paper we characterize immigration policy in a richer model where migrants are also a source of cultural externalities stemming from either preferences or the functioning of formal and informal institutions in receiving  countries. While in terms of pure economic effects immigrants do not generally have any more incentives than low-skilled natives to allow for more immigration in the future, this is not the case when accounting for cultural externalities. Therefore, insofar as past immigrants have a voice in affecting future policies, a time-consistent immigration policy entails back-loading, as natives attempt at limiting voice of immigrants in the future,  the economic effects of immigration flows as well as the cultural externality they introduce. Furthermore, natives exploit any precommitment device to limit immigration flows, e.g., building "walls", limiting immigrants' political rights, or accumulating fiscal surpluses.

Intergenerational altruism and house prices: evidence from bequest tax reforms in Italy (with G. Bellettini and F. Taddei), 

European Economic Review, 92, 2017.

Abstract. The degree of intergenerational altruism is estimated in a benchmark Barro-type OLG framework with imperfect altruism, exploiting the quasi-experimental variation generated by reforms of the tax treatment of bequests and inter vivos real estate donations enacted in Italy between 2000 and 2001. Using a panel data set containing information on the housing stock and house prices in 13 large Italian cities between 1993 and 2004, the structural parameter of interest is estimated via the effect of the reform on house prices. We identify a lower bound of 0.27, an estimate that agrees with existing ones for the US economy. 

Experiencing breast cancer at the workplace (with R. Banerjee)

Journal of Public Economics, 134, 2016.  [WP version].   Featured on NPR News: listen (or read).

Abstract. We study a dynamic natural experiment involving nearly 3,000 American women of age 50--64 to understand how a woman's propensity to receive an annual mammography changes over time after a co-worker is diagnosed with breast cancer. We find that in the year this event occurs the probability of screening drops by about 6 percentage points, off a base level of 70%. This impact effect is persistent for at least two years. Underlying mechanisms and implications for health policy are discussed. 

Revisiting wage, earnings, and hours profiles (with P. Rupert)

Journal of Monetary Economics, 72, 2015.  Appendix.   Profiles data: Stata; CSV.   WP version.

Abstract. For the youngest cohorts whose entire working life can be observed, hours start falling much earlier than wages. Wages do not fall (if they fall at all) until one's late 60's. The data suggest that many workers start a smooth transition into retirement by working progressively fewer hours while still facing an upward-sloping wage profile. This pattern is not an artifact of staggered abrupt retirement or selection. This evidence imposes restrictions on dynamic models of the aggregate economy, and provide updated numerical profiles that can be readily used in quantitative macroeconomic analysis to incorporate this new pattern into aggregate models.

Bequest taxes, donations, and house prices (with G. Bellettini, F. Taddei)

B.E. Journal of Macroeconomics, 13(1), 2013.

Abstract. This paper is an empirical investigation into the effect of bequest taxes (estate or inheritance tax, in the US) and inter vivos real estate donations taxes (gift tax, in the US) on (i) house prices, (ii) house donations, and (iii) market transactions. In a simple model with intergenerational altruism, a lower tax rate unambiguously increases (i) and has an ambiguous effect on (ii) and (iii). We test these predictions using an original and unique data set containing information on sales, donations and real estate prices in 13 large Italian cities between 1993 and 2004. This period spans a major reform that first decreased and then abolished the inter vivos real estate donations tax and bequest tax in Italy. We find that the reform is associated with cumulative real appreciation of about 5% between 2001 and 2004, an increase in donations, and a decrease in market transactions over the same period.

The tax evasion social multiplier: evidence from Italy (with R. Galbiati)

Journal of Public Economics, 96(1), 2012.   Appendix

Abstract. We estimate social externalities of tax evasion in a model where congestion of the auditing resources of local tax authorities generates a social multiplier. Identification is based on a contrast of the variance of tax evasion at different levels of aggregation. We use a unique data set that contains audits of about 80,000 small businesses and professionals in Italy and also provides an exact measure of reference groups in our model. We find a social multiplier of about 3, which means that the equilibrium response to a shock that induces an exogenous variation in mean concealed income is about 3 times the initial average response. This is a short-run effect that persists to the extent that auditing resources are not adjusted to internalize the congestion externality. 

The anatomy of the aggregate labor supply elasticity (with R. Fiorito)

Review of Economic Dynamics, 15(1), 2012.   Code and data file

Abstract. We show that the aggregate Frisch elasticity of labor supply can greatly exceed the corresponding individual-level parameter, and we illustrate the “anatomy” of the former in terms of intensive and extensive margins. The methodology consists of using micro data from the PSID to construct a panel of individuals and an aggregate time series obtained by aggregating these individuals each year. These two data sets represent exactly the same sample at different levels of aggregation, and we use them to identify the parameters of two distinct MaCurdy-type micro and macro equations. We find a micro elasticity of about 0.1 and a much larger macro elasticity that ranges from 1.1 to 1.7. There is no conflict between the two estimates: the micro one reflects only the intensive margin while the macro one reflects, in addition, the much more volatile extensive margin. Furthermore, aggregation of only continuously employed individuals allows us to provide a reliable estimate of the intensive margin elasticity in the range 0.3–0.4. This implies an extensive margin elasticity in the range 0.8–1.4. These findings suggest that micro evidence is not a benchmark for assessing how large the Frisch elasticity of labor supply should be in a model of the aggregate economy. 

Crime in Europe and in the US: dissecting the "reversal of misfortunes" (with Buonanno, Drago, Galbiati)

Economic Policy, 2011.   Appendix.   Dataset

Abstract. Contrary to common perceptions, today both property and violent crimes (with the exception of homicides) are more widespread in Europe than in the United States, while the opposite was true thirty years ago. We label this fact as the ‘reversal of misfortunes’. We investigate what accounts for the reversal by studying the causal impact of demographic changes, incarceration, abortion, unemployment and immigration on crime. For this we use time series data (1970–2008) from seven European countries and the United States. We find that the demographic structure of the population and the incarceration rate are important determinants of crime. Our results suggest that a tougher incarceration policy may be an effective way to contrast crime in Europe. Our analysis does not provide information on how incarceration policy should be made tougher nor does it provide an answer to the question whether such a policy would also be efficient from a cost-benefit point of view. We leave this to future research. 

Unpacking social interactions (with. E. Cohen Cole)

Economic Inquiry, 46(1), 2008.

Abstract. As empirical work in identifying social effects becomes more prevalent, researchers are beginning to struggle in identifying the composition of social interactions within any given reference group. In this article, we present a simple econometric methodology for the separate identification of multiple social interactions. The setting under which we achieve separation is special but is likely to be appropriate in many applications. 

Discrete choice with social interactions and endogenous memberships

Journal of the European Economic Association, 5(1), 2007.

Abstract. This paper is about selection of neighbors in models of social interactions. I study a general equilibrium model of behavior subject to endogenous social influences when heterogeneous individuals can choose whom to associate with, buying associations on a “memberships market”. Social effects in behavior turn out to be a stratifying force: The desire for valuable interactions induces inefficient sorting and may lead to the endogenous emergence of “social traps”. The theory is then used to suggest identification strategies that may solve, in a microfounded way, identification and selection problems that typically affect empirical work on social interactions. Such strategies offer a viable alternative when valid instrumental variables or randomized experiments are not available. 

OTHER PUBLICATIONS

Shallow and deep economic thinking, Œconomia, 13(3), 2023.

How does grandparents' child care affect labor supply? IZA World of Labor, 2016

Offerta di lavoro. Manuale di Economia del Lavoro, Pepi De Caleo and Brucchi Luchino, eds, Il Mulino, 2015

Allocazione del tempo. Rivista di Politica Economica, 101(1-3), 2012.

Tremonti, istruzioni per il disuso (with A. Bisin, M. Boldrin, S. Brusco, A. Moro, and A. Rustichini). Ancora del Mediterraneo. First edition: 2010. Second edition: 2011.

Crimen e inmigración: cómo entender diferentes pautas. In Efectos Económicos de la Inmigración en España, Marcial Pons y FEDEA, 2009.  English version: Immigration and crime: making sense of multiple patterns.

Review of 'Economics and Social Interaction: Accounting for Interpersonal Relations', B, Gui and R. Sugden, eds." Journal of Economics, 88(1), 2006.

Comportamento economico e relazioni sociali. In Teoria Economica e Relazioni Interpersonali, P. Sacco and S. Zamagni eds, Il Mulino, 2006.

Partecipazione con avversione al rischio: [...] sintesi dei modelli di Weitzman e Meade. Rivista di Politica Economica, 91(1), 2001.