Working papers results

2016 - n° 96
This paper provides a detailed empirical assessment of the evolution of income inequality and the redistributive e↵ects of the tax and transfer system following the 2007-2008 crisis. It focuses on the US case, drawing on data from the Current Population Survey for the period 2007-2012. Contrary to most existing studies, it uses of a wide range of inequality indicators and looks in detail at several sections of the income distribution, allowing for a clearer picture of the heterogeneous consequences of the crisis. Furthermore, it analyses the contribution of di↵erent types of taxes and transfers, beyond the overall cushioning e↵ect of the system, which allows for a more refined assessment of its e↵ectiveness. Results show that although the crisis implied income losses across the whole income distribution, the burden was disproportionately born by low to middle income groups. Income losses experienced by richer households were relatively modest and transitory, while those experienced by poorer households were not only strong but also highly persistent. The redistributive system had a crucial role in taming the increase in income inequality in the immediate aftermath of the crisis, and during the GR years, particularly cash transfers. After 2010, however, its e↵ect became weaker and income inequality experienced a new surge. The findings of this paper contribute to a better understanding of the distributional consequences of aggregate crises and the role of tax and transfer policies in stabilising the income distribution in a crisis aftermath.e theoretical bases for the impact of higher education policy on social mobility.
Vanda Almeida
Keywords: Crisis,Gini,Income,Inequality,Income tax,Low income,Personal Income Distribution,Redistribution,Safety net,Transfers
2016 - n° 95
This paper relates social mobility and social stratification to higher education policy. We show that higher‐education policy which leads to differences in quality and per‐student expenditure as well as in admission procedures between standard and elite universities, is a key factor in generating permanent social stratification and social immobility. We develop an intergenerational model which shows that a two‐tier higher education characterised by a division between elite and standard universities can be a key factor in generating permanent social stratification, social immobility and self‐reproduction of the ‘elite’. In our approach, low mobility is essentially explained by the differences in quality and in selection between elite and standard universities. A key result is that the wider the quality gap and the difference in per‐student expenditures between elite and standard universities, the less social mobility. This is because a larger quality gap reinforces the weight of family backgrounds at the expense of personal ability. Our simulations show that this impact can be large. These findings provide theoretical bases for the impact of higher education policy on social mobility.
Elisa S. Brezis, Joel Hellier
Keywords: Elite,Higher Education,Intergenerational mobility,Social stratification
2016 - n° 90
In this paper, we exploit pension reform-induced changes in retirement eligibility requirements to assess the role of grandparental child care availability in the employment of women who have children under 15. We focus on Italy for two reasons: first, it has low rates of female employment and little formal child care provision, and second, it has undergone several pension reforms in a relatively short time span. Our analysis shows that, among the women studied, those whose own mothers are retirement eligible have a 13 percent higher probability of being employed than those whose mothers are ineligible. The pension eligibility of maternal grandfathers and paternal grandparents, however, has no significant effect on the women’s employment probability. We also demonstrate that the eligibility of maternal grandmothers mainly captures the effect of their availability for child care. Hence, pension reforms, by potentially robbing households of an important source of flexible, low-cost child care, could have unintended negative consequences for the employment rates of women with children.
Massimiliano Bratti, Tommaso Frattini, Francesco Scervini
Keywords: grandparental child care,maternal employment,pension reform,retirement
2016 - n° 88
We study a setting where anti-discrimination legislation gives rise to adverse selection in the labor market. Firms rely on nonlinear compensation contracts to screen workers who differ in their family/career orientation. This results in a la- bor market equilibrium where career-oriented workers are offered an inefficiently low duration of parental leave. In addition, family-oriented workers are offered lower wages as compared to their equally skilled career-oriented counterparts. We demonstrate the usefulness of mandatory parental leave rules in mitigating the distortion in the labor market and derive conditions under which a Pareto im- provement is possible. We also characterize the optimal parental leave policy and highlight the possibility for parental leave legislation to eliminate the wage penalty of family-oriented workers by supporting pooling employment contracts.
Spencer Bastani, Tomer Blumkin, Luca Micheletto
Keywords: anti-discrimination,adverse selection,parental leave,efficiency
2016 - n° 85
How do tax incentives affect firms’ investment? Using confidential UK corporation tax returns, we provide new evidence on the effects of incentives in the form of depreciation allowances. We exploit a 2004 exogenous change in the qualifying thresholds for the first-year depreciation allowances (FYAs) and conduct a difference-in-difference analysis. Results suggest that the investment rate increased between 2.1 and 2.6 percentage points when firms became qualified for FYAs, relative to firms that never qualified. This implies an increase in investment rate of 11 percent at the mean. We exploit exogenous variation in the timing of tax payments to show that this large effect is not due to an increase in available cash and hence, this is primarily a cost of capital effect. Firms respond rather quickly to FYAs, within 12 to 18 months. Firms also bunch just below notches in the cost of capital created by the qualifying thresholds, suggesting salience of the FYAs. Such behaviour does not drive our main results.
Giorgia Maffini, Jing Xing, Michael P. Devereux
Keywords: investment,corporate tax,depreciation allowances,SMEs
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