Aart Gerritsen, Bas Jacobs, Kevin Spiritus, Alexandra V Rusu
We derive the Pareto-efficient mix of non-linear taxes on labour income and capital income if people differ in their rates of return on capital. We allow for two reasons why rates of return differ: because individuals with higher ability are better able to invest their capital or because wealthier individuals enjoy scale effects in wealth accumulation. In both cases, a strictly positive tax on capital income is part of any Pareto-efficient tax system. We derive a condition for the Pareto-efficient tax mix that relies solely on empirical sufficient statistics – not on social welfare weights – and find that Pareto-efficient taxes on capital income increase with the degree of return heterogeneity. Numerical simulations for empirically plausible return heterogeneity suggest that Pareto-efficient marginal tax rates on capital income are positive and substantial.
{"title":"Optimal Taxation of Capital Income with Heterogeneous Rates of Return","authors":"Aart Gerritsen, Bas Jacobs, Kevin Spiritus, Alexandra V Rusu","doi":"10.1093/ej/ueae083","DOIUrl":"https://doi.org/10.1093/ej/ueae083","url":null,"abstract":"We derive the Pareto-efficient mix of non-linear taxes on labour income and capital income if people differ in their rates of return on capital. We allow for two reasons why rates of return differ: because individuals with higher ability are better able to invest their capital or because wealthier individuals enjoy scale effects in wealth accumulation. In both cases, a strictly positive tax on capital income is part of any Pareto-efficient tax system. We derive a condition for the Pareto-efficient tax mix that relies solely on empirical sufficient statistics – not on social welfare weights – and find that Pareto-efficient taxes on capital income increase with the degree of return heterogeneity. Numerical simulations for empirically plausible return heterogeneity suggest that Pareto-efficient marginal tax rates on capital income are positive and substantial.","PeriodicalId":501319,"journal":{"name":"The Economic Journal","volume":"3 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-09-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142247746","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Michael Blanga-Gubbay, Paola Conconi, Mathieu Parenti
Using detailed information from lobbying reports filed under the Lobbying Disclosure Act, we construct a unique dataset that allows us to identify which firms lobby on Free Trade Agreements (FTAs) negotiated by the United States, their position (in favour or against) and their lobbying effort on the ratification of each trade agreement. Using this dataset, we show that lobbying on FTAs is dominated by large multinational firms, which are in favour of these agreements. On the intensive margin, we exploit exogenous variation across FTAs to show that individual firms put more effort supporting agreements that generate larger potential gains – larger improvements in their access to foreign consumers and suppliers and smaller increases in domestic competition – and that are more likely to be opposed by politicians. To rationalise these findings, we develop a new model of endogenous lobbying on trade agreements. In this model, heterogeneous firms select into trade and choose whether and how much to spend lobbying on the ratification of an FTA, and politicians may be biased in favour of or against the agreement.
{"title":"Lobbying for Globalisation","authors":"Michael Blanga-Gubbay, Paola Conconi, Mathieu Parenti","doi":"10.1093/ej/ueae082","DOIUrl":"https://doi.org/10.1093/ej/ueae082","url":null,"abstract":"Using detailed information from lobbying reports filed under the Lobbying Disclosure Act, we construct a unique dataset that allows us to identify which firms lobby on Free Trade Agreements (FTAs) negotiated by the United States, their position (in favour or against) and their lobbying effort on the ratification of each trade agreement. Using this dataset, we show that lobbying on FTAs is dominated by large multinational firms, which are in favour of these agreements. On the intensive margin, we exploit exogenous variation across FTAs to show that individual firms put more effort supporting agreements that generate larger potential gains – larger improvements in their access to foreign consumers and suppliers and smaller increases in domestic competition – and that are more likely to be opposed by politicians. To rationalise these findings, we develop a new model of endogenous lobbying on trade agreements. In this model, heterogeneous firms select into trade and choose whether and how much to spend lobbying on the ratification of an FTA, and politicians may be biased in favour of or against the agreement.","PeriodicalId":501319,"journal":{"name":"The Economic Journal","volume":"14 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-09-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142247747","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Laura Derksen, Jason T Kerwin, Natalia Ordaz Reynoso, Olivier Sterck
We show that ordinary appointments can act as effective substitutes for hard commitment devices and increase demand for a critical healthcare service, particularly among those with self-control problems. We show this using an experiment that randomly offered HIV testing appointments and hard commitment devices to high-risk men in Malawi. Appointments more than double testing rates, with effects concentrated among those who demand commitment. In contrast, most men who take up hard commitments lose their investments. Appointments overcome commitment problems without the potential drawback of commitment failure, and have the potential to increase demand for healthcare in the developing world.
{"title":"Healthcare Appointments as Commitment Devices","authors":"Laura Derksen, Jason T Kerwin, Natalia Ordaz Reynoso, Olivier Sterck","doi":"10.1093/ej/ueae077","DOIUrl":"https://doi.org/10.1093/ej/ueae077","url":null,"abstract":"\u0000 We show that ordinary appointments can act as effective substitutes for hard commitment devices and increase demand for a critical healthcare service, particularly among those with self-control problems. We show this using an experiment that randomly offered HIV testing appointments and hard commitment devices to high-risk men in Malawi. Appointments more than double testing rates, with effects concentrated among those who demand commitment. In contrast, most men who take up hard commitments lose their investments. Appointments overcome commitment problems without the potential drawback of commitment failure, and have the potential to increase demand for healthcare in the developing world.","PeriodicalId":501319,"journal":{"name":"The Economic Journal","volume":"24 5","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-08-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141923546","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Many studies document low rates of financial literacy and suboptimal levels of participation in financial markets. These issues are particularly acute among women. Does this reflect a self-reinforcing trap? If so, can a nudge to participate in financial markets generate knowledge, confidence, and further increase informed participation? We conduct a large field experiment that enables and incentivizes working-age men and women—a challenging group to reach with standard financial training programs—to trade stocks for four to seven weeks. We provide no additional educational content. We find that trading significantly improves financial confidence, as reflected in stock market participation, objective and subjective measures of financial knowledge, and risk tolerance. These effects are especially strong among women. Participants also become more self-reliant and consult others less when making financial decisions.
{"title":"Trading stocks builds financial confidence and compresses the gender gap","authors":"Saumitra Jha, Moses Shayo","doi":"10.1093/ej/ueae076","DOIUrl":"https://doi.org/10.1093/ej/ueae076","url":null,"abstract":"Many studies document low rates of financial literacy and suboptimal levels of participation in financial markets. These issues are particularly acute among women. Does this reflect a self-reinforcing trap? If so, can a nudge to participate in financial markets generate knowledge, confidence, and further increase informed participation? We conduct a large field experiment that enables and incentivizes working-age men and women—a challenging group to reach with standard financial training programs—to trade stocks for four to seven weeks. We provide no additional educational content. We find that trading significantly improves financial confidence, as reflected in stock market participation, objective and subjective measures of financial knowledge, and risk tolerance. These effects are especially strong among women. Participants also become more self-reliant and consult others less when making financial decisions.","PeriodicalId":501319,"journal":{"name":"The Economic Journal","volume":"98 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141883620","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sergi Basco, David Lopez-Rodriguez, Enrique Moral-Benito
This paper investigates the impact of local house price booms on capital misallocation within industries. Using the geographical variation provided by the Spanish housing boom (2003-2007), we show that firms exposed to positive local house price shocks received more bank credit and their investment grew more when they had a higher proportion of real estate assets. This collateral channel results in an increasing dispersion of the capital-labor ratio within industries. A counterfactual calculation suggests that the capital misallocation generated by this channel can account for around 40% of the TFP decline experienced by the Spanish economy during the housing boom.
{"title":"House prices and misallocation: the impact of the collateral channel on productivity","authors":"Sergi Basco, David Lopez-Rodriguez, Enrique Moral-Benito","doi":"10.1093/ej/ueae075","DOIUrl":"https://doi.org/10.1093/ej/ueae075","url":null,"abstract":"This paper investigates the impact of local house price booms on capital misallocation within industries. Using the geographical variation provided by the Spanish housing boom (2003-2007), we show that firms exposed to positive local house price shocks received more bank credit and their investment grew more when they had a higher proportion of real estate assets. This collateral channel results in an increasing dispersion of the capital-labor ratio within industries. A counterfactual calculation suggests that the capital misallocation generated by this channel can account for around 40% of the TFP decline experienced by the Spanish economy during the housing boom.","PeriodicalId":501319,"journal":{"name":"The Economic Journal","volume":"185 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141883619","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Ruben Durante, Nicola Mastrorocco, Luigi Minale, James M Snyder
We use novel survey data from Italy to shed light on key questions regarding the measurement of social capital and the use of social capital indicators for empirical work. Our data cover a sample of over 600,000 respondents interviewed between 2000 and 2015. We identify four distinct components of social capital – (i) social participation, (ii) political participation, (iii) general trust, and (iv) trust in institutions – and examine how they relate to each other. We then study how each dimension of social capital relates to various socioeconomic factors both at the individual and the aggregate level, and to various proxies of social capital commonly used in the literature. Finally, building on previous work, we investigate to what extent different dimensions of social capital predict differences in key economic, political, and health outcomes. Our findings support the view that social capital is a multifaceted object with multiple dimensions that, while related, are distinct from each other. Future work should take such multi-dimensionality into account and carefully consider what measure of social capital to use.
{"title":"Unpacking Social Capital","authors":"Ruben Durante, Nicola Mastrorocco, Luigi Minale, James M Snyder","doi":"10.1093/ej/ueae074","DOIUrl":"https://doi.org/10.1093/ej/ueae074","url":null,"abstract":"We use novel survey data from Italy to shed light on key questions regarding the measurement of social capital and the use of social capital indicators for empirical work. Our data cover a sample of over 600,000 respondents interviewed between 2000 and 2015. We identify four distinct components of social capital – (i) social participation, (ii) political participation, (iii) general trust, and (iv) trust in institutions – and examine how they relate to each other. We then study how each dimension of social capital relates to various socioeconomic factors both at the individual and the aggregate level, and to various proxies of social capital commonly used in the literature. Finally, building on previous work, we investigate to what extent different dimensions of social capital predict differences in key economic, political, and health outcomes. Our findings support the view that social capital is a multifaceted object with multiple dimensions that, while related, are distinct from each other. Future work should take such multi-dimensionality into account and carefully consider what measure of social capital to use.","PeriodicalId":501319,"journal":{"name":"The Economic Journal","volume":"39 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-07-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141775007","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The necessity to overhaul national infrastructure has become one of the key issues of US domestic policy in recent years. While the benefits of infrastructure spending are often straightforward, its unintended consequences are less well understood. This paper studies the impact of transportation infrastructure on local crime, focusing on the construction of the Interstate Highway System (IHS), the largest public works project in US history. Using a staggered difference-in-differences design and a county-by-year panel dataset spanning all US counties between 1960 and 1993, we find that a highway opening in a county led to an 8% rise in total index crime. This effect is driven by property crime (burglary, larceny, and motor vehicle theft), although some evidence suggests an increase in violent crime as well. Exploring potential mechanisms, we show that the positive effect of highways on crime is concentrated in counties with low pre-existing stock of police resources where increased connectivity may have raised the returns to crime. Moreover, we find that highway construction induced higher local employment, average firm size, and the local population size, thus increasing the returns to criminal activity, and ultimately the risk of victimisation in the newly-connected counties.
{"title":"The Road to Crime: An Unintended Consequence of the Interstate Highway System","authors":"Francesca Calamunci, Jakub Lonsky","doi":"10.1093/ej/ueae068","DOIUrl":"https://doi.org/10.1093/ej/ueae068","url":null,"abstract":"The necessity to overhaul national infrastructure has become one of the key issues of US domestic policy in recent years. While the benefits of infrastructure spending are often straightforward, its unintended consequences are less well understood. This paper studies the impact of transportation infrastructure on local crime, focusing on the construction of the Interstate Highway System (IHS), the largest public works project in US history. Using a staggered difference-in-differences design and a county-by-year panel dataset spanning all US counties between 1960 and 1993, we find that a highway opening in a county led to an 8% rise in total index crime. This effect is driven by property crime (burglary, larceny, and motor vehicle theft), although some evidence suggests an increase in violent crime as well. Exploring potential mechanisms, we show that the positive effect of highways on crime is concentrated in counties with low pre-existing stock of police resources where increased connectivity may have raised the returns to crime. Moreover, we find that highway construction induced higher local employment, average firm size, and the local population size, thus increasing the returns to criminal activity, and ultimately the risk of victimisation in the newly-connected counties.","PeriodicalId":501319,"journal":{"name":"The Economic Journal","volume":"50 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141775011","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We experimentally study effort provision and network formation in the linear-quadratic game characterised by positive externality and complementarity of effort choices among network neighbours. We compare experimental outcomes to the equilibrium and efficient allocations and study the impact of group size and linking costs. We find that individuals overprovide effort relative to the equilibrium level on the network they form. However, their payoffs are lower than the equilibrium payoffs because they create fewer links than it is optimal which limits the beneficial spillover effects of effort provision. Reducing the linking costs does not significantly increase the connectedness of the network and the welfare loss is higher in larger groups. Individuals connect to the highest effort providers in the group and ignore links to relative low effort providers, even if those links would be beneficial to form. This effect explains the lack of links in the network.
{"title":"Network formation and efficiency in linear-quadratic games: An experimental study","authors":"Gergely Horváth","doi":"10.1093/ej/ueae073","DOIUrl":"https://doi.org/10.1093/ej/ueae073","url":null,"abstract":"We experimentally study effort provision and network formation in the linear-quadratic game characterised by positive externality and complementarity of effort choices among network neighbours. We compare experimental outcomes to the equilibrium and efficient allocations and study the impact of group size and linking costs. We find that individuals overprovide effort relative to the equilibrium level on the network they form. However, their payoffs are lower than the equilibrium payoffs because they create fewer links than it is optimal which limits the beneficial spillover effects of effort provision. Reducing the linking costs does not significantly increase the connectedness of the network and the welfare loss is higher in larger groups. Individuals connect to the highest effort providers in the group and ignore links to relative low effort providers, even if those links would be beneficial to form. This effect explains the lack of links in the network.","PeriodicalId":501319,"journal":{"name":"The Economic Journal","volume":"5 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141775008","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I investigate the properties of output gaps in New Keynesian DSGE models and study the relationship between theory-based quantities and the estimates obtained with standard approaches. Theoretical gaps display low frequency variations, have similar frequency domain representation as potentials and are generally correlated with them. Potentials have important business cycle variability. Existing statistical approaches fail to recognize these features and generate distorted estimates. Gaps are best estimated with a Polynomial filter. Explanations for the outcomes are given. I propose a statistical procedure reducing estimation biases.
{"title":"FAQ: How do I estimate the output gap?","authors":"Fabio Canova","doi":"10.1093/ej/ueae072","DOIUrl":"https://doi.org/10.1093/ej/ueae072","url":null,"abstract":"I investigate the properties of output gaps in New Keynesian DSGE models and study the relationship between theory-based quantities and the estimates obtained with standard approaches. Theoretical gaps display low frequency variations, have similar frequency domain representation as potentials and are generally correlated with them. Potentials have important business cycle variability. Existing statistical approaches fail to recognize these features and generate distorted estimates. Gaps are best estimated with a Polynomial filter. Explanations for the outcomes are given. I propose a statistical procedure reducing estimation biases.","PeriodicalId":501319,"journal":{"name":"The Economic Journal","volume":"16 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141775012","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Malte Sandner, Stephan L Thomsen, Libertad González
We investigate the impact of public childcare provision on the incidence of severe child maltreatment. For identification, we exploit a reform that expanded early childcare in Germany, generating large temporal and spatial variation in childcare coverage at the county level. Using high-quality administrative data covering all reported cases of child maltreatment in Germany by county and year, we find that an increase in childcare slots by one percentage point in a county reduced child maltreatment cases leading to out-of-home placement by about 1%. Our results suggest that the provision of universal public childcare may be more cost-effective than previously thought.
{"title":"Preventing Child Maltreatment: Beneficial Side Effects of Public Childcare","authors":"Malte Sandner, Stephan L Thomsen, Libertad González","doi":"10.1093/ej/ueae070","DOIUrl":"https://doi.org/10.1093/ej/ueae070","url":null,"abstract":"We investigate the impact of public childcare provision on the incidence of severe child maltreatment. For identification, we exploit a reform that expanded early childcare in Germany, generating large temporal and spatial variation in childcare coverage at the county level. Using high-quality administrative data covering all reported cases of child maltreatment in Germany by county and year, we find that an increase in childcare slots by one percentage point in a county reduced child maltreatment cases leading to out-of-home placement by about 1%. Our results suggest that the provision of universal public childcare may be more cost-effective than previously thought.","PeriodicalId":501319,"journal":{"name":"The Economic Journal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-07-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141738107","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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