(Re)distribution

We construct a series of posttax income for France over the 1900–2018 period and compare them with US series. We quantify the extent of redistribution—the reduction from pretax to posttax inequality—and estimate the contribution of redistribution in explaining differences in posttax inequality. We find that differences in pretax inequality drive most of the differences in posttax inequality between France and the United States, and that changes over time in both countries are mostly due to changes in pretax inequality. We highlight that the concept of redistribution can be empirically misleading for judging how policies reduce inequalities.

This paper uses a rich quantitative model with endogenous skill acquisition to show that capital-skill complementarity provides a quantitatively significant rationale to tax capital for redistributive governments. The optimal capital income tax rate is 67 percent, while it is 61 percent in an identically calibrated model without capital-skill complementarity. The skill premium falls from 1.9 to 1.84 along the transition following the optimal reform in the capital-skill complementarity model, implying substantial indirect redistribution from skilled to unskilled workers. These results show that a redistributive government should take into account capital-skill complementarity when taxing capital.

The project aims to shed new light on why public support for carbon taxes is so low, despite the crucial role that many economists and environmental campaigners believe they could play in reducing greenhouse gas emissions and mitigating climate change.

My work will highlight how urban markets, such as housing or transport, respond to government investment and evolve with development. Understanding the mechanisms involved will then inform crucial policy questions. Should governments, particularly in developing countries, optimize existing ‘technologies’ serving the urban lower-income masses – such as shared minibuses or informal settlements – or invest in the formal housing or transit infrastructure?

We measure college graduate quality—the average human capital of a college’s graduates—for graduates from 2,800 colleges in 48 countries. Graduates of colleges in the richest countries have 50% more human capital than graduates of colleges in the poorest countries. Migration reinforces these differences: emigrants from poorer countries are highly positively selected on human capital. Finally, we show that these stocks and flows matter for growth and development by showing that college graduate quality predicts the share of a college’s students who become inventors, engage in entrepreneurship, and become top executives both within and across countries.

This project studies the distributional effects of international trade policies and shocks via their impact on consumer prices, which may be different across consumer groups who have different consumption baskets.

Generous maternity leave, affordable daycare, extensive social safety nets, excellent universal health care, and high-quality public schools, are all notable features of Nordic countries. There is a widespread belief that such strong public investments in children contribute to a levelled playing field and promote social mobility. However, gaps in learning outcomes between children of rich and poor parents remain as high in Nordic countries as elsewhere in Europe. One explanation for this paradox is that the equalizing impacts of public investments are undone by parental investments in children of rich and poor families, which are as unequal in Nordic countries as in the rest of the European continent.

This paper quantifies employer market power in US manufacturing and how it has changed over time. Using administrative data, we estimate plant-level markdowns—the ratio between a plant's marginal revenue product of labor and its wage. We find most manufacturing plants operate in a monopsonistic environment, with an average markdown of 1.53, implying a worker earning only 65 cents on the marginal dollar generated. To investigate long-term trends for the entire sector, we propose a novel, theoretically grounded measure for the aggregate markdown. We find that it decreased between the late 1970s and the early 2000s, but has been sharply increasing since.

We quantitatively investigate the welfare costs of increasing tax revenues in low-income countries. We consider three tax instruments: consumption, labour income and capital income taxes. The analysis is based on a general equilibrium model featuring heterogeneous agents, incomplete financial markets, and rural and urban areas. We calibrate the model to Ethiopia and decompose the welfare costs into their aggregate and distributional components. We find that changing taxes alter the composition of demand. This, together with limited labour mobility, causes the incidence of higher taxes to fall disproportionately on the rural population, regardless of the instrument. Consumption taxes are the instrument with the largest welfare loss.

This paper quantifies the contribution of technology gaps to international income inequality. I develop an endogenous growth model where cross-country differences in R&D efficiency and cross-industry differences in innovation and adoption opportunities together determine equilibrium technology gaps, trade patterns, and income inequality. Countries with higher R&D efficiency are richer and have comparative advantage in more innovation-dependent industries. I calibrate R&D efficiency by country and innovation dependence by industry using R&D, patent, and bilateral trade data. Counterfactual analysis implies technology gaps account for one-quarter to one-third of nominal wage variation within the OECD.

We show that foreign capital liberalization reduces capital misallocation and increases aggregate productivity for affected industries in India. The staggered liberalization of access to foreign capital across disaggregated industries allows us to identify changes in firms' input wedges, overcoming major challenges in the measurement of the effects of changing misallocation. Liberalization increases capital overall. For domestic firms with initially high marginal revenue products of capital (MRPK), liberalization increases revenues by 23%, physical capital by 53%, wage bills by 28%, and reduces MRPK by 33% relative to low MRPK firms. The effects of liberalization are largest in areas with less developed local banking sectors, indicating that inefficiencies in that sector may cause misallocation. Finally, we propose an assumption under which a novel method exploiting natural experiments can be used to bound the effect of changes in misallocation on treated industries' aggregate productivity. These industries' Solow residual increases by 3–16%.

Using a structural life-cycle model, we quantify the heterogeneous impact of school closures during the corona crisis on children affected at different ages and coming from households with different parental characteristics. In the model, public investment through schooling is combined with parental time and resource investments in the production of child human capital at different stages in the children’s development process. We quantitatively characterise the long-term consequences from a COVID-19-induced loss of schooling, and find average losses in the present discounted value of lifetime earnings of the affected children of ⁠, as well as welfare losses equivalent to about of permanent consumption. Because of self-productivity in the human capital production function, younger children are hurt more by the school closures than older children. The negative impact of the crisis on children’s welfare is especially severe for those with parents with low educational attainment and low assets.

Can strengthening intellectual property protection for producers of one good affect innovation in other related goods? To answer this question, we exploit a unique policy experiment in the interwar military aircraft industry. Airframe designs had little intellectual property protection before 1926, but changes passed by Congress in 1926 provided airframe manufacturers with enhanced property rights over new designs. We show that granting property rights to airframe producers increased innovation in airframes, but slowed innovation in aero-engines, a complementary good where there was no change in the availability of intellectual property protection. We propose and test a simple theory that explains these patterns.

How has cross-border integration affected the relative taxation of labour and capital historically and globally? And which countries have been most affected by the erosion of effective capital taxation, and why? Answering these questions is critical to shed light on the macroeconomic effects and long-run social sustainability of globalisation.

A huge challenge for research and policy efforts to accelerate economic development is that firms in poor countries grow surprisingly slowly, making job creation in the “Global South” difficult to achieve. Why can't some firms access desirable markets?

This paper studies whether higher within-firm pay inequality is driven by managerial talent or managerial rent extraction and whether, ultimately, firms with larger pay disparities have lower valuations.

The informal sector accounts for a large part of the economy in most developing countries, comprising between 20-80 percent of the labour force and an equally large share of firms. Yet, we still know little about the overall labour market and welfare effects of trade liberalisation in settings characterised by extensive labour market regulation, weak enforcement, and informality, which characterize many developing economies. This research fills this gap by developing a structural equilibrium model of trade and informality.

A rapidly growing number of US cities have decided to set local minimum wages. Are minimum wages set at city level a good idea? This study examines the main trade-offs emerging from the local variation in minimum wage policies.

This study builds a unified non-parametric approach to predicting the unequal effects of trade shocks through both channels based on detailed microdata on spending and employment from the United States.

The optimal tax system amplifies the redistributive effects of prices rather than offsetting them, and that this amplification is stronger when we consider the endogenous response of markets.

This study assesses who would lose and who would gain from stricter immigration policies across different local labor markets, taking into account changes in wages, housing prices and internal migration responses.