UCLouvain Economics Seminar

We investigate the long-term economic consequences of mass refugee inflow. After the Greco-Turkish war of 1919–1922, 1.2 million Greek Orthodox were forcibly resettled from Turkey to Greece, increasing the host population by more than 20 percent within a few months. Building a novel geocoded dataset of more than 10,000 settlements in Greece, we examine the educational and occupational outcomes of refugee and native villages and their variation across birth cohorts throughout the 20th century. Using a Diff-in-Diff empirical approach, we find that refugee villages invested more in education and experienced greater structural transformation and industrialization relative to native ones. We find evidence in support for the “uprootedness” hypothesis, with forced migration (i) causing a shift in preferences toward investment in human portable assets (as opposed to physical) (ii) reducing the utility cost of leaving farming, as refugees are less attached to the land in their new location (relative to natives).

Joint with Nikos Benos, Stelios Karagiannis, Stelios Michalopoulos, Elias Papaioannou, and Seyhun Orcan Sakalli

We study the profitability of bundling by an upstream firm who licenses technologies to downstream competitors, and who faces competition for one of its technologies. In an otherwise standard “Chicago-style” model, we show that the existence of downstream competition can make inefficient bundling profitable. Forcing downstream firms to use a less efficient technology can soften competition, thus allowing the upstream firm to extract more profit through the licensing of its monopolized technology.

with Greg Taylor

In the literature on inequality and risk, changing distribution densities at the margin has been popularized as mean-preserving spreads by Rothschild and Stiglitz (1970). We import this idea to propose a definition of a positive productivity shock into the optimal nonlinear income tax framework à la Mirrlees. We then study the impact of a positive shock on productivity, taking place on a given interval I, on the optimal allocation and optimal marginal tax rates. We derive a general result for the class of rank-dependent social welfare functions consistent with Lorenz ordering (Simula and Trannoy, 2022a,b), including the maximin as limit case, with no condition on the elasticity of taxable income. Specifically, we show that the change in optimal marginal tax rates is non-monotonic on I. Our theoretical findings have meaningful empirical implications and can be used as a test of the optimal income tax model. We look at the fiscal situation in the US to provide an example where the predicted tax change according to the theory is verified, roughly speaking.

joint with Laurent Simula (ENS Lyon )

The Roma have faced poverty, discrimination and even enslavement and extermination since immigrating to Europe from India in the early 12thcentury. Persistent disparities between Roma and non-Roma throughout Europe have prompted recent integration initiatives. Drawing on a conceptual framework suggested by the literature on oppositional identity, aspirations, social capital, and the economics of religiosity, we explore the impacts of religious engagement on the integration of this marginalized population into broader society as captured by increased educational attainment. Using data from 12 Eastern European countries, we estimate the effect of religiosity on education with an instrumental variable (IV) approach that leverages exogenous variation in communist-era religious restrictions. We find that higher parental religiosity significantly increases child educational outcomes. Results indicate that religiosity also closes the gap between Roma respondents and their non-Roma neighbors for beliefs and other indicators. A placebo test among non-Roma households reveals no similar religiosity effects on educational outcomes of non-Roma children. Although more research is needed to identify specific mechanisms, these results suggest that religious engagement may soften oppositional identities in favor of alternative norms and aspirations. The role religious institutions may play in ultimately integrating the Roma and enhancing their future prospects merits further attention.

with Justin D. Kagin

We estimate behavioral responses to dividend taxation using recent French reforms: a rate hike and, five years later, a cut. Exploiting tax data at household and firm-level, we find very large dividend tax elasticities to both reforms. Individuals who control firms adjust dividend receipts instantaneously, accounting for most of the aggregate dividend reaction. Investment is insensitive to dividend taxation, except in small firms whose reaction is moderately negative. Dividend adjustments are instead driven by corporate saving, as owner-managers treat firms as tax-free saving vehicles. Small businesses’ profits decline following dividend tax increases, suggesting firms also serve as tax-free consumption vehicles.

Joint with Laurent Bach, Brice Fabre, Arthur Guillouzouic, Claire Leroy et Clément Malgouyres

Introducing a new measure of scientific proximity between private firms and public research groups and exploiting a multi-billion euro financing program of academic clusters in France, we provide causal evidence of spillovers from academic research to private firms. Private sector firms in the top quartile of exposure to the funding shock increase their R\&D effort by 20% compared to the bottom quartile. We then use qualitative evidence, exploiting reports produced by the funded clusters, as well as quantitative evidence, using administrative data on labor mobility and R&D public--private partnerships, to shed light on the channels for these spillovers. We show that spillovers are driven by contracting between the private and public sectors and, to a lesser extent, by labor mobility from one to the other and by informal contacts. We discuss policy implications of these findings.

(with Antonin Bergeaud, Arthur Guillouzouic and Emeric Henry)

University access has greatly expanded during the past decades and further growth figures prominently in political agendas. We study possible consequences of historical and future expansions in a stochastic, general equilibrium Roy model where tertiary educational attainment is determined by intelligence and disadvantage from low socioeconomic status or poor non-cognitive skills. The enlargement of university access enacted in the UK following the 1963 Robbins Report 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 intelligent students from advantaged backgrounds and to a declining college wage premium across cohorts. Our structural estimates indicate that the implemented policy was unfit to reach high-ability, disadvantaged individuals as Robbins had instead advocated. We show that counterfactual meritocratic selection policies would have attained that goal and so would have also been progressive.

(with Andrea Ichino and Aldo Rustichini)

Poverty assistance is often administered in-kind even though cash transfers might raise recipients’ welfare more effectively. We characterize the political economy constraint that paternalistic motives impose on the welfare system. In our experiment, a representative sample of U.S. citizens reveal their motives by deciding whether to constrain real U.S. food stamp recipients’ choices between in-kind donations and cash equivalents we disburse. The modal respondent (40%) imposes the strictest possible constraints, while 30% impose no constraints. Hence the majority’s behavior is consistent with deontological motives rather than trade-off thinking. Yet, because of biased beliefs about recipient preferences, respondents underestimate the restrictiveness of their interventions, suggesting that they are partly misguided. When respondents decide between restricting recipients whom they believed should be restricted and giving choice to those whom they believe should have choice, they place substantially more weight on the former motive, which, too, tends to increase the severity of restrictions. Overall, respondents’ goal is not to ensure sufficient healthy nutrition, but to prevent consumption of items deemed inappropriate. While respondents reveal racial and gender stereotypes in various survey questions, neither donor nor recipient demographics have substantial effects on restriction decisions, though restrictions increase with respondents’ political conservatism. In-experiment behavior correlates strongly with views about government policy.

(joint with B. Douglas Bernheim, Tony Q. Fan, Zach Freitas-Groff)

This paper evaluates the labor market effects of sick pay mandates in the United States. Using the National Compensation Survey and difference-in-differences models, we estimate their impact on coverage rates, sick leave use, labor costs, and non-mandated fringe benefits. Sick pay mandates increase coverage significantly by 13 percentage points from a baseline level of 66%. Newly covered employees take two additional sick days per year. We find little evidence that mandating sick pay crowds-out other non-mandated fringe benefits. We then develop a model of optimal sick pay provision along with a welfare analysis. For a range of plausible parameter values, mandating sick pay increases welfare.

Joint with Johanna Catherine Maclean and Nicolas R. Ziebarth

This paper investigates whether political connections affect individuals’ propensity to engage in white-collar crime. We identify connections by campaign donations or direct friendships and use the 2007 French Presidential election as a marker of change in the value of political connections to the winning candidate. We compare the behavior of Directors of publicly listed companies who were connected to the future President to the behavior of other non-connected Directors, before and after the election. Consistent with the belief that connections to a powerful politician can protect someone from prosecution or punishment, we uncover indirect evidence that connected Directors are more likely to engage in suspicious insider trading after the election: Purchases by connected Directors trigger larger abnormal returns, connected Directors are less likely to comply with trading disclosure requirements in a timely fashion, and connected Directors trade closer in time to their firms’ announcements of results.

Joint with Thomas Bourveau and Renaud Coulomb

Monitoring economic conditions in real time,or nowcasting, is among the key tasks routinelyperformed by economists. Nowcasting entails some key challenges, which also characterisemodern Big Data analytics, often referred to as the three “Vs”: the large number of timeseries continuously released (Volume), the complexity of the data covering various sectors ofthe economy, published in an asynchronous way and with different frequencies and precision(Variety), and the need to incorporate new information within minutes of their release (Ve-locity). In this paper, we explore alternative routes to bring Bayesian Vector Autoregressive(BVAR) models up to these challenges. We find that BVARs are able to effectively handlethe three Vs and produce, in real time, accurate probabilistic predictions of US economicactivity and, in addition, a meaningful narrative by means of scenario analysis.

Joint with Jacopo Cimadomo, Domenico Giannone, Michele Lenza and Andrej Sokol

We analyse the existence and underlying mechanisms of neighbourhood effects in welfare-to-work transitions in the context of a dominant proportion of foreign-born individuals. The analysis is based on Luxembourg social security longitudinal data, covering 2001–2015, and provides precise information at the postcode level, corresponding mostly to streets. Our identification strategy exploits the exogenous variations provided by the very fine data granularity and follows two paths. We first examine interactions among all neighbours using an individual-level analysis, before focusing on interactions among only welfare recipients using a matched-pair analysis. This second step allows us to deal with the mediating effect of welfare recipients’ citizenship. The main findings highlight the existence of neighbourhood effects in welfare-to-work transitions, which are also affected by the characteristics of the neighbours, including their citizenship. These characteristics suggest that social norms and/or stigma, prevail over the support for welfare recipients to find a job, and over the in-group support for welfare recipients. The matched-pair analysis provides contrasting results across citizenship for individuals from large-sized citizenship groups (interactions within the own group) and individuals from medium-sized groups (interactions between groups).

Joint with Alessio Fusco