All posts by admin

XREAP2018-09: Relocation of the Rich: Migration in Response to Top Tax Rate Changes from Spanish Reforms

Recent Spanish tax reform granted regions the authority to set income tax rates, resulting in substantial tax differentials. We use individual-level information from Social Security records over a period of one decade. Conditional on moving, taxes have a significant effect on location choice. A one percent increase in the net of tax rate for a region relative to others increases the probability of moving to that region by 1.7 percentage points. Focusing on the stock of top-taxpayers, we estimate an elasticity of the number of top taxpayers with respect to net-of-tax rates of 0.85. Using this elasticity, a theoretical model implies that the mechanical increase in tax revenue due to higher tax rates is larger than the loss in tax revenue from the outflow of migration.

Agrawal,D.R., Foremny, D. (IEB, XREAP)



XREAP2018-08: Long-Lasting Social Capital and its Impact on Economic Development: The Legacy of the Commons

This paper analyzes the historical determinants and long-term persistence of social capital, as well as its effect on economic development, by looking at the legacy of the commons in a Spanish region. In medieval times, common goods were granted to townships and were managed collectively by local citizens. This enabled the establishment of institutions for collective action and self-government. Common goods persisted until the second half of the nineteenth century. We argue that the experience of cooperation among villagers, repeated over the centuries, increased the social capital in each local community. In 1845, a law forced small villages to merge with others, a fact which generated exogenous variation in the number of mergers (i.e., cooperative networks) that each modern municipality was required to have. We exploit this change in an IV and RD setting and find that current municipalities formed by a greater number of old townships have a denser network of associations. We also find that higher social capital is associated with more economic development.

Montolio, D. (IEB, XREAP); Tur-Prats, A.



XREAP2018-07: Economic Crisis and Social Trust: Reviewing the effects of economic hardship on interpersonal and institutional confidence

The economic crisis of 2008 led to a significant erosion of trust in those countries that were hit hardest. However, whether this fall in trust can best be explained by external economic factors or by the lack of response on the part of the institutions to civic needs and demands is unclear. This study seeks to address this question by examining the specific case of Spain. Its aim is to analyse in comparison with other factors, the effect of increasing socioeconomic precariousness upon levels of interpersonal and institutional trust. The study examines the respective impact of these factors upon different social groups according to their degree of exposure to the effects of the crisis. Our results show that the deterioration suffered by household economies has important consequences in terms of interpersonal trust. Those most severely affected by the recession lose a great deal of trust in others. We also find that a deterioration in socioeconomic conditions has different effects in relation to institutional trust. The perception of the overall state of the economy is important for all types of institutional trust. Without calling into question the importance of institutional performance on levels of institutional trust, our research sheds new light on the importance of different economic factors for social cohesion.

Torrente, D.; Caïs, J.; Bolancé, C. (RISKCENTER, XREAP)



XREAP 2018-06: New Imported Inputs, Wages and Worker Mobility

We provide a comprehensive assessment of the effects of new imported inputs on wage dynamics, on the skill-composition of the labor force, on worker mobility, and on the efficiency of matching between firms and workers. We employ matched employer-employee data for Italy, over 1995-2007. We complement these data with information on the arrival of new imported inputs at the industry level. We find new imported inputs to have a positive effect on average wage growth at the firm level. This effect is driven by two factors: (1) an increase in the white-collar/blue-collar ratio; and (2) an increase in the average wage growth of blue-collar workers, while the wage growth of white collars is not significantly affected. The individual-level analysis reveals that the increase in the average wage of blue collars is driven by the displacement of the lowest paid workers, while continuously employed individuals are not affected. We estimate the unobserved skills of workers following Abowd et al. (1999). We find evidence that new imported inputs lead to a positive selection of higher-skilled workers, and to an improvement in positive assortative matching between firms and workers.

Colantone, I.; Matano, A. (AQR-IREA, XREAP); Naticchioni, P.


XREAP 2018-05: Alternative methods of estimating the longevity risk

The aim of this paper is to estimate the longevity risk and its trend according to the age of the individual. We focus on individuals over 65. We use the value-at-risk to measure the longevity risk. We have proposed the use of an alternative methodology based on the estimation of the truncated cumulative distribution function and the quantiles. We apply a robust estimation method for fitting parametric distributions. Finally, we compare
parametric and nonparametric estimations of longevity risk.



XREAP 2018-04: Tracking economic growth by evolving expectations via genetic programming: A two-step approach

The main objective of this study is to present a two-step approach to generate estimates of economic growth based on agents’ expectations from tendency surveys. First, we design a genetic programming experiment to derive mathematical functional forms that approximate the target variable by combining survey data on expectations about different economic variables. We use evolutionary algorithms to estimate a symbolic regression that links survey-based expectations to a quantitative variable used as a yardstick (economic growth). In a second step, this set of empirically-generated proxies of economic growth are linearly combined to track the evolution of GDP. To evaluate the forecasting performance of the generated estimates of GDP, we use them to assess the impact of the 2008 financial crisis on the accuracy of agents’ expectations about the evolution of the economic activity in 28 countries of the OECD. While in most economies we find an improvement in the capacity of agents’ to anticipate the evolution of GDP after the crisis, predictive accuracy worsens in relation to the period prior to the crisis. The most accurate GDP forecasts are obtained for Sweden, Austria and Finland.

Claveria, O. (AQR-IREA, XREAP); Monte, E.; Torra, S. (RISKCENTER, XREAP)