We investigate the macroeconomic effects of fiscal consolidations based upon government spending cuts, transfers cuts and tax hikes. We extend a narrative dataset of fiscal consolidations, finding details on over 3500 measures. Government spending and transfer cuts are much less harmful than tax hikes. Standard New Keynesian mod- els match our results when fiscal shocks are persistent. Wealth effects on aggregate demand mitigates the impact of a persistent spending cut. Static distortions caused by persistent tax hikes cause larger shifts in aggregate supply under sticky prices. This channel explains different sizes of multipliers found in fiscal stimuli compared to consolidation plans.
Using new cross-country survey and experimental data, we investigate how beliefs about intergenerational mobility affect preferences for redistribution in France, Italy, Sweden, the U.K., and the U.S.. Americans are more optimistic than Europeans about social mobility. Our randomized treatment shows pessimistic information about mobility and increases support for redistribution, mostly for “equality of opportunity” policies. We find a strong political polarization. Left-wing respondents are more pessimistic about mobility, their preferences for redistribution are correlated with their mobility percep- tions, and they support more redistribution after seeing pessimistic information. None of these apply to right-wing respondents, possibly because they see the government as a “problem” and not as the “solution.”
We examine intergenerational mobility (IM) in educational attainment in Africa since independence using census data. First, we map IM across 27 countries and more than 2,800 regions, documenting wide cross-country and especially within-country heterogeneity. Inertia looms large as differences in the literacy of the old generation explain about half of the observed spatial disparities in IM. The rural-urban divide is substantial. Though conspicuous in some countries, there is no evidence of systematic gender gaps in IM. Second, we characterize the geography of IM, finding that colonial investments in railroads and Christian missions, as well as proximity to capitals and the coastline are the strongest correlates. Third, we ask whether the regional differences in mobility reflect spatial sorting or their independent role. To isolate the two, we focus on children whose families moved when they were young. Comparing siblings, looking at moves triggered by displacement shocks, and using historical migrations to predict moving-families’ destinations, we establish that, while selection is considerable, regional exposure effects are at play. An extra year spent in a high-mobility region before the age of 12 (and after 5) significantly raises the likelihood for children of uneducated parents to complete primary school. Overall, the evidence suggests that geographic and historical factors laid the seeds for spatial disparities in IM that are cemented by sorting and the independent impact of regions.
We show that the correct experiment to evaluate the effects of a scale adjustment is the simulation of a multi year fiscal plan rather than of individual scale shocks. Simulation of scale plans adopted by 16 OECD countries over a 30-year period supports the hypothesis that the effects of consolidations depend on their design. Fiscal adjustments based upon spending cuts are much less costly, in terms of output losses, than tax-based ones and have especially low out- put costs when they consist of permanent rather than stop and go changes in taxes and spending. The difference between tax-based and spending-based adjustments appears not to be explained by accompanying policies, including monetary policy. It is mainly due to the different response of business confidence and private investment.
Flexible labor markets require geographically mobile workers to be efficient. Otherwise firms can take advantage of the immobility of workers and extract rents at the expense of workers. In cultures with strong family ties, moving away from home is costly. Thus, to limit the rents of firms and avoid moving, individuals with strong family ties rationally choose regulated labor markets, even though regulation generates lower employment and income. Empirically, we do find that individuals who inherit stronger family ties are less mobile, have lower wages, are less often employed and support more stringent labor market regulations. We find a positive association between labor market rigidities at the beginning of the twenty-first century and family values prevailing before World War II, and between family structures in the Middle Ages and current desire for labor market regulation. Both results suggest that labor market regulations have deep cultural roots.
We study which policy tool and at what level a majority chooses in order to reduce negative externalities, such as pollution. We consider three instruments: a rule that sets an upper limit to the activity which produces the negative externality, a quota that forces a proportional reduction of the activity, and a proportional tax on it. For all instruments the majority chooses levels which are too restrictive when the activity is performed mainly by a small fraction of the population, and when costs for reducing activities or paying taxes are quite convex. Also, a majority may choose an instrument that is different than what a social planner would choose; for instance, a rule when the social planner would choose a tax.
We propose a test of bias based upon patterns of judicial errors. We model the trial court as minimizing a weighted sum of type I and II errors. We define racial bias as a situation where the weight depends on defendant/victim race. If the court is unbiased, the error rate should be independent of the combination defendant/victim race. We test this prediction using an original dataset on all capital appeals in 1973-1995. We find that in the first and last stages of appeal the probability of error is 3 and 9 percentage points higher for minority defendants who killed white (versus minority) victims.
This paper responds to the comment of Di Tella and Dubra (2013). We first clarify that the model of Alesina and Angeletos (2005) admits two distinct types of multiplicity: one that is at the core of their contribution, and a separate one that is at work in Di Tella and Dubra's example. We then proceed to show how Alesina and Angeletos's results are robust to alternative specifications of the voting mechanism.
By using a unique and large data set on loan contracts between banks and microfirms, we find robust evidence that women in Italy pay more for credit than men, although we do not find any evidence that women borrowers are riskier than men. The male/female differential remains even after controlling for a large number of characteristics of the type of business, the borrower, and the structure of the credit market. The result is not driven by lack of credit history, nor by women using a different type of bank than men, since the same bank charges different rates to male and female borrowers.
The study examines the historical origins of existing cross-cultural differences in beliefs and values regarding the appropriate role of women in society. We test the hypothesis that traditional agricultural practices influenced the historical gender division of labor and the evolution of gender norms. We find that, consistent with existing hypotheses, the descendants of societies that traditionally practiced plough agriculture today have less equal gender norms, measured using reported gender-role attitudes and female participation in the workplace, politics and entrepreneurial activities. Our results hold looking across countries, across districts within countries, and across ethnicities within districts. To test for the importance of cultural persistence, we examine the children of immigrants living in Europe and the United States. We find that even among these individuals, all born and raised in the same country, those with a heritage of traditional plough use exhibit less equal beliefs about gender roles today.
Ideas about what is ‘fair’ influence preferences for redistribution. We study the dynamic evolution of different economies in which redistributive policies, perception of fairness, inequality and growth are jointly determined. We show how including beliefs about fairness can keep two otherwise identical countries on different development paths for a very long time. We show how different initial conditions
regarding how ‘fair’ is the same level of inequality can lead to two permanently different steady states. We also explore how bequest taxation can be an efficient way of redistributing wealth to correct ‘unfair’ past accumulation of inequality.
The Great Recession has severely hit the economies of most of the countries. Given that, fiscal policies have gained back a central role in the debate as a tool to recover from this situation. This paper provides an overview about the main controversial issues related to the fiscal policy. In particular, we analyze the role and the different effects played by discretionary counter-cyclical policies – say, for instance, tax cuts or increased government spending. Disagreement on this topic follows from the fact that it is extremely difficult to isolate the exogenous effect of these policies on GDP. We review several ways in which economists have tried to deal with this problem of estimation. Finally, we discuss why spending-based adjustments are preferable and less likely to be costly than tax-based ones and why large fiscal consolidation accompanied by appropriate policies can be much less costly than what we think.
Arti cial states are those in which political borders do not coincide with a division of nationalities desired by the people on the ground. We propose and compute for all countries in the world two new measures how arti cial states are. One is based on measuring how borders split ethnic groups into two separate adjacent countries. The other one measures how straight land borders are, under the assumption the straight land borders are more likely to be arti cial. We then show that these two measures seem to be highly correlated with several measures of political and economic success.
Alesina, Alberto, Paola Giuliano, and Nathan Nunn. 2011. “Fertility and the Plough.” American Economic Review Papers and Proceedings 101: 499-503.
We establish an inverse relationship between family ties, generalized trust and political participation. The more individuals rely on the family as a provider of services, insurance, transfer of resources, the lower is civic engagement and political participation. The latter, together with trust, are part of what is known as social capital, therefore in this paper we contribute to the investigation of the origin and evolution of social capital over time. We establish these results using within country evidence and looking at the behavior of immigrants from various countries in 32 different destination places.