Seminars

Lunch Seminar: Fernando Alvarez - University of Chicago

September 15, 2017
1:00 pmto2:00 pm

Random Risk Aversion and Liquidity: A Model of Asset Pricing and Trade Volumes

Burhanettin Kuruscu - University of Toronto

November 13, 2017
5:00 pmto6:30 pm

Use It or Lose It: Efficiency Gains from Wealth Taxation (with Fatih Guvenen, Gueorgui Kambourov, Sergio Ocampo-Diaz and Daphne Chenk)

Abstract:
This paper studies the quantitative implications of wealth taxation (tax on the stock of wealth) as opposed to capital income taxation (tax on the income flow from capital) in an overlapping-generations incomplete-markets model with rate of return heterogeneity across individuals. With such heterogeneity, capital income and wealth taxes have opposite implications for efficiency and some key distributional outcomes. Under capital income taxation, entrepreneurs who are more productive, and therefore generate more income, pay higher taxes. Under wealth taxation, on the other hand, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity, which expands the base and shifts the tax burden toward unproductive entrepreneurs. This reallocation increases aggregate productivity and output. In the simulated model calibrated to the US data, a revenue-neutral tax reform that replaces capital income tax with a wealth tax raises welfare by about 8% in consumption-equivalent terms. Moving on to optimal taxation, the optimal wealth tax is positive, yields even larger welfare gains than the tax reform, and is preferable to optimal capital income taxes. Interestingly, optimal wealth taxes result in more even consumption and leisure distributions (despite the wealth distribution becoming more dispersed), which is the opposite of what optimal capital income taxes imply. Consequently, wealth taxes can yield both efficiency and distributional gains.

Nicoleta Ciurila - University of Amsterdam

September 20, 2017
1:00 pmto2:00 pm

How Should Pension Benefits Be Linked to Contributions in Pay-as-you-go Pension Systems?

Abstract:
I compare in terms of macroeconomic outcomes and welfare the current US pension system with the three most widespread types of pension benefit arrangements: i) a flat benefit (FL) system that pays the same pension regardless of the amount of previous contributions, ii) a notional defined contribution (NDC) system in which benefits are based on previous accrued contributions and iii) a defined benefit (DB) system in which pensions are a constant replacement rate times the average life-time earnings. I show that the current US system imposes an implicit tax on continuing to work after the early retirement age that distorts labor supply at the extensive margin substantially. This outweighs the insurance against idiosyncratic shocks provided by the fact that the replacement rate decreases with average lifetime earnings under the current US pension system. Overall, the steady state of the economy with the US pension system is the worst performing in terms of welfare. Welfare is the highest in the steady state with the FL pension system due to the better insurance provided by the system, although labor supply distortions are higher, mainly at the intensive margin. In the case of a higher contribution rate such as the one prevailing in the Italian pension system, the FL system still provides the highest welfare, but the difference compared to the NDC and the DB system is considerably smaller. This is because a higher contribution rate imposes higher labor supply distortions. The NDC and the DB systems are similar in terms of macroeconomic outcomes and welfare. However, the DB system provides a slightly higher labor supply, less insurance against shocks and a slightly higher welfare than the NDC system.

Maria Polyakova - Stanford University

March 29, 2018
4:45 pmto6:00 pm

TBA

Bård Harstad - University of Oslo

April 30, 2018
4:45 pmto6:00 pm

TBA

Mark L. Egan - Harvard Business School

May 17, 2018
4:45 pmto6:00 pm

TBA

Lunch Seminar: Francesco D’Amuri - Banca d’Italia

October 18, 2017
1:00 pmto2:00 pm

Aging Workforce, Pension Reform, and Firm’s Dynamics (with Francesca Carta and Till von Wachter)

Abstract:
We exploit unique employer-employee data combined with balance sheet information covering 4000 Italian firms for the period 2005-2015 to analyze the short-run impact of a higher retirement age on: i) turnover and wages of workers of different age classes, ii) capital and iii) productivity levels. To obtain exogenous firm-level variation in the shares of elderly workers we exploit an unanticipated pension reform taking place in 2012 and restricting public pension eligibility criteria in different ways for workers belonging to different demographic groups. We find that the increase in the number of elderly workers has a positive impact on employment levels of workers of other age classes, confirming the presence of complementarities already found in studies carried out at more aggregate levels. Turning to wages, the increased supply of elderly workers implies a reduction in their daily pay, but has no impact on compensation for the rest of the workforce. Finally, an ageing workforce is associated in the short run to an increase in total capital and productivity levels, but a reduction in their per-worker amounts.

Salome Baslandze - EIEF

October 2, 2017
5:00 pmto6:30 pm

Connecting to Power: Political Connections, Innovation, and Firm Dynamics (with Ufuk Akcigit and Francesca Lotti)

Abstract:
Do political connections affect firm and industry dynamics? We study the Italian firms and their workers to answer this question. Our analysis uses a brand-new data spanning the period from 1993 to 2014 where we merge: (i) firm-level balance sheet data, (ii) universe of social security data on workers, (iii) patent data from the European Patent Office, (iv) registry of local politicians, and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that the industries with more politically connected firms feature worse firm dynamics. Market leaders are much more likely to hire a politician and less likely to innovate, compared to their competitors. In addition, connections relate to higher survival and growth in employment and sales but not in productivity. We build a firm dynamics model where we allow firms to invest in innovation and/or rent-seeking to advance their productivity and to overcome regulatory or bureaucratic burden. The model highlights an interaction between static gains and dynamic losses from rent-seeking for aggregate productivity.

David Austen-Smith - Northwestern University

May 14, 2018
4:45 pmto6:00 pm

TBA

Aleh Tsyvinski - Yale University

September 25, 2017
5:00 pmto6:30 pm

Generalized Compensation Principle