Highlights
WP 12/05
Fabiano Schivardi in “Export and Wages: Rent Sharing, Workforce Composition or Return to Skills?”, with Mario Macis, exploits the large and unexpected devaluation of the Italian lira in 1992 to explore the relationship between exports and wages. By using matched employer-employee data he could distinguish between workforce composition effects, changes in the market value of workers’ unobservable skills and an actual export wage premium enjoyed by workers above and beyond what they would get in non-exporting firms. The results indicate that the increase in the export shares induced by the 1992 devaluation did cause wages to rise and that this effect was due to both exporting firms paying a wage premium (“rent-sharing” effect) and to changes in the market value of workers’ unobservable skills (“skill composition” effect). The paper documents that the former is larger for workers with more export-related experience and that the latter only emerges when the value of individual skills is allowed to differ in the pre- and post-devaluation periods. Both findings represent novel contributions to the literature on the effects of international trade on wages.
WP 12/04
Luigi Guiso in “Household Finance. An Emerging Field”, with Paolo Sodini, surveys the fast-growing research in household finance and explains why the study of how households use financial markets to achieve their objectives has attracted a lot of attention over the last decade and gained the status of an independent field in financial economics. He stresses three reasons. First, the size of financial services and products used by households has grown larger than that of corporate finance in many advanced countries. Second, newly available rich and comprehensive data on household finance have given impulse to research in this area, allowing to investigate issues that could not be studied before. Finally, the increased complexity of the products that households face in financial market paired with a documented lack of financial sophistication by many households raises concerns about households ability to cope with financial decisions. This challenges existing regulatory frameworks aimed at protecting households from making mistakes and from being exploited by intermediaries aware of their un-sophistication.
WP 12/03
Valentino Dardanoni in “Incentive and Selection Effects of Medigap Insurance on Inpatient Care”, with Paolo Li Donni, studies the Medigap insurance market in the United States. The Medicare program, which provides insurance coverage to the elderly, does not protect them fully against high out-of-pocket costs. Therefore private supplementary insurance (Madigap) has been available to cover Medicare gaps. The paper estimates how much the utilization of inpatient care is affected by Medigap, separating its incentive and selection effects. To this aim two alternative estimation methods are used: a standard recursive bivariate probit and a discrete multivariate finite mixture model, proposed by the authors. Using data from the Health and Retirement Survey, they find that estimated incentive effects are modest and quite similar across models: individuals who buy Medigap insurance increase, on average, their probability of having an inpatient stay by 4 percentage points. They also find a substantial degree of selection in the market, driven mainly by two residual heterogeneity variables capturing attitude to buy insurance and health care utilization. The latter result points out that Medigap is an insurance market with substantial multidimensional residual heterogeneity and heavy cross-subsidization of high risk types at the expense of low risk ones.
WP 12/02
Luigi Guiso in “Democratization and Civic Capital”, with Paolo Pinotti, using historical data on democratization and voting turnout in Italy, documents that prior to the 1912 franchise electoral turnout was higher in the South than in the North of Italy. They find that the 1912 franchise led to a decrease in the participation in political elections that was much larger in the South than in the North to the point that a reversal emerged and the gap has since never been bridged. These findings suggest that a process of democratization through the concession of voting rights to a larger segment of the population does not lead to higher political participation if the beneficiaries of the new rights lack, as people in the South did, the civic culture necessary to exert them. Moreover, concession of voting rights seems unlikely to develop a civic culture, as the gap between the two areas of the country has never been filled even after decades of democratic rights.
WP 12/01
Giancarlo Spagnolo in “Reputation, Competition, and Entry in Procurement” reviews some recent research of his with other co-authors aimed at better understanding the role of long-term relationship and reputational mechanisms in procurement. He focuses on how these forces interact with supplier competition, entry, buyer’s discretion and the regulatory framework. Public procurement is particularly interesting because – besides sharing the governance problems of private procurement - it is highly regulated for accountability reasons. For instance in Europe regulation constraints the use of past performance information to select contractors while in the US this use is encouraged, though there is a lively debate on whether this behavior reduces the ability of new contractors to enter the market. The paper presents some novel evidence on the benefits of allowing buyers to use reputational indicators based on past performance and concludes reporting preliminary results from a laboratory experiment showing that reputational mechanisms can be designed to stimulate rather than to hinder new entry.