Research Papers

The literature studying the macroeconomics of weather has focused on temperature and precipitation annual averages, ignoring their distributions over space and time. We construct hundreds of variables from high frequency, high spatial resolution weather measurements. Using the LASSO, we identify the parsimonious subset of variables that can best explain GDP and key macro-fiscal variables. We find that an increase in the occurrence of high temperatures and droughts, and scarcer mild temperatures reduce GDP. These variables substantially improve the share of GDP variations explained by weather. Additional evidence suggests that fiscal policy mitigates these shocks.

Our study uses administrative data on firm-to-firm transactions and quasi- experimental variation in the rollout of electronic invoicing reforms in Peru to study the diffusion of e-invoicing through firm networks and its effect on tax compliance. We find that voluntary e-invoicing adoption is higher amongst firms with partners who have been mandated to adopt e-invoicing, implying positive technology adoption spillovers. Spillovers are stronger from downstream partners and from export-oriented firms, consistent with incentives in the VAT system. Trading partners of firms who have been mandated to adopt e-invoicing report lower taxable purchases. Transaction-level data suggests that this decline comes from the termination of firm-supplier relationships. Lower purchases result in lower VAT credits, and higher VAT payments following the reform, suggesting positive tax compliance spillovers.

We investigate the substantial variation in the extent to which a rise in value-added tax (VAT) is passed on to consumers. We first extend existing theory to characterize the roles of imperfect competition and product differentiation, then investigate these relationships empirically using a panel of 14 Eurozone countries between 1999 and 2013. We find that consumers pay a larger share of VAT increases when producers face more competitive upstream markets: the higher tax reduces final demand, but this lower demand does not in turn reduce input prices as much when upstream markets are competitive. Greater scope for quality differentiation also increases pass-through, by reducing the relative price elasticity of demand.

This paper examines the impact of switching from paper to e-invoicing on firm tax compliance and performance using quasi-experimental variation in the roll-out of VAT e-invoicing in Peru. We find that e-invoicing increases reported firm sales, purchases and value added by over 5 percent in the first year after adoption. The impact is concentrated among small firms and sectors with traditionally higher rates of noncompliance, suggesting that e-invoicing enhances compliance by lowering compliance costs and strengthening deterrence. The reform's positive effects on tax collection are hindered by shortcomings in the VAT refund mechanism in Peru, suggesting that digital tools such as e-invoicing should be complemented by other reforms to improve revenue collection.

Economic volatility remains a fact of life in Sub Saharan Africa (SSA). Household-level shocks create large consumption fluctuations, raising the incidence of poverty. Drawing on micro-level data from South Africa and Tanzania, we examine the vulnerability to shocks across household types (e.g. by education, ethnic group, and economic activity) and we quantify the impact that reducing consumption volatility would have on aggregate poverty. We then discuss coverage of consumption insurance mechanisms, including financial access and transfers. Country characteristics crucially determine which household-level shocks are most prevalent and which consumption-smoothing mechanisms are available. In Tanzania, agricultural shocks are an important source of consumption risk as two thirds of households are involved in some level of agricultural production. For South Africa, we focus on labor market risk proxied by transitions from formal employment to informal work or unemployment. We find that access to credit, when available, and government transfers can effectively mitigate labor market shocks.

This paper documents the steady increase in intraregional trade in sub-Saharan Africa since 1980, links this rise to important growth spillovers in the region, and identifies the main source countries and those most vulnerable to the economic conditions of others. Estimates show that in the short run, positive idiosyncratic shocks to regional trading partners’ growth significantly increase growth in the average sub-Saharan African country, while in the long-run the annual impact of growth in regional trading partner’s is smaller in magnitude. Policy implications including the need to support further continent-wide integration and the associated growth spillovers are discussed. Actions policymakers in sub-Saharan Africa can take to capture the benefits of these spillovers, while limiting exposure to the associated risks, are also proposed.

Trade liberalizations are associated with higher wage inequality, but nearly the entire related literature is silent about the transition process. I address these limitations by developing a micro-founded model highligthing the reallocation dynamics between heterogeneous firms and workers. On the transition path following a trade reform, expanding high-paying exporters benefiting from new opportunities abroad increase wages to recruit better workers faster. Increased competition leads domestic firms’ workers to accept wage cuts to delay their employers’ exit and keep their job. I provide micro-empirical evidence supporting the main novel mechanisms. Results from the calibratedmodel suggest an overshooting response of inequality.

This paper investigates the effects of firm growth on hiring and separations and contributes to the literature on worker flows by studying the wages and characteristics of new and separated workers. First, I show that separations are an essential and robust component of firm growth. I argue that this may be the result of a more intense search for better matches at faster growing firms. Second, I find that wage offers to new hires increase with firm hiring rates. This is partly the result of the selection of more experienced workers. However fixed unobservable and variable observable worker characteristics cannot fully explain this relationship: the residual wage of new hires is significantly associated with the firm hiring rate. We interpret this as direct evidence of the firm-level upward-sloping labor supply curve predicted by the canonical models. We provide estimates of the slope of the curve using an instrumental variable approach to control for supply shocks. We find that a 10% increase in the hiring rate results in a wage increase of 1%.

What is the contribution of industry reallocation and productivity changes to the economic gains resulting from banking deregulation? How does local industrial structure determine the outcomes of banking deregulation? This study uses the staggered reforms of the banking sector in the U.S. between 1977 and 1997 to empirically investigate these questions. In the private sector, we show that the deregulation-induced reallocation of workers was directed towards industries with lower GDP per worker. Moreover, employment gains were associated with a reduction in productivity. Nevertheless we find that these effects are offset by across the board within-industry productivity gains. In addition, total output and aggregate productivity increased because of the reallocation of workers out of unemployment, self-employment and non-private industries towards the more productive private sector. Finally we find that initial industry mix can explain up to one third of the variation in state aggregate responses.