Working Papers

The Role of Market Structure and Timing in Determining VAT Pass-Through, 2021, pdf, previous version
  Joint with A.Copestake
We examine the role of market characteristics and timing in explaining observed heterogeneity in VAT pass-through. 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 important roles for product market regulation and product quality, and little impact of advance announcement of reforms. Our findings have important implications for policy-makers considering VAT rate adjustments, by illuminating which of the consumers or the producers would experience the brunt of a reform across different settings.

Digitalization to improve tax compliance: evidence from VAT e-invoicing in Peru, 2020, pdf, previous version, Revise and Resubmit at JPubE
  Joint with E.Dabla-Norris, S.Khalid, and F.Lima
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.

Household Consumption Volatility and Poverty Risk: Case Studies from South Africa and Tanzania, 2020, pdf
  Joint with C.Pizzinelli and R.Perrelli
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.

Regional Growth Spillovers in Sub-Saharan Africa, 2018, pdf
  Joint with F.Arizala and M.MacDonald
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 liberalization and inequality: a dynamic model with worker and firm heterogeneity, 2018, pdf
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.

The characteristics of worker flows by firm growth: empirical evidence from a matched firm-worker dataset from France, 2016, pdf
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%.

Reallocation, industry structure and the effects of banking deregulation, 2016, pdf
  Joint with J.Vogel and J.Nosal
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.