Working papers results

Recent developments in endogenous growth theory suggest fertility decline in the context of the demographic transition was crucial for achieving long-term growth, and that it was triggered by forces eminently economic in nature. It is then somewhat puzzling that France, which was not as industrialised as other parts of Europe, lead that decline. Taking advantage of the considerable internal heterogeneity, this paper looks within France for some answers. Using dpartement level data for the last quarter of the nineteenth century, it studies the correlates of fertility estimating a 2SLS fixed-effects model. Results confirm the importance of some of the forces suggested by standard fertility choice models. Nevertheless, certain non-economic factors (such as secularisation) -for which I provide new measurements- also explain part of the variation. Spatial dependence turns out as well to be significant in all specifications of the model, suggesting some sort of diffusion was indeed taking place.

This paper brings the French case into the current debate on Malthusian dynamics in early modern times. In particular, it studies the long-term evolution of aggregate variables, showing that nineteenth century France was hardly a Malthusian world in a strict sense. Homeostasis was maintained throughout the century and there were signs of a strong positive check, but if there was some sort of preventive check, this was not 'written in stone'. The results of both cointegrated VAR and short-run analysis grant a reading where departure from the Malthusian world (if there ever was one) is due to a secular change in the relationship between income, marriages, and births. If this interpretation is correct, the fertility decline was instrumental in the sustained decline in mortalit1y during the century.

Differences in college enrollment rates between poor and rich students are a prevalent phenomenon, but particularly striking in Latin America. The literature suggests explanations such as differences in "college preparedness" on the one hand, in that poor students lack skills that enable them to benefit from college, and "credit constraints" on the other hand. One explanation that has been neglected in this analysis consists of differences in information sets between the poor and the rich - for example about career opportunities-translating into different perceptions of individual returns to college. Data on people's subjective expectations of returns allow to take this factor into account and to directly address the following identification problem: conditional on their information sets poor people might expect low returns and thus decide not to attend. Or they might face high (unobserved) costs that prevent them from attending de-spite high expected returns. Conventional approaches rely on strong assumptions about people's information sets and about how they form expectations to address this identification problem.

Data on people's subjective expectations of returns as well as on their schooling decisions allow me to directly estimate and compare cost distributions of poor and rich individuals. I find that poor individuals require significantly higher expected returns to be induced to attend college, implying that they face higher costs than individuals with wealthy parents. I then test predictions of a model of college attendance choice in the presence of credit constraints, using parental income and wealth as a proxy for the household's (unobserved) interest rate. I find that poor individuals with high expected returns are particularly responsive to changes in direct costs, which is consistent with credit constraints playing an important role. Evaluating potential welfare implications by applying the Local Instrumental Variables approach of Heckman and Vytlacil (2005) to my model, I find that a sizeable fraction of poor individuals would change their decision in response to a reduction in direct costs. Individuals at the margin have expected returns that are as high or higher than the individuals already attending college, suggesting that government policies such as fellowship programs could lead to large welfare gains.

The currently available empirical evidence shows remarkable differences between various estimates of the effects on U.S output of an exogenous shift in Federal tax liabilities. Shocks identified via the narrative method, imply a multiplier of about three over . an horizon of three years. Tax shocks identified in fiscal VAR models deliver a much smaller multipier of about one. Is this heterogeneity real, or is it simply the result of different approaches to the identification of exogenous shifts in taxes? Or of different specifications of the empirical model used to estimate the tax multiplier? In this paper we reconcile this apparently contradictory evidence by showing that the large multiplier obtained via the narrative identification methods are generated by the choice of a limited information approach in their estimation and not by the different nature of the shocks. Using the shocks identified by a Narrative methods in a multivariate dynamic model delivers estimates of the tax multiplier very much in line with those obtained in the traditional fiscal VAR approach.

This paper documents the existence of a slowly evolving trend in the dividendprice ratio, dpt , determined by a demographic variable, MY : the middle-aged to young ratio. Deviations of dpt from this long-run component explain transitory but persistent fluctuations in stock market returns. The relation between MY and dpt is a prediction of an overlapping generation model. The joint significance of MY and dpt in longhorizon forecasting regressions for market returns explain the mixed evidence on the ability of dpt to predict stock returns and provide a model-based interpretation of statistical corrections for breaks in the mean of this financial ratio.

We characterize the boundaries of the set of transfers implementing a given allocation rule without imposing any assumptions on the agent's type space or utility function besides quasi-linearity. In particular, we characterize the pointwise largest and the pointwise smallest transfer that implement a given allocation rule and are equal to zero at some prespecied type (extremal transfers). Exploiting the concept of extremal transfers allows us to obtain an exact characterization of the set of all implementable allocation rules (the set of transfers is non-empty) and the set of allocation rules satisfying Revenue Equivalence (the extremal transfers coincide).

Furthermore, we show how the extremal transfers can be put to use in mechanism design problems where Revenue Equivalence does not hold. To this end we rst explore the role of extremal transfers when the agents with type dependent outside options are free to participate in the mechanism. Finally, we consider the question of budget balanced implementation. We show that an allocation rule can be implemented in an incentive compatible, individually rational and ex post budget balanced mechanism if and only if there exists an individually rational extremal transfer scheme that delivers an ex ante budget surplus.

This paper uses a quasi-experimental strategy to disclose utterly political reasons behind the allocation of intergovernmental transfers in a federal state. We apply a regression discontinuity design in close elections to identify the effect of political alignment on federal transfers to municipal governments in Brazil. We find that municipalities where the mayor is affiliated with the coalition of the Brazilian President receive larger (discretionary) infrastructure transfers by about 40% in preelection years. This effect is mainly driven by the fact that the federal government penalizes municipalities run by mayors from the opposition coalition who won by a narrow margin, thereby tying their hands for the next election.