Working papers results
facilitated the introduction of structural reforms, defined as deregulation
in the product markets and liberalization and deregulation in the labor
markets. After reviewing the theoretical arguments that may link the
adoption of the Euro and structural reforms, we investigate the empirical
evidence. We find that the adoption of the Euro has been associated with
an acceleration of the pace of structural reforms in the product market.
The adoption of the Euro does not seem to have accelerated labor market
reforms in the "primary labor market;" however, the run up to the Euro
adoption seems to have been accompanied by wage moderation. We also
investigate issues concerning the sequencing of goods and labor market
reforms.
two alternative theories - children as consumption vs. investment good. We use
as a natural experiment the Italian pension reforms of the 90s that introduced a clear
discontinuity in the treatment across workers. This policy experiment is particularly
well suited, since the consumption motive predicts lower future pensions to reduce
fertility, while the old-age security to increase it. Our empirical analysis identifies
a clear and robust positive effect of less generous future pensions on post-reform
fertility. These findings are consistent with old-age security even for contemporary
fertility.
ex-ante optimality requires intergenerational risk sharing. We compare the level
of time-consistent intergenerational risk sharing chosen by a social planner and by office
seeking politicians. In the political setting, the transfer of resources across generations
- a PAYG pension system - is determined as a Markov equilibrium of a probabilistic
voting game. Negative shocks represented by low realized returns on the risky asset
induce politicians to compensate the old through a PAYG system. Unless the young are
crucial to win the election, this political system generates more intergenerational risk
sharing than the (time consistent) social optimum. In particular, these transfers are
more persistent and less responsive to the realization of the shock than optimal. This is
because politicians anticipate their current transfers to the elderly to be compensated
through offsetting transfers by future politicians, and thus have an incentive to overspend.
Perhaps surprisingly, aging increases the socially optimal transfer but makes
politicians less likely to overspend, by making it more costly for future politicians to
compensate the current young.
We develop and estimate a medium scale macroeconomic model that allows for unemployment
and staggered nominal wage contracting. In contrast to most existing quantitative models,
employment adjustment is on the extensive margain and the employment of existing workers is
efficient. Wage rigidity, however, affects the hiring of new workers. The former is introduced
via the staggered Nash bargaing setup of Gertler and Trigari (2006). A robust finding is that
the model with wage rigidity provides a better description of the data than does a flexible wage
version. Overall, the model fits the data roughly as well as existing quantitative macroeconomic
models, such as Smets and Wouters (2007) or Christiano, Eichenbaum and Evans (2005). More
work is necessary, however, to ensure a robust identification of the key labor market parameters.
and productivity growth in the Italian manufacturing industries in 1995-2003.
Our results indicate that the off-shoring of intermediates within the same
industry (narrow off-shoring) is beneficial for productivity growth, while
the off-shoring of services is not. We also find that the way in which off-
shoring is measured may matter considerably. The positive relation between off-
shoring of intermediates and productivity growth is there with our direct
measures based on input-output data but disappears when either a broad measure
or the Feenstra-Hanson off-shoring measure employed in other studies are used
instead.