September, 15th - Cristina Bratu (visiting @DEMM)

Firm productivity and immigrant - native earnings disparity

We study the role of firm productivity in explaining earnings disparities between immigrants and natives using population-wide matched employer-employee data from Sweden. We find substantial earnings returns to working in firms with higher persistent productivity, with greater gains for immigrants from non-Western countries. Moreover, the pass-through of within-firm productivity variation to earnings is stronger for immigrants in low-productive, immigrant-dense firms. But immigrant workers are underrepresented in high-productive firms and less likely to move up the productivity distribution. Thus, sorting into less productive firms decreases earnings in poor-performing immigrant groups that would gain the most from working in high-productive firms.

 

September, 22nd - Anita Quas (Università di Milano)

The Role of Governmental Venture Capital in the Regional Ecosystem of Innovative Start-ups

This paper analyses the impact of government venture capital (GVC) intervention on a number of features of regional ecosystems for innovative start-ups, including the availability of private VC investments, entrepreneurial activity, employment growth and innovation. Focussing on 11 European countries in the 2003-2020 period, we find a positive relationship between GVC activity and PVC activity at the regional (NUTS2) level, which is especially strong when a region has set up its own regional GVC programme. Instead, we find that the GVC activity organized by national governments are more effective when it comes to spur regional entrepreneurial activity and sustain regional employment, especially in science and technology. We do not find distinctive effect for EU-level GVC initiatives, probably due to their very recent introduction. These results provide relevant insights into how policymakers could design GVC initiatives, with the ultimate goal of effectively support innovative start-ups.

 

October, 13th - Daniele Checchi (Università di Milano)

Hours Inequality

The vast literature on earnings inequality has so far largely ignored the role played by hours of work. This paper argues that in order to understand earnings dispersion we need to consider not only the dispersion of hourly wages but also inequality in hours worked as well as the correlation between the two. We use data for the US, the UK, France, and Germany to examine the evolution of hours inequality and of the correlation between individual hours and wages, and assess their contribution to recent trends in earnings inequality. We find that, other than in the US, hours inequality is an important force, which has changed over the period under analysis (1990-2016). The elasticity of hours with respect to wages has also played a key role in the European economies. This elasticity used to be negative, thus tending to reduce inequality as those with lower hourly wages worked longer hours, but has increased over the past decades, becoming nil or positive, and hence eroding an important equalizing force. The paper examines which are the potential causes behind the change in the elasticity, notably the role of trade and labour market institutions.

 

November, 3rd - Domenico Massaro (Università di Milano)

The Impact of Growth on the Transmission of Patience

Patience affects economic growth, no news. This paper investigates the opposite causal relationship, i.e., how growth influences patience. We propose a simple theoretical framework where heterogeneous parents may choose to transmit their cultural trait - patience - to their offspring. Our model shows that parental effort to educate children to patience positively depends on economic growth. We test empirically this result using both country-level and individual data and show that, coherently with the model's prediction, growth has a significant impact on the effort to teach patience.

 

November, 17th - Lorenzo Zirulia (Università di Milano)

Social innovation as the community provision of public goods

The aim of this paper is to develop a model to analyze social innovation as the community provision of a group-specific public good. On the “demand” side, we interpret social innovation as an imperfect substitute for a “traditional” group-specific public good, produced by the government and financed by taxes. On the “supply side”, social innovation is co-produced by “suppliers” (social innovators) and “consumers” (the members of the target group) with the former being motivated by altruism in favor of the target group. Therefore, the social aspect in our view of social innovation appears both in individual preferences and in production function of social innovation, consistently with the extant literature.

 

December, 1st - Simona Gamba (Università di Milano)

Spillovers of pharmaceutical Price Regulations: evidence from the AMNOG reform in Germany

In years of growing pharmaceutical spending, regulators have exerted substantial effort in reducing the impact of this tendency. As part of their strategy, several countries have introduced External Reference Pricing (ERP). This is a mechanism through which the domestic price is linked to a benchmark price, based on publicly available pricing data from a number of foreign countries where a price has already been set. This creates potentially complex mechanisms of strategic interaction at the international level. The focus of this paper is on the spillover effects of the introduction of ERP in one country, and specifically on the impact on early adopters. We use a simple theoretical model to show that the introduction of ERP in one country may increase prices in those countries that adopt the new drug before that country and are included in its reference basket. Our empirical analysis uses a dataset of 73 cancer drugs in 21 countries, and exploits the introduction of ERP in Germany in 2011 as part of the AMNOG bill. The results confirm our theoretical predictions, thus showing that the introduction of ERP in one country may have relevant spillover effects, with the size of price increases estimated to be between 8% and 13%.

 

December, 15th- Carlo Fiorio (Università di Milano)

One step forward and three steps back: pros and cons of a flat tax reform

We use a rich administrative dataset on individual tax returns from 2008 to 2015 to analyse the behavioural and distributive effects of a flat tax (FT) reform introduced in 2011 for residential property income in Italy replacing the progressive personal income tax. Linking a panel of individual tax data with cadastral property records, and using a difference-in-difference identification strategy, we address five research questions: (i) does a FT increase the probability of declaring a positive rental income to the tax authorities? (ii) does the FT increase the declared tax base? (iii) is the reduced tax burden shared with the tenant? (iv) does the FT affect the overall tax revenue? (v) who are the gainers of the policy? The estimated intention-to-treat effects suggest that the decrease of tax evasion is limited whereas tax reduction is large, it is not shared with tenants and it mostly benefits top-income taxpayers. Overall, top 1% of property owners reap about 20% of the overall lost tax revenues.