ABSTRACT. Public infrastructure projects like roads and schools have been regarded as drivers of development, yet developing democracies systematically fail to deliver such investments, and half-finished projects are a common issue. Using a novel database of over 75,000 small development projects in Brazil, we estimate that more than 40% of projects that start are never completed. Employing a close races regression discontinuity design on Brazilian mayoral elections, we find that turnover negatively impacts the delivery of projects inherited in a construction stage, while causes positive responses on the execution of more recent projects. We argue that our results are consistent with a theory linking project non-conclusion to electoral incentives, where inefficiencies on project procurement are driven by a credit-claim dynamics that disincentives the conclusion of works inherited from the opposition. Our findings highlight the importance of insulating policies from the electoral process in local politics.

ABSTRACT. Our goal is to understand the role of teacher’s beliefs towards cognitive/non-cognitive skills on their task allocation and to also understand the impact of task allocation on students’ outcomes. We collected data on 84 municipal schools in Rio de Janeiro, 168 3rd and 4th-grade teachers and 3,500 students. We created an instrument to measure teacher's teaching task allocation and their beliefs on the importance of cognitive/non-cognitive skills. We conducted a randomized control trial in which half of teachers received text messages about the importance of socioemotional skills. We are able to show that this intervention had a positive and significant effect on teacher's belief, which lead teacher to increase their socioemotional investments in about 6\%, in comparison to control teachers. Also, treatment had a direct positive impact on students’ socio-emotional skills.

ABSTRACT. How does the presence of organized crime affects the intensity of the COVID-19 epidemic? Rio de Janeiro is the perfect laboratory to answer such an overlooked question because two distinct types of criminal organizations operate in its territory. First, there are drug trafficking gangs comprised of slum dwellers. Second, there are the milícias, paramilitary groups with links to the police, usually financed by extortion. We estimate two-way fixed effects models comparing the number of cases (deaths) caused by Severe Acute Respiratory Syndrome (SARI) before and after the COVID-19 outbreak in neighborhoods with and without the presence of organized crime. We document two findings. First, the number of SARI deaths in neighborhoods controlled by gangs increased 43% less than in areas without any form of organized crime. In neighborhoods controlled by milícias, however, this outcome increased $29\%$ more than areas without any form of organized crime. We find similar effects for SARI hospitalizations. These results are robust to various specifications. Overall, our results show that the reaction of organized crime to a public health crisis depends on its form of criminal governance.

ABSTRACT. Business and financial cycles in the euro area are highly attuned. We develop a macroeconomic model in which banks play a central role as providers of credit to households, businesses, and other nonbank financial institutions. The model generates countercyclical default rates and procyclical recovery rates on loans. We fit the model to European data and find that shocks that originate in the financial sector account for the bulk of fluctuations in economic and financial activity.

ABSTRACT. What are the aggregate effects of reducing informality in a financially constrained economy? This paper answers this question by developing and calibrating an entrepreneurship model to data on matched employer-employee from both formal and informal sectors in Brazil. The model distinguishes between informality on the business side (extensive margin) and the informal hiring by formal firms (intensive margin). We find that when informality is eliminated along both margins, aggregate output increases by 7.2%, capital by 13.7%, and TFP by 3.5%. The output and TFP increases would be a factor of 1.4 and 1.9 larger if informality were only eliminated on the extensive margin, a result that supports the view that, in an economy with financial frictions, the informal economy can play a positive role by diminishing the negative effects of costly regulations and institutions on the economy. Finally, we find dramatic differences in the cost of financing social security in our baseline model economy relative to an economy with no frictions.

ABSTRACT. Traditionally, much has been written about the effects of FX (foreign exchange) sterilized interventions on exchange rates, both theoretically and empirically, with mixed results. More recently, the international finance literature has tried to explain the deviations from the well-known Covered Interest Parity (CIP) condition that have, since the 2008 Great Financial Crisis, arisen among advanced economies currencies. Here, we originally merge these two strands of the literature by analyzing the effects of sterilized FX interventions on the CIP (Covered Interest Parity) deviation. Our sample is composed of Brazilian Central Bank FX interventions between 2009 and 2020. This period contains a major program of announced FX interventions in response to the Taper Tantrum, in 2013, which has already been shown to have significantly affected the level of the exchange rate (Chamon, Garcia, and Souza (2017)). To gauge the effects, we build a counterfactual employing the ArCo methodology, developed by Carvalho, Masini, and Medeiros (2018), and also make use of \cite{jorda2005estimation} Local Projections. The results indicate that selling US dollars in the futures market increases CIP deviations while buying US dollar futures has the opposite effect. Offering US dollar repo credit lines points to a short-lived decrease in the deviation. The number of sterilized sales or purchases of spot currency seems not to be high enough to lead to conclusive results.

ABSTRACT. The underrepresentation of women in male-dominated fields of study can generate a lack of role models for female students, which may influence their career choices. This paper sheds light on this question, investigating the existence of impacts of the gender composition of instructors and peers in the Department of Economics from a selective Brazilian university. Specifically, we analyze whether having higher shares of female professors and classmates throughout undergraduate studies in Economics affects female students' labor market outcomes. We use comprehensive administrative data from the University of Sao Paulo, containing information on students' academic results and students', instructors', and course-sections' characteristics. We merge this data with Brazilian labor market and firm ownership data to obtain a broad range of career outcomes, including labor force participation, occupational choices, career progression, and wages. To overcome endogeneity issues arising from the self-selection of students into professors and peers, we exploit the random assignment of students in the first semester classes and focus on mandatory courses. A higher representation of women in a male-dominated field, such as Economics, increases female students' labor force participation. Moreover, larger female faculty shares increase the probability that a female student becomes a top manager. These results suggest ways to counteract the highly discussed glass-ceiling in high-earning occupations. We show that students' academic performance and elective course-choice are not driving the effects. Instead, we find suggestive evidence that higher shares of female classmates may increase the likelihood of working during undergraduate studies, leading to stronger labor market attachment.

ABSTRACT. Affirmative action initiatives in higher education have been implemented to improve access of vulnerable groups and to reduce inequality in educational attainment. A growing empirical literature has investigated how such policies impact college students’ outcomes and pre-college human capital accumulation. Yet, little is known about how they affect students’ choice of high school and, consequently, future outcomes related to this decision. I study this question in the context of Brazil, one of the most unequal countries in the world, and where the government approved, in 2012, the "Quota Law (QL)”. It established that fifty percent of all vacancies in each major and federal higher education institution, including some of the best universities in the country, has to be reserved to students that attended secondary education integrally in a public school. I show that the adoption of QL increases strategic mobility from private to public schools by as much as 34 to 43% percent and that the movers come disproportionately from low-SES and low-quality private schools. Furthermore, strategizing seems a costly decision, as students move to schools that are 1.1 standard deviations poorer and 0.77 standard deviations worse in average performance. In spite of that, the overall effect of QL on persistence rates of private school students is positive and driven by the movers, suggesting either a change in effort level or a better match between students and schools.

ABSTRACT. This article studies out-migration following drought shocks in the Brazilian semiarid region. We build a municipality-level panel of migration rates covering the period of 1975-2010, based on decennial Demographic Census data. Drought shocks are found to increase out-migration, especially in the early periods of our sample. Additional analysis suggests financial constraints as possible mechanisms behind these results, as municipalities with higher eligibility for social security benefits migrate less in extreme drought events. However, we find no evidence of lesser out-migration in municipalities with a larger provision of financial services.

ABSTRACT. Mergers and Acquisitions can increase the monopsony power of firms and potentially affect workers’ wages and employment. In this paper, we analyze the effects of retail pharmacy mergers on labor market outcomes in Brazil. Using employer-employee matched data set between 2007 and 2018, we implement a difference-in-differences design where we compare outcomes pre- and post-merger and across local labor markets with differing changes in concentration. We focus on two types of workers employed in pharmacies: pharmacists and salespeople. Our preliminary results show a decrease in relative wages of pharmacists but no effects for salespeople. These results provide guidance to the study of M&A’s in other industries by exposing the importance of disaggregating labor markets into occupations and calculating how mergers change concentration in each of these markets.

ABSTRACT. This paper studies an increasingly popular anti-corruption policy --- corporate debarment or blacklisting --- to understand how both disclosing illicit corporate practices and the sanctions for these practices affect firm and worker outcomes. I exploit a unique policy change in Brazil, implemented in 2014, that imposed stricter penalties for corrupt firms. I combine the universe of firms that were publicly debarred between 2014 and 2016 with detailed matched employer-employee administrative data. Using a matched difference-in-differences approach, I find that debarment is associated with a sizable decline in employment and an increase in the probability of exiting the formal sector. I also document that workers' annual earnings fall by about 26 percent after debarment. The impacts are driven by lost revenues from government contracts. Reputational effects are limited as workers who have previously worked in debarred firms only experience small earnings losses. The results shed light on the costs to workers when their employers are debarred in weighing the consequences of corruption crackdown

ABSTRACT. A significant number of studies have documented the positive and causal relation- ship between innovation inputs - R&D - and outputs - product or process innovation - and labor productivity. A likely implication of this positive relationship is the fact that innovation is likely to be associated with higher wages of more productive firms. This paper explores the relationship between innovation and wages using the Brazil employer-employee census and a novel measure of innovation derived from the share of technical and scientific occupations of workers in the firm. We find a robust and positive wage premium associated to innovative firms. The decomposition of this innovation related wage premium suggest a series of important stylized facts: i) the innovation wage premium is larger for manufacturing but also positive and significant for agriculture and services; ii) it is larger for large firms, but also positive and significant for all firm size categories including micro firms; and iii) it is larger for medium and low skill occupations, although this depends on the use of firm fixed effects. More importantly, the paper explores the causality between innovation and wages, and finds empirical support to the idea of both self-selection" - firms that innovate pay already higher wages before becoming innovator - and increases in wages associated to start innovation activity; which are persistent over 3 years after firms start innovating.

ABSTRACT. Achieving value creation in cross-sector collaborations (CSCs) – involving nonprofit, private, and public organizations – normally require the presence of enfranchised actors that will transfer managerial practices and knowledge to their collaborating parties. As such value created through collaborations with public organizations is socially desirable, CSCs are expected to benefit other stakeholders beyond originally targeted groups. Yet, this may challenge the enforcement of intellectual rights from parties with superior background, especially when counterfactual assessment techniques are used to estimate the causal impacts of transferred performance-enhancing practices. Consequently, allowing for practices replication beyond the initial CSC arrangement may severely distort the assessment of causal impact. Drawing on CSCs in education services, we theorize this dilemma and test it with a randomized control trial assessment. Our findings demonstrate that by acting as boundary spanners the learning-side partners (public managers) internalize and replicate the received practices, thus increasing the performance of nontargeted units under their jurisdiction, even without additional external aid by the transferring-side partner (nonprofit actor) in the replication process. Furthermore, we observe that successful replication of practices is not driven by learning-side resources, which even attenuates the proposed dilemmas in CSCs.

ABSTRACT. Public health procurement is shaped not only by administrative choices but also by judicial decisions that enforce the law on public buyer units. Judicial enforcement is costly for two reasons. First, as mandatory purchases are invariably urgent, it undermines procurement planning. Second, as judicial sanctions for non-compliance are severe, auctioneers have higher incentives to maximize tender success at the expense of higher prices, what we call ‘under the gun’ effect. Unique data on health litigation and procurement of prescription and non-prescription drugs allow us to estimate the overall enforcement costs and the under the gun effect from higher sanctions. Judicial enforcement implies (i) higher negotiated prices (from 30.73% to 44.37%), (ii) fewer participant firms (from 28.63% to 32.21%), (iii) fewer bids (from 39.40% to 45.93%), and (iv) lower probability of success (from 38.56% to 48.66% less probable) in urgent tenders in comparison with ordinary ones. To estimate the under the gun effect, we utilize urgent administrative tenders that are not subject to judicial sanctions. We estimate that judicial sanctions increase prices in between 8.83% to 9.97%. Thus, judicial enforcement compels the executive to carry out the purchases, which generates high costs to the public budget. These results might suggest that judges should consider the social costs associated with the enforcement of court decisions when the judiciary acts as a policymaker.

ABSTRACT. Leaders’ characteristics have been addressed by leadership researchers in order to try to identify how effective is the influence that they have on their followers. This work focus on one of these characteristics, the professional background, in order to verify whether or not the fact of having a background on activities that are typically not aligned with environmental issues impact directly on deforestation levels on a local level. We propose that agribusiness local leader (mayors) lead to a higher economic development than leaders with other professional backgrounds without promoting higher deforestation levels. We used a regression discontinuity design in order to test our hypothesis due to the quasi-randomized characteristics of the municipal elections where agribusiness leaders whether win or lose by close margins. We gathered data from different sources concerning the 760 municipalities in the Legal Amazon region from 1996 to 2016. We found that agribusiness local leaders promote a higher economic development, measured by businesses creation, without promoting more harms to the forest than leaders with other professional backgrounds. We also found support indicating that direct agricultural investments are used as economic incentives and that agribusiness leaders do not influence the creation of municipal legislations concerning environmental issues.

ABSTRACT. This article uses the 1987 reinterpretation of the Section 20 of the Glass-Steagall Act (GSA, 1933) to investigate the conflict of interest in which banks acting as venture capital (VC) general partners (VCGP) pick VC investments to boost their underwriting activity. From 1929 to 1999, commercial banks (CB) could not underwrite securities. Between 1989 and 1999, a subset of CBs had authorization to underwrite corporate securities. Thus, in this interlude, there were authorized and non-authorized CBs. Using dif-in-dif analysis, we find that authorized VCGP reduced investments in first rounds, the number of rounds, and distance from investees, increased syndication and of portfolio firms that exited by means of an IPO. This change in investment policy and success is indicative of conflict of interest.

ABSTRACT. This paper proposes a two-step procedure to back out the conditional alpha of a given stock using high-frequency data. We rst estimate the realized factor loadings of the stocks, and then retrieve their conditional alphas by estimating the conditional expectation of their risk-adjusted returns. We start with the underlying continuous-time stochastic process that governs the dynamics of every stock price and then derive the conditions under which we may consistently estimate the daily factor loadings and the resulting conditional alphas. We also make two contributions to the empirical literature on the conditional CAPM. First, we examine the main drivers of the conditional alphas in the US stock market from 2001 to 2017. Second, we investigate whether these conditional alphas indeed relate to pricing errors by assessing the performance of a long-short trading strategy that bets on the conditional alpha estimates. It not only performs well both in absolute and relative terms, but also exhibits only weak systematic exposure to the usual risk factors.

ABSTRACT. How did trading automation impact broker-dealer firms and workers? While electronic trading platforms have been available for decades, widespread adoption of automated trading mostly occurred after the 2007 major market redesign promoted by the US Securities and Exchange Commission. With the intent of lowering access costs to stock markets, the policy fostered speed-driven competition between exchanges and trading firms. By leveraging several regulatory records to construct a rich linked employer-employee panel of equities traders, I study how employment, profits, and market structure were affected by higher returns to technology upgrading. Using variation in availability of local IT stock in investment firms, I find that automation eliminated 100 trading jobs on average during 2007-2009 for each additional computer per worker existing before SEC’s Regulation National Market System became effective. Through a series of tests, I show that these results are unlikely to be driven by the Great Recession or the rise in online brokerage services.

ABSTRACT. How can a small change in fiscal accountability boost violent disputes for valuable natural resources? In this paper, we investigate a regulation change in Brazil that greatly reduced governmental monitoring capacity against gold laundering and we show how this affected violence in illegal gold-mining sites. We argue that the new regulation introduced in 2013 made it harder for authorities to find transactions of illegal gold between miners and first-buyers. This increased demand for raw illegal gold and in turn boosted violence as dispute for deposits increased in areas where mining is forbidden. To verify this, we gather a unique database combining gold deposits, Indigenous Territories, Natural Conservation Areas, and homicide rates; we then use a difference-in-differences design to find that municipalities more exposed to illegal mining experienced extra 7 homicides per 100,000 people - or an increase of roughly 20\% - after the regulation was passed.

ABSTRACT. In this paper we investigate if Compulsory voting in Brazil follows an age-based rule that says that if an individual is between eighteen and seventy years old, she's subject to abstention fines if she fails to turnout. Using individual panel data for all registered voters in Brazil for five different elections we explore the age cutoffs created by this law in order to provide causal estimates of persistence in turnout. Employing a Fuzzy RD approach, we estimate the effect of previous on current turnout, using the exposure to abstention fines as an instrument. Using this strategy, we are able to identify that voting on an election causes an individual to become 46% more likely to vote on the next election. We show that there is a high degree of persistence in turn out due to compulsory voting.

ABSTRACT. We develop a unifying approach to estimating climate impacts and adaptation, and apply it to study the impact of climate change on local air pollution. Economic agents are usually constrained when responding to daily weather shocks, but may adjust to long-run climatic changes. By exploiting simultaneously variation in weather and climatic changes, we identify both the short- and long-run impacts on economic outcomes, and measure adaptation directly as the difference between those responses. As a result, we identify adaptation without making extrapolations of weather responses over time or space, and overcome prior studies' biases in the estimates of climate adaptation.

ABSTRACT. We study real estate markets where squatting is tolerated by authorities and a dual (formal and informal) housing market emerges. We develop a housing supply model in which geographical constraints and squatting play distinct roles on the housing supply curve. We estimate supply curves for more than 90 metropolitan areas using satellite data that maps steep-sloped terrain and bodies of water, a comprehensive slum survey, and census data of more than 400 municipalities. We find that illegal settlements are more important to explain the cross-sectional variation in supply elasticities than geographical constraints. As an illustrative application, estimated supply elasticities are used to forecast future housing prices increase due to natural population growth.

ABSTRACT. This paper assesses the effects of the introduction of  Psychosocial Care Centers (CAPSs) in Brazil on mental health. These units are the centerpiece of the Brazilian psychiatric reform, meant to deliver community-based mental health services for people with moderate or severe disorders, including substance abuse. Using a differences-in-differences design that exploits the roll-out of the CAPSs across the country, we show that these centers improved access and utilization of outpatient mental health care and reduced hospital admissions due to mental illnesses, especially those related to schizophrenia and long-lasting. We also find that the introduction of centers delivering substance abuse treatment reduced deaths caused by alcoholic liver disease. Despite these positive effects, our evidence indicates that this shift away from inpatient care increased homicide rates. 

ABSTRACT. We investigate the impact of institutions on the transmission of shocks across firms. Using novel inter-firm wire transfer data, we find that suppliers exposed to natural disasters pass this shock to their customers particularly when the customer's court system is congested. Evidence suggests that congested courts amplify spillovers through potential future holdup problems: customers face frictions both in contracting with new suppliers and in obtaining bank credit. Subsequently, customers integrate the affected supplier's industry and obtain liquidity by selling their accounts receivables. Our results highlight the importance of institutions in facilitating economic resilience.

ABSTRACT. We build a linear-quadratic model of trading in a market with private information and heterogeneous agents. Agents receive private taste/inventory shocks and trade continuously. Agents have different costs of holding excessive inventory, which may stem from different absolute risk aversion. In equilibrium, trade is gradual. Trading speed depends on the number of participants and their size. Trade among large market participants is slower than that among small ones. Price has momentum due to the actions of large traders: it drifts down if sellers are more patient to trade than buyers. Traders infer total supply from trading flow of an individual. This inference affects the willingness to accept flow and the price impact of the individual trader. The model can also answer welfare questions, e.g. about the social costs and benefits of market consolidation. The model can accommodate individual inventory shocks as well as private information about common value.

ABSTRACT. Indebted policymakers have a limited budget and are subject to inflationary shocks forcing them to either (i) increase interest rate to have inflation on the pre-announced target or (ii) accept higher inflation. We model the inter-temporal trade-off between fiscal and monetary policy when forward-looking, rational, and fully informed agents finance public deficits. We show that a high public-debt level opens the doors to ad-verse expectations, pressuring nominal interest rates and leading to target-coordination failure. Our parsimonious model with a single confidence shock supports the policy actions observed in the aftermath of the 2002 Brazilian crisis characterised by inflation expectations overshooting the target. First, a higher target level to restore coordination.Second, both a gradual reduction of debt-to-GDP, to improve fiscal strength, and an increase of the share of the public debt with pre-fixed interest rates as opposed to indexed debt. Finally, we find empirical evidence of higher debt levels and lower inflation targets increasing both the probability to overshoot the inflation target and increasing the size of the deviation from the target.

ABSTRACT. We propose a simple model for firm's pricing decision, based on the interplay between transmission of information flow inside the firm and the provision of incentives. Such mechanism, endogenously, generates discrete prices and explain price stickiness even though there is no cost on adjusting prices or acquiring information. We embed this firm structure in a multi-sector general equilibrium model and derive a new Phillips curve where the misalignment of incentives and the number of division of a given firm drive the slope of the Phillips curve, exposing a new channel to monetary policy and illustrating its impact. Empirically, we use a new retail daily database to stress the relationship between misalignment and price-setting discussion, providing an empirical estimation of the theoretical explanation. Our model matches the main stylized facts on micro-data from multi-product prices, as well as the stylized facts from macro-impact of monetary policy.

ABSTRACT. This paper shows that dollar appreciations lead to declines in GDP, investment, and credit to private sector in Emerging Market Economies (EMEs). These results imply that the transmission of dollar movements to EMEs occurs mainly through financial conditions rather than net exports, contrary to what would be expected from the conventional Mundell-Fleming model. Moreover, the central role of the U.S. dollar in global trade invoicing and financing - the dominant currency paradigm - and the increased integration of EMEs into international supply chains weaken the traditional trade channel. Finally, as expected if financial vulnerabilities are dominant, EMEs with higher exposure to credit denominated in dollars and lower monetary policy credibility experience greater contractions during dollar appreciations.

ABSTRACT. This paper aims to investigate whether the sentiment of the Central Bank of Brazil can help to predict the yield curve. Our forecast strategy is composed of two steps: first, we analyzed the COPOM statements and minutes to extract the sentiment of the Central Bank of Brazil; second, we used the constructed sentiment variables together with macroeconomic factors as explanatory variables of the latent factors in the Dynamic Nelson and Siegel model. Our sample ranges from January 2006 to December 2017. We found that macroeconomic factors play an important role in the forecast of the yield curve and, when used in addition to macroeconomic variables, the sentiment of Central Bank of Brazil improves the accuracy of all horizons forecasts and for any maturity.

ABSTRACT. Forbearance is a concession granted by a lending bank to a borrower for reasons of financial difficulty. This paper examines why and when delinquent bank loans are forborne, using a novel dataset with over 13 million delinquent loans to non-financial firms in Brazil, from which 1.1 million are forborne. Our evidence shows that larger loans are more likely to be forborne, and that the greater the difficulty to seize collateral, the larger the probability of forbearance. Previous forbearances to a borrower are also positively associated to the probability of forbearance, which may be an indicative of loan evergreening. We also show that more than 80% of forbearance events occur in less than four months after a loan becomes more than 60 days past due (after which the bank may no longer accrue interest). Finally, we find that a regulatory rule that forces banks to increase provisions of non-delinquent loans when the same borrower also has a delinquent loan creates incentives for banks to forbear delinquent loans. Because loan evergreening may pose macroeconomic resource allocation problems and forbearance may be used to conceal loan losses, decrease provisions and manage earnings and capital, our findings have implications for the design of regulation and supervisory processes.

ABSTRACT. This paper examines how banks reallocate credit after the introduction of a more enforceable housing collateral contract in Brazil. This new contract greatly improved the repossession of real estate assets used as collateral for personal and business loans. We find opposing effects of this policy. Because of the stronger enforcement, credit supply increased in municipalities with higher homeownership, leading to the creation of new firms, higher employment, and economic performance. However, banks restricted credit to borrowers in low homeownership municipalities. These areas experienced a decline in entrepreneurship, local labor demand, and economic activity. The credit reallocation was greatest for credit-constrained banks, consistent with higher external financing costs. Finally, the differential effects in credit supply induced a redistribution of labor in the economy: workers migrated from low to high homeownership municipalities after the reform.

ABSTRACT. This paper assesses the macroeconomic effects of Sovereign Wealth Funds on commodity exporting small open economies. It develops a Dynamic Stochastic General Equilibrium model to assess the dynamic responses of main macroeconomic variables to commodity price shocks under two alternative fiscal rules: one in which the government uses all commodity related fiscal revenues to finance current government expenditures (spend-as-you-go rule), and the second all revenues are saved into a Sovereign Wealth Fund (prudent rule). The results show that under the prudent rule, government expenditure is less pro-cyclical and most macroeconomic variables are less volatile than under the spend-as-you-go rule. The size of government savings is the main mechanism behind the stabilization role played by Sovereign Wealth Fund. These results highlight the importance of adopting SWF as a stabilization mechanism in commodity exporting countries.

ABSTRACT. We study the effects of an increase in the progressivity of the capital income tax in an endogenous growth model where households are heterogeneous with respect to the elasticity of intertemporal substitution, and calculate how the economic growth rate and asymptotic distribution of income depend on it. We also consider an alternate version of the model where the income tax is levied on total income. For comparison with the previous literature we also consider another version where the heterogeneity is with respect to the rate of time discount. Numeric simulations of the calibrated the versions of the model for the USA consider five income classes, and indicate how the magnitude of these effects depends on the progressivity parameter. We also explore the effects of a fiscal reform that replaces a tax on total income by a flat tax on labor income plus a progressive capital income tax, and show how it affects the income quintiles and aggregate economic growth. We find that the negative effect on economic growth of an increase in progressivity is larger in the alternate model, indicating that progressive taxation of labor income is more deleterious to growth than when it affects only capital income. We also find that an increase in progressivity reduces inequality faster and further when only capital income is subject to it.

ABSTRACT. This paper simulates an incomplete market economy populated by infinitely- lived agents and subjected to shocks on the total factor productivity (TFP). The individuals face an idiosyncratic shock in labor productivity and fail to observe the true probability distribution that describes the evolution of TFP. They are averse to ambiguity in relation to aggregate uncertainty and form beliefs each period about two possible models. Their preference is represented by a smooth ambiguity model that displays wealth decreasing absolute ambiguity aversion. Comparing to the model that assumes rational expectations, we find that the Gini coefficient for wealth increases 3 bp for the Bayes' rule, increases 7 bp for the belief rule that imposes a positive correlation between the individual labor income and gives more weight to the model that overestimates the transition probabilities to a recession. When this correlation is negative the Gini is not affected. In the sensitivity analysis we find that in a model that considers both risk and ambiguity aversion, the former dominates the latter and there is no impact on wealth inequality. The implications on aggregate macroeconomic variables are mixed.

ABSTRACT. A group of experts, for instance climate scientists, is to choose among two policies f and g. Consider the following decision rule. If all experts agree that the expected utility of f is higher than the expected utility of g, the unanimity rule applies, and f is chosen. Otherwise, the precautionary principle is implemented and the policy yielding the highest minimal expected utility is chosen. This decision rule may lead to time inconsistencies when an intermediate period of partial resolution of uncertainty is added. We propose two axioms that enlarge the initial group of experts with veto power, making it the smallest ''rectangular set" that contains the original one. As a result, the decision rule becomes dynamically consistent. Our analysis offers a novel behavioral characterization of rectangularity and a prescriptive way to aggregate opinions in order to avoid sure regret.

ABSTRACT. Given a dataset in the form of choice correspondence, we interpret each choice set as a set of strategies available for the decision maker. We interpret observed choices as the equilibrium strategies for the decision maker in an unobserved strategic situation against unobserved players (phantoms). We study three different models of this kind from the revealed preference perspective. The first model consists of a phantom with a fixed set of strategies. We show that this model is characterized by the Sen's $\alpha$-axiom. The second model consists of a phantom who is symmetric to the decision maker. We show that this model is characterized by WWARNI. The third model consists of a set of phantoms. We show that this model has no testable implications. The models allow us to interpret some of the models of boundedly rational choice as that of fully rational choice. As an application, we provide an alternative representation for choice functions satisfying Weak WARP. We also provide an alternative representation for Rational Shortlist methods.

ABSTRACT. A sequence of short-lived agents must choose which action to take under a fixed, but unknown, state of the world. Prior to the realization of the state, a long-lived principal designs and commits to a dynamic information policy in order to persuade agents towards his most preferred action. The principal’s persuasion power is potentially limited by the existence of conditionally independent and identically distributed private signals for the agents as well as their ability to observe history of past actions. I characterize the problem for the principal in terms of a dynamic belief manipulation mechanism and analyze its implication for social learning. I prove that the optimal policy is the static concavification of principal's payoff in every period (greedy policy) and it has the same value of a policy that discourages all agents from following own signals (single disclosure policy), for a sufficiently patient principal. I also show when the optimal policy and the single disclosure policy coincide, for any given discount factor and for the long-concave class of distribution of private beliefs.

ABSTRACT. The goal of this study is to investigate the effects of a reading and writing program on literacy development in early childhood education. To this end, we conducted a randomized study, including 44 intervention schools and 44 control schools. The main results indicate that the children who participated in the program outperformed the control children, especially in the measures of reading a "rhyme" and writing words. Analysis of heterogeneous effects suggest that the intensity of treatment and the infrastructure of schools may reinforce the effects on the development of writing skills.

ABSTRACT. This paper aims to use a national age-at-school-entry policy to identify the causaleffect of mothers getting their children enrolled a year earlier in Primary School.Brazilian public and private primary schools admit children up to one year youngerthan the national minimum age to enter school if their birthday is before an arbitrarythreshold, defined as March 31. Using a Fuzzy Regression Discontinuity Design anda Fixed-Effects Event-Study, we estimate the impact of having children enrolled inPrimary School on mothers’ labor outcomes, using longitudinal data from a quarterlyBrazilian socioeconomic survey. We found positive and significant impact on employ-ment rates, employment status, hours in labor and income, besides some evidenceon participation rate and no significant effect on formality rate and working hours.Our results show no impact of the treatment on fathers’ labor income, suggesting thatmothers benefits disproportionately by having children enrolled in primary school. Be-sides, our most positive results are concentrated on the second quarter, when there’sno winter or summer vacation, with enrolled children attending school for the wholeperiod.

ABSTRACT. Extensive research reports how financial incentives to students, teachers and schools can be used to promote learning. Yet little empirical attention has been given to similar incentives focused on the head of the government. This paper aims to fill this gap by exploring a tax reform in the state of Ceará in Brazil that implements municipal competition for fiscal resources based on education performance. Using rich administrative data, we compare students, teachers and school principals in schools at different sides of Ceará’s border over key implementation dates to estimate how the results-based financing (RBF) reform affected education outcomes. Students exposed to the RBF mechanism presented 3pp (or 8 percent) increase in test scores of mathematics and portuguese compared to students just outside the border - or equivalent to 2.5 months gain in learning biannually. Combining RBF and technical assistance to municipalities boosts these impacts in at least two-fold. We investigate a list of mechanisms: (i) public spending on education increases during RBF periods but returns to pre-RBF levels when TA is introduced; (ii) the selection of principals is more likely to be through a formal process (10pp), and less likely to be through political appointment (8pp); (iii) principals or teachers enroll significantly more in training (10pp), and report it as useful more often; (iv) teachers are 9pp more likely to cover 80% of the curriculum. Our findings suggest that combining the results-based mechanism to the mayor with formal selection of principals, training and pedagogical support leverages significant gains in learning.

ABSTRACT. The international landscape of corporate taxation has been changing rapidly: tax rates have fallen across the world and opportunities to shift profits to low-rate locations have grown. The challenge to tax corporations is particularly stark in developing countries which often lack the institutional capacity to enforce compliance. One tool already deployed in several low-income countries and being discussed in international tax cooperation agreements are minimum taxes, provisions that tax firms on a broader base if reported profits are too low. In this paper we use administrative data on the universe of corporate taxpayers between 2011-2018 to study the impact of a minimum tax implemented in Honduras. We first document substantial tax evasion when costs are deductible: large corporations significantly increase their reported profit margins when incentives to over report costs disappear, implying evasion rates of up to 17% of profits. We then show that firms strategically reduce reported revenue in order to locate below the exemption threshold for the minimum tax policy and estimate revenue elasticity around one. Using these parameters, we calibrate a model of firm optimization and study the impacts of alternative tax schedules. As designed, we estimate the minimum tax policy increased tax revenues by up to 30%, but at the cost of substantially decreasing firms' aggregate profits. We then show that the tax authority can increase revenues by up to 10% without losses on aggregate profit by introducing a small degree of production distortion through limited cost deductibility

ABSTRACT. This paper explores the differences in labor market power regarding the type of worker. Using four-digit manufacturing industry data in Brazil from 2007 to 2015, we propose a test to verify whether the wage elasticity supply faced by firms is equivalent for both white-collar workers and blue-collar workers. We found a mean wage elasticity for blue-collars of around 1.59 and for white-collars of around 1.25. The results show that the hypothesis of homogeneity between the wage elasticity of blue-collars labor supply and white-collars labor supply is hardly rejected. Yet, for few cases, blue-collar workers had greater wage elasticity than white-collar workers.

ABSTRACT. This paper revisits the impact of the Microempreendedor Individual program in Brazil on the number of active firms, entry in the formal sector and informality of microentrepreneurs. The program started in July 2009 and eliminating entry costs and reduced the cost of remaining formal for eligible microentrepreneurs. We use recently made available administrative records to show that the program increased in 38\% the number of registered firms and increased in 96\% firm entry in the formal sector between 2009 and 2015. We build a panel that tracks all registered employment activity of microentrepreneurs that registered between 2010 and 2015. Our estimates suggest that the MEI program was responsible for the formalization of 3.7 million individuals. These results contradict previous work that suggested much smaller impacts of the program.