ABSTRACT. We model the intertemporal trade-off between fiscal and monetary policy under an inflation targeting regime. An indebted and altruistic policymaker chooses public expenditure and current inflation. Private agents choose consumption, debt purchase, and form expected inflation. Debt level determines target credibility: low debt levels make the target fully assured, and high levels make target announcement innocuous. For an endogenous interval of intermediate debt level, named fiscal fragility zone (FFZ), there are multiple equilibria, expected inflation is higher than the announced target, and debt rollover is expensive. We show that, within FFZ, policymakers should (i) do fiscal austerity to reduce debt gradually (ii) increase the inflation target and the share of non-indexed bonds to raise the lower bound of the FFZ. High public debt limiting low inflation is a common fact in emergingmarket crises. However, it may become a global fact after an adverse global shock such as a world war or health pandemics.

ABSTRACT. What is the impact on the transmission of monetary policy in Brazil under the fiscal ceiling implemented in 2016? We find empirical evidence of the response of fiscal variables to monetary policy shocks by estimating a dynamic model factor. Then,we analyze whether the imposition of an expenditure ceiling affected monetary policy effectiveness in Brazil. We propose a heterogeneous-agents new keynesian model (HANK) to the Brazilian economy with spending cap and find that the expenditure ceiling adopted by Brazil might have “muted” a fiscal transmission channel for monetary policy, reducing its impact on the output gap.

ABSTRACT. We show that in a economy with tax evasion and monopolistic competition, the uniform commodity taxation is not necessarily optimal. Instead, the tax authority should levy uniform effective taxes and impose lower nominal taxes on sectors which can most evade taxes. Moreover, the tax rate should be inversely proportional to the elasticity of evasion similarly as the classical Ramsey taxation. In addition, optimal taxes on intermediate goods are still zero. We also simulate the equilibrium and explore how the choice of different tax regimes affect the economy

ABSTRACT. Over the last three decades, countries have widely adopted fiscal rules. This paper studies how fiscal rules affect economic growth. With an overlapping generations model with endogenous growth, in which the government imposes two fiscal rules, a debt rule and a budget balance rule, we analyze the dynamics of public debt, economic growth and welfare in an economy. Empirically, we conduct two exercises to examine the impact of fiscal rules. The first estimates a growth equation derived from the theoretical model for a panel of countries to verify the correlations predicted by the model. The second evaluates the effect of fiscal rules on GDP per capita growth rate. To address the endogeneity problem, we use a cross-country panel with an IV approach. The instrument explores the geographical diffusion of fiscal rules across countries. Results show that fiscal rule adoption positively affects economic growth for developing and low-income countries. For Europe, better fiscal rules also have a positive impact on growth. Well-designed debt rules seem a better recipe for economic growth than budget balance rules, especially in developing and low-income countries.

ABSTRACT. Ethnic identity -- and its associated history, norms, and institutions -- is a fundamental determinant of political and economic outcomes in Africa. We use the partition of ethnic groups across different countries, caused by the Scramble for Africa, to study the effect of group size on economic development. The arbitrariness of the border design works as natural experiment and caused exogenous variation in the population size of split groups. We combine information on the historical homeland of ethnic groups, gridded geo-referenced estimates of population before the colonization, and a measure of ethnic contemporary economic performance, as proxied by satellite images of light density at night. Using within group variation plus country fixed effects, we find that larger groups are currently more developed. We exploit several channels that can potentially mediate these effects. Larger groups are more likely to have natural endowments (as access to lake and diamond mines); they are closer to the capital city; they are linguistically more similar to the rest of the population; and they are more likely to be politically organized and be represented in the highest political positions in the country.

ABSTRACT. Religion and beliefs in the supernatural are present in all societies. Yet, studies about the spread of small-scale supernatural belief systems remain quite limited. In this work, we test the anthropological hypothesis that historical pastoralist practices disfavored the emergence of witchcraft beliefs. The high interdependence of production and the mobility patterns that characterize pastoralists’ practices make accusations of supernatural actions within the group quite complex and disturbing to local environment. Consistent with this hypothesis, we document that people descending from historically more pastoral societies have a lower level of contemporary belief in witches. The results using an instrumental variable based on the ecological determinants of pastoralism corroborates our main analysis. We further show that the main mechanism behind our result seems to be pastoralist groups’ freedom of movement and an increase in social ties, proxied by the level of trust in relatives, neighbors, courts, and local councils. We also observe an increase in references to witchcraft in pastoral societies’ oral traditions, consistent with the hypothesis that a lack of fear makes pastoralists more willing to speak, sing and joke about the supernatural. Finally, we test for the importance of cultural persistence by examining people who live today in locations with low levels of suitability for pastoralism but belong to ethnic groups that have historically lived in areas with high levels of suitability and show that the reduction in belief in witchcraft persists.

ABSTRACT. How does entrepreneurs' ancestry affect their firm's performance? Based on surnames, we classify entrepreneurs in Europe and Asia into ethnic groups. For each group, we estimate the expected productivity and capital structure, controlling for size, country, and industry. Then we verify whether these ethnic effects predict firms' productivity in a multi-ethnic country overseas, Brazil. This approach accounts for differences in institutions and human capital supply, discrimination, and selection into entrepreneurship. Our results reveal a one-to-one relationship between ethnic productivity in Brazil and abroad. Cultural influence on capital structure explains 40-60\% of this relationship. In particular, the higher the propensity to raise short-term loans, the higher the performance. This finding is consistent with the disciplinary role of frequent debt repayments. To further test this hypothesis, we explore a credit expansion policy that encouraged entrepreneurs to extend debt maturity. Although this policy targeted highly productive groups, the beneficiaries presented lower performance than comparable firms.

ABSTRACT. This study aims to identify the causal effect of cultural inheritance on formal labor market variables via the network effect. The identification strategy is based on an epidemiological approach to understanding cultural effects on economic variables that allows us to separate cultural aspects between groups that share the same institutions and economic environments. For this, a rich database is organized based on the identification of individuals of Jewish and non-Jewish Polish descent. The results of the income difference between these two groups are explained by the labor network effect. Furthermore, we find an important difference in the role of gender in the formation of these networks, such that the network effect is mainly produced by the network formed by men.

ABSTRACT. This paper studies peer effects in higher education by observing students in an environment of active learning, where peer interaction is a meaningful mechanism explaining performance. The identification of peer effects relies on the random assignment of students to groups and explores variation both in terms of the share of low and high-ability students in each group as well as the frequency that peers meet for group work. The main result of the paper is that the share of low and high-ability peers in a group is not able to explain by itself the existence of positive peer effects on performance, which arises only when we consider the fraction of a student’s high-ability peers in the group that are also peers in a second group. We show that when pairs of students meet in more than one group, they are more likely to establish a link, measured by students’ self-reported naming of their relevant peers. Thus, increased interaction with high-ability peers impacts positively performance. However, we also show that this effect depends on whether the student himself is classified as low or high-ability.

ABSTRACT. Lengthening school time is an attractive policy that middle-income countries have been adopting. However, regardless of an increasing number of works analyzing the impact of increasing instructional time on students' achievement, little is known about the spillover that this kind of policy generates, despite its high cost for poor students from developing countries. Therefore, we evaluate the impact of full-day schools on regular public schools (part-time). To do so, we analyze the Programa de Ensino Integral (PEI) of São Paulo state for secondary education in a dataset with schools geolocations. We use a dynamic difference-in-differences strategy to show that full-day schools change students and teachers composition of nearby regular schools and negatively affect their achievement and drop-out. Furthermore, we estimate PEI' impact on treated schools removing spillover bias and confirm that the spillovers are relatively small compared with the program's gains.

ABSTRACT. Does attending a particular graduate school matter for academic outcomes once we account for students’ selection into graduate programs? This paper sheds light on this previously unexploited question by investigating the impact of attending a selective master’s institution in Economics on Ph.D. placement. Using data from the ANPEC exam, widely used for admission to Brazilian master’s programs in Economics, we can control for relevant variables, such as applicants’ colleges and ANPEC scores. To address the potential selection biases, we compare only students who applied and were accepted to the top four master’s programs, as in Dale and Krueger (2002). When we account for students’ observable and unobservable characteristics, we show that seemingly large differences between programs nearly vanish, and top master’s programs perform similarly in Ph.D. placements abroad.

ABSTRACT. This paper estimates the impact of accountability scores on Brazilian higher education outcomes. We explore a natural experiment: the introduction of an accountability system for Brazilian undergraduate programs named SINAES that was implemented by the Ministry of Education in 2004. The design of the evaluation system enables us to implement a regression discontinuity strategy. We test whether program quality is sensitive to negative reinforcement, such as punishments imposed when a minimum threshold is not attained. We also test whether program administrators seek higher evaluation scores as a form of advertisement to attract prospective students. Our results show that program administrators respond to the threat of punishment by improving program quality in the next evaluation cycle, but we cannot determine whether administrators seek higher grades in order to advertise their programs and increase enrollments or to improve the quality and prestige of their programs.

ABSTRACT. We study the causal effect of job loss on hospitalization and mortality for the universe of Brazilian workers, and investigate how these are impacted by exogenously-defined variation in access to unemployment insurance (UI) after dismissal. We construct a novel, individual-level dataset that matches observations across several administrative, nationally-comprehensive records on employment, hospital discharges, and mortality in Brazil for a period of 17 years. Using a combined matching and difference-in-differences approach based on firms' mass layoffs, estimates show that, for male workers, involuntary unemployment causes an increase of 15% in the probability of in-patient admission to public hospitals, and an increase of 37% in the risk of mortality. Such impacts are mostly driven by external causes of hospitalization/deaths, such as injuries, accidents, and assaults. Using a regression-discontinuity design that explores a sharp change in UI eligibility based on workers' dismissal dates between successive employment spells, we further show that UI take-up largely offsets the risk of hospitalization for older workers, and that such mitigating effect lasts beyond the program's benefit window. Our results suggest that job displacement programs can play an important role in mitigating some of the adverse health risks of job loss for potentially susceptible individuals.

ABSTRACT. We exploit the random assignment of cases across courts in the state of Sao Paulo in Brazil to study the effect of judicial bias on labor market outcomes. Employees assigned to courts that favor firm continuation are more likely to stay with their employer, but they earn, on average, lower wages after bankruptcy. The effect is concentrated in periods of economic expansion. We explore several potential mechanisms that can drive this result, including risk aversion, adjustment costs, non-wage amenities and information frictions. The evidence suggests that imperfect information about outside options in the local labor market can rationalize this result.

ABSTRACT. We investigate gender performance differences in reaction to task-rewards variation in a competitive environment, and we explore their potential sources. We use admission exam data from a selective Brazilian university, UNICAMP, to verify how the female-male performance gap changes in parts of the exam that count relatively more towards the final admission exam score, i.e., in which rewards are larger. In this environment, female and male applicants answer identical questions, irrespective of their major choice. However, the question rewards (weights) toward the exam's final score vary based on the applicant's major choice. The richness of our data allows us to flexibly control for applicants' major-choice self-selection issues (through the use of applicant fixed-effects combined with multiple subject-specific ability measures). Our results suggest that females' performance decreases relative to males' when they face a larger-reward subject, and this decrease is more pronounced for higher-achieving applicants. We do not find systematic heterogeneity in the effect of increasing rewards across subjects. The exam structure and its competitive nature allow us to rule out a few often-cited potential factors such as risk aversion and `slacking off' as key drivers of our results. After investigating applicants' performance in more detail (at the exam question level), we also rule out gender differences in performance on difficult questions, mental fatigue, and time-management issues as potential mechanisms. However, females become significantly more likely to omit (not answer) questions when rewards are more important. Female applicants are more likely to have perfect scores on questions with lower rewards (parts of the exam that count less toward the final score). Taken together, the pieces of evidence suggest that gender differences in diligence and self-confidence can explain our results.

ABSTRACT. In this paper, we study the firm's response to informality detection. We combine rich Brazilian administrative data and apply a Difference-in-difference framework to estimate the effect of informality detection on firm dynamics and credit outcomes. We found that formal employment growth spikes in the year of the labor inspection, suggesting that firms become more responsive to the threat of a future labor inspection. However, we observe a persistent decrease in the firm's formal employment and revenue growth in the years after the informality detection. Concerning the firm-credit outcomes, we document that outstanding loan growth decreases and the non-perform loan rate increases after labor inspection. We do not find significant effects on interest rates, which is inconsistent with the estimated effect on default rate. A possible explanation is that the detected firms, which should be facing higher interest rates, are responding to the increase in credit costs by borrowing less. Taking together, our results suggest that financial friction may be a channel for the persistent decrease in the firm's growth.

ABSTRACT. We investigate the effects of having a child on parents’ criminal behavior in Brazil. Exploring rich administrative records, we find that first-time fathers are 18.5% more likely to be criminally prosecuted in the two years after childbirth. This is driven by economically motivated and violent crimes, while we observe a small decrease in crimes with no clear economic motivation. Fathers that increase their criminal activity are younger and are at the bottom part of the income distribution. Lastly, we show large increases in domestic violence, which are consistent with both effects of economic unrest in the household and increases in the time spent between partners.

ABSTRACT. I describe how institutional changes affect criminal behavior by reducing the expected benefit of crime through harsher law enforcement. I investigate the effect of legal authorities’ supervision on violent crime by focusing on junkyards, firms often associated with auto theft. Starting in 2014, many states in Brazil created new regulations and increased monitoring of spare parts sold by junkyards. I show that the robbery of vehicles dropped significantly after this institutional change, and this decrease is more extensive in locations near junkyards closed after the new regulation. Municipalities that approved the new regulation of junkyards presented, on average, a 6.4% drop in auto theft by year compared to non-target ones. Previous trends or increases in police surveillance do not explain the decrease in stolen vehicles. My results shed some light on the effect on crime of harsher supervision over a market that criminals may exploit to convert stolen vehicles into cash.

ABSTRACT. In this paper, we revisit an episode of a market transition from legal to illegal and investigate how illegal markets could affect modern slavery. We exploit the Brazilian government's complete shutdown of the mahogany market in the late '90s using a quasi-experimental research design exploiting the natural variation in the occurrence of mahogany trees in Brazilian municipalities as a treatment indicator. Taking advantage of new administrative data on labor inspections from the Brazilian Ministry of Labor, we find that the shutdown of the mahogany market sharply increased the probability of labor inspections found slave labor in affected municipalities. To deal with the possibility that police actions could have been coordinated to attack large companies right after the law change, we rely on the fact that 100% of police operations in the locations in the sample resulted from local complaints rather than police investigations. Our results are robust to several robustness exercises.

ABSTRACT. The increase in income and wealth inequality has influenced governments to adopt redistributive policies. The close relation between education premium and inequality contributed to the increase of college subsidies financed by progressive taxation. However, once entrepreneurs account for a large share of rich individuals and are disproportionately highly educated compared to the population, these two policy instruments may impact entrepreneurial decisions, changing the composition of workers and entrepreneurs and the distribution of firms in the economy. We evaluate the efficiency and welfare impacts of distinct education and taxation policies in an OLG economy with education and entrepreneurial decisions and calibrate it for the US economy at the beginning of the 2000s.

ABSTRACT. We study talent allocation in an economy where teachers play a crucial role in forming the workforce’s human capital. We define a Roy model with an externality in the occupational choice because teachers’ quantity and quality are essential to workers’ human capital. Then, when individuals with more abilities choose to become teachers, all workforce benefits. However, in our model, individuals’ occupational decisions are distorted by frictions in the labor and educational goods markets, which may cause a misallocation of talent and harm economic growth and development. After calibrating the model to the Brazilian economy, we find that removing the friction in the labor market increase the Brazilian income by 16.94%. Also, if we assume that the barriers to becoming a teacher across the Brazilian regions are equal to the state with the highest average teachers’ human capital, GDP would increase by 87.85% due to externalities of the teacher’s occupation.

ABSTRACT. We study whether college admissions should implement quotas for lower-income applicants. We develop an overlapping-generations model and calibrate it to data from Brazil, where such a policy is widely implemented. In our model, parents choose how much to invest in their child’s education, thereby increasing both human capital and likelihood of college admission. We find that, in the long run, the optimal income-based affirmative action increases welfare and aggregate output. It improves the pool of admitted students but distorts pre-college educational investments. The welfare-maximizing policy benefits lower- to middle-income applicants with income-based quotas, while higher-income applicants face fiercer competition in college admissions. The optimal policy reduces intergenerational persistence of earnings by 5.7% and makes nearly 80% of households better off.

ABSTRACT. We use worker flows to define better approximations to labor markets. Labor market definitions are important to predict the effects of mergers, labor market policies (like minimum wages), migration, trade shocks, and other events on labor market outcomes. Researchers have typically relied on ad-hoc approximations such as geographic boundaries, occupational codes, or industry codes at differing levels of granularity. For any given job, it is not clear which definition is most appropriate. For example, the relevant market for airline pilots might be a detailed occupation-industry cell at the national level. On the other hand, the relevant market for pharmacy cashiers might consist of many occupations and industries but only within a narrow geographic area. The paper follows two steps. First, we use an approach from the network literature to identify labor markets. We use worker flows across occupations, industries, and geographies to define N markets. The defined markets maximize a measure of the density of links within markets. Second, we describe the resulting markets. For example, we show that labor markets often cross one-digit industry and occupation codes.

ABSTRACT. The substantial increase in female labour force participation observed in the second half of the last century has lost its pace worldwide. In this paper, I propose a new hypothesis for this phenomenon: the employment costs of motherhood (ECM), defined as the additional cost an employed mother has to pay while raising their children, are not decreasing as expected. A natural policy to mitigate this effect is the provision of job-protected maternity leave for workers right after birth. In this paper, I analyse this issue in two steps: (a) by proposing a theoretical model that defines the employment costs of motherhood in its structure, and (b) by analysing the effects of a British policy that increased the length of maternity leave over female labour supply. My theoretical setup shows that a policy change that increases maternity leave is only effective if the level of ECM is high enough. My empirical findings show that the boost in the British maternity leave system increased the probability of a mother being at work one year after the birth by 8.8 percentage points. The effects on single mothers are even more substantial: 14.1 percentage points. In the long run, the effects on all mothers persist, with a 9.9 percentage point increase in the probability of being employed three years after the birth (for single mothers, the effect fades down to 2.2 percentage points).

ABSTRACT. We investigate the labor market impacts of internal migration in Brazil using a shift-share approach which combines weather-induced migration with past settlement patterns in each destination. Increasing internal migration rate by 1p.p. reduces formal employment of natives by 0.13p.p., while increases the share of informal jobs by a similar magnitude. Consistent with downward wage rigidity in the formal sector, we find a smaller negative effect on formal earnings (0.59%) than on informal earnings (0.75%), but also a negative impact on the share of workers receiving nonwage benefits in the range of 0.31p.p. to 0.69p.p. We complement this evidence using firm-level administrative data on employer-sponsored health insurance contracts. Our results show that firms operating in a municipality that receives more migrants are 1.5p.p. less likely to provide health insurance to employees, an effect that is mostly driven by large firms. Finally, less educated individuals bear most of the losses due to migration.

ABSTRACT. Despite major progress in fighting gender inequality over the past sixty years, women remain heavily underrepresented at the top of the status distribution in both the public and private sectors. Surprisingly, very little evidence exists about how female leaders may curb the underrepresentation problem at top positions. Using a Regression Discontinuity Design on close elections in Brazil, I analyze how the election of a female mayor affects the gender composition gap among top municipal executives. I show that electing a female mayor in a close race increases the share of female managers by 17 %. This increase does not come at the cost of observed quality of employees. I also present evidence that public sector-specific and supply-side channels are unlikely to explain my findings; instead, an increase in gender-inclusive policies within female-led governments suggests that homophily may be a driver of the results.

ABSTRACT. A main issue in improving public sector efficiency is to understand to what extent public appointments are based on worker capability, instead of being used to reward political supporters (patronage). I contribute to a recent literature documenting patronage in public sector employment by establishing what type of workers benefit the most from political connections. Under the (empirically supported) assumption that in close elections the result of the election is as good as random, I estimate a causal forest to identify heterogeneity in the conditional average treatment effect of being affiliated to the party of the winning mayor. Contrary to previous literature, for most positions we find positive selection on education, but a negative selection on (estimated) ability. Overall, unemployed workers or low tenure employees that are newly affiliated to the winning candidate's party benefit the most from political connections, suggesting that those are used for patronage.

ABSTRACT. We study how individual political views shape firm behavior and labor market outcomes. Using new micro-data on the political affiliation of business owners and private-sector workers in Brazil over the 2002–2019 period, we first document the presence of political assortative matching: business owners are significantly more likely to employ copartisan workers. Political assortative matching is larger in magnitude than assortative matching along gender and racial lines. We then provide three sets of results consistent with the presence of employers’ political discrimination. First, several patterns in the micro-data and an event study are consistent with a discrimination channel. Second, we conduct an incentivized resume rating field experiment showing that owners have a direct preference for copartisan workers opposed to workers from a different party. Third, we conduct representative large-scale surveys of owners and workers revealing that labor market participants view employers’ discrimination as the leading explanation behind our findings. We conclude by presenting evidence suggesting that political discrimination in the workplace has additional real consequences: copartisan workers are paid more and are promoted faster within the firm, despite being less qualified; firms displaying stronger degrees of political assortative matching grow less than comparable firms.

ABSTRACT. This paper documents the effects of the mass migration episode of the late nineteenth and early twentieth century on social capital and political attitudes in Brazil. We exploit novel data containing the vote shares at the municipality level for the 1960 Presidential elections, the last under the 1946 Constitution, to investigate the medium-run effects of immigration. We find an increase in the vote share for candidates associated with left-wing parties. In the long run, we provide evidence that municipalities with a higher fraction of European immigrants elected legislators more inclined to the left and document persistent impacts on social capital. More specifically, individuals living in high exposed municipalities to immigration are more likely to support democracy, trust neighbors and institutions, and be satisfied with state performance today.

ABSTRACT. The present work aims to understand politicians' careers, looking at monetary and non-monetary outcomes of winning a mayoral election in Brazil. Specifically, we ask how becoming a mayor affects wage growth in office and after the mayor mandate and other monetary dimensions such as wealth and firm ownership. Further, we investigate the impact of becoming a mayor on political career outcomes and occupational transitions in the formal labor market. To this end, we merged electoral data from 2004 to 2016 with a large administrative source of information and novel data on mayors' wages to reconstruct politicians' paths in political careers and the formal labor market. We estimate the effect of winning a municipal mayor election using a regression discontinuity design in a close election context. Our main finding is that the wage while in office represents a large wage growth for winners of mayoral elections when compared to the runners-up that were in the formal labor market after their loss in the elections. Since we find no effect on declared wealth growth, firm ownership, and occupational mobility in the public formal labor market, we interpret our results as evidence that the wage while in the office is the main monetary benefit of becoming a mayor. We also present evidence that winning a close election for mayor election is not a gateway to other elective offices.