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| LSE Economics |
Position: Associate Professor of Economics (with tenure)
Research Interests: Public Economics, Social Insurance, Taxation, Behavioral Economics
Other Positions, Affiliations and Awards:
Job Opportunity: Pre-doctoral Full-time Research Assistants
Abstract: In the absence of unemployment insurance (UI) choices, the standard approach to estimating the value of UI is to infer it from the observed consumption response to job loss in combination with some assumption on preferences. Exploiting the unique data and policy context in Sweden, we propose two alternative approaches, which we implement and compare to the standard consumption-based approach on the exact same sample of workers. We find that the drop in consumption expenditures upon job loss is relatively small (~ 13 percent), but the marginal propensity to consume (MPC), estimated using variation in local government transfers, is around 25 percent higher when unemployed than when employed. We show that this wedge in MPCs, the focus of our first approach, reveals a high relative price of smoothing consumption, confirmed by direct evidence on the limited consumption smoothing means available during unemployment. The estimated relative price provides a lower-bound on the value of UI, which turns out to be substantially higher than the consumption-based estimate under standard preference assumptions. Exploiting the UI choices embedded in the Swedish UI system, we also propose a Revealed-Preference approach, which confirms that the average value of UI is large in our setting, but also reveals substantial dispersion in the value of UI, above and beyond the variation in consumption drops.
Abstract: This paper analyses job seekers' perceptions and their relationship to unemployment outcomes to study heterogeneity and duration-dependence in both perceived and actual job finding. Using longitudinal data from two comprehensive surveys, we document (1) that reported beliefs have strong predictive power of actual job finding, (2) that job seekers are over-optimistic in their beliefs, particularly the long-term unemployed, and (3) that job seekers do not revise their beliefs downward when remaining unemployed. We then develop a reduced-form statistical framework where we exploit the joint observation of beliefs and ex-post realizations, to disentangle heterogeneity and duration-dependence in true job finding rates while allowing for elicitation errors and systematic biases in beliefs. We find a substantial amount of heterogeneity in true job finding rates, accounting for almost all of the observed decline in job finding rates over the spell of unemployment. Moreover, job seekers' beliefs are systematically biased and under-respond to these differences in job finding rates. Finally, we show theoretically and quantify in a calibrated model of job search how biased beliefs contribute to the slow exit out of unemployment. The biases can explain more than 10 percent of the incidence of long-term unemployment.
Abstract: We study the impact of deterrence, tax morale, and simplifying information on tax compliance. We ran five experiments spanning the tax process which varied the communication of the tax administration with all income taxpayers in Belgium. A consistent picture emerges across experiments: (i) simplifying communication increases compliance, (ii) deterrence messages have an additional positive effect, (iii) invoking tax morale is not effective. Even tax morale messages that improve knowledge and appreciation of public services do not raise compliance. In fact, heterogeneity analysis with causal forests shows that tax morale treatments backfire for most taxpayers. In contrast, simplification has large positive effects on compliance, which diminish over time due to follow-up enforcement. A discontinuity in enforcement intensity, combined with the experimental variation, allows us to compare our letter treatments against standard enforcement measures. The simplification treatments are far more cost-effective, allowing for substantial savings on enforcement costs, and also improve compliance in the next tax cycle.
Abstract: The article revisits the central trade-off between insurance and incentives in the design of UI policies. The generosity of UI benefits does not just differ across countries, but also across workers within countries. After illustrating some important dimensions of heterogeneity in a cross-country analysis, I extend the standard Baily-Chetty formula to identify the key empirical moments and elasticities required to evaluate the differentiated unemployment policy within a country. The article reviews some prior work and aims to provide guidance for future work trying to inform the design of unemployment policies.
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