Pedro Maia Gomes

 

Home CV Research Teaching Press Links Personal


   

"If to do were as easy as to know what were good to do, chapels had been churches and poor men's cottages princes' palaces."

 

Shakespeare

The Merchant of Venice

   

 

 

Profiles:

Orcid

Scopus (407 citations)

SSRN

 
 

ResearcherID

Google Scholar (1761 citations)

IDEAS

 
   

Publons

Research Gate

   

 


 

 

Ph.D. thesis: Macroeconomic effects of fiscal policy

 
 

Advisors: Prof. Frank Cowell and Sir. Chris Pissarides

 

 

 

 

Top-3 publications:

 
 

Gomes, P. (2015), "Optimal public sector wages", The Economic Journal, 125 (587), 1425-1451 [Austin Robinson Memorial Prize].

 
 

Gomes, P. (2018), "Heterogeneity and the public sector wage policy", International Economic Review, 59 (3), 1469-1489.

 
 

Gomes, P. and Kuehn, Z. (2017), "Human capital and the size distribution of firms", Review of Economic Dynamics, 26, 164-179.

 

 

 

 

Top-3 most cited publications (according to SCOPUS):

 
 

Afonso, A., Furceri, D., Gomes, P. (2012), "Sovereign credit ratings and financial markets linkages: application to European data", Journal of International Money and Finance, 31 (3), 606-638.

 
 

Afonso, A., Gomes, P., Rother, P. (2011), "Short and Long-run Determinants of Sovereign Debt Credit Ratings", International Journal of Finance and Economics, 16 (1), 1-15.

 
 

Gomes, P (2012), "Labour market flows: facts from the United Kingdom", Labour Economics, 19 (2), 165-175.

 

 

 

 

Detailed Research

             


 

2020

Working paper

 

Area:

Fiscal policy,

Labour markets

 

IZA working paper

 

 

"Public Employment Redux", with Pietro Garibaldi and Thepthida Sopraseuth

Abstract: The public sector hires disproportionately more educated workers. Using US microdata, we show that the education bias also holds within industries and in two thirds of 3-digit occupations. To rationalize this finding, we propose a model of private and public employment based on two features. First, alongside a perfectly competitive private sector, a cost-minimizing government acts with a wage schedule that does not equate supply and demand. Second, our economy features heterogeneity across individuals and jobs, and a simple sorting mechanism that generates underemployment – educated workers performing unskilled jobs. The equilibrium model is parsimonious and is calibrated to match key moments of the US public and private sectors. We find that the public-sector wage differential and excess underemployment account for 15 percent of the education bias, with the remaining accounted for by technology. In a counterintuitive fashion, we find that more wage compression in the public sector raises inequality in the private sector. A 1 percent increase in unskilled public wages raises private-sector inequality by 0.13 percent.


 

2020

Working paper

 

Area:

Fiscal policy,

Labour markets

 

IZA working paper

 

 

"You're the one that I want! Understanding the over-representation of women in the public sector", with Zoe Kuehn.

Abstract: In most countries, the public sector hires dis-proportionally more women than men. We document gender di erences in employment, transition probabilities, hours, and wages in the public and private sector using microdata for the United States, the United Kingdom, France, and Spain. We then build a search and matching model where men and women decide if to participate and if to enter private or public sector labor markets. We calibrate our model separately to the four countries. Running counterfactual experiments, we quantify whether the selection of women into the public sector is driven by: (i) lower gender wage gaps, (ii) possibilities of better conciliation of work and family life, (iii) greater job security, or (iv) intrinsic preferences for public sector occupations. We find that, quantitatively, women's higher public sector wage premia and their preferences for working in the public sector explain most of the selection. We calculate the monetary value of public sector job security and work-life balance premia, for both men and women, and we quantify how wage and employment policies affect male and female unemployment, inactivity rates, and wages di erently.


 

2019

Working paper

 

Area:

Fiscal policy,

Labour markets

 

IZA working paper

 

"Public-sector compensation over the life cycle", with Felix Wellschmied

Abstract: The size of the public sector in terms of employment and compensation has a strong life-cycle dimension. We establish a quantitative partial-equilibrium life-cycle model with incomplete markets, private and public sectors, and risk-averse workers, and use it to (i) calculate three dimensions of public-sector compensation: wage, pension, and job-security premia, and (ii) quantify the effects of harmonizing the compensation in the two sectors. We find that the job-security and pension’s premia are important forms of compensation to public-sector workers. Harmonizing the characteristics of public employment with those of the private sector would lower the unemployment rate and reduce government costs.


 

2019

Working paper

 

Area:

Fiscal policy,

Labour markets

 

"Public-sector employment, wages and education decisions", with Andri Chassamboulli

Abstract: We set up a search and matching model with a private and a public sector to understand the effects of employment and wage policies in the public sector on unemployment and education decisions. The effects of wages and employment of skilled and unskilled public-sector workers on the educational composition of the labor force depend crucially on the structure of the labor market. An increase of skilled public-sector wages has a small positive impact on educational composition and larger negative impact on the private employment of skilled workers, if the two sectors are segmented. If search across the two sectors is random, it has a large positive impact on education and a large positive impact on skilled private employment. We highlight the usefulness of the model for policymakers by calculating the value of public-sector job security for skilled and unskilled workers.


 

2020

Working paper

 

Area:

Fiscal policy,

Labour markets

IZA Working Paper

 

"Jumping the queue: nepotism and public-sector pay", R&R Review of Economic Dynamics, with Andri Chassamboulli

Abstract: We set up a model with search and matching frictions to understand the effects of employment and wage policies, as well as nepotism in hiring in the public sector, on unemployment and rent seeking. Conditional on inefficiently high public-sector wages, more nepotism in public sector hiring lowers the unemployment rate because it limits the size of queues for public-sector jobs. Wage and employment policies impose an endogenous constraint on the number of workers the government can hire through connections.


 

2020

Published

 

Area:

Fiscal policy,

Labour markets

 

 

"How important are worker gross flows between public and private sector?", Economics Letters, forthcoming, with Andri Chassamboulli and Idriss Fontaine.

Abstract: We measure the size of gross worker flows between public and private sector and their importance for the dynamics of public employment over the last two decades in the US, UK, France and Spain. Between 10 and 35 percent of all in flows and out flows of the public sector are from and to private employment. These flows only account for 7 to 25 percent of the fluctuations of public employment.


 

2020

Published

 

Area:

Fiscal policy,

Labour markets

 

IZA Working Paper

 

"Labour market flows: accounting for the public sector", Labour Economics, forthcoming, with Idriss Fontaine, Ismael Galvez-Iniesta and David Vila-Martin.

Abstract: For the period between 2003 and 2018, we document a number of facts about worker gross flows in France, the United Kingdom, Spain and the United States, focussing on the role of the public sector. Using the French, Spanish and UK Labour Force Survey and the US Current Population Survey data, we examine the size and cyclicality of the flows and transition probabilities between private and public employment, unemployment and inactivity. We examine the stocks and flows by gender, age and education. We decompose contributions of private and public job-finding and job-separation rates to fluctuations in the unemployment rate. Public-sector employment contributes 20 percent to fluctuations in the unemployment rate in the UK, 15 percent in France and 10 percent in Spain and the US. Private-sector workers would forgo 0.5 to 2.9 percent of their wage to have the same job security as public-sector workers.


 

2017

Published

 

 

Area:

Fiscal policy,

Macroeconomics

 

IZA Working Paper

 

"Human capital and the size distribution of firms"Review of Economic Dynamics, 26, 164-179, with Zoë Kuehn.

Abstract: Countries with a lower fraction of workers with secondary education have smaller firms. We set up a model of occupational choice where individuals have primary, secondary or tertiary education. A more educated work force raises firm size and productivity. More educated workers earn higher wages, and hence among educated individuals only the more able become entrepreneurs. We find that within the framework of our model, different educational attainments can explain one third of the difference in average firm size between the US and Mexico. While improved educational attainments hence imply an increase in firm size over time, a fall in the price of capital together with capital-skill complementarity acts in the opposite direction, something that can explain a relatively constant average firm size in the US since the late 1970's. Our policy experiments highlight additional effects of public employment and a skill bias in public hiring on firm size and productivity.


 

2016

Book chapter

 

 

Area:

Labour Markets

Fiscal policy 

 

 

"Reforming the public sector's wage policy", in Public Sector Economics and the Need for Reforms, P. Apostolis, (eds.), MIT press.

Abstract: I propose a reform of public sector wages consisting of: i) a review of pay of all public sector workers to align the distribution of public sector wages with the private sector and ii) stipulating up a rule to determine the yearly growth rate of public sector wages. I use a model with search and matching frictions and heterogeneous workers to evaluate this reform in the steady-state and over the business cycle. The model was calibrated to the UK economy based on Labour Force Survey data. A review of the pay received by all public sector workers to align the distribution of wages with the private sector reduces steady-state unemployment by 3 percentage points. Implementing a procyclical simple rule to determine the yearly growth rate of public sector wages reduces the volatility of unemployment by 3 to 8 percent and of private consumption by 4 to 12 percent. I show that, in a sample of 29 developed countries for the pre-crisis period of 1995-2006, countries that deviated more from the rule had a larger increase in the unemployment rate and higher volatility of unemployment relative to GDP.


 

2018

Published

 

Area:

Fiscal policy,

Labour markets

IZA working paper

 

"Heterogeneity and the public sector wage policy", International Economic Review, 59 (3), 1469-1489.

Abstract: A model with search and matching frictions and heterogeneous workers was established to evaluate a reform of the public sector wage policy in steady-state. The model was calibrated to the UK economy based on Labour Force Survey data. A review of the pay received by all public sector workers to align the distribution of wages with the private sector reduces steady-state unemployment by 1.9 percentage points.


 

2015

Published

 

Area:

Fiscal policy 

Labour Markets

 

Cited newspapers:

US (1,2), UK (1,2)

 

"Optimal public sector wages", The Economic Journal, 125 (587), 1425-1451.

Abstract: I build a dynamic stochastic general equilibrium model with search and matching frictions in order to determine the optimal public sector wage policy. Public sector wages are crucial to achieve efficient allocation of jobs. High wages induce too many unemployed to queue for public sector jobs, in turn raising unemployment. The optimal wage depends on the frictions in the two sectors. Following technology shocks, public sector wages should be procyclical, and deviations from the optimal policy significantly increase the volatility of unemployment.

Awarded the Austin Robinson Memorial Prize for the best paper published in the Economic Journal in 2015 by an author who is within five years of receiving their PhD.

  .


 

2014

Published

 

Area:

Fiscal policy 

Labour Markets

 

IZA Working Paper

 

"Interactions between private and public sector wages", Journal of Macroeconomics,  39(PA), 97-112, with António Afonso.

Abstract: We examine the interactions between public and private sector wages per employee in OECD countries. The growth of public sector wages and of public sector employment positively affects the growth of private sector wages. Moreover, total factor productivity, the unemployment rate and the degree of urbanisation are also important determinants of private sector wage growth. With respect to public sector wage growth, we find that it is influenced by fiscal conditions in addition to private sector wages. We then set up a dynamic labour market equilibrium model with two sectors, search and matching frictions and exogenous growth to understand the transmission mechanisms of fiscal policy. The model is quantitative consistent with the main estimation findings.



 

2013

Working paper

 

Area:

Sovereign ratings

 

"Do credit rating agencies piggyback? Evidence from sovereign debt ratings".

Abstract: I argue that when two or more credit rating agencies rate a product, they have the incentive to put a weight on the competitors' rating. This piggybacking allows an agency to increase the precision of its own rating while doing less monitoring. Although it is privately effcient, it implies that having more rating agencies does not necessarily increase the overall monitoring. Using annual data on sovereign debt ratings I show that the probability of a rating change depends on the rating differential towards its competitors, even when accounting for a common information set, which is consistent with the hypothesis.


 

2014

Published

 

Area:

Sovereign ratings

 

Online Appendix

 

Data used

 

"Sovereign credit ratings, market volatility, and financial gains", Computational Statistics & Data Analysis, 76(C), 20-33, with António Afonso and Abderrahim Taamouti.

Abstract: The reaction of EU bond and equity market volatilities to sovereign rating announcements (Standard & Poor's, Moody's, and Fitch) is investigated using a panel of daily stock market and sovereign bond returns. The parametric volatilities are filtered using EGARCH specifications. The estimation results show that upgrades do not have significant effects on volatility, but downgrades increase stock and bond market volatility. Contagion is present, with sovereign rating announcements creating interdependence among European financial markets with upgrades (downgrades) in one country leading to a decrease (increase) in volatility in other countries. The empirical results show also a financial gain and risk (value-at-risk) reduction for portfolio returns when taking into account sovereign credit ratings’ information for volatility modelling, with financial gains decreasing with higher risk aversion.


 

2012

Published

 

Area:

Sovereign ratings

 

ECB Working paper

 

Data used

 

"Sovereign credit ratings and financial markets linkages: application to European data", Journal of International Money and Finance, 31 (3), 606-638,with António Afonso and Davide Furceri.

Abstract: We use EU sovereign bond yield and CDS spreads daily data to carry out an event study analysis on the reaction of government yield spreads before and after announcements from rating agencies (Standard & Poor's, Moody's, Fitch). Our results show significant responses of government bond yield spreads to changes in rating notations and outlook, particularly in the case of negative announcements. Announcements are not anticipated at 1-2 months horizon but there is bi-directional causality between ratings and spreads within 1-2 weeks; spillover effects especially among EMU countries and from lower rated countries to higher rated countries; and persistence effects for recently downgraded countries.


 

2011

Published

 

Area:

Sovereign ratings

 

"Do fiscal imbalances deteriorate sovereign debt ratings?", Revue Économique, 62 (6), 1123-1134., with António Afonso.

Abstract: We use sovereign debt rating estimations from Afonso, Gomes and Rother (2009, 2011) for Fitch, Moody's, and Standard & Poor's, to assess to what extent the recent fiscal imbalances are being reflected on the sovereign debt notations. With macro and fiscal data up to 2010, and macro and fiscal projections, we obtain the expected rating for several OECD countries. The answer to the title question is yes, but in a diverse way for each country. Our average model predictions point to a heterogeneous behaviour of rating agencies across countries.


 

2011

Published

 

Area:

Sovereign ratings

 

ECB Working paper

 

Data used

 

"What are the Short and Long-run Determinants of Sovereign Debt Ratings", International Journal of Finance and Economics, 16 (1), 1-15, with António Afonso and Philipp Rother.

Abstract: We study the determinants of sovereign debt ratings from the three main international rating agencies, for the period 1995-2005. Using linear and ordered response models we employ a specification that allows us to distinguish between short and long-run effects, on a country's rating, of macroeconomic and fiscal variables. Changes in GDP per capita, GDP growth, government debt, and government balance have a short-run impact on a country's credit rating, while government effectiveness, external debt, foreign reserves and default history are important long-run determinants.


 

2009

Published

 

Area:

Sovereign ratings

 

"Ordered Response Models for Sovereign Debt Ratings", Applied Economics Letters, 16 (8), 769-773, with António Afonso and Philipp Rother.

Abstract: Using ordered logit and probit plus random effects ordered probit approaches we study the determinants of sovereign ratings. The last procedure should be more appropriate for panel data as it considers the existence of an additional normally distributed cross-section error.


 

2020

Working paper

 

Area:

Fiscal policy,

Labour markets

 

IZA working paper

 

 

 

 

"Public Employment Redux", with Pietro Garibaldi and Thepthida Sopraseuth

Abstract: The public sector hires disproportionately more educated workers. Using US microdata, we show that the education bias also holds within industries and in two thirds of 3-digit occupations. To rationalize this finding, we propose a model of private and public employment based on two features. First, alongside a perfectly competitive private sector, a cost-minimizing government acts with a wage schedule that does not equate supply and demand. Second, our economy features heterogeneity across individuals and jobs, and a simple sorting mechanism that generates underemployment – educated workers performing unskilled jobs. The equilibrium model is parsimonious and is calibrated to match key moments of the US public and private sectors. We find that the public-sector wage differential and excess underemployment account for 15 percent of the education bias, with the remaining accounted for by technology. In a counterintuitive fashion, we find that more wage compression in the public sector raises inequality in the private sector. A 1 percent increase in unskilled public wages raises private-sector inequality by 0.13 percent.


 

2019

Working paper

 

Area:

Labour markets

 

 

IZA working paper

 

"Output Costs of Educational and Skill Mismatch", with Pietro Garibaldi and Thepthida Sopraseuth

Abstract: We propose a simple theory of under- and over-employment. Individuals of high type can perform both skilled and unskilled jobs, but only a fraction of low-type workers can perform skilled jobs. People have different non-pecuniary values over these jobs, akin to a Roy model. We calibrate two versions of the model to match moments of 17 OECD economies, considering separately education and skills mismatch. The cost of mismatch is 3% of output on average but varies between -1% to 9% across countries. The key variable that explains the output cost of mismatch is not the percentage of mismatched workers but their wage relative to well-matched workers.


 

2019

Published

 

Area:

Applied

 Education

 

"Literacy and primary school expansion in Portugal: 1940-62", accepted Revista de Historia Económica Journal of Iberian and Latin American Economic History, with Matilde Machado

Abstract: In 1940, the Portuguese government approved a massive primary school construction plan that projected a 60% increase in the number of primary schools. Based on the collection of a new dataset, we describe literacy levels in Portugal prior to the plan as well as the plan’s strategy regarding the location of schools. We then estimate the causal impact of the increase in the number of schools between 1940 and the early 60s on enrolment and literacy, all at the county level. We conclude the increase in the number of schools was responsible for 80% of the increase in enrolment and 13% of the increase in the literacy rate of the affected cohorts.


 

2019

Working paper

 

Area:

Fiscal policy,

Labour markets

 

"Public-sector employment, wages and education decisions", with Andri Chassamboulli

Abstract: We set up a search and matching model with a private and a public sector to understand the effects of employment and wage policies in the public sector on unemployment and education decisions. The effects of wages and employment of skilled and unskilled public-sector workers on the educational composition of the labor force depend crucially on the structure of the labor market. An increase of skilled public-sector wages has a small positive impact on educational composition and larger negative impact on the private employment of skilled workers, if the two sectors are segmented. If search across the two sectors is random, it has a large positive impact on education and a large positive impact on skilled private employment. We highlight the usefulness of the model for policymakers by calculating the value of public-sector job security for skilled and unskilled workers.


 

2019

Working paper

 

Area:

Macroeconomics

 

 

 

 

"Human capital and financial development: firm-level interactions and macroeconomic implications", with Lian Allub and Zoe Kuehn

Abstract: Capital-skill complementarity in production implies non-trivial interactions between availability of human capital and financial constraints. Firms that are constrained in their access to finance hire a lower proportion of skilled workers compared to unconstrained rms. On the other hand, a lack of human capital increases skilled wages, reducing firms' desired capital intensity and thus loosening effective financial constraints. We build a dynamic occupational-choice model to quantify how a lack of human capital and financial frictions, as well as the joint effect of both restrictions interact to explain cross-country differences in aggregate output per capita, productivity, average firm size, and college premia. We calibrate our model to US data, and we vary financial frictions and educational attainment as observed across countries. We find that the joint effect of both restrictions is up to 50 percent larger compared to the sum of the individual effects. In countries with a negligible share of tertiary educated workers, financial development has only small effects on aggregate output.


 

2017

Published

 

 

Area:

Labour Markets

 

Online Appendix

 

"Unobserved Heterogeneity, Exit Rates, and Re-employment Wages", Scandinavian Journal of Economics,119 (2), 375-404, with Javier Fernandez Blanco.

Abstract: Exit rates from unemployment and re-employment wages decline over an unemployment period after controlling for worker observable characteristics. In this study, the role of unobserved heterogeneity in an economy where workers are informed privately about skills and they direct their own search is investigated. We show that the unique equilibrium is separating and that skilled workers have more job opportunities with higher wages. The composition of the unemployment pool varies with the duration of unemployment, so the average exit rates and wages fall with time. The separating equilibrium relies on the ability of firms to commit to renting an input that is complementary in terms of production to the skills of worker and performance-related pay schemes.


 

2017

Published

 

 

Area:

Fiscal policy,

Macroeconomics

 

IZA Working Paper

 

"Human capital and the size distribution of firms"Review of Economic Dynamics, 26, 164-179, with Zoë Kuehn.

Abstract: Countries with a lower fraction of workers with secondary education have smaller firms. We set up a model of occupational choice where individuals have primary, secondary or tertiary education. A more educated work force raises firm size and productivity. More educated workers earn higher wages, and hence among educated individuals only the more able become entrepreneurs. We find that within the framework of our model, different educational attainments can explain one third of the difference in average firm size between the US and Mexico. While improved educational attainments hence imply an increase in firm size over time, a fall in the price of capital together with capital-skill complementarity acts in the opposite direction, something that can explain a relatively constant average firm size in the US since the late 1970's. Our policy experiments highlight additional effects of public employment and a skill bias in public hiring on firm size and productivity.



 

2018

Published

 

Area:

Fiscal policy,

Labour markets

 

"Heterogeneity and the public sector wage policy", International Economic Review, 59 (3), 1469-1489.

Abstract: A model with search and matching frictions and heterogeneous workers was established to evaluate a reform of the public sector wage policy in steady-state. The model was calibrated to the UK economy based on Labour Force Survey data. A review of the pay received by all public sector workers to align the distribution of wages with the private sector reduces steady-state unemployment by 1.9 percentage points.



 

2020

Published

 

Area:

Fiscal policy,

Labour markets

 

 

"How important are worker gross flows between public and private sector?", Economics Letters, forthcoming, with Andri Chassamboulli and Idriss Fontaine.

Abstract: We measure the size of gross worker flows between public and private sector and their importance for the dynamics of public employment over the last two decades in the US, UK, France and Spain. Between 10 and 35 percent of all in flows and out flows of the public sector are from and to private employment. These flows only account for 7 to 25 percent of the fluctuations of public employment.


 

2020

Published

 

Area:

Fiscal policy,

Labour markets

 

IZA Working Paper

 

"Labour market flows: accounting for the public sector", Labour Economics, forthcoming, with Idriss Fontaine, Ismael Galvez-Iniesta and David Vila-Martin.

Abstract: For the period between 2003 and 2018, we document a number of facts about worker gross flows in France, the United Kingdom, Spain and the United States, focussing on the role of the public sector. Using the French, Spanish and UK Labour Force Survey and the US Current Population Survey data, we examine the size and cyclicality of the flows and transition probabilities between private and public employment, unemployment and inactivity. We examine the stocks and flows by gender, age and education. We decompose contributions of private and public job-finding and job-separation rates to fluctuations in the unemployment rate. Public-sector employment contributes 20 percent to fluctuations in the unemployment rate in the UK, 15 percent in France and 10 percent in Spain and the US. Private-sector workers would forgo 0.5 to 2.9 percent of their wage to have the same job security as public-sector workers.


 

2015

Published

 

Area:

Labour Markets

 

Codes and Data

 

Graphical Appendix

 

"The importance of frequency in estimating labour market transition rates", IZA Journal of Labor Economics, 4:6.

Abstract: Labour markets transition rates are typically estimated using survey data, which are mainly carried at monthly or quarterly frequency. I argue that rates from surveys at different frequencies are not comparable, even if corrected for time aggregation. I estimate labour market transition rates using monthly and quarterly frequency CPS data. I apply time-aggregation correction to make them comparable. I find notable differences in terms of levels and volatilities. While the continuous time-aggregation correction does not alter the unemployment decomposition using the monthly survey, it does so when using the quarterly survey.


 

2012

Published

 

Area:

Labour market

 

Data used

 

"Labour market flows: Facts from the United Kingdom", Labour Economics, 19(2), 165-175.

Abstract: This paper documents a number of facts about worker gross flows in the United Kingdom for the period between 1993 and 2010. Using Labour Force Survey data, I examine the size and cyclicality of the flows and transition probabilities between employment, unemployment and inactivity, from several angles. I examine aggregate conditional transition probabilities, job-to-job flows, employment separations by reason, flows between inactivity and the labour force and flows by education. I decompose contributions of job-finding and job-separation rates to fluctuations in the unemployment rate. Over the past cycle, the job-separation rate has been as relevant as the job-finding rate.



 

2017

Working paper

 

Area:

Fiscal policy,

 

 

"Made in Europe: monetary and fiscal policy mix with financial frictions", with Hernán Seoane

Abstract: We show that, in a financially constrained environment, relative to an active fiscal--passive monetary policy regime, an active monetary--passive fiscal policy amplifies technology shocks, neutralizes financial shocks, and mitigates the expansionary effects of fiscal shocks through a ``debt deflation" and ``real interest rate" channels. Several features of the data suggest that, during the last decade, the United States implemented an active fiscal--passive monetary policy, while the Euro area implemented an active monetary--passive fiscal policy, implying that the distinct post-crisis dynamics of the United States and the Euro area can be rationalized through different fiscal and monetary policy mixes.
 


 

2015

R&R

 

Area:

Fiscal policy

 

 

"Technological change and the decline of public investment", with Davide Debortoli. R&R Quantitative Economics.

Abstract: Over the past 40 years public investment has declined in most developed countries. This paper argues that such pattern can be the consequence of investment-specific technological progress. Public investment, mostly on infrastructures, experienced a slower rate of innovation than private investment, composed primarily by equipment and software. Within a simple neoclassical growth model with a public sector, we show that such type of technological progress reduces the incentives to invest in public capital, and accounts for 80 percent of the observed decline. The implied co-movements of other fiscal instruments are also consistent with observed trends.



 

2018

Published

 

Area:

Economics of Culture

 

Blog post

 

"Evaluating 3 decades of the European Capital of Culture programme: a differences-in-differences approach", Journal of Cultural Economics, 1-17 with Alejandro Librero-Cano

Abstract: We measure the regional impact of the European Capital of Culture programme using a difference-in-differences approach. We compare the regions of cities that hosted the event with the regions of cities that tried to host it but did not succeed. GDP per capita in hosting regions is 4.5 percent higher compared to non-hosting regions during the event and the effect persists more than 5 years after it. This result suggests that the economic dimension of the event is important and support claims that the event serves as catalyst for urban regeneration and development.


 

2016

Published

 

 

Area:

Macroeconomics of finance

 

Data & Codes

 

"In search of the determinants of international asset market comovements", International Review of Economics and Finance, , 44, 103-117, with Abderrahim Taamouti.

Abstract: We show, in a broad class of affine general equilibrium models with long-run risk, that the covariances between asset returns are linear functions of risk factors. We use a dynamic conditional correlation model to measure the covariances of stock and sovereign bond markets in the Euro Area. We use a new approach to measure risk factors based on Google search data. The factors explain 50 to 60 percent of the variation of the covariances between European stocks and 25 to 35 percent of the covariances between European bonds. The information improves the portfolio performance compared to an equally weighted portfolio.