Research

Publications:

Public employment and homeownership dynamics (with Pedro Gomes, Birkbeck, University of London) - Published at Public Choice

Using micro data from the Italian Survey on Household Income and Wealth, we examine a previous undocumented dimension in which outcomes between public- and private-sector workers differ: homeownership. We show that public employees are more often homeowners than private employees are, and that this difference has widened after the Great Recession. We disentangle the effect of workers' characteristics from the role of public-sector jobs characteristics, such as higher wages or job security, on homeownership differences across sectors. We find that demographic characteristics are important in explaining the historical difference, but cannot explain the widening gap across sectors. The higher job security, reflected in higher share of permanent contracts in the public sector in Italy, explains most of the divergence among sectors after the Great Recession. Part of the mechanism works through the financial system, with permanent contracts workers being less likely to be refused a loan.

Working papers:

Labor market institutions and homeownership - Winner of Swiss Society of Economics and Statistics Young Economist Award 2018, University of Milan Bicocca DEMS Working Paper No. 440 (submitted)

To what extent labor market institutions can explain homeownership rate differences over time and across countries? Using data from 19 countries over fifty years, I find a positive correlation between employment rigidities and homeownership, and a negative correlation with wage rigidities. I rationalize these findings through a DSGE model where heterogeneous households face a housing tenure decision in the presence of labor frictions. Labor rigidities affect housing tenure choice through their impact on employment and wage volatility. Labor institutions explain a relevant share of homeownership heterogeneity between countries and over time and labor reforms can interfere with policies targeted to increase homeownership.

Public debt and household lending (with Marta Giagheddu, University of Lund) - University of Milan Bicocca DEMS Working Paper No. 441 Media coverage: The FinReg Blog - Duke University

We investigate the link between housing wealth concentration and the macroeconomic effects of a rise in domestic banks' exposure to sovereign securities. We build a general equilibrium model with housing and heterogeneous agents who differ in their investment opportunities. Banks, optimizing their portfolio between mortgages and sovereign securities, are characterized by financial frictions as households' collateralized debt links government debt with the real economy, through interest rates and housing prices. A country willing to lower the financing cost of the domestic debt in a time of dry out of financial markets has in moral suasion a viable option. We find a trade-off between real estate wealth concentration, household lending and consumption inequality. However, under binding financial regulation, moral suasion can help reducing wealth inequality while persistently rising consumption inequality. This comes at the cost of generating worse losses for savers and banks, while failing to reduce financing costs of government.

Do labor market institutions matter for fertility? (with Andresa Lagerborg, IMF) - EUI Eco Working Papers Number: 2017/07

We study whether labor market institutions not targeted to maternity impact the total fertility rate (TFR). We distinguish between unemployment rigidities (UR) and real wage rigidities (RWR), since the former reduces and the latter amplifies the response of the business cycle to shocks. Panel regressions and principal component analysis reveal that UR, such as employment protection and union strength, increase TFR. On the other hand, RWR, proxied by the centralisation of wage bargaining and unemployment benefits reduce TFR. We also find evidence that unemployment volatility reduces fertility whereas wage volatility raises fertility. Thus, to the extent that labor market institutions affect unemployment and wage volatility, they may also affect fertility. We complement our analysis with a DSGE model that incorporates households’ fertility decision as well as unemployment and wage rigidities. We find that downward wage rigidities amplify real contractions in response to negative demand shocks and lead to large drops in employment and fertility.

Wealth inequality and liquidity (with David Domeij, Stockholm School of Economics and Marta Giagheddu, University of Lund)

Can the composition of the household portfolio hinder the efficiency of taxation as a tool to reduce inequality? We explore this question in a model with heterogeneous agents and two assets (liquid and illiquid) to examine different fiscal policies (wealth taxation, progressive labor income taxation and wealth gains taxation) in terms of their ability to actually affect liquid and illiquid wealth concentration. We find that a total wealth tax may increase inequality due to agents' different capabilities of changing their portfolio composition along the wealth distribution. Income taxes (labor income and wealth gains) are valid tools to reduce inequality, acting on the wealth accumulation process and on the incentive to hold liquid vs illiquid assets, respectively. Finally, simulations performed with a lower loan-to-value ratio than that in the baseline scenario dampen the inequality increase and reduction, confirming that the borrowing channel is important for the shape of the wealth distribution and for evaluating the efficiency trade-offs of inequality-reducing policies.

Work in progress:

Distributional consequences of sovereign debt default (with Giagheddu M., Marchesi S. and Mariani L.)

Investment choices and wealth inequality: evidence from Italy

This paper uses micro-data from the Bank of Italy Survey of Household Income and Wealth to investigate the drivers of net wealth inequality dynamics in Italy during the Great Recession. Understanding the sources of wealth inequality is important from a welfare perspective, since different causes may have different implications and may call for different policy interventions. I analyse the evolution of wealth components across the wealth distribution and I use Gini index decomposition to assess the relevance of each wealth component for total inequality. I show that a large part of wealth dynamics in Italy during the Great Recession was driven by the evolution of real estate. I document that the Gini index for net wealth increased significantly between 2008 and 2012 and decreased between 2012 and 2014. The evolution is very similar for the Gini index for real estate. I find that the increase in inequality observed in Italy between 2008 and 2012 cannot be attributed to changes in the relative contribution of each wealth component, but more likely to the rise of real estate shares held by households in the top of the wealth distribution. The reduction in inequality observed after 2012 instead, can be related to changes in the share of real estate, but also to a shift between the relative importance of other real assets and financial assets.