CURRENT RESEARCH PAPERS
WORKING PAPERS
Welfare Redistribution in a Highly Risk-Averse Electric Market
(with Pablo Blanchard and Andrés Osta)
This paper examines how welfare is distributed among consumers with different sensitivities to real-time prices in the electricity market. We extend the model of Joskow and Tirole (2007) by incorporating a reliability risk-averse planner who prioritizes rare but severe energy scarcity events. In our extended model, we introduce a reliability risk-averse planner who is particularly concerned with extreme energy scarcity events—low-probability but high-impact occurrences that can lead to significant welfare losses for consumers with low price sensitivity. Our framework allows us to estimate the effects of demand insensitivity on the expected wholesale price, the optimal investment plan, and the role of reliability risk aversion in shaping the planned capacity of the Uruguayan power generation system. Without considering reliability risk aversion, more than 60\% of the system’s fossil thermal capacity would be unjustified. However, in a reliability risk-averse planning framework, we estimate the implicit risk preferences embedded in Uruguay’s investment plan. Fossil thermal capacity enhances net welfare for both consumer types: price-sensitive consumers benefit from reduced expected electricity costs, while price-insensitive consumers benefit from increased electricity availability during extreme scarcity events. Although the welfare gain for price-insensitive consumers is sixteen times larger, price-sensitive consumers pay similar prices, as the investment costs are primarily covered by price-insensitive consumers.
Wage mobility and job reallocation in a collective bargaining scheme
(with Pablo Blanchard, Paula Carrasco, and Cecilia Parada)
In recent years, the significant rise in inequality has highlighted the key role of minimum wage policies in improving conditions for low-paid workers, while at the same time questioning their potential employment effects. This rise has elevated wage policy to a central issue for policymakers at various levels. Our paper investigates the reallocation process within the wage structure of jobs influenced by a less studied wage policy: the contractual wage scheme floors established through collective bargaining. We analyse the social security records of private sector workers in Uruguay, enriched with comprehensive information on wage policy. Our identification strategy is based on a radical change in wage policy in 2005 in Uruguay that introduced different floors within industries through collective bargaining. Our results show the effectiveness of the policy in boosting low-wage jobs, with wage growth increasing by more than 10 percentage points in the lowest wage brackets in 2005 and remaining effective in 2014. Our results indicate that wage growth reflects the causal impact of minimum wage policy rather than macroeconomic changes. The study also documents significant effects on wage mobility, especially for lower-paid workers, improving our understanding of how wage policies can address inequality and improve labour market outcomes.
Unveiling Procurement Manipulation: Regulatory Thresholds in a Middle-Income Country
(with Eliana Álvarez, Federico Scalese y Román Sugo)
Governments play a vital role in regulating the behavior of individuals and businesses to ensure the effective provision of public goods and services. Public procurement, while promoting economic activity, also poses moral hazard challenges. Governments implement purchasing rules to address these issues, but it is essential to understand their impact. In our paper, we examine the effects of changes in procurement regulations on procurement manipulation, its characteristics, and the underlying mechanisms in a middle-income country. We work with a novel database from administrative records containing all procurements of goods and services between 2002 and 2021. By analyzing purchasing behavior around one administrative threshold, we quantify 4,000 manipulated procedures, representing 7.5\% of the total. Manipulation reacts immediately but asymmetrically to threshold changes. We find higher levels of manipulation toward the end of the year, among more regulated buyers, and in environments with low auditing levels. Additionally, we find that a previous relationship with a seller in the prior year increases the probability of manipulation, and that manipulation leads to higher prices. Finally, we develop a model to capture the burden cost of using a more complex procedure at the threshold, estimating it at 1.5 times the procurement award. This research sheds light on the consequences of procurement regulation changes and provides insights into the dynamics of manipulation within the studied context. Understanding these findings can inform policymakers in designing more effective and targeted procurement regulations to mitigate moral hazard issues and enhance transparency and accountability.
Distributive effects of a coordinated wage bargaining scheme
(with Pablo Blanchard, Paula Carrasco, and Cecilia Parada)
Using matched employer-employee administrative data from Uruguay, we analyze the distributive effects of a wage policy with a national minimum wage and more than two hundred wage floors. This wage policy reduces inequality in the lower tail of the wage distribution for all formal private workers, mainly among males, and during a most favorable macroeconomic context. For males, we find spillovers affecting the upper end. Exploring job mechanisms: a smaller distributive effect aligns with a higher displacement effect within sectors in the bottom distribution and among the more affected sectors, but no evidence is found in total employment performance.
Twenty years of job flows in an emerging country
(with Gabriel Merlo)
In a market economy, firms are continuously exposed to economic shocks that affect their performance and results. In response to these shocks, firms react by reallocating their productive factors, such as capital and labor, to more productive uses. We estimate the job flows over a twenty-year period in Uruguay, exploring firm and worker characteristics. We use panel data from social security administrative records that match employers and employees in formal firms between 1996 and 2015. Job flow levels and their cycles are consistent with international evidence. Entry and exit of firms from the market play an important role, explaining about 30% of the total number of jobs created and destroyed for the whole period with high heterogeneity across industries, firm age, and firm size. In particular, the smallest firms are not as relevant in explaining net growth as political and popular beliefs would suggest, and it is start-ups that have the main role in job creation in Uruguay. Despite representing only 5% of total employment, they created more than one-quarter of new jobs and maintained this role in a fully saturated regression. Among worker characteristics, we found no differences in job flows by gender, but female workers gain participation in the period; there are bigger flow rates among workers under 25 and workers in the first and third wage terciles.
Informality and government enforcement in Latin America
This paper analyzes how the informality responds to the quality of the labor enforcement and the bundle of benefits that the formal workers receive in different countries of Latin America. Countries with different levels of informality were compared, highlighting the features that could induce these different levels. In a general equilibrium framework, the government chooses a level of government enforcement and a bundle of benefits maximizing the workers’ utility subject to a budget constraint, a representative firm chooses the share of workers in formality and informality that they want to hire, and the workers offer a share of time in formality and informality. I estimate the main parameters of the model, the production function, the quality of government enforcement and the quality of benefits, for five countries: Argentina, Brazil, Colombia, Peru and Uruguay. Differences in the quality functions of the government enforcement and benefits are found, as well as in the fines established to enforce the agents.
Serie Documentos de Trabajo, DT. Instituto de Economía, Facultad de Ciencias Económicas y Administración, Universidad de la República, Uruguay. DT 21/2014. ISSN: 1510-9305 (on paper) ISSN: 1688-5090 (on line)
PUBLICATIONS & FORTHCOMING
Are Female Bosses a Path to Equality? Evidence of their incidence on Gender Gaps
(with Estefanía Galván, Cecilia Parada and Agustina Romero) SERIEs - Journal of the Spanish Economic Association. Special Issue on Gender in the Economy
While a large body of literature has focused on identifying the causes of female under-representation in hierarchical positions, relatively little is known about the impact of female leadership on gender outcomes among employees. Using 26 years of high-quality, matched employer-employee administrative data from Uruguay, this paper examines how the gender composition in hierarchical positions within firms influences employees' gender gaps. Our results indicate that a higher proportion of female bosses within firms is associated with narrower pay gaps. After accounting for unobserved heterogeneity through fixed effects for workers and bosses, we find that increasing female representation among managerial roles increases female monthly salaries by 2.6 to 3.3 log points—approximately a reduction of 15\% of the 20 log points of the overall gender wage gap. This effect has become more pronounced recently, especially in firms with higher female representation in hierarchical positions. Furthermore, we find that greater female representation in leadership positions increases the number of female workers through two channels: more women are hired, and fewer women leave the firms. Finally, we provide suggestive evidence that female bosses improve job matching, reducing gender gaps; female bosses reduce gender pay differences by 20% to 25% for new hires and 20% for those who switch jobs more often.
Initial inequality, unequal development: Effects of family instability on child development
(with Maira Colacce and Gonzalo Salas) Review of Economics of the Household
This article evaluates the link between family instability and children’s socioemotional development. Using a longitudinal survey, we can track the number and role of household members and measure the children’s development. We analyze the entries of younger siblings and the exits of grandparents and fathers during the first ten years of a child’s life, in relation to two benchmarks: stable households (no changes in household composition) and nuclear stable households (mother, father, and child in every period). The entry of a younger sibling affects children’s externalizing and internalizing problems, particularly in households with lower educational levels. These results relate to the changes in the mother’s time use and her inability to substitute market work with housework, leading to an increased overall workload. The father’s exit from the household is associated with greater behavioral problems in children in relation to the nuclear stable household benchmark, but not observed in households with other structures. Also, the father’s permanent absence has a significant association with children’s externalizing and internalizing problems, regardless of the mother’s educational level. Regarding grandparents, their permanent presence increases children’s externalizing problems when the mother has a lower educational level. Taken together, and considering that development levels were already lower for children with low-educated mothers in the first wave, these results highlight the diverging consequences of family instability in children of low and high-educated mothers, widening the initial development inequalities.
Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment
(with Marcelo Bergolo, Guillermo Cruces, Matias Giacobasso y Ricardo Perez-Truglia), American Economic Journal: Economic Policy
According to the canonical model of Allingham and Sandmo (1972), firms evade taxes by making a trade-off between a lower tax burden and higher expected penalties. However, there is still no consensus about whether real-world firms operate in this rational way. We conducted a large-scale field experiment, sending letters to over 20,000 firms that collectively pay over 200 million dollars in taxes per year. In our letters, we provided firms with exogenous but nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measure the effect of these signals on their subsequent perceptions about the auditing process, based on survey data, as well as on the actual taxes paid, according to administrative data. We find that firms do increase their tax compliance in response to information about audits. However, the patterns in these responses are inconsistent with utility maximization. The evidence suggests that, much like scarecrows frighten off birds, audits can be a significant deterrent for tax evaders even though they would be perceived as harmless by a rational optimizer.
Birth Collapse and a large-scale access intervention with sub-dermal contraceptive implants
(with Cecilia Parada, Ivone Perazzo y Eliana Sena) , Studies in Family Planning Volume52, Issue3 September 2021 Pages 321-34 (2021) onlinelibrary.wiley.com/doi/epdf/10.1111/sifp.12171
Between 2016 and 2018, we observe in Uruguay a steep decline of almost 20% in the number of total births, leading to the collapse of the adolescent fertility rate after decades of relative stagnation. We estimate the quantitative contribution on birth rates, especially teen births, of a policy of expanded availability of sub-dermal contraceptive implants. We exploit the expansion schedule of a large-scale policy of free-of-charge access to sub-dermal implants in the country's public health system through an event study to capture causal effects. We use detailed birth administrative records for the last 20 years. We document an average reduction of 3% in the birth rate in public health facilities across the two years after the policy was implemented in each department. These reductions were notably higher among teens and first births. Although changes in women's fertility decisions are a multi-causal phenomenon, we claim that the sub-dermal contraceptive implants contribute to one-third of the teen and young women's birth collapse.
Transfer Program Enforcement and Children's Time Allocation
(with Gonzalo Salas), Review of Economics of the Household 19, pages 1099–1137 (2021) https://link.springer.com/article/10.1007/s11150-020-09531-w
We examine levels of enforcement of conditions for two transfer programs and estimate how they affect teenagers' time allocation, and in particular, time devoted to school attendance, labor supply and home production. We develop a structural discrete choice model in which young individuals and their parents decide how to allocate their time, including whether to attend school. They also choose how many hours to work in the market, how much time to devote to home production and leisure activity. To estimate the model, we use household panel data which combines administrative records and surveys covering the period of 2005-2012 in Uruguay, during which two consecutive CCT programs were introduced with different designs. Our model captures the share of individuals who are in school, who are working, who are both studying and working, as well as those who neither study nor work; we also capture the share and number of hours devoted to market work and home production, and individuals' GPA distribution. The policy experiments performed indicate that school attendance can be increased by raising the level of enforcement and by sending the cash transfer to the teenagers rather than to their parents.
Are Not Any Silver Linings in the Cloud? Subjective Well-being Among Deprived Young People
(with Paula Carrasco, Gonzalo Salas and Ivone Perazzo) Journal of Happiness Studies 22, pages 491–516 (2021) doi: 10.1007/s10902-020-00238-4
This paper analyzes the channels of change of subjective well-being (SWB), and how are the effects of a social intermediation program. We develop a simple theoretical model to link SWB with the individual and reference wealth, the effort and the level of aspirations. After to overcome selection issues with an instrumental variable to identify causal effects, we find a negative impact on SWB being the main channel of this change is subjective relative wealth, i.e., the relation between the individual and the reference wealth. There is no effect through other theoretical channels, but the results on SWB are heterogeneous by psychological features; they are higher among those with low aspiration levels and external locus of control. Finally, we disentangle the main program characteristics that might generate this effect giving relevant information for the policymakers.
Misperceptions About Tax Audits
(with Marcelo Bergolo, Guillermo Cruces, Matias Giacobasso and Ricardo Perez-Truglia) American Econmic Association Papers and Proceedings Vol. 108, May 2018 pp83-87
For some entities, the utility-maximizing evasion rate depends substantially on tax audit features, such as audit probabilities and penalty rates. Bergolo et al. (2017) document large misperceptions about these features. In this paper, we expand the analysis of survey data to explore potential sources of these misperceptions. Of all the channels that we explore, recent contact with audits best explains differences in misperceptions.
Pension schemes and labor supply in the formal and informal sector
IZA Journal of Labor Policy 2017 6:8 https://doi.org/10.1186/s40173-017-0085-1
This paper analyzes the participation path of workers in the formal and informal sectors throughout their lives, their pension eligibilities, as well as how the social security scheme can change the aforementioned participation path. High levels of informality have impacts on the benefits that workers receive, especially their pension benefits. I use Argentinean panel data from 1995 to 2008 to construct a structural discrete choice model which estimates the population's labor path and their pension eligibilities. I find evidence that low-educated workers have difficulties to obtain a pension by the age of 65 and even by age 70. Policy experiments show that if the parameters are fixed as in the pay-as-you-go (PAYG) model, there is a slight reduction in the years worked in the formal sector and the percentage of workers who obtain a Full pension. If the pension requirements (minimum age and years contributing) are stricter, there is an increase in the years spent in the formal sector but it is not sufficient to achieve the benchmark level of pension coverage. If the requirements are looser, there is a reduction in the amount of time spent in formality to contribute up to the new threshold.
Informality sectoral selection and earnings in Uruguay
(with Marisa Bucheli) Estudios Economicos vol. 25, num 2, julio-diciembre 2010, pag 291-307)
In this paper we define an informal worker as one who is not contributing to the social security system. We analyze the likelihood of being an informal worker, and we estimate the differentials in earnings between sectors using the OLS estimation and a switching regression model. We find that formality is more likely among the better-educated, and among men, those residing in the capital city, and heads of households. In addition, we find that according to five different proxies of the average gap for salaried workers and several sub-samples, earnings are higher in the formal than in the informal sector for all the samples.
Adaptive preferences and capabilities
(with Maria Fernanda Ceni and Gonzalo Salas) Prisma Social N 5. December 2010
The aim of this research is to observe the links between the monetary poverty, deprivation on attachment, and the development of adaptive preferences. We work with a sample of individuals who sleep in the Montevideo's shelter net, collecting socioeconomic and psychological information through a specific survey and the Rorschach test. We find evidence about the development of adaptive preference in these individuals, and we assess the question if it is the life in the shelters one of the main reasons why the individuals adapt their preference respect to the feasibility of the life far of this protection.
OTHER PAPERS & UNPUBLISHED MANUSCRIPTS
Transferencias intergeneracionales en Uruguay.
(with Marisa Bucheli and Cecilia Gonzalez) Revista de Economía , Vol.14, No 2, Segunda Época, Banco Central del Uruguay, Noviembre.
El objetivo de este trabajo es presentar la estimación de los flujos econó-micos entre edades en Uruguay y en particular, analizar las transferencias entre edades. Los individuos consumen a lo largo de toda su vida pero sus ingresos se concentran en las edades medias. Esto hace que en un deter-minado período co-existan generaciones con ingresos laborales inferiores a su consumo (los dos extremos del ciclo de vida) con generaciones cuyo ingreso es superior al consumo. El défi cit de los primeros se financia con ingresos de individuos en las edades medias y/o -en particular en las edades mayores- por flujos originados en la vida activa pasada. Así, este financiamiento toma la forma de transferencias y reasignaciones basadas en activos. Para analizar esos flujos, se recurre a estimar el valor promedio por edad de distintas cuentas (consumo público y privado, ingreso laboral, impuestos, transferencias públicas y privadas, reasignaciones en base a activos). Los valores estimados son consistentes con los datos macroeconómicos (en particular con el sistema de Cuentas Nacionales) y los perfiles por edad se ajustan a la información relevada en microdatos provenientes de encuestas a hogares. Se utilizó información del año 1994.
Las tarifas públicas bajo un enfoque integrado.
(with Gastón Carracelas and Milton Torrelli) Revista Boletín de Historia Económica, Ano IV-N5. Asociación Uruguaya de Historia Económica. Pp 57-73.
En este trabajo se realiza el estudio de la estructu-ra tarifaria del sector eléctrico en el Uruguay del siglo XX. La defi nición de la categoría analítica Modelo de Estructura Tarifaria (MET), permite estudiar cómo las estructuras tarifarias se encuentran relacionadas con el rol asignado a las empresas públicas y con los objetivos más generales del modelo de desarrollo que esta en su base. La identificación de cuatro MET y, por tanto, la obtención de una clara modelización y periodización de dichas estructuras, se constituye en el principal resultado obtenido