Francisco Costa

Assistant Professor of Economics at Fundação Getulio Vargas (FGV/EPGE) 
On leave at UCSD Department of Economics.

Research interests: Environmental/Energy Economics, Development Economics.

francisco.costa [at]
(+55) (21) 3799-5871
Praia de Botafogo, 190/1100, 
Rio de Janeiro, RJ, 22250-900, Brazil.

A growing body of evidence documents that policies can affect household behaviors persistently, even if they are no longer in place. This paper studies the importance of such ``hysteresis'' -- the failure of an effect to reverse itself as its underlying cause is reversed -- for the welfare evaluation of corrective policies. First, we introduce hysteresis into the textbook framework used to derive canonical sufficient statistics formulas for the welfare effect of corrective policies. We then derive new formulas allowing for hysteresis. We show that, under certain conditions, the persistent effect of a short-run (i.e., temporary) policy becomes a key new statistic to evaluate the welfare effect of such a policy, but also of a long-run (i.e., permanent) version of a similar policy. Second, we estimate the persistent effect of a short-run policy, for which we argue that these conditions are met, in a policy-relevant context: residential electricity use in a developing country setting. We estimate that about half of the dramatic short-run reductions in residential electricity use induced by a 9-month long policy, which was imposed on millions of Brazilian households in 2001, persisted for at least 12 years after the policy ended. Finally, we combine our estimates with our framework to illustrate the severe implications that such hysteresis can have for the welfare evaluation of corrective policies.

Homicides and the Age of Criminal Responsibility: A Density Discontinuity Approach, with João de Faria, Felipe Iachan and Bárbara Caballero. [Coverage: Época OnlinePortal BrasilExame.comTerraJornal do BrasilEBCTrubuna da BahiaIGO PovoR&R at Economìa, the journal of LACEA.

We employ a density discontinuity design to evaluate the deterrence effect of more severe punishments around the legal age of criminal responsibility in Brazil. Motivated by the criminology literature, we propose a novel proxy based on the inherent risk underlying criminal activities. Using violent death rates as a proxy for an individual's involvement in violent crime, we find no discernible deterrence effects. We additionally study arrest data from the country's third most populous state, Rio de Janeiro, and discuss the advantages of our proxy in light of potential underreporting biases from using criminal records.