Research

Abstract: We study the role of elite colleges as engines of upward mobility. A groundbreaking financial aid reform in Colombia overhauled access to elite universities by rendering them financially accessible for academically successful low-SES students. We leverage stringent program eligibility criteria and nationwide administrative microdata on long-term educational and labor market outcomes to estimate effects on economic mobility, equity, and efficiency. Using a regression discontinuity design, we find that enhancing college quality substantially improved individuals' long-term educational attainment and earnings and successfully narrowed socioeconomic gaps. Using difference-in-differences, we find that it did not disadvantage nonrecipients, promoting both equity and efficiency.  

• Summary for a broader audience: VoxDev, Foco Económico (here and here)

• Media coverage: El Colombiano, Cambio

Abstract: Despite substantial offshore tax evasion, Argentines disclosed assets worth 21% of GDP under a tax amnesty in 2016. We study how enforcement initiatives impact individuals’ tax behavior, tax progressivity, and revenue collection. Offshore tax evasion is concentrated among the wealthiest 0.1% of adults. Tax compliance improved, expanding the tax bases for wealth and capital income taxes, especially at the top. The subsequent tax hike on foreign assets in 2019 boosted tax progressivity, raising the effective tax rate for the wealthiest 0.1% of adults, and established Argentina’s wealth tax as one of the most successful globally in revenue generation.

• Media coverage: Prospect

Abstract: Our study is the first to investigate the effects of reparations for victims of gross human rights violations. In Colombia, victims of forced displacement, homicide, and other atrocities during the conflict received a lump-sum payment equal to three times their annual household income. Using novel linked administrative microdata and event studies, we show that reparations help victims rebuild their lives and significantly improve their well-being and that of their children. Specifically, reparations promote investment in physical and human capital, leading to enhanced living and health conditions, better educational outcomes, and increased asset-building and entrepreneurship, despite slightly discouraging labor supply.

• Summary for a broader audience: UCLA Anderson Review, UC Berkeley Social Science Matrix, FocoEconómico

Abstract: We study behavioral responses to personal wealth taxes in Colombia using tax microdata (1993-2016) linked with the leaked Panama Papers, which shed light on offshoring to Colombia’s most relevant tax havens. We leverage variation from four reforms that modified the wealth tax design—tax duration and rate schedule—and introduced discrete jumps in the tax liability. Using bunching and difference-in-difference techniques, we obtain four key results. First, we find salient and compelling evidence that wealth tax hikes cause taxpayers to lower their reported wealth instantly—a reporting response that slashes, at most, one-fifth of tax revenue. Second, this response can persist even after the wealth tax no longer applies—i.e., “hysteresis”—reflecting taxpayers’ strategic avoidance behavior. Third, taxpayers misreport what authorities cannot cross-verify: they inflate (interpersonal) debt and underreport non-third-party-reported business assets. Lastly, the wealthiest taxpayers respond to wealth tax hikes by hiding assets in hard-to-track entities in tax havens. 

• • Summary for a broader audience: VoxEU, VoxDev, World Bank Development Impact Blog, Econimate

Abstract: This article discusses the challenges and potential policy choices for levying progressive taxes and taxing the rich in Latin America, a region known for its high-income inequality, limited tax-collection capacity, and low share of taxes collected from personal income and wealth. Factors such as high exemption thresholds, low top marginal tax rates, and limited administrative capacity undermine the redistributive ability and revenue collection of the tax systems in the region. Moreover, the income composition for the top percentiles largely comes from capital, and the effective tax rates they face are often low due to the preferential treatment of capital income and wealth. After discussing the evidence of how the rich in Latin America respond to progressive taxes on income and wealth and changes in enforcement policy, we provide some insights on potential policy choices to tax them effectively. These may include broadening the income tax base by lowering the number of exempt and non-taxable income items and the statutory exemption thresholds, reevaluating preferential tax rates on capital income, monitoring foreign income, addressing the abuse of tax treatment by business earners, and enhancing tax administration capacity. Additionally, wealth taxes may complement the tax system with updates to property registers and scrutiny of foreign assets.

Abstract: Reparations recognize and address the harm victims suffered during the war, conflict, or authoritarianism, and some experts argue that the compensation can also help victims to rebuild life projects. Using linked administrative microdata, we study the world's largest reparations program, currently being implemented in Colombia. First, we provide descriptive evidence on Colombia's conflict victims. Then, we shed light on how reparations' various aims have shaped the program's design and implementation features and who has received compensation. Lastly, we discuss the practical challenges and tensions in balancing the various goals of reparations programs under tight fiscal constraints and limited state capacity.

Abstract: Does diversity affect people’s perceptions of income distribution and their preferences for redistribution? I leverage variation from a Colombian financial aid reform boosting the share of low-income students at an elite university. Combining college records and original survey data, I study how diversity affects high-income students’ social networks, perceptions, and preferences by exploiting treatment variation across cohorts and majors using difference-in-differences. Exposure to low-income peers caused high-income students to diversify their social networks, have more accurate perceptions of the income distribution, and support progressive redistribution. My preferred interpretation is that diversity raised students’ concerns about (the lack of) equal opportunity. 

• Summary for a broader audience: FocoEconómico

Abstract: We study the impact of money on households during the COVID-19 pandemic. In March 2020, Colombia rolled out a new unconditional cash transfer (UCT) to one million households in poverty worth $19 (PPP $55.6) and paid every 5-8 weeks. Using an RCT and linked administrative and survey data, we find the UCT had positive (albeit modest) effects on measures of household well-being (e.g., financial health, food access). Moreover, the UCT boosted support for emergency assistance to households and firms during the crisis and promoted social cooperation. Finally, we explore the bottlenecks in expanding mobile money during a pandemic.

• Policy report: Impact Evaluation Report to the Colombian Government (Spanish)

• Summary for a broader audience: IPA Project Summary; IPA Webinar

• Media coverage: Revista Semana, La República, and Dinero

Abstract: This paper investigates the feasibility of wealth taxation in developing countries. It uses rich administrative data from Colombia and leverages a government-designed program for voluntary disclosures of hidden wealth, as well as the threat of detection triggered by the Panama Papers leak. There are two key findings. First, there is substantial (primarily offshore) evasion: two-fifths of the wealthiest 0.01% evade taxes, with these evaders concealing one-third of their wealth offshore. Second, strengthening enforcement can have a significant impact on wealth tax compliance, tax revenue, and progressivity. These results highlight both challenges and opportunities for wealth taxation in the developing world.

• Summary for a broader audience: VoxDev, World Bank Development Impact Blog, InequaliTalks, FocoEconómico, La Silla Vacía, El Espectador  

• Media coverage: Brookings Blog, ICIJ, Law360, La República, El Espectador (here and here), and Tax Notes

Abstract: How does financial aid affect postsecondary enrollment, college choice, and student composition? We present new evidence based on a large-scale program available to low-income high-achievers for attending high-quality colleges in Colombia. RD estimates show aid eligibility raised immediate enrollment by 56.5 to 86.5%, depending on the complier population. This rise, driven by matriculation at private high-quality colleges, closed the SES enrollment gap among high-achievers. Moreover, a DID approach suggests enrollment of aid-ineligible students also improved because college supply expanded in response to heightened demand. With ability stratification largely replacing SES stratification, diversity increased 46% at private high-quality colleges.

• Summary for a broader audience: VoxDev, FocoEconómico (here and here), La Silla Vacía, and a podcast [in Spanish]

War and Progressive Income Taxation in the 20th Century, BEHL Working Paper Series 2014-03

• Summary for a broader audience: FocoEconómico

• News coverage: Marginal Revolution and Vox

• Data file on top marginal personal income tax rates (here)

Social Mobility, Redistributive Preferences, and Happiness in Colombia, Desarrollo y Sociedad, 2011, 68: 171-212 [in Spanish]

High Incomes and Personal Taxation in a Developing Economy: Colombia 1993-2010 (with Facundo Alvaredo) Commitment to Equity Working Paper No. 12, March 2013 [Spanish translation in Revista de Economía Institucional, 16(31): 157-194 here] 

• Summary for a broader audience: Vox Lacea

• Media coverage: New York Times, Revista Semana, El Tiempo (here, here, here, here, and here), La República (here, here, here, and here), Portafolio (here and here), El Espectador, El Colombiano, and El Pais, BluRadio.

Income Inequality and Poverty in Colombia. Part 1: The Role of the Labor Market (with Isabelle Joumard) OECD Economics Department Working Paper No. 1036, April 2013

Income Inequality and Poverty in Colombia. Part 2: The Redistributive Impact of Taxes and Transfers (with Isabelle Joumard) OECD Economics Department Working Paper No. 1037, April 2013 [Spanish translation in Revista Internacional de Presupuesto Público, 83: 11-48 here]

The Process of Reform in Latin America: A Review Essay (with Jeff Dayton-Johnson and Sebastian Nieto-Parra) OECD Development Center Working Paper No. 304, October 2011 

• Summary for a broader audience: Vox Lacea