Research

Abstract: In public finance models, a social planner allocates transfers to maximize welfare subject to equity–efficiency trade-offs. These trade-offs are central to higher education policies—e.g., financial aid and ``top percent" admissions—where eligibility depends on both SES and academic ability. Using quasi-experimental variation from Colombia, we examine how financial aid targeting shapes these trade-offs. We compare incidence, treatment effects on planner-valued outcomes, and MVPFs across SES and test scores, combining RD and boundary discontinuity designs. We find unambiguous gains from targeting low-SES high achievers, but take-up rates, treatment effects, and MVPFs vary substantially by SES and ability. Targeting students above the 91st test-score percentile reduces progressivity—since test scores predict SES—dampens extensive-margin enrollment, shifts impacts to the intensive margin, and lowers the MVPF. These trade-offs intensify once students adjust their behavior in response to policy. By contrast, treatment effects and MVPF are larger among poorer students. In this context, equity and efficiency align.

Abstract: We study the impact of financial aid on upward mobility. We estimate the causal impacts of a Colombian policy targeting high-achieving, low-SES students on later-life educational and labor-market outcomes. Using regression discontinuity design, difference-in-differences, and population-wide administrative microdata, we find that the policy boosted attendance and completion at high-value-added colleges, particularly in STEM fields. Improved college quality led to greater skill development. Nine years later, recipients earn 18 log points more and are more likely to reach the top 1%. The policy narrowed socioeconomic gaps in college quality, attainment, skill development, earnings, and returns to ability, improving equity and efficiency.

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

• Media coverage: El Colombiano, Cambio

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: Argentina’s 2016 tax amnesty led to the disclosure of hidden assets totaling 21% of GDP—an exceptionally large amount, concentrated offshore and among the wealthiest 0.1%. We examine how this enforcement initiative affected taxpayer behavior, tax progressivity, and revenue. Compliance improved—especially among high-wealth individuals—expanding the bases of both the wealth and capital income taxes. A subsequent tax hike on foreign assets further enhanced progressivity and raised effective tax rates on the top 0.1%, generating nearly 0.8% of GDP in wealth tax revenue—one of the highest yields globally. We discuss why, despite prior failed amnesties, Argentina’s 2016 policy package proved unusually effective.

• Media coverage: Prospect

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, Cato Institute Research Brief, Microeconomic Insights

  • Media coverage: El País

Abstract: This paper examines the impact of denying a wanted abortion on women and children in Colombia using high-quality administrative microdata and credibly exogenous variation in abortion access. Women can seek legal abortions through a tutela, with cases randomly assigned to judges. Female judges are 20 p.p. (32%) less likely to deny abortion cases than male judges, and we use the judge's sex as an instrument for abortion denial. Denial of a wanted abortion has both immediate and lasting effects. It increases a woman's risk of death by 2.5 p.p within nine months, mainly due to unsafe abortion procedures, and raises the likelihood of carrying the pregnancy to term by 31 p.p. Tracking outcomes up to 15 years later, we find that women denied an abortion experience more health issues, lower educational attainment, reduced labor-force participation, and higher rates of single motherhood, poverty, and reliance on government assistance. Existing children, born before their mother sought an abortion, are less likely to attend school and more likely to work.

• Media coverage: El Espectador (here and here), El País, La Cadera de Eva, Voces Francas, El Tiempo, RCN Radio, La FM

• Podcast: Faculti

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, El País

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]

Abstract: College financial aid programs often target individuals based on a combination of academic merit and socioeconomic status. The design of these programs can also be influenced by social preferences and political factors. This paper analyzes the evolution of Colombia's flagship program, Ser Pilo Paga, later renamed Generación E-Excelencia. It examines how the national government initially designed the program based on social objectives and budget constraints and subsequently modified it in response to student behavior, political pressures, and shifting priorities. Finally, the paper briefly discusses how these design changes might affect the program's impact on equity and efficiency.

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.

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