Research

Research

Working papers:

Abstract: We study the incidence of local taxes on the welfare of heterogeneous residents. A structural model of imperfectly mobile households who differ in terms of income and family status allows us to back out type-specific preferences for local public goods. We calibrate the model with plausibly causal tax-base and housing-price elasticity estimates. Based on municipality-level data for Switzerland, we find that households with children perceive locally provided public services as a normal good, whereas households without children perceive them as an inferior good. This in turn implies that the burden of local taxes is mainly borne – linearity of taxes and capitalization into lower housing prices notwithstanding – by top-25% income households without children. 


Abstract: We estimate the capitalization of regulated prostitution taking place in residential apartments into the rental prices of nearby dwellings. We use unique geo-localized administrative information regarding sex workers in the city of Lugano (Switzerland), which experienced a sudden and unintended increase of prostitution in residential apartments after a state-wide policy that closed brothels located in the city’s outskirts. We find that apartment rents drop by 1.6% for each prostitute working within 50 meters. This effect is however non-linear. We thus provide policy suggestions about the optimal spatial concentration of sex-workers. 


Abstract: This paper investigates the impact of opening the labor market to qualified immigrants who hold fully equivalent diplomas with respect to natives and speak the same mother tongue. Leveraging the 2002 opening of the Swiss labor market to qualified workers from the European Union, we show that the policy change led to a large inflow of young immigrants with the same linguistic background as natives. This, in turn, produced heterogeneous effects on natives wages and employment. While incumbent workers experienced a wage gain and a decrease in the likelihood of becoming inactive, the opposite happened for young natives entering the labor market after the policy change. This is likely the result of different patterns of complementarity/substitutability between same-language immigrants and natives with different levels of labor market experience.


Publications:

Abstract: We design a parsimonious spatial equilibrium model featuring workers embodied with heterogeneous skills and non-homothetic preferences. In equilibrium, locations with improved commuting access become relatively more attractive to the high- skilled, high-income earners. We then empirically analyze the effects of the construction of the Swiss highway network between 1960 and 2010 on the distribution of income at the local level, as well as on employment and commuting by education level. We find that the advent of a new highway access within 10km led to a long-term 24% increase in the share of high-income taxpayers and a 8% decrease in the share of low-income taxpayers. Highways also contributed to job and residential urban sprawl.  

The identification of strategic interactions among local governments is typically plagued by endogeneity problems. This paper proposes an identification strategy that makes use of a multi-tier federal system. State-level fiscal reforms provide an arguably exogenous source of variation in tax rates of local jurisdictions. %Moreover, state borders spatially bound the effects of state-level fiscal reforms across areas that are otherwise highly integrated.  I exploit the fact that local jurisdictions located close to a state border have some neighbors in another state and propose to instrument the (average) tax rate of neighbor jurisdictions with the state-level tax rate of the neighboring state. I use this instrument to identify strategic personal income tax setting by local jurisdictions in Switzerland. In contrast to most of the existing empirical literature and to all results based on standard instruments, I find that tax rates are strategic substitutes in most cases. Tax rates are found to be strategic complements only in the context of large tax cuts. I then develop a residence-based personal income tax competition model and show that tax rates are strategic substitutes if the elasticity of the marginal utility of the public good with respect to the tax rate is above one. This is notably the case in presence of economies of scale in the public good provision.   

We propose a difference-in-differences strategy to identify the existence of interjurisdictional tax competition. Our strategy rests on differences between desired tax levels determined by culture-specific preferences and equilibrium tax levels determined by fiscal externalities and by preferences. While preferences differ systematically between French-speaking and German-speaking Swiss municipalities,  local income taxes burdens exhibit smooth spatial gradients. To qualify the empirical evidence, we develop a theoretical model of strategic tax setting by local governments that anticipate the effects of taxes on the per-capita income and the median ``hedonic'' income,  two inextricable consequences of the sorting of heterogeneous individuals.

Interjurisdictional competition over mobile tax bases is an easily understood mechanism, but actual tax-base elasticities are difficult to estimate. Political pressure for reducing tax rates could therefore be based on erroneous estimates of the mobility of tax bases. We show that tax competition provided the most prominent argument in the policy debates leading to a succession of reforms of bequest taxation by Swiss cantons. Yet, canton-level panel data spanning multiple bequest tax reforms over a 36-year period suggest the relevant tax base, high- income retirees, to be relatively inelastic with respect to tax rates. The alleged pressures of tax competition did not seem in reality to exist. 

Projects: