Research
Research
(with Nicolás Grau and Jorge Rivera)
Journal of Quantitative Criminology, 39, 283–332 (2023).
Abstract:
Objective: To study the effect of pretrial detention on post-verdict labor market outcomes.
Method: We combine Chilean individual administrative data for criminal cases and labor market outcomes to estimate the effect of pretrial detention for first-time defendants on labor outcomes using the Difference-in-differences (DiD) method, controlling by individual fixed effects, and an instrumental variables (IV) approach. The IV approach takes advantage of the quasi-random assignment of judges.
Results: The IV results show that pretrial detention reduces the probability of having formal employment and the average monthly wage by 39% and 56% during the six months following the final trial verdict. DiD estimation delivers estimates that are between one-third and one-half smaller. The magnitudes of the effects shown continue to be relevant as much as 24 months after the final trial verdict. The negative effect of pretrial detention also exists for accused individuals whose trial does not end with a custodial sentence. The results of our analysis suggest that the negative effect of pretrial detention is (at least) driven by the lasting effect of being excluded from the labor market during the trial, the accompanying social stigma, and the impact of pretrial detention on the probability of post-verdict incarceration.
Conclusion: Despite the relevant and lasting effects of pretrial detention on labor market performance, the evidence suggests that individuals in both the control and treatment groups keep the same labor dynamics pretrial and posttrial if they return to work immediately after its conclusion. Therefore, conditional on the decision to keep pretrial detention as an ongoing policy, a possible avenue to attenuate the negative effect on labor outcomes is to design public policies that support access to the labor market and finding an employment position immediately following pretrial detentions and trial proceedings.
(with Francisco Martinez and Daniel Oda)
Central Bank of Chile Working Papers Nº 944, (2022).
Abstract:
This paper analyzes the effect of monetary policy in the credit market, by modeling the dynamics of banks’ interest rates relative to its equilibrium level. We estimate the banks’ equilibrium interest rates, which include latent spreads and/or specific margins. Additionally, we allow a gradual convergence to the target and asymmetric adjustment speeds, as it may be different for active and passive rates and it depends on whether these adjust to higher or lower levels as compared to the current one. The use of regimes based on the relative level of the rate to its objective has advantages over only differentiating between increases and decreases in the monetary policy rate (MPR), since it also recognizes changes in spreads, which exploit the heterogeneity of the banks and include the effects of specific factors. Using Chilean data from January 2004 to September 2019, we find that although there is a direct transmission of MPR on the banks’ interest rates, this is not immediate. In particular, we show that the adjustment of deposits rates to changes in the MPR is faster in a monetary easing, while, for commercial rates, banks adjust their rates more rapidly to a tightening. This result is consistent with international evidence, in particular for larger institutions, but this effect is diluted in a period of less than a year.
MA in Economics Dissertation (2017).
Abstract:
El presente estudio investiga los impactos locales que el boom de precios de commodities tuvo sobre el mercado laboral en Chile. Mediante el uso de las encuestas CASEN 1998 al 2013 y los Índices de Precios de Exportación, se encuentra evidencia de que el aumento en la valorización de los bienes primarios produjo efectos positivos tanto en el salario nominal promedio como la tasa de empleo de las comunas chilenas. En particular, un incremento en 10% en los precios de commodities generó un aumento en 4% en el salario medio y 0,5 puntos porcentuales en la tasa de empleo, respectivamente. Los impactos heterogéneos, por otra parte, muestran que las personas más beneficiadas con este boom fueron los trabajadores menos calificados y las de género masculino. Además, se encuentra evidencia de impactos indirectos del shock de precios sobre el mercado laboral y efectos que van en línea con lo que se desprende de la famosa Enfermedad Holandesa.
(with José Matus and Daniel Oda)
mimeo in “Intermediación Financiera y Banca Central en Chile”, Central Bank of Chile (2021).
Abstract:
In this paper I study how banks adjust the maturity structure of their balance sheets in response to changes in monetary policy, and how this adjustment differs across banks. I build a New Keynesian model with heterogeneous banks that face financial frictions and choose the maturity of their lending contracts. Banks fund long-term loans with short-term deposits and differ in their exposure to interest rate risk depending on their size. The model shows that a contractionary monetary policy shock reduces the price of capital and narrows lending margins, which makes banks shorten the maturity of their loan portfolios. I further test the model’s predictions using U.S. Call Report data from 1997 to 2017. I find that higher interest rates are associated with a lower maturity gap, and this effect is smaller for larger banks. I also find that most of the adjustment comes from the asset side, rather than the liability side, which is consistent with the assumptions of the model. These findings suggest that it is important to consider bank heterogeneity when studying how monetary policy affects the financial system.
Abstract:
In this paper, we study the effect of natural disaster events on the financial sector, and explore how maturity mismatch in the banking system influences the transmission of these shocks. To do so, we implement a DSGE model where banks supply long-term loans and demand short-term deposits within a New-Keynesian framework. Our results show that a natural disaster shock negatively affects output, consumption, investment, and inflation. Additionally, this shock dampens the demand for loans, reduces banks’ lending capacity, and decreases bank’s revenues. The presence of maturity mismatch modifies these dynamics, attenuating some of the negative effects on output and investment but introducing additional financial vulnerabilities. The model is calibrated to Chile, a country highly vulnerable to natural disasters, ensuring relevance to disaster-prone emerging economies. This research provides important insights for policymakers aiming to strengthen economic resilience and financial stability in the face of natural disasters.