Ignacio P. Campomanes

I am a Resident Fellow at the Navarra Center for International Development. I received my PhD in Economics from the University of Minnesota in 2018.

Research Interests: Political Economy, Macroeconomics, Public Economics, Development

Contact

campomanes@unav.es

Navarra Center for International Development

Universidad de Navarra

ICS-Edificio Bibliotecas

Pamplona, Spain 31009

Latest Research:

The Political Economy of Inequality, Mobility and Redistribution (New Version)

Abstract: How does the interaction between inequality and social mobility affect the choice of fiscal policy? I analyze this question in a model of democratic politics with imperfect tax enforcement, where the ability of individuals to evade taxes limits the amount of redistribution in the economy. Social mobility creates an insurance motive that increases voluntary compliance, favoring the tax enforcement process. In such an environment, redistributive pressures brought about by an increase in inequality are only implementable in highly mobile societies. On the contrary, when mobility is low, higher inequality reduces tax rates and does not translate into higher redistribution. I empirically analyze the predictions of the model for a sample of 72 countries during the period 1960-2015. Using cross-sectional as well as panel estimation techniques, the results point to a positive relation between market inequality and the level of redistribution only when social mobility is relatively high.

Foreign Aid and Fiscal Policy (Draft)

Abstract: This paper examines the effects of foreign aid on fiscal policy in an economy with a relevant informal sector and productive public capital. The fiscal response to aid depends on the characteristics of the recipient government. A benevolent government that maximizes its citizens utility uses aid to lower taxation and increase public capital, producing an rise in formal sector production and households welfare in steady state. This is true regardless of the way foreign aid is structured. On the contrary, the form of aid produces different effects when the government is self-interested and cares about its own political rents. When aid is unconditional or tied to public investment projects, the government keeps taxes constant while decreasing domestic investment, using the additional resources to increase its own consumption. Only when structured as a supplement to domestic revenue mobilization, foreign aid serves to increase total aggregate public capital and therefore foster output and welfare in the long run.

Inequality and Growth: How Social Mobility Reshapes the Main Theoretical Channels (Draft)

Abstract: This paper analyzes how the different theoretical mechanisms proposed to explain the inequality-growth relation are affected by the introduction of social mobility in a politico-economic environment with imperfect tax enforcement. I show that the direct negative effect of inequality on growth predicted by models of incomplete markets is specially pronounced in societies with low social mobility, while it is lessened in highly mobile economies. This is due the different effects of the increase in inequality on redistribution in each case. In the former, higher inequality leads to less redistribution which magnifies the inefficiencies created by the market incompleteness. Instead, in the latter case the rise in inequality produces an increase in redistribution that partially compensates the initial inequality increase. In models where inequality favors economic growth, because of investment indivisibilities or heterogeneity in marginal propensities to save among the population, a similar result applies. Inequality is specially beneficial for economic growth when social mobility is low, as the compensating effect of redistribution is reduced. Finally, exogenous taxation costs modulate the previous results depending of whether redistribution helps or retards economic growth. Altogether, the insights of the paper suggest that social mobility must be taken into account when analyzing the effects of inequality on economic development.

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