Research
Work in Progress
“Protecting Jobs and Firms: The Impact of Short-Time Work during the COVID-19 Crisis in Belgium”
Job Market Paper (Coming soon!)
Abstract: Short-Time Work (STW) programs aim to protect jobs and firms, but their effectiveness during the COVID-19 pandemic remains unclear. This paper evaluates STW during the pandemic, a period marked by economic lockdowns and high program uptake. Using a fuzzy regression discontinuity design, I analyze a Belgian policy reform that restricted access to firms that had used the program for less than 20% of contractual days at the peak of the crisis. The results show that STW effectively preserved employment in firms partially affected by lockdown measures, but had no significant effect on firms in essential sectors unaffected by lockdowns, indicating deadweight losses. These heterogeneous responses align with theoretical predictions, which suggest that STW is more effective for firms facing large and unexpected productivity shocks.
Presented at the 19th Belgian Day of Labour Economist (BDLE) and IRES Lunch Seminar.
“Short-time work and its effect on employment and firm survival: evidence from the Great Recession in Belgium” with Bart Cockx and Gert Bijnens.
Abstract: We evaluate the effectiveness of Belgium’s short-time work (STW) program during the Great Recession, a period when the country recorded the highest STW take-up rate in Europe. STW allows firms to reduce working hours in response to temporary shocks while avoiding layoffs, playing a key role in European labor market insurance systems. Using an instrumental variable strategy that exploits quasi-exogenous variation stemming from an institutional feature of the Belgian program, we estimate the causal effects of STW on employment and firm survival. We find that, while STW significantly reduces the volume of work per worker, it does not lead to statistically significant employment gains for the average treated firm. Importantly, positive employment effects are concentrated among small manufacturing firms, which are more likely to face binding liquidity constraints. These findings highlight the importance of targeting and screening in improving the cost-effectiveness of STW programs and minimizing deadweight losses.
Presented at AIEL 2023 Genoa, COMPIE 2024 Amsterdam, ESPE 2024 Rotterdam, and EALE 2024 Bergen.
“Hiring subsidies and temporary work agencies”
with Sam Desiere and Giulia Tarullo. [IZA Working Paper]
Abstract: This paper evaluates a hiring subsidy for lower-educated youths in Flanders (Belgium) that reduced labour costs by approximately 13% for a period of two years, starting in 2016. Using a donut Regression Discontinuity Design, we find no evidence that the subsidy improved the job finding rate of eligible job seekers in 2016-19, a period marked by a tight labour market. We then investigate the role of temporary work agencies, which disproportionately employ the target group and obtain 25% to 34% of the subsidies. Using Difference-in-Differences regressions, we demonstrate that agencies did not raise wages of eligible agency workers in response to the policy. Remarkably, despite a 3.3% labour cost reduction, full-time equivalent employment of eligible workers in these agencies decreased by 9.2% over the three years following the reform. Our findings highlight how an active labour market policy affects agency employment.
Presented at EEA-ESEM 2024 Rotterdam (by Giulia Tarullo)
“Shiftwork in Europe: Ten facts”
with Sam Desiere. [Long abstract]
Abstract: Shift work is a modality of work organization that has been scarcely explored in the economic literature compared to other working time modalities (e.g., part-time and temporary work). Policymakers have focused their attention on the negative effects that working shifts can have on the well-being and health of workers. However, less is known about differences in the prevalence of shift work over time and across countries. This paper describes ten stylized facts regarding the evolution of the prevalence of shift work across 15 European countries during 2001-2019 and links changes to differences in the evolution of shift premium across and within countries. It uses evidence from two surveys. The European Labor Force Survey (EU-LFS) for understanding differences in the prevalence of shift work across and within countries, and the European Structure of Earnings Survey (SES) to map changes in the shift premium.
Presented at 8th European User Conference 2023 Mannheim.
“Firm outcomes adjustment in response to changes in the corporate income tax rate in Developing Countries: Evidence from Ecuador 2013 - 2019”
Master Thesis supervisor: William Parienté . [Abstract]
Abstract: The low tax capacity is an important issue in many developing and emerging countries. Most governments have tackled this issue by implementing fiscal reforms that comprise changes in tax rates, improvements in administrative enforcement or even both at the same time. I use a quasi experimental setting created as a result of a fiscal reform in Ecuador in late 2014. Using a panel of administrative data from firms financial statements during the period 2013-2018, I exploit the variation created by the reform that consisted in an increase from 22% to 25% - in 2015 - and to 28% - in 2018 - on the statutory corporate income tax rate. Four types of responses are studied: 1) corporate size responses, 2) financing responses, 3) profit shifting responses and 4) changes in ownership structure after the reform. Even though there is a large literature that has been built around firms behavior to changes in corporate tax rates in developed countries, there is ambiguos and scarced evidence about the responses of firms to fiscal reforms in developing and emerging countries.
Working Papers
“Theory and Empirics of Short-Time Work: A Review”
with Muriel Dejemeppe and Giulia Tarullo. [WP]
Abstract: Following massive take-up rates during the COVID-19 period, short-time work (STW) policies have attracted renewed interest. In this paper, we take stock of this policy instrument and provide a critical review of STW systems in Europe. We focus on the objectives of STW programs and their primary characteristics, as well as the inefficiencies associated with these policies, such as excessive use and slower worker reallocation. Additionally, we take a stroll through the main contributions of STW impact evaluations. Finally, we identify relevant directions for the refinement of the main design features of the scheme, key lessons, and avenues for future research.
“Taxable Income Elasticities in Developing Countries: Evidence From Ecuador”
with José G. Castillo García. [WP]
Abstract: Tax reforms involve welfare changes that need to be consistently measured. Pivotal parameter in such empirical efforts is the Elasticity of Taxable Income (ETI). This paper contributes to the estimation of the ETI in developing economies. We rely on a research design based on Ecuador's Reformatory Law of Tax Equity of 2007. By using personal income tax administrative records, we show that, on average, the ETI (net-of-MTR) of the aggregated gross income is around -0.23. Also, we find evidence of heterogeneous responses to tax policy shocks through changes in Marginal Tax Rates, conditional on income levels; a one percentage point increase in the MTR leads to an increase of 0.15 percentage points of the aggregated gross income in lower-income taxpayers, while for higher-income taxpayers we report a null effect. Results are robust to different specifications and adjustments proposed due to parallel changes in deduction policies.
Publications
with Segundo Camino. [ Article ] [Review of Development Economics]
Abstract: The construction sector is one of the most important sectors for economic development due, among other reasons, to the productive chains that it generates. This paper presents an analysis of the determinants of the total factor productivity (TFP) in the Ecuadorian construction sector during the period 2007–2018. In the first stage, we estimate a production function using the Wooldridge (Economics Letters, 2009, 104, 112–114) estimator to correct the simultaneous determination of inputs and firm unobserved productivity. In the second stage, we analyze the main determinants of TFP. These determinants are classified into four groups: internal, international trade, financial constraints, and external characteristics. Our results suggest that firm age is positively related with TFP but negatively related with TFP growth. Similarly, the fact of being a family firm is negatively related with TFP, but size is positively related with TFP and its growth across the construction subsectors. In addition, we find that access to debt and credit is positively related with productivity, but less-competitive environment is negatively related with productivity. Finally, our results suggest that TFP and its growth are pro-cyclical with respect to the gross domestic product. Our results have several managerial implications that are discussed in this article.
“Is FDI a potential tool for boosting firm’s performance? Firm level evidence from Ecuador”
with Segundo Camino and Mary Armijos. [ Article ] [Journal of Evolutionary Economics]
Abstract: In developing countries, the evidence regarding the direct and indirect effects of FDI on economic and financial performance at the firm level is mixed. To contribute to this literature, we provide empirical evidence of direct and indirect effects of FDI on firm’s performance, using return on assets (ROA), gross revenues and gross revenues growth rate as performance measures. We examine the private formal enterprise sector in Ecuador from 2007 to 2018. Our identification strategy relies on the use of the Generalized Method of Moments (GMM) methodology for dynamic panel data which allows us to control for potential endogeneity, autocorrelation and heteroskedasticity issues. The results suggest that firms with inward FDI grow faster than their counterparts, and firms with higher amounts of FDI as a share of total revenues have on average higher levels of gross revenues. Moreover, we find negative horizontal wages and gross revenues spillover effects on gross revenues growth rates, but positive horizontal gross revenues spillover effects on ROA. There is also significant evidence of negative horizontal spillover effects in all economic sectors, whereas evidence for forward and backward spillovers is heterogeneous across them.
“Determinants of profitability of life and non-life insurance companies: evidence from Ecuador”
with Segundo Camino. [ Article ] [International Journal of Emerging Markets]
Abstract: The purpose of this paper is is to identify the main determinants of insurance profitability on life and non-life segments to obtain which variables affect in each market of the Ecuadorian insurance sector. Using a large panel data set with financial information from 2001 to 2017 we estimate the determinants through a panel corrected standard errors regression. We find that net premiums, technical reserves, capital ratio and score efficiency are micro-determinants in the life insurance sector, whereas in the non-life sector, the micro-determinants include also claim levels and liquidity ratios; moreover, we find that HHI is a determinant of profitability only in the life insurance sector. Among the macro determinants set, we find that the interest rate has also a significant impact both in the life and non-life insurance segments.
“Market power versus efficiency in the Ecuadorian bank credit market”
with Segundo Camino-Mogro, Mary Armijos, Paúl Vera-Gilces, Natalia Bermúdez-Barrezueta, Xavier Ordeñana-Rodríguez, and Juan Dominguez. [ Article ] [Journal of Applied Economics]
Abstract: This paper analyzes credit level determinants from a microeconomic standpoint. Furthermore, we test market power and efficiency hypotheses on credit levels in general, which are then classified as high- or low-risk. We use the non-parametric Data Envelopment Analysis (DEA) and a two-step system Generalized Method of Moments (GMM) approach. In addition, we do robustness checks using other market power variables to demonstrate that our results do not change. The main findings uncover evidence that supports the efficiency hypothesis vis-a-vis market power in determining total credit, high-risk credit, and low-risk credit allocation. This result indirectly suggests that banks operate at optimal costs and have correct operational management regarding the placement of credits. The most efficient banks may have better placement processes, better risk scores, and better information management of potential clients, which could lead to a greater market share (because of efficiency rather than concentration).