Working papers

[NEW]Historical Newspaper Markets (with L.V.A. Colombo, M. Magnani, and M.G. Onorato) (Latest version)

Abstract

This paper proposes a novel methodology to identify the geographic market of local newspapers when information on their diffusion is not available or is not sufficiently granular. We illustrate the methodology using historical data from 154 newly digitized newspapers published in Italy between 1919 and 1922. Combining machine learning-augmented optical character recognition techniques, multi-way fixed-effect regressions, and GIS tools, our approach allows us to estimate markets based on news content. Text-based location of newspaper markets considerably improves over assuming that market boundaries coincide with administrative aggregations. We discuss how our technique strengthens the usage of newspapers as a granular and time-varying source of historical information and offers new avenues for identification strategies.

[NEW]Fiscal Policy and Politicians’ Term Length (with F. Franzoni and J. Klarin) (Latest version; CESifo WP)

Abstract

This paper investigates the causal effect of the term length of political executives on economic policy outcomes. To establish causality, we exploit the staggered adoption of four-year terms for governors across US states, using data for the period 1937-2008. We find that increasing governors’ tenure in office from two years to four years reduced state expenditures and revenues by approximately 0.3-0.5 percentage points of GDP. The effect on state finances is primarily driven by a reduction of current spending and grants from the federal government, and it is concentrated in states where the incumbent governor expects fierce competition in the next election. Lastly, we discuss the implications of longer terms for macroeconomic stabilization, political budget cycles, and intergovernmental resource allocation.

[Revised]Biased Forecasts and Voting (with J. Bizzotto and A. Reslow) (Latest version; CESifo WP)

Abstract

We introduce macroeconomic forecasters as political agents who may bias reports
to influence voters. In a probabilistic voting framework, a voter forms expectations
based on a forecaster’s reports. A partisan forecaster faces a trade-off between
protecting its reputation and influencing the vote. The model predicts that the
forecaster may lie before and after the vote. We test the model’s predictions using
high-frequency, forecaster-level data around the Brexit referendum. We find that
forecasters exposed to financial losses from Brexit issued significantly more inaccurate GDP growth forecasts than others. The findings suggest that influential
forecasters may strategically manipulate information when stakes are high.

Inverting the Chain? VAT Collection Regimes and Tax Compliance (with D. Gamannossi Degl’Innocenti, M. Le Moglie, and F. Passerini) (Latest version)

Abstract

The Value-Added Tax (VAT) is widely recognized as being inherently self-enforcing because it features third-party reporting and spread withholding along the production chain. However, a growing literature documents significant VAT tax gaps, sparking interest in possible improvements to VAT design. Reverse Charge (RC) is among the main examples: recently adopted by multiple countries to a variety of industries, RC shifts the entire tax payment on retailers, which, however, remain subject to third-party reporting. Leveraging administrative firm-level data from Italy and a quasi-experimental variation, we show that RC leads to an increase of reported value added (+20 percent). The effect of RC is present across the distribution of firm size although it is stronger among small firms and companies that used to bunch around the zero-liability tax kink. On these firms, RC limits the incentive to under-report sales. On the other end of the distribution of firm size, we document that RC increased reported value-added by limiting over-reporting of purchases.

[Revised]Legislative Effectiveness, Trade Schocks, and Electoral Accountability (with Barton E. Lee) (Latest version; CESifo WP)

Abstract

Successful economies rely upon effective lawmaking. Representatives must be
effective legislators—able to craft and pass new laws—and voters must choose to
(re)elect these effective legislators, particularly when circumstances demand new laws.
We analyze election outcomes from the U.S. House of Representatives, legislators’
legislative effectiveness scores, and exogenous increases in import competition from
China between 2002 and 2010. We document that trade shock exposure significantly
reduces the probability of reelection of incumbents who have a record of being (relatively) ineffective legislators. On the contrary, for incumbents with a record of being
effective legislators, the adverse effects of trade shock exposure largely nullified; for
very effective legislators, trade shock exposure even improves their electoral fortunes.
We provide evidence that this result is driven by trade shock exposure increasing voters’ demand for policy change and, in turn, their support for more effective legislators.
Our results have consequences for the effectiveness of future cohorts of legislators.

Gender Gaps in Political Careers: Evidence from Competitive Elections (Latest version; CESifo WP)

Abstract

This paper documents large and long-lasting gender differences in the career returns from participating in an election. Among candidates who marginally win their primary for a seat in the US House of Representatives, women are 20 percent less likely than men to win the seat. Using a difference-in-discontinuities design, I then show that the gender gap in the probability of being elected translates into diverging future career outcomes. Women are substantially less likely than men to win future elections and to climb the political hierarchy. Similar results are obtained in the context of runoff mayoral elections in Italy.

[NEW]Strategic bankruptcies. Do Smart Politicians Do It Better? (with M. Bordignon and G. Turati) (Latest version; CESifo WP; CIFREL WP)

Abstract

We study the reaction of low vs. high-skilled politicians to a reform, approved in Italy in 2011, that introduces stringent individual financial and career sanctions to local administrators who are judged responsible for their municipality’s bankruptcy. To this aim, we leverage exogenous variation induced by close elections between a mayoral candidate who holds a college degree and a mayoral candidate who does not. After the introduction of sanctions, skilled politicians tend to declare bankruptcy with a higher probability than low-skilled politicians. The effect is concentrated in municipalities in which the financial state of distress was not advocating for a bankruptcy. Our findings document that individual sanctions against politicians may backfire if strategic considerations are not taken into account properly.

[Revised]When Women Take All: Direct Election and Female Leadership (Latest version; CESifo WP)
Awards: SIEP Prize 2022; IIPF Young Economist Honorable Mention 2022
Media: Genderlab.unibocconi.it

Abstract

This paper investigates how direct election regimes (à la presidential democracy) affect the selection of women into political offices compared to indirect appointment (à la parliamentary). Exploiting the staggered phase-in across Italian municipalities of a reform to the local institutional regime, I find that the introduction of direct elections increased the fraction of female mayors substantially. The results are stronger in cities with a high pre-reform share of female politicians and driven by high-quality female officials replacing undereducated incumbents. Taken together, the results of this paper inform that direct election regimes ease the selection of competent politicians into office.