Economica

Drawing on a matched survey–administrative dataset tracking careers from 1975 to 2018, we examine the trends in intragenerational earnings mobility in Italy over the past 40 years. We compare earnings trajectories from age 35 to age 45 via a refined version of the ‘income risk decomposition’ proposed by Austin Nichols in 2008, distinguishing between ‘good’ and ‘bad’ earnings mobility from an individual welfare perspective. Our findings reveal that the long‐run trend of increasing cross‐sectional earnings inequality in Italy has been accompanied by widening persistent disparities within the same generation. For all cohorts of workers, at least 80% of inequality is permanent, reaching nearly 90% for the most recent cohort. We also uncover that a substantial share of individuals—between 25% and 39%—do not benefit from stable upward income mobility during a crucial career phase. This issue has worsened over time, with the last ten cohorts experiencing higher income instability (+20.2 +20.2 %) and declining upward mobility (−34.7$-34.7$%), largely explained by the growing prevalence of atypical employment arrangements. Furthermore, using intragenerational Great Gatsby curves, we show that cohorts exposed to greater earnings inequality also face more persistent differences and reduced earnings growth, especially in the aftermath of the Great Recession.

Fertility levels have decreased greatly in virtually every nation, but the timing of the decline has differed even among developed countries. In Europe, Asia and North America, total fertility rates (TFRs) of some nations dipped below the magic replacement figure of 2.1 as early as the 1970s. But in other nations, fertility rates remained substantial until the 1990s, plummeting subsequently. This paper addresses why some countries in Europe and Asia with moderate fertility levels in the 1980s have become the ‘lowest low’ nations today (TFRs less than 1.3), whereas those that decreased earlier have not. Also addressed is why the crossover point for the two groups of nations was around the 1980s and 1990s. An important factor that distinguishes the two groups is their economic growth in the decades after the Second World War, especially the 1960s and 1970s. Countries with ‘lowest low’ fertility rates today experienced rapid growth in GDP per capita after a long period of stagnation or decline. They were catapulted into modernity, but the beliefs, values and traditions of their citizens changed more slowly. Thus swift economic change may lead to both generational and gendered conflicts that result in a rapid decrease in TFR.

Using a new survey and experimental data, we investigate how information on inequality and immigration affects preferences for redistribution in Italy. Our analysis addresses both the economic and cultural dimensions of immigration, showing that, in general, preferences for redistribution are inelastic to new information. However, we find that providing information about the native–immigrant composition of poverty reduces exclusionary redistributive preferences. Specifically, when respondents learn that poverty among natives is lower than they had previously believed, they are less likely to prioritize natives and exclude immigrants from receiving welfare benefits. This provides evidence of an economic in‐group bias in redistribution preferences. Heterogeneous treatment effects also reveal the presence of a cultural in‐group bias among certain sociodemographic groups.

A rich literature has long studied the asymmetric effects of monetary policy over the business cycle, generally presenting mixed results. Most of the empirical work, however, focuses on the responses of output and prices. Our analysis centres on the dynamics of the markup, given the key role that it plays in the transmission of monetary policy, the fact that it constitutes a key leading indicator for predicting economic and financial crises, its direct relationship with income distribution, and the scarce studies on the subject. Recent empirical findings suggest that the markup decreases (increases) in response to a monetary policy tightening (easing) shock, a counterintuitive result if we consider the basic New Keynesian model, which delivers a countercyclical response of the markup conditional on a monetary shock. We show that the dynamics of the markup depend on whether the monetary policy shock takes place during a period of expansion or recession, with the markup responding as expected in the New Keynesian model in recessions, but failing to do so in expansions. Our results have important policy implications, providing evidence that the transmission mechanism of monetary policy through the markup would not be operative during booms.

Measuring time‐varying policy intensity as the proportion of relevant newspaper articles, we study how the Chinese government's 2012 anti‐corruption campaign affected listed companies from 2012 to 2014. We find that the campaign's first two years decreased the market value of politically connected companies by 7.5%, which is equivalent to 80–83% of the benefit brought by these connections. These impacts were driven mainly by non‐government‐owned companies, less productive companies, and companies in regions with higher levels of corruption. Furthermore, our analysis reveals that companies with political connections have reallocated more resources to marketing to sustain their operations since the start of the campaign. Additionally, they have retained a larger share of their profits to navigate through more challenging economic and financing conditions.

We develop an equilibrium model of labour force participation to examine the labour market business cycle. The model remains agnostic about unemployment inflows and outflows, modelling these flows with a structural moving average representation derived from a factor‐augmented vector autoregression model. Estimating the augmented dynamic stochastic general equilibrium model on data for the USA, we identify the structural shocks and parameters driving business cycle fluctuations, avoiding misspecified job‐finding and job‐separation rates. Our results show that real wage rigidities play a minor role, labour force participation is mildly procyclical, and transitions between employment, unemployment and non‐participation are strongly cyclical.

We study the capacity reduction process in an industry with geographically complex market structure, using the case study of the closing of bank branches in Spain in the years following the burst of the credit bubble (2008–14). We geolocate each bank branch and identify as its competitors those branches that lie within 150 metres of it. We find that branches with competitors are less likely to close than branches without, indicative of strategic behaviour. Clustering the circle markets centred within the same census tract using fixed effects, we estimate a negative effect of the number of competitors at the start on both the exit rate in a local market and the probability of closing of an individual branch. This sign is the opposite of both what has been found in the related literature, and what we estimate without the census tract fixed effects. We argue that this negative relationship is rationalizable by a standard free entry model in the presence of fixed costs. We also find that branch closings are faster when the parent bank has other branches in the same local market, which is further evidence for strategic behaviour.

We conduct a survey experiment among 18,000 respondents in Germany to examine the determinants of support for rent control policies. We find that highlighting undesirable price and supply effects lowers respondents' agreement with rent control, while pointing out that it can prevent the displacement of low‐income tenants increases agreement. However, while our treatments shift support for the policy into the hypothesized direction, the effect size decreases with misperceptions. Our results suggest that responsiveness to new information depends largely on prior beliefs, which affect perceived credibility and political neutrality of the received information. Mere information provision may therefore not be sufficient to effectively alter policy views.

This paper puts forward an analytically tractable dynamic stochastic general equilibrium model, with both labour and product market frictions. Frictions in the labour market arise from the power of labour market insiders to periodically preset nominal wages, without full current information. Product market frictions arise from monopolistic competition and staggered pricing. The model results in an insider–outsider New Keynesian Phillips curve (IO‐NKPC) that transcends the main limitations of the benchmark and hybrid NKPCs based on staggered pricing, as: (i) it is expressed in terms of unanticipated inflation since current inflation depends on prior expectations about its level; (ii) unemployment (output) and inflation persistence are endogenous; and (iii) the divine coincidence between the stabilization of inflation and employment (output) does not apply, rendering a Taylor‐type interest rate rule optimal. Dynamic simulations reveal multifaceted inflation dynamics shaped by the interplay of price stickiness and labour market persistence. An empirical application to the euro area validates the IO‐NKPC's superior forecasting performance, highlighting its relevance for understanding inflation dynamics and guiding effective monetary policy design.

This study explores the impact of light‐touch interventions on the academic outcomes of female scholarship recipients. In a randomized trial involving nearly 2000 students at the University of Bologna, we delivered a targeted message highlighting how higher education can reduce the gender gap in the labour market, and boost employment prospects. The nudge increased the likelihood of meeting scholarship requirements by nearly 5 percentage points, alongside significant gains in passing exams with higher credit values, and a reduction in failed exams in the medium term, with no short‐term effects. Notably, there was an improvement in grades during the July/August exam period, reflecting a shift towards prioritizing quality over quantity in academic efforts, even though grades were not part of the requirements for maintaining scholarships. Treated students exhibited enhanced academic focus and more strategic study habits, without increasing overall exam load. These findings highlight the potential of cost‐effective informational nudges to drive meaningful changes for women facing financial and informational barriers, providing valuable insights for policies designed to support female students. The results emphasize the importance of well‐timed informational interventions in helping women to make informed decisions about their education, ultimately enhancing their academic success and long‐term economic prospects.

From 1995 to 2015, Costa Rica, El Salvador and Panama underwent significant labour market transformations, particularly in the occupational distribution and participation of women. This paper examines these shifts through an occupational choice model, focusing on three key frictions affecting efficient talent allocation: labour market discrimination, barriers to human capital accumulation, and restrictive social norms. The findings reveal that improved talent allocation drove economic growth in Costa Rica and Panama, primarily due to reductions in barriers to human capital accumulation. In contrast, labour market discrimination intensified, supporting the retaliatory hypothesis and creating headwinds for growth. The aggregate effects in El Salvador are relatively mild and noisy, making it difficult to pin down the impact qualitatively. Nonetheless, prevailing social norms around market work have precipitated sharply in El Salvador for both genders, creating a significant impediment to growth.

This paper shows that changes in consumer sentiment play a quantitatively important role in the transmission of monetary policy on economic activity. Specifically, the paper's empirical estimates indicate that changes in short‐term consumer sentiment may very well double the negative responses of consumer expenditure to contractionary monetary policy shocks. In contrast, long‐term consumer sentiment plays only a minimal role in the propagation of monetary policy shocks into consumer expenditure.

This paper explores the relationship between health risks from COVID‐19 and UK labour supply, using pre‐existing conditions as a source of variation in COVID‐19 health risk. We find that those with pre‐existing conditions were less likely to work during the pandemic after controlling for a rich set of covariates, including labour supplied pre‐pandemic, but only when remote work was unavailable. This relationship begins by April 2020, persists through to September 2021, and shows signs of fading after COVID‐19 risks had fallen in 2022. Our results are strong enough to explain a 1–1.5 percentage point drop in employment during the pandemic. Placebo tests confirm that our estimates do not reflect labour demand shocks, and that a negative relationship between pre‐existing conditions and labour supplied, conditional upon the covariates, did not exist pre‐pandemic.

This paper contributes to the literature by quantifying the effects of supply shortages on inflation in 19 European economies. In contrast to many other papers, it focuses on factual country‐specific shortages in materials and equipment reported by enterprises in the business surveys conducted by the European Commission rather than supply chain tensions that are measured only globally or for some major economies. We apply the local projections method in a panel framework, and estimate the responses of nine measures of consumer and producer inflation to supply shortages. We find that supply shortages are inflationary for all considered measures of inflation, and a larger effect can be observed for the inflation of prices of goods rather than services. The peak of impulse responses can be observed 4–6 quarters after a shock, while the effect usually dies out after 8–12 quarters. After a year, a one‐standard‐deviation shock in supply shortages is followed by annual inflation being higher by 0.7–3.4 percentage points, depending on the inflation measure. Interestingly, the inflationary effects of supply shortages seem to be related mainly to periods of intense global supply tensions.

In the aftermath of the Great Recession, hiring credits have become popular worldwide. The empirical literature shows positive but moderate effects of such interventions on employment. However, an in‐depth analysis of the characteristics of the beneficiary firms and their wage‐setting policies is still lacking. By using a linked employer–employee dataset, this paper presents a firm‐level analysis of a three‐year employer‐borne payroll tax cut for permanent hirings introduced in Italy in 2015. After estimating firm and worker fixed effects through the standard AKM model, we show that the take‐up of hiring credits is significantly higher for firms that pay lower wages, are less productive, employ workers with lower mean abilities, and have a lower retention rate. This result is robust to several specifications and stratifications of the sample, and provides a further and different perspective from which to question the use of active labour market policies based on employer‐borne payroll tax cuts.

The objective of the Federal Reserve (the Fed), namely, its dovish stance, is often blamed for the so‐called Great Inflation. A popular proxy for the Fed's dovish stance is constructed using the inflation coefficients in estimated Taylor rules. However, for a welfare‐optimizing central bank, the estimated Taylor coefficients are not sufficient for inferring its underlying preference. We quantify the Fed's objective—the targeting rule—relying on a conditional estimator that is free of the classical simultaneity problem. We discover that the Fed's targeting rule remained stable during the pre‐ and post‐Volcker periods—the opposite of what is implied through a Taylor rule estimation.

Digitalization has an impact on many vested businesses, decreasing marginal costs and increasing informed customers, among other things. However, measuring the impact of digitalization remains difficult. Betting markets provide a clean setting to estimate the price impact of digitalization, as products are homogeneous and it is easy to measure pricing behaviour. Consistent with mixed strategy models under imperfect information, we show that between 2000 and 2023, transaction costs for gamblers dropped by over 60%, although transaction‐cost dispersion persists. Furthermore, we also find that betting markets became more informationally efficient over this period, with a significant decrease in the favourite–longshot bias.

This paper evaluates the effects of the Hungarian disability employment quota, which requires firms over a size threshold to employ individuals with disabilities or pay a non‐compliance tax. In 2010, the tax was raised from very low levels to 170% of the minimum wage cost associated with meeting the quota. We employ a regression discontinuity design on firm‐level data to estimate the effects of the policy and provide a lower‐bound estimate to account for the potential bias resulting from firms bunching below the threshold. Firms respond to the quota by hiring 0.24–0.29 additional workers with disabilities, with a lower bound estimate of 0.12–0.17. However, about two‐thirds of the quota is not fulfilled, which is puzzling as the tax is higher than the minimum wage cost of a worker with disabilities. Our model shows that high hiring costs associated with employing individuals with disabilities might be an important factor behind this anomaly. We test this hypothesis by showing that the effect is weaker in regions with a low share of individuals with disabilities, implying that without adequate policies targeting the removal of supply‐side barriers to the employment of people with disabilities, even strong demand‐side financial incentives cannot achieve their goals.

Using firm‐level data from the manufacturing sector in China, I document that zombie firms are larger and less productive, and receive higher subsidy rates on average. The difference in subsidy rates between zombies and non‐zombies reflects both the selection criteria of zombies and the underlying joint distribution of subsidy rate and productivity. I develop a model with heterogeneous firms to quantify the impact of zombies on aggregate productivity. Quantitative exercises show that while both policies—reducing subsidy dispersion and facilitating zombie exits—effectively reduce the zombie rate, the former yields greater productivity gains.

In the post‐pandemic period, there was substantial cross‐country heterogeneity in energy prices faced by consumers, due to variation in countries' energy mixes, as well as variation in government energy subsidy policies. The main contribution of this paper is to exploit this country‐level variation to show that countries with higher domestic energy prices faced higher subsequent core inflation. Core inflation rises gradually after an energy shock, for a little over a year, before falling back to the pre‐shock rate of inflation. We argue that in the aftermath of large energy price shocks, core inflation is not a reliable measure of underlying or persistent inflation, and should be adjusted for the predicted, country‐specific, energy cost pass‐through. Focusing more narrowly on services inflation rather than core inflation does not solve the problem, as services inflation responds similarly, in both magnitude and duration, to energy price shocks.

Governments have increasing access to individual information, but they exploit little of it when setting taxes. This paper shows how to reveal inequality aversion from observed tax policy choices of such governments. First, I map governments' priorities into concerns for vertical and horizontal equity. While vertical equity underlies inequality aversion, horizontal equity introduces a restriction against tax discrimination. This restriction affects the measurement of inequality aversion. Second, I apply the model to a hypothetical gender tax using Norwegian tax return data. The main result is that inequality aversion is overestimated when horizontal equity is ignored.

The natural rate of interest (r∗${r}^{\ast }$) has recently been in decline, yet little is known about its historical variation. This paper estimates r∗${r}^{\ast }$ over more than three centuries for the United Kingdom, between 1700 and 2019. Results suggest that the longer‐run equilibrium interest rate rose persistently during much of the 18th and 19th centuries, and only began to decline around the turn of the 20th. Historical decompositions suggest that structural changes in productivity, demography, and risk are largely responsible for this reduction. I argue that secular stagnation is unique to contemporary history, insofar as r∗${r}^{\ast }$ ascended across much of the Late Modern Era.

This paper analyses whether monetary union membership reduces the duration of high inflation episodes (HIEs). The study uses survival models estimated on a sample of 190 countries over the period 1950M01 to 2022M12. The results show that despite the often‐cited issue of the heterogeneity of member countries, monetary unions significantly reduce the duration of HIEs, but not deflation episodes. This result remains robust to a battery of tests and is valid for both developed and developing countries. Furthermore, the results show that giving up monetary sovereignty in favour of an independent common central bank is more effective in terms of price stability than adopting inflation targeting. However, for countries seeking to preserve their monetary sovereignty, inflation targeting remains the best option for reducing the duration of HIEs. This performance of monetary unions in terms of price stability appears to be linked to the greater de facto independence of their central banks, the adoption of supranational fiscal rules, and the incentives to preserve the durability of the currency area. However, estimates show that the capacity of a monetary union to limit HIEs among its members diminishes as it expands to include new countries.

Using a mix of household‐ and employer‐based survey data from 46 countries, we provide novel evidence that workers in larger establishments perform more non‐routine analytical tasks, even within narrowly defined occupations. Moreover, workers in larger establishments rely more on the use of information and communication technologies to perform these tasks. We also document a 15% raw wage premium that workers in larger establishments enjoy relative to their counterparts in smaller establishments. A mediation analysis shows that our novel empirical facts on the task content of jobs are able to explain 5–20% of the establishment size wage premium, a similar fraction to what can be explained by selection of workers on education, gender and age.

We evaluate the efficacy of the Financial Action Task Force (FATF) Recommendations 2012, which set the global standard on combating money laundering and terrorist financing, by exploiting its staggered adoption in 16 East and South African countries. Using the trade gap as a proxy for trade‐related fraud activities, such as trade‐based money laundering, we find that the adoption of the FATF recommendations is correlated with a 15.3% reduction in trade‐related fraud. The FATF is particularly effective within countries with capable state and low corruption. The amount by which FATF adoption can reduce trade‐related fraud depends on a country's compliance level. Our results are robust to a series of robustness checks and contribute to a lively policy debate surrounding the role of international organizations in combating the financing of organized crimes.