Author: gallipol

Social Security, Endogenous Retirement and Intra-household Cooperation


We model the retirement incentives induced by the U.S. Social Security system in a framework that allows for different degrees of cooperation and strategic interaction between spouses.

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Abstract. This paper studies the retirement incentives induced by the U.S. Social Security system in a framework which allows for different degrees of cooperation and strategic interaction between spouses. We develop a model in which spouses maximize joint household utility, subject to the additional constraint that neither partner  finds it optimal to deviate from the best constrained household allocation. We show that accounting for \non- cooperative” behavior through this additional constraint can rationalize various choices of older couples observed in the 1932-42 cohort of the Health and Retirement Study. Non-cooperative behavior helps with two puzzles in the retirement literature:  (i) the clustering of benefit claiming at age 62 despite significant gains associated to delayed claiming by husbands; and (ii) the joint benefit claiming of couples. We contrast our  findings to those from a unitary model of the household, extended to include a process for declining health, and show that the latter can rationalize neither early nor joint claiming behavior if individuals can independently make benefit and labor force participation decisions.

Citation

@techreport{turner2008social,
  title={Social Security, endogenous retirement and intrahousehold cooperation},
  author={Turner, Laura and Gallipoli, Giovanni and others},
  year={2013},
  institution={UBC Working paper}
}

Non-Convexities in Dynamic Programming Problems


We study the properties of models where agents choose over non-convex budget sets due to extensive margin decisions and  fixed costs.

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Abstract. Models where agents choose over non-convex budget sets are commonly used in the analysis of economic problems with extensive margin decisions and  fixed costs. Their solutions have interesting and distinctive features that are especially relevant in quantitative applications.  We describe how problems with non-convex choice sets differ from standard problems and investigate under which circumstances the inclusion of random shocks makes their solution identical to the solution of standard problems. A simple framework is provided for the analysis of these problems and a numerical example is illustrated.

Citation

@article{gallipoli2008non,
  title={Non-convexities in dynamic programming problems},
  author={Gallipoli, Giovanni and Nesheim, Lars},
  year={2013}
}

Ability, Parental Valuation of Education and the High-School Drop Out Decision


We study how parental preferences for education affect the likelihood that a child graduates from high school. We derive new results on the identification of unobserved factor models.

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Abstract. The probability of dropping out of high school varies considerably with parental education. Using a rich Canadian panel dataset, we examine the channels determining this socio-economic status effect. We estimate an extended version of Carneiro, Hansen and Heckman (2003)’s factor model, incorporating effects from cognitive and non-cognitive ability and parental valuation of education (PVE). We find that cognitive ability and PVE have substantial impacts on dropping-out and that parental education has little direct effect on dropping-out after controlling for these factors. Our results confirm the importance of determinants of pre-high school ability stocks but also indicate an important role for PVE during teenage years.

Citation

@article{foley2014ability,
  title={Ability, Parental Valuation of Education, and the High School Dropout Decision},
  author={Foley, Kelly and Gallipoli, Giovanni and Green, David A},
  journal={Journal of Human Resources},
  volume={49},
  number={4},
  pages={906--944},
  year={2014},
  publisher={University of Wisconsin Press}
}

How Robust is the Skill-Dispersion-Complementarity Hypothesis?


We examine the empirical robustness of the hypothesis that countries with higher skill dispersion specialize in sectors characterized by a submodular production function.

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Abstract. We explore the robustness of the hypothesis, First put forward by Grossman and Maggi (2000) (GM), that countries with higher skill dispersion specialize in the sector characterized by a submodular production function, i.e. the industry that cross-matches workers of different skills (henceforth referred to as SDC hypothesis). We relax the assumption of constant returns to skill, breaking the link between submodularity and the concavity of isoquants, a key feature in GM. We show that when a submodular sector displays convex isoquants, it no longer benefits from higher skill dispersion and higher skill dispersion countries may specialize in the supermodular sector. We investigate this theoretical possibility by performing a variety of simulations, based on empirical skill distributions, and find that in the vast majority of cases the SDC hypothesis is not violated.

Citation

@misc{bombardini2015robust,
  title={How Robust is the Skill-Dispersion-Complementarity Hypothesis?},
  author={Bombardini, Matilde and Gallipoli, Giovanni and Pupato, Germ{\'a}n},
  year={2015}
}

Macroeconomic Effects of Job Reallocations: A Survey

We provide a critical overview of the approaches that have characterized the empirical literature on the macroeconomic effects of job reallocations.

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Abstract. This paper critically appraises the approaches that have characterized the literature on the macroeconomic effects of job reallocations. Since Lilien’s (1982) seminal contribution there has been a flourishing of empirical analysis but no unifying theoretical framework has obtained consensus in the scientific debate. We face a corpus of research which is heterogeneous in variables’ selection and experimental design. This heterogeneity makes the evaluation of results a daunting task. As a guiding principle for our excursion we track down the methodological development of the solutions to the crucial problem of observational equivalence of aggregate and sectoral reallocation shocks. We draw two main conclusions from our analysis. The first is that the non-directional nature of reallocation shocks holds the key to the solution of the fundamental identification problem. In this sense the recent perspective on job creation and destruction
shows much promise. The second conclusion is that sectoral reallocation of labor has been responsible for no less that 1/4 and no more that 2/3 of the variance of aggregate unemployment in postwar data. While this range may seem wide it is an indication that the importance of labor reallocation may have changed over time, being quite large at particular historical junctures.

Citation

@article{gallipoli2013macroeconomic,
  title={Macroeconomic Effects of Job Reallocations: a Survey},
  author={Gallipoli, Giovanni and Pelloni, Gianluigi},
  journal={Review of Economic Analysis},
  volume={5},
  number={2},
  pages={127--176},
  year={2013},
  publisher={RCEA}
}

Skill Dispersion and Trade Flows

We ask whether skill dispersion is a source of comparative advantage. We find evidence of sizable effects linking the dispersion of skills to industry specialization.

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Abstract. Is skill dispersion a source of comparative advantage? In this paper we use microdata from the International Adult Literacy Survey to show that the effect of skill dispersion on trade flows is quantitatively similar to that of the aggregate endowment of human capital. In particular we investigate, and find support for, the hypothesis that countries with a more dispersed skill distribution specialize in industries characterized by lower complementarity of workers’ skills. The result is robust to the introduction of controls for alternative sources of comparative advantage, as well as to alternative measures of industry-level skill complementarity.

Citation

@article{BGP2012skill,
  title={Skill Dispersion and Trade Flows},
  author={Matilde Bombardini, Giovanni Gallipoli, Germ{\'a}n Pupato},
  journal={The American Economic Review},
  volume={102},
  number={5},
  pages={2327--2348},
  year={2012}
}

Household Responses to Individual Shocks: Disability and Labour Supply

We study how changes in health status affect the labor supply and consumption choices of individuals and couples. We find evidence of non-cooperative behavior in couples and quantify its implications for marital insurance.

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Abstract. How do people respond to idiosyncratic shocks? Using longitudinal data from the Canadian Survey of Labour and Income Dynamics we use variation in health status to develop and estimate a life cycle framework which rationalizes observed responses of individuals and couples to disability shocks. Two puzzling findings associated with disability onset motivate our work: (1) the almost complete absence of added worker e effects within households and, (2) the fact that single workers’ labor supply responses to disability shocks are larger and more persistent than those of married workers. We argue that these facts are consistent with optimal life cycle behavior when we account for the interaction of two mechanisms: first, a dynamic human capital accumulation motive linking wages to labor supply; second, the ability of spouses to transfer time through home production. We provide evidence supporting the empirical relevance of both these mechanisms and show that dynamic labor supply decisions depend crucially on the interaction of the two. Our findings suggest that the persistence of measured wage shocks may be in part a by-product of optimal individual responses.

Citation

@article{gallipoli2009household,
  title={Household Responses to Individual Shocks: Disability and Labour Supply},
  author={Gallipoli, Giovanni and Turner, Laura},
  year={2009}
}