Category: Published Research

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Abstract. We develop and estimate an equilibrium model of geographic variation in the intergenerational elasticity of earnings (IGE). The theory extends the Becker-Tomes model, introducing a production sector in which workers’ human capital inputs are complements. In this setting the return to parental human capital investments is lower where skill complementarity is more intense, and this is reflected in less intergenerational persistence. We also show that education subsidies may be more desirable where skill complementarities are stronger, endogenously leading to a negative correlation between progressive public policy and IGE. Using microdata we construct location-specific measures of skill complementarity and document that patterns of geographic variation in IGE are consistent with this hypothesis. Geographic differences in skill complementarity directly account for roughly one fifth of cross-country variation in IGE, and possibly more if one allows for the indirect effect through government expenditure in public education.

Citation

@article{Abbott_Gallipoli_RED2017,
title = {Human Capital Spill-Overs and the Geography of Intergenerational Mobility},
journal = {Review of Economic Dynamics},
volume = {25},
pages = {208 - 233},
year = {2017},
note = {Special Issue on Human Capital and Inequality}
}

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Abstract. We develop a model of firms’ growth in which the tax and credit environments act as selection mechanisms. Such a model, parameterized and validated using a variety of data restrictions, can rationalize observations about input choices and size patterns typical of many developing countries. Using counterfactual experiments, we show that firms’ optimal responses to the tax environment are effective in reducing efficiency losses. As a consequence, tax distortions only account for 13% of the gap in output per worker between an undistorted economy and the benchmark. Credit constraints account for 44% of this gap. However, the interaction between the cost of capital and credit constraints appears to be the most important source of misallocation and can explain up to 85% of the difference in output per worker between the benchmark and first-best.

Citation

@article{goyette2015distortions,
  title={Distortions, Efficiency and the Size Distribution of Firms},
  author={Goyette, Jonathan and Gallipoli, Giovanni},
  journal={Journal of Macroeconomics},
  volume={45},
  pages={202--221},
  year={2015},
  publisher={North-Holland}
}

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Abstract. We compare two large-scale policy interventions aimed at reducing crime: subsidizing high school completion and increasing the length of prison sentences. To this purpose we use a life-cycle model with endogenous education and crime choices. We apply the model to property crime and calibrate it to U.S. data. We find that targeting crime reductions through increases in high school graduation rates entails large efficiency and welfare gains. These gains are absent if the same crime reduction is achieved by increasing the length of sentences. We also find that general equilibrium effects explain roughly one half of the reduction in crime from subsidizing high school.

Citation

@article{fella2014education,
  title={Education and Crime over the Life Cycle},
  author={Fella, Giulio and Gallipoli, Giovanni},
  journal={The Review of Economic Studies},
  volume={81},
  number={4},
  pages={1484--1517},
  year={2014},
  publisher={Oxford University Press}
}

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Abstract. This paper investigates a theoretical mechanism linking comparative advantage to the distribution of skills in the working population. We develop a tractable multi-country, multi-industry model of trade with unobservable skills in the labor market and show that comparative advantage derives from (i) cross-industry differences in the substitutability of workers’ skills and (ii) cross-country differences in the dispersion of skills. We establish the conditions under which higher skill dispersion leads to specialization in industries characterized by higher skill substitutability across tasks. The main results are robust when the model is extended to allow for partial observability of skills. Finally, we use distributions of literacy scores from the International Adult Literacy Survey to approximate cross-country productivity differences due to skill dispersion and we carry out a quantitative assessment of the impact of skill dispersion on the pattern of trade.

Citation

@article{bombardini2014unobservable,
  title={Unobservable Skill Dispersion and Comparative Advantage},
  author={Bombardini, Matilde and Gallipoli, Giovanni and Pupato, Germ{\'a}n},
  journal={Journal of International Economics},
  volume={92},
  number={2},
  pages={317--329},
  year={2014},
  publisher={North-Holland}
}

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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}
}

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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}
}

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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}
}