Working Papers

Pension Privatization, Behavioral Responses, and Income in Old Age: Evidence from a Cohort-Based Reform in Uruguay  

(with Maximiliano Lauletta) 

This paper studies the effects of the privatization of the pension system on workers’ reported earnings, employment and retirement behavior, and income in old age. We analyze a reform to the pension system in Uruguay that transitioned from a pay-as-you-go system with defined benefits into a mixed system, in which a fraction of social security contributions is used to fund the pay-as-you-go system and the remaining fraction is allocated to individual retirement accounts. Overall, our evidence suggests that pension privatization can boost labor supply in old age and have the unexpected benefit of increasing tax compliance, but it can have detrimental effects on the pension income of some workers, which can partially explain some of the push to roll back privatizations in several countries over the last two decades. 

(1) WP 

What Makes a Tax Evader? 

(with Martín Leites, Ricardo Perez-Truglia, and Matias Strehl)  - R&R The Review of Economics and Statistics 

Why do some individuals choose to evade taxes while others do not? We address this question using a combination of a survey questionnaire and incentivized laboratory games to measure individual preferences, values, and beliefs, and tax administrative records to measure individual-level evasion choices. We find that these individual traits have some power to predict who evades taxes, but other factors, such as the environment, play a much bigger role. 

(1) NBER WP  (2) SSRN WP 

How do Top Earners Respond to Taxation? Evidence from a Tax Reform in Uruguay

(with with Gabriel Burdin, Mauricio De Rosa, Matias Giaccobasso, Martín Leites, and Horacio Rueda) - R&R Journal of the European Economic Association

In this paper, we analyze how top income earners (TIEs) respond to changes in personal income taxation. Using an unprecedented combination of administrative records from the Tax and Social Security Agencies, we exploit a unique reform to Uruguay’s progressive income tax schedule that generated quasi-random tax rate variation in the top 1% of the distribution. We find an intensive margin elasticity of 0.577, which is partially explained by a real labor supply adjustment. Responses on the extensive margin are larger, with an extensive margin semi-elasticity of 2.479, which is mostly driven by shifts from the labor to the corporate income tax base. We estimate that the efficiency costs of the reform are, at most, 31.3% of the projected tax revenue.  

(1) SSRN WP  

Publications & Forthcoming Papers

Tax Progressivity and Taxing the Rich in Developing Countries: Lessons from Latin America 

(with Juliana Londoño-Vélez and Darío Tortarolo) Oxford Review of Economic Policy. 39(3): 530-549, 2023. 

This chapter describes developing countries’ experiences of levying progressive taxes and taxing the rich. We approach this study by focusing on the experience of Latin American (LA) countries.

(1) WP 

Employment Vulnerability and Earnings in Kyrgyzstan

(with Kamalbek Karymshakov, and Burulcha Sulaimanova), Journal of Development Studies.  59(7): 1076-1091, 2023.   

This research examined the impact of employment vulnerability on earnings using panel data for 2010–2013 and 2016 from the Kyrgyzstan household survey and a fixed-effects model with instrumental variables. Results indicate a negative impact of employment vulnerability on earnings, being the women who experienced this negative effect more severely. 

Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment 

(with Rodrigo Ceni, Guillermo Cruces, Matias Giaccobasso and Ricardo Perez-Truglia), American Economic Journal: Economic Policy. 15(1): 110-153, 2023.

The canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off between the costs and benefits of evasion. However, there is no direct evidence that firms react to audits in this way. We conducted a large-scale field experiment in collaboration with Uruguay’s tax authority to address this question.

(1) SSRN WP (2) NBER WP (3) VoxDev (4) Media(El Pais)

Dissecting Inequality-Averse Preferences

(with Gabriel Burdin, Santiago Burone, Mauricio De Rosa, Matias Giaccobasso, and Martín Leites), Journal of Economic Behavior and Organization. 200: August, 782-802, 2022.    

Although different approaches and methods have been used to measure inequality aversion, there remains no consensus about its drivers at the individual level. We conducted a survey experiment to understand why people are inequality-averse. The main findings are that (1) the prevalence of inequality aversion is high; (2) the extent of inequality aversion depends on the individual’s position in the income distribution; (3) individuals are more likely to accept inequality when it comes from effort rather than luck regardless of their income position; (4) the effect of social mobility on inequality aversion is conditional on individual’s income position.

(1) WP (2) Media(La Diaria) 

Digging into the Channels of Bunching: Evidence From the Uruguayan Income Tax

(with Gabriel Burdin, Mauricio De Rosa, Martín Leites, and Matias Giaccobasso), The Economic Journal. 131(639): 2726-2762, 2021. 

Based on detailed administrative tax records, we implement a bunching design to explore how individual taxpayers respond to personal income taxation in Uruguay. We estimate a very modest elasticity of taxable income at the first kink point (0.06) driven by a combination of gross labor income and deductions responses. Taxpayers use personal deductions more intensively close to the kink point and underreport income to the tax authority. Our results suggest that the efficiency costs of taxation are not necessarily large in contexts characterized by limited deduction opportunities. Policy efforts should be directed at broadening the tax base and improving enforcement capacity.

(1) SSRN WP (2) IZA WP (3) VoxLACEA 

The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is High 

(with Guillermo Cruces),  Journal of Public Economics. 193, 2021. 

Research questions: How do the effects of social assistance vary across the distribution of individuals’ propensities to be employed formally?; Along which behavioral margins do they respond the most? Informality or real non-participation?; What is the size of the responses relative to the financial incentives?; What are the efficiency implications from the observed behavioral responses in registered employment?

(1) SSRN WP ((2) IZA WP  (3) VoxDev  (4) Media(El Pais) (5) Blog DE

(Part of this work circulated previously as "Work incentives and Welfare Programs. Evidence on Real and Reporting Effects")

Low-skilled workers and the effects of minimum wage in a developing country: Evidence based on a density-discontinuity approach  

(with Sharon Katzkowicz, Gabriel Pedetti and Martina Querejeta), World Development.  139, 2021. 

Objective: We present new evidence on the impact of minimum wage policy on a low-skilled worker unregulated sector - the domestic-work sector in Uruguay- on wages, employment, and formal-informal sector mobility for women.


The Effect of Labor-Demands Shocks on Women´s Participation in the Labor Force: Evidence from Palestine 

(with Belal Fallah, Iman Saadeh, Arwa Abu Hashhash and Mohamad Hattawy), Journal of Development Studies 57(3), 400-416.

Research question: To what extent demand-side factors affect the labor supply patterns of women in developing countries? We use the occupied West Bank of Palestine as a case of study to answer this question. 

Misperceptions About Tax Audits

(with Rodrigo Ceni, Guillermo Cruces, Matias Giaccobasso and Ricardo Perez-Truglia), American Economic Association Papers and Proceedings 108(May 2018), 83-87, 2018

Objective: Evidence shows that firms have large misperceptions about audit features. In this paper, we explore the sources of these misperceptions using a survey-experiment. 

(1)  SSRN WP

Intra-Household Behavioral Responses to Cash Transfer Programs: Evidence From a Regression Discontinuity Design

(with Estefanía Galván), World Development 103(March 2018), 100-118, 2018

Research question: How Conditional Cash Transfers (CCT) programs in developing countries affect intra-household socio-economic outcomes?

(1) IZA WP 

Labor-Market Scars When Youth Unemployment Is Extremely High: Evidence from Macedonia

(with Marjan Petreski and Nikica Mojsoska-Blazevski), Eastern European Economics 55(2), 168-196, 2017

Objectives: First, to investigate the determinants of the duration of unemployment spell of youth in a developing context; and second, to assess how the unemployment spell duration affects later employment (the employment ‘scarring’ effect) and wage outcomes (the wage ‘scarring’ effect). 

(1) IZA WP 

Work and tax evasion incentive effects of social insurance programs. Evidence from an employment-based benefit extension

(with Guillermo Cruces), Journal of Public Economics 117, 211-228, 2014  

Research question: How social insurance programs shape individual's incentives to take up registered employment and to report earnings to the tax authorities?

(1) IZA WP (2) FOCO (3) VoxLacea,  slides (3) data (3) prensa

Las Transferencias Públicas y su Impacto Distributivo: La Experiencia de los Países del Cono Sur en la Década de 2000

(with Javier Alejo and Fedora Carbajal), El Trimestre Económico 81(1), 163-198, 2014

Research question: To what extent do monetary public transfers to households affect income inequality of the Southern Cone countries in the 2000s?

(1) CEDLAS WP (2) VoxLacea 

Informality, Contributory and Non Contributory Programmes. Recent Reforms to the Social Protection System in Uruguay

(with Guillermo Cruces), Development Policy Review 31(5), 531-551, 2013

Research question: What are the incentive effects for formal and informal employment from social-protection reforms implemented in Uruguay in the 1990s and 2000s?

(1) FOCO (2) wp,slides (3) data (3) prensa

Robustness of Vulnerability Estimators. Evidence from Panel Data for Argentina and Chile

(with Guillermo Cruces and Andrés Ham), Journal of Income Distribution 21(1), 28-64, 2012  

Research question: What is the effectiveness - i.e. the predictive power, of vulnerability indicators to forecast future poverty states?  

Exploring the urban-rural labor income gap in Uruguay: a quantile regression decomposition

(with Fedora Carbajal), Economic Analysis Review 25(2): Special Issue: Inequality and income mobility in Latinamerica, 133-168, 2010 

Research question: To what extent do differences in workers' characteristics and returns to work explain the urban-rural labor income gap in Uruguay?

Selected Work in Progress

Cash Wages and Labor Markets: Evidence from Uruguay

(with Favier Feinmann, and Maximiliano Lauletta)

Dynamic incentives and income-tested cash social programs 

(with Joan Vilá, and Guillermo Cruces)

Sectoral Minimum Wages, Firms, and Wage Inequality: Evidence from Uruguay

(with Rodrigo Ceni, Mathias Fondo, and Damián Vergara)

What Drives the Preferences for Redistribution of the Richest? Survey-Experiment Evidence

(with Matias Strehl, and Martin Leites)

Unpublished Manuscripts

Are there ethnic inequality traps in education? Empirical evidence from Brazil and Chile

(with Adriana Conconi, Guillermo Cruces and Andrés Ham),  PMMA Working Paper 2012-04, 2012

Privaciones nutricionales: su vínculo con la pobreza y el ingreso monetario

(with Martín Leites and Gonzalo Salas), Serie Documentos de Trabajo # 03/06, 2006