With the cost of education continuing to rise, financial aid to student becomes more important to help those with merit but little means (or borrowing constraints). Identifying whether financial aid actually helps bright students go to university is of course the most important question.
Loris Vergolini and Nadir Zanini study this in the case of Italy, where they surveyed students before and after university entrance, in the context of a generous financial aid initiative targeted towards bright low-income students. The results are sobering. it does not appear to have motivated more students to go to university. Those who were going anyway now are willing to move farther, presumably to potentially better programs. But this program was only recently introduced and could not have an impact on the school effort of those about to graduate. One can hope that its existence will motivate younger cohorts to excel in school to be eligible and make it to university.
Showing posts with label Italy. Show all posts
Showing posts with label Italy. Show all posts
Is pardoning prisoners the best way to keep jail costs low?
I mentioned yesterday that we do not know whether capital punishment is a deterrent or not. What about imprisonment sentences? That is much harder to establish without very precise coding of convictions in multiple jurisdictions with different sentences for the same crime. Finding or establishing such a dataset should be very difficult. But maybe we can find some partial answers in indirect ways.
Nadia Campaniello, Theodoros Diasakos and Giovanni Mastrobuoni use an interesting natural experiment in Italy. There, the parliament occasionally decides on mass pardons to reduce jail crowding. When such proposals are being discussed, suicide rates in Italian prisons drop. That means clearly that prisoners do not like ex-post being in prison, and sufficiently to make life depend on it. If this matters also ex-ante (before they head to jail and in particular before the decide to commit a crime), we should see a deterrence effect. But this may be a big if.
Nadia Campaniello, Theodoros Diasakos and Giovanni Mastrobuoni use an interesting natural experiment in Italy. There, the parliament occasionally decides on mass pardons to reduce jail crowding. When such proposals are being discussed, suicide rates in Italian prisons drop. That means clearly that prisoners do not like ex-post being in prison, and sufficiently to make life depend on it. If this matters also ex-ante (before they head to jail and in particular before the decide to commit a crime), we should see a deterrence effect. But this may be a big if.
How to regulate prostitution
While being the oldest profession, prostitution has always been a thorn in the eyes of authorities. The market clearly says it satisfies a demand, but it goes against some moral code. Banning it has never been an efficient solution, in particular because it leads to crime and adverse health outcomes. A better way may be to regulate it in some fashion, but how?
Giovanni Immordino and Francesco Flaviano Russo may have found how, and it involves the prohibition of buying sex, but no limit on selling it. Legalizing selling sex is interesting because it allows taxing it and makes it possible to reduce STD infection rates by applying health policies. What is striking it that the policy for prostitution is the exact opposite of the policy applies in some countries for illegal drugs: decriminalizing consumption and sometimes buying but criminalizing the sale. From what I could see, this seemed to work relatively well. While the tax aspect is the same as for prostitution, the health one is different. By making drug consumption legal, one has better access to consumer to apply health policies, while sellers are of little use in this respect (except when they cut the drug with more harmful material).
Giovanni Immordino and Francesco Flaviano Russo may have found how, and it involves the prohibition of buying sex, but no limit on selling it. Legalizing selling sex is interesting because it allows taxing it and makes it possible to reduce STD infection rates by applying health policies. What is striking it that the policy for prostitution is the exact opposite of the policy applies in some countries for illegal drugs: decriminalizing consumption and sometimes buying but criminalizing the sale. From what I could see, this seemed to work relatively well. While the tax aspect is the same as for prostitution, the health one is different. By making drug consumption legal, one has better access to consumer to apply health policies, while sellers are of little use in this respect (except when they cut the drug with more harmful material).
Divorce risk is good for the savings rate
Savings rates have declined over the last decades in developed economies. Many explanations have been offered for this, including the availability of better insurance that allows to smooth out better potential risks. One other that was suggested was that the higher divorce rates and the larger number of out-of-wedlock children would lead to lower savings because economies of scale in consumption do not kick in. An old paper by Luis Cubeddu and José-Víctor Ríos-Rull dispelled this idea, showing in a model economy that the higher risk of divorce actually increases the savings rate, as people foresee the risk and accumulate precautionary savings.
You may dismiss this theoretical result on the grounds that there is no way that freshly married people foresee increased divorce risk and react by saving more. And that may be why this paper was never published. But they there is now evidence from Italy that there is some truth to this result.
Filippo Pericoli and Luigi Ventura, who do not quote the above study, find that this precautionary saving is actually quite substantial at 11% of overall savings. So there, Italians are more rational than we thought.
You may dismiss this theoretical result on the grounds that there is no way that freshly married people foresee increased divorce risk and react by saving more. And that may be why this paper was never published. But they there is now evidence from Italy that there is some truth to this result.
Filippo Pericoli and Luigi Ventura, who do not quote the above study, find that this precautionary saving is actually quite substantial at 11% of overall savings. So there, Italians are more rational than we thought.
The excessive taxation of married couples in Italy
In these times of fiscal austerity, governments are scrambling to find tax revenues and in particular to close loopholes and to chase tax evaders. While the goal is to raise more revenue (and be somewhat fairer, as tax evaders tend to have higher incomes), that can have the adverse effect of actually reducing tax revenue. While it is clear that the Laffer Curve is correct, there is little evidence that in aggregate any western economy is on the right side of its peak. But there there are some individual circumstances where it is.
Fabrizio Colonna and Stefania Marcassa discuss the taxation of married couples in Italy. Taxation in Italy is based on the individual, with deductions for children and the non-working spouse. As the incidence of these tax credits on the marginal tax credit decreases with the income of the first earner in a couple, typically the husband, there is a strong incentive for wifes of lower income husbands to work, full-time or part-time. This reduces the labor supply of the poor, increases poverty and increases the strain on welfare programs.
The paper estimates a complex labor choice model and runs two scenarios: the current one, and one where households can choose to file taxes individually or jointly. The latter boost women's labor force participation rate by 3 percentage points and reduces the proportion of women under some poverty threshold by half that. Others scenarios, such as gender-based taxation, are explored as well. In all scenarios, the assumption is that taxes are revenue-neutral. As poverty is reduced, the need for redistribution is reduced, something that makes the scenarios even more attractive.
Fabrizio Colonna and Stefania Marcassa discuss the taxation of married couples in Italy. Taxation in Italy is based on the individual, with deductions for children and the non-working spouse. As the incidence of these tax credits on the marginal tax credit decreases with the income of the first earner in a couple, typically the husband, there is a strong incentive for wifes of lower income husbands to work, full-time or part-time. This reduces the labor supply of the poor, increases poverty and increases the strain on welfare programs.
The paper estimates a complex labor choice model and runs two scenarios: the current one, and one where households can choose to file taxes individually or jointly. The latter boost women's labor force participation rate by 3 percentage points and reduces the proportion of women under some poverty threshold by half that. Others scenarios, such as gender-based taxation, are explored as well. In all scenarios, the assumption is that taxes are revenue-neutral. As poverty is reduced, the need for redistribution is reduced, something that makes the scenarios even more attractive.
The military draft, mortality and education
The data sometimes work in mysterious ways and provide puzzling correlations that lead to interesting research questions. One such correlation is that exemption from military service leads to lower mortality later in life.
Piero Cipollone and Alfonso Rosolia find this while looking at a natural experiment following the 1981 earthquake in Southern Italy. Boys from the affected region were exempted from military service, and they were followed, along with non-exempted neighbors, to track their life and education. By concentrating on boys both sides close to the border of the exempt region, they find that those exempt ended up being more educated. I can easily believe that, as they were not spending some of their prime learning years hiding in bushes and peeling potatoes, and they were expecting a longer work life. But the exempt also have lower mortality. This is not due to a lower incidence of military accidents, it is rather linked to the higher school completion rates. In fact, the authors conclude that raising high school completion by 10 percentage points would lower mortality by one or two percentage points in the decade thereafter. That is impressive at that age.
Piero Cipollone and Alfonso Rosolia find this while looking at a natural experiment following the 1981 earthquake in Southern Italy. Boys from the affected region were exempted from military service, and they were followed, along with non-exempted neighbors, to track their life and education. By concentrating on boys both sides close to the border of the exempt region, they find that those exempt ended up being more educated. I can easily believe that, as they were not spending some of their prime learning years hiding in bushes and peeling potatoes, and they were expecting a longer work life. But the exempt also have lower mortality. This is not due to a lower incidence of military accidents, it is rather linked to the higher school completion rates. In fact, the authors conclude that raising high school completion by 10 percentage points would lower mortality by one or two percentage points in the decade thereafter. That is impressive at that age.
Do Italians trust the television or the judges?
In several countries, mass media have become, at least from my viewpoint, a dominant means of forming public opinion on just about anything. In the US it is particularly apparent that experts are less trusted by the public than media, or even less than people's prejudice. In politics, this is even more widespread, where media make or brake a politician, and politicians cater directly to the media. Imagine how things could turn when the politician owns the media. This is the current situation in Italy, where Prime Minister Silvio Berlusconi heads a formidable media empire and tries to fend off numerous accusations of corruptions and abuse of power (loosely speaking) that emanate from the judiciary.
Fabio Sabatini studies how much the Italian Prime Minister is trusted by the public. He finds that trust in television is by far the cleared determinant for trust in Berlusconi, and the second is lack in education, the third distrust in the judiciary. So much for Berlusconi claiming his empire has nothing to do with his repeated elections.
Fabio Sabatini studies how much the Italian Prime Minister is trusted by the public. He finds that trust in television is by far the cleared determinant for trust in Berlusconi, and the second is lack in education, the third distrust in the judiciary. So much for Berlusconi claiming his empire has nothing to do with his repeated elections.
The demand for theater
What determines demand for theater? Theater managers should be interested in understanding their market. Beyond this, this is also important for policy as theater is frequently and substantially subsidized. This the characteristics of those who go to theater and how frequently they do so may help understand whether it is worth subsidizing it. For example, if only rich people go to theater, one could leave the state out and let the public pay higher prices, which substitute for taxes (and would then improve efficiency). If it is mostly poor people who attend theater, then it may be worth subsidizing if there is some sort of positive externality from it.
Concetta Castiglione uses micro data from Italy to find results that are not very surprising: everything is driven by education and income. Rich educated people pay more taxes and get them back in part in theater performances. This is even more pronounced than for higher education, for which forceful arguments have been made that the state should stop subsidizing it.
Of course, all this ignores consideration about the supply. but that does not matter here. Demand should be essentially the same whether theaters are subsidized or not in Italy.
Concetta Castiglione uses micro data from Italy to find results that are not very surprising: everything is driven by education and income. Rich educated people pay more taxes and get them back in part in theater performances. This is even more pronounced than for higher education, for which forceful arguments have been made that the state should stop subsidizing it.
Of course, all this ignores consideration about the supply. but that does not matter here. Demand should be essentially the same whether theaters are subsidized or not in Italy.
How to fight tax evasion
Tax evasion is a serious problem in developing countries because of the tiny administrative capacity of authorities and the size of the informal sector. Even in more developed economies, say, the Southern European ones, tax evasion is part of daily life. Again, administrative capacity is lacking. One could even argue it is a problem in the United States seeing the tiny auditing staff of tax authorities and the complexity of the tax code. Tax auditors have thus to define priorities.
Mirco Tonin studies the rules that Italy and Bulgaria instituted. In Italy, businesses and self-employed people reporting revenues below some level are subject to higher scrutiny. The idea is thus not to go after those who declare to be big fish, but rather those who may hide it. And making it known that there is such a threshold induces people to declare more to tax authorities. In Bulgaria, authorities are after employees and firms that declare too little in social security contributions. This is also forcing them to declare more to avoid scrutiny.
Tonin uses a model of imperfect monitoring to figure out whether such threshold rules make sense. And yes, they improve tax revenue, as those who have higher true income declare more than the threshold, and those below become more truthful. Now all you need to do is figure out where to put the threshold to equalize marginal tax revenue and marginal auditing cost, possibly adjusted by the dead-weight cost of taxation and for observable characteristics of the tax payer.
Mirco Tonin studies the rules that Italy and Bulgaria instituted. In Italy, businesses and self-employed people reporting revenues below some level are subject to higher scrutiny. The idea is thus not to go after those who declare to be big fish, but rather those who may hide it. And making it known that there is such a threshold induces people to declare more to tax authorities. In Bulgaria, authorities are after employees and firms that declare too little in social security contributions. This is also forcing them to declare more to avoid scrutiny.
Tonin uses a model of imperfect monitoring to figure out whether such threshold rules make sense. And yes, they improve tax revenue, as those who have higher true income declare more than the threshold, and those below become more truthful. Now all you need to do is figure out where to put the threshold to equalize marginal tax revenue and marginal auditing cost, possibly adjusted by the dead-weight cost of taxation and for observable characteristics of the tax payer.
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