Pompeo POttery

Matteo Paradisi

I am a Postdoctoral Fellow at the National Bureau of Economic Research (NBER). Starting in July 2020, I will join the Einaudi Institute for Economics and Finance (EIEF).

My primary research interests are at the intersection of Public and Labor Economics. I mainly work with European administrative tax data.

E-mail: paradisi@nber.org

My papers

Research

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Working Papers

Labor Substitutability and the Impact of Raising the Retirement Age
October 16, 2019
We find substitutability among age cohorts within the firm, and document its importance for the revenues collected by an increase in the full retirement age.
Career Spillovers in Internal Labor Markets
October 15, 2019
We document the existence of career spillovers among employees in firms with limited promotion opportunities.
Product Collections

Work in progress

Firms and Policy Incidence (available upon request)

Abstract

I study the role of firms for the consequences of public policies that target workers by developing a framework to incorporate firms in welfare analysis. Building on the existing sufficient statistics frameworks, I introduce heterogeneity across firms, and involuntary unemployment caused by firm’s employment decisions. The model rationalizes the use of firm-level causal estimates of the effects of a policy to study its welfare impact. I apply the model to various policies studied in the literature. The new approach significantly changes the welfare conclusions for most policies, suggesting a pivotal role of firms for the passthrough of public policies.

Firm-level Tax Incidence: Redistribution of Labor Costs Within the Firm

Abstract

How is the cost of payroll taxes redistributed within the firm? Standard tax incidence theory is based on the assumption that labor markets are perfectly competitive and firm-idiosyncratic shocks to the cost of labor have no effects on the wages of incumbent workers. However, labor market frictions generate quasi-rents at the firm, whose elasticity determines part of the effect of payroll taxes on wages. I attempt to identify this component by studying how wages respond to firm-level changes in the cost of labor for low-paid employees. I use administrative data for the universe of French private sector firms that I match to information on paid social security contributions to study a payroll tax reform implemented in France in 2003. This policy changed payroll tax subsidies for low-paid workers leaving tax rates unchanged for other workers. I exploit variation in the wage distribution of the subset of low-paid workers to create firm-level shifts in the average payroll tax rate of low-paid employees and I use them as an instrument for the total change in the cost of labor. I show that tax cuts affect both low-paid and high-paid employees by increasing their net wages. This redistribution reduces the effectiveness of the policy in transferring resources to low-paid workers. I then estimate a structural model to evaluate the economy-wide redistribution of the benefits of lower taxes and the contribution of firms to the passthrough of the policy.

In the Business of Compliance: Firm Revenue Manipulation in Response to the Audit System

Abstract

Small businesses and the self-employed face greater opportunities to conceal their income sources relative to employees, leading to substantial tax gaps. Despite the magnitude of this problem, evidence on how these businesses comply with the tax system is still scarce. This paper aims to estimate revenue elasticities and perceived audit risk by exploiting a discontinuity in audit probability around a firm-specific revenue threshold in the Italian audit system. We rely on administrative data on the universe of Sector Studies declarations filed by small businesses and the self-employed over 2007-2016. We readapt the theory on non-linear budget set models to the context of firm revenue declaration. We uncover substantial bunching at the thresholds in data for 2007-2010. Consistent with the model intuition, proxies for the ease and convenience of revenue manipulation across provinces and sectors correlate with our estimates. We then implement reduced-form and structural approaches to estimate the model primitives and study whether the disclosure of audit rules can be revenue enhancing.

Other publications

Austerity in 2009-2013Economic Policy, Volume 30, Issue 83, pp. 383–437, 2015

Media coverage: Cato Institute

Abstract

The conventional wisdom is (i) that fiscal austerity was the main culprit for the recessions experienced by many countries, especially in Europe, since 2010 and (ii) that this round of fiscal consolidation was much more costly than past ones. The contribution of this paper is a clarification of the first point and, if not a clear rejection, at least it raises doubts on the second. In order to obtain these results we construct a new detailed “narrative” dataset which documents the size and composition of the fiscal plans implemented by several countries over 2009–13. Out of sample simulations, that project output growth conditional only upon the fiscal plans implemented since 2009, do reasonably well in predicting the total output fluctuations of the countries in our sample over the years 2010–13 and are also capable of explaining some of the cross-country heterogeneity in this variable. Fiscal adjustments based on cuts in spending appear to have been much less costly, in terms of output losses, than those based on tax increases. Our results, however, are mute on the question whether the countries we study did the right thing implementing fiscal austerity at the time they did, that is 2009–13.

Paper
Political Budget Cycles: Evidence from Italian CitiesEconomics & Politics, Vol. 29, Issue 2, pp. 157-177, 2017

with A. Alesina

Abstract

The introduction of a new real estate taxes in Italy in 2011 provides a natural experiment, which is useful to test for political budget cycles. The new real estate tax allowed discretion to local governments. This generates a random variation in the distance of municipalities from the following elections when they choose the level of the tax rate. We do find substantial evidence of political budget cycles, with municipalities choosing lower tax rates when close to elections. We observe this budget cycle for smaller municipalities where the tax was more likely to be the single most important issue for the local government. Cities close to elections with large deficits did not set lower rates and so did municipalities with a lower average value of properties. Finally, the political budget cycle is stronger in the South.

Paper

Curriculum Vitae

I am a Postdoctoral Fellow at the National Bureau of Economic Research (NBER).
Starting July 2020, I will join the Einaudi Institute for Economics and Finance (EIEF) in Rome.
I received my Ph.D. in Economics from Harvard University in 2019 and my Master of Science in Economic and Social Sciences from Bocconi University.

Teaching

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