Pompeo POttery

Matteo Paradisi

I am an Assistant Professor at 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: matteo.paradisi@eief.it

My papers

Research

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Working Papers

Career Spillovers in Internal Labor Markets

Revise & Resubmit, Review of Economic Studies

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.

Audit Rule Disclosure and Tax Compliance (available upon request)

Abstract

We study whether tax agencies can selectively disclose their audit selection criteria to foster voluntary tax compliance. We rely on the Italian Sector Studies, a policy creating salient file-specific discontinuities in the tax audit schedule of small firms and the self-employed. This setting allows us to pursue two empirical strategies, leveraging access to a confidential database of more than 26 million Sector Study files from the 2007-2016 period. First, we set up a structural model to rationalize the substantial bunching responses observed at the featured thresholds, and we estimate the model parameters exploiting local heterogeneity in bunching and tax rates. After reconstructing the prevailing level of evasion in a sensible range of counterfactuals where taxpayers perceive audit risks to be constant, we determine that selective disclosure results in 3.7-7.7% higher mean declared revenues relative to keeping the thresholds secret. Second, we exploit the staggered introduction of a 2011 reward regime that reinforces the initial audit risk discontinuity. In line with our theory, we show that taxpayers who benefit from greater audit exemptions above the threshold tend to reduce their relative compliance, while those originally below the threshold improve it. However, on the net reported profits increase on average by 16.2% in treated sectors over the course of six years. Together, our results suggest that tax authorities can design the release of audit-relevant information to stimulate compliance even among the “hard-to-tax”.

Other publications

Policy Papers

Rewarding compliance: effects of the 2011 reward regime on Italian small businessesRewarding compliance: effects of the 2011 reward regime on Italian small businessesPrepared for the Italian Revenue Agency (Agenzia delle Entrate)

with E. Di Gregorio

Abstract

We study the effects of a unique Italian reform incentivizing voluntary tax compliance among the self-employed and small businesses. Starting in 2011, taxpayers in a growing number of sectors were promised an increase in audit exemptions upon achieving a set of desirable conditions defined by the Revenue Agency. While policy rewards might induce a tax base rise among previously non-compliant filers, curbing audit risks for broad categories of the taxpaying population might prove revenue reducing. Over the first six years of implementation, our event-study analysis of more than 9 million anonymized records reveals a substantial expansion of average declared revenues, total costs, and gross profits, with little heterogeneity across macro-regions. Although aggregate compliance does not seem to improve by policy metrics, our distributional analysis shows that large gains obtain among taxpayers appearing non-compliant in the year before their sector’s reform. We also provide a dynamic perspective on bunching at salient, audit-relevant revenue thresholds generated by the system. Relative revenue reshuffling from above and below these thresholds provide evidence that bunching in our context may emerge from both desirable and adversarial updating in compliance behavior.

Paper
Una proposta per un APE volontario finalmente a regimeUna proposta per un APE volontario finalmente a regimeIstituto Bruno Leoni, Briefing Papers

with F. Del Prato

Media coverage: Il Foglio

Abstract

In this paper we advocate for Ape (an early retirement option available to Italian employees) to become "structural". We claim that it responds to the need for greater flexibility in retirement, while maintaining the sustainability of the pension system over the long-run. Moreover, we discuss some proposals that would make it easier for potential beneficiaries to claim AdE, reducing the low take-up problem observed in the first months after its implementation. 

Paper

Curriculum Vitae

I am an Assistant Professor at the Einaudi Institute for Economics and Finance (EIEF) in Rome.
I was previously a Postdoctoral Fellow at the National Bureau of Economic Research (NBER).
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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