- A Generalized Endogenous Grid Method for Non-Smooth and Non-Concave Problems, forthcoming The Review of Economic Dynamics. Abstract: [...] Fortran code to implement the algorithm and to replicate the simulations in the paper.
- Privately Optimal Severance Pay, with Christopher J. Tyson, forthcoming The B.E. Journal of Macroeconomics, Contributions, 2013. Abstract: [...]
- Matching, Wage Rigidities and Efficient Severance Pay, The B.E. Journal of Economic Analysis & Policy, Contributions, 2012, 12(1). Abstract: [...]
- When Do Firing Taxes Matter?, Economics Letters, 2007, 97(1), 24-31. Abstract: [...]
- Termination Restrictions and Investment in General Training, European Economic Review, 2005, 49(6), 1479-1499. Abstract: [...]
- Does Divorce Law Matter?, with Paola Manzini and Marco Mariotti, Journal of the European Economic Association, 2004, 2(4), 607-633. Abstract: [...]
- Reserve Uncertainty and Speculative Attacks on Target Zones, Economics Letters, 2001, 70(2), 223-228. Abstract: [...]
- Efficiency Wage and Efficient Redundancy Pay, European Economic Review, 2000, 44(8), 1473-1490. Abstract: [...]
and Crime over the Life Cycle, with Giovanni Gallipoli.
This draft: May 2013.
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.
- The Non-neutrality of
Severance Payments with Incomplete Markets, (with Marco
Cozzi). This draft:
We study the insurance properties of mandated severance payments (SP) in an economy with costly labor mobility and incomplete markets. The framework allows for wage flexibility at the level of the individual firm-worker match: when faced with SP, firms modify the wage profile and entry wages fall to compensate for the future severance pay. In turn, this change in wages affects welfare, because of the workers’ limited borrowing possibilities. Since the incentives to save are altered, the capital stock varies, and non-trivial general equilibrium effects are also present. On the one hand, with SP agents are better insured and the precautionary motive of saving is reduced. On the other hand, the change in the wage profile reduces the savings of young individuals and tends to increase that of older ones. The model is solved numerically and calibrated to the US economy. For realistic SP schemes, average welfare effects are positive in steady state comparisons, and they are: 1) heterogeneous in the population, with both young and unemployed workers that can be considerably worse-off, 2) quantitatively important, namely in the order of 0.6-2.4% of consumption in the original steady-state. A correction of the welfare measures taking care of the potentially non structural parameters shows that the results are robust also along this dimension.
Do Firing Costs Matter? This draft: February 1999.
This paper uses a strategic bargaining framework to reassess the effect of dismissal costs in models of voluntary separation. It shows that firing, as opposed to inducing a quit, is always an off-equilibrium strategy for firms in this class of models. Thus, dismissal costs can affect payoffs only if some exogenous event may force the firm to fire the worker despite it being suboptimal, or if the firm's assets are only partly specific to the relationship. In this latter case, dismissal costs increase the specificity of the firm's capital and depress ex post expected profits. In any case, firing restrictions do not affect separation decisions, as firms always find it profitable to induce workers to quit whenever separation is efficient. Involuntary separation is an essential feature of a world in which firing costs result in a lower probability of separation. In such a world, they may be welfare improving, as the separation rate is inefficiently high in the absence of firing restrictions.The results in this paper will never be published as one single paper. I include it here because it is a self-contained, and cited, reference on the effects of firing costs in environments with risk-neutral and homogeneous workers. Only the result on the neutrality of firing taxes in models of voluntary separation is available elsewhere ("When Do Firing Taxes Matter?" above).