It takes two to tango: Labor responses to an income tax holiday in Argentina
(with Guillermo Cruces and Victoria Castillo); (Slides)
Presentations: 2nd World Bank Tax Conference, 53a JIFP (Cordoba), 76th IIPF (Iceland), 8th UDEP Workshop (Peru), Applied Micro Seminar (UC Santa Barbara), NTA (Tampa), PF Seminar (Berkeley), 13th ACLEC (UC Santa Cruz), Labor Symposium (Berkeley), 18th IZA-SOLE, AAEP meeting (La Plata), RIDGE PF Workshop (Uruguay), NTA (Philadelphia), Ministry of Labor (Argentina), 2nd Zurich PF Conference (U. of Zurich), UNU-WIDER PF Conference (Mozambique)

ABSTRACT

We exploit a large, quasi-randomized, 2.5-year-long income tax holiday to identify intertemporal labor responses of high-wage earners to net wage changes. In August 2013, the Argentine government exempted a group of wage earners from the income tax for 2.5 years while leaving in place the tax on other high-wage earners. Eligibility was based on whether past wage earnings were below a fixed threshold, thus levying sharply different marginal and average tax rates—effectively 0% for workers below the threshold. Using rich population-wide administrative data and a regression discontinuity design, we estimate a precise and very small wage earnings elasticity of 0.017 for this large, salient, and temporary income tax change. Responses are larger for more flexible outcomes (overtime hours) and for more elastic groups (job switchers and managers). We also find avoidance responses from new entrants who faced no tax if their first monthly wage was below the fixed threshold. This strategic entry below the threshold to dodge taxes required coordination with employers. Our findings suggest the presence of rigidities in the labor market, which imply that wage earners' responses to tax changes depend largely on substantial coordination with employers.

Wage effects of employer-mediated transfers
(with Santiago Garriga); (Slides)
Presentations: Econometric Society 2021, IFS-UCL-LSE/STICERD Seminar, CESifo Area Conference on Public Economics 2021, ZEW Research Seminar, International Online PF Seminar 2021, ASSA Annual Meeting 2021, U of Nottingham brown bag, UC Berkeley labor lunch, IIPF 2020, UC Berkeley PF lunch

ABSTRACT

We explore whether the way in which tax credits are disbursed affects the gross wage of workers. We exploit an unusual reform in Argentina that shifted the disbursement responsibility of child benefits from employers to a government agency in staggered fashion, from 2003 to 2010. Using population-wide administrative data and an event-study approach based on firms' switching date set by the government, we show that the way tax credits are disbursed matters for the final economic incidence. Our evidence suggests that employers capture about 6-14 percent of the transfers through lower wages when they mediate the payments. We argue that in the firm-based system, transfers were likely understood as part of the starting compensation package and employers exploited this confusion to extract rents. Our findings therefore accord with the hypothesis that transfers are not entirely captured dollar for dollar by workers. More generally, this paper suggests that relying on firms as mediators in the tax-benefit system could have unintended consequences; as less salient schemes may lead to rent capture.

Imperfect competition in product and labor markets. A quantitative analysis
(with Roman D. Zarate); Submitted (Slides)
Presentations: SEA 90th Annual Meeting, Labor Seminar at UC Berkeley, Trade Seminar at UC Berkeley, CAF Symposium

ABSTRACT

We disentangle the extent of imperfect competition in product and labor markets using plant-level data. We derive a formula for the ratio between markups and markdowns assuming cost-minimizing firms that face upward-sloping labor supply and downward-sloping product demand curves. We then separate this combined measure of market power by estimating firm-level labor supply elasticities instrumenting wages with a different set of instruments including the use of intermediate inputs, input price shocks, and TFP shocks. Our results suggest that both markets exhibit imperfect competition, but the variation is mainly driven by markups. We also estimate the relative gains of removing market power dispersion on allocative efficiency, finding that markups are more important on TFP than markdowns.

Taxpayers' responses to tax and administrative notches across the revenue distribution
(with Santiago Garriga and Jorge Puig); Revision in progress

ABSTRACT

We estimate the response of firms and self-employed workers to two revenue taxes—Monotributo and Gross Receipts Tax—across the turnover distribution using rich administrative data from Argentina. We exploit several revenue-dependent discontinuities that provide incentives to underreport taxable income combined with a bunching design to estimate sales elasticities. We also explore heterogeneities by firm size, type of activities, and type of taxpayers. In the case of small firms, we find sizeable bunching below the thresholds that is stronger for higher tax incentives. The response is stronger in sectors that have more space for manipulation, such as service-based activities. In the case of medium and large firms, bunching is more muted but it suggests that even large firms are able to underreport their gross sales to avoid facing higher tax rates. Firms also seem to find more costly the indirect administrative cost of becoming a collection agent than the direct fiscal cost of the Gross Receipts Tax. We cannot rule out, however, that large firms adjust other margins (or taxes) to compensate for the higher tax pressure.

SELECTED WORK IN PROGRESS

POLICY PAPERS

Anatomía del Impuesto a las Ganancias sobre los Asalariados: Argentina 2000-2016
In preparation for Revista de Trabajo (Ministry of Labor, Argentina)

Investment in ICT, Productivity, and Labor Demand (SSRN WP) (Updated version)
(with Irene Brambilla), World Bank Policy Research Working Paper No. 8325 (January 2018)

Pre-doctoral