Carlotta Berti Ceroni

Poverty Traps and Human Capital Accumulation

In this paper, we analyze the emergence and persistence of poverty traps and study how wide-spread poverty and the unequal distribution of income can slow down the accumulation process and lead to steady-state equilibria characterized by low aggregate output levels. We define poverty as a state deriving from the lack of adequate skills and associate income inequality with the unequal distribution of education attainments. In this context the goal of our contribution is twofold. First, we show that low asymptotic mobility and persistent income inequality can emerge as a consequence of the fact that the poor require relatively higher returns to increase expenditure on education, so that they devote to education smaller shares of their income that the rich. Second, we critically evaluate our and other related results, in order to shed light on the explanatory power of different sets of assumptions.

Persistence of Politicians and Firms' Innovation

We empirically investigate whether the persistence of politicians in political institutions affects the innovation activity of firms. We use 12,000 firm-level observations from three waves of the Italian Observatory over Small and Medium Enterprises, and introduce a measure of political persistence defined as the average length of individual political careers in political institutions of Italian municipalities. Standard OLS shows no raw correlation between political persistence and firms’ innovation activity. However, once the causal effect is isolated by means of instrumental variables, using death of politicians as an exogenous source of variation of political persistence, we find a robust negative relation between political persistence and the probability of process innovation. This finding is consistent with the view that political stability may hinder firms’ incentive to innovate to maintain their competitiveness, as long as they can extract rents from long-term connections with politicians.

Compulsory Schooling Laws and the Cure Against Child Labor

Equally, poor countries display similar compulsory schooling laws but different levels of child labor and school attendance. This paper provides an explanation for the existence of child labor, which relies on the imperfect enforcement of compulsory schooling laws and is consistent with the above cross-country differences. In the presence of complementarities in the production of human capital that justify legislative intervention, mandatory measures ensure that coordination failures are solved so that all parents send their children to school and the socially optimal equilibrium is reached. However, if enforcement of legislation is too low, multiple equilibria emerge. In this case, child labor occurs more often among poor households, and compulsory schooling laws may have adverse welfare effects.

Child Labor and Resistance to Change

We study the interactions between technological innovation, investment in human capital and child labor. In our setting new technologies require new skills and new skills can be developed only through schooling. In a two-stage game, first firms decide on innovation, then households decide on education. In equilibrium the presence of inefficient child labor depends on parameters related to technology, parents’ altruism and the diffusion of firm property. When child labor exists, it is due to either firms reluctance to innovate or households’ unwillingness to educate or both. The optimal policy to eliminate child labor depends crucially on its underlying cause. We show that, in some cases, compulsory schooling laws or a ban on child labor are welfare reducing, while a subsidy to innovation is the right tool to eliminate child labor and increase welfare.

Financial Liberalization, Property Rights, and Growth in an Overlapping-Generations Model

In this paper we develop an endogenous growth model of open economies, where countries differ with respect to the quality of property rights. Within this context, we analyze two types of reforms. First, we look at growth and welfare effects of removing capital controls, given the degree of property rights protection. Second, we endogenize the quality of property rights and study the political support for a reform aimed at improving it. We show that, in countries where property rights are poorly protected, the liberalization of capital movements, that may or may not foster economic growth in the short-run, eliminates the possibility of sustained physical capital accumulation. Nevertheless, the removal of capital controls may benefit the agents alive at the time of liberalization, leaving a burden for future generations. Ceteris paribus, the political support for a reform of property rights will be stronger in the closed economy than in the open economy.

Immigration Policy, Migrants' Selection and Human Capital Accumulation

This paper investigates the economic consequences of international migration from the point of view of destination countries. Consistently with international evidence on migration flows, we build a model where the migration rate is higher among the highly-educated. A negative relationship is shown to exist between the domestic wage level and the percentage of educated workers among immigrants, which raises interesting policy implications. In particular, the optimal immigration policy from the point of view of natives requires an immigration quota above a certain minimum level. Extending the analysis to a dynamic setting, we highlight additional effects of the immigration quota on human capital accumulation among natives.

Temporary Migration And Human Capital Accumulation

We analyze under which conditions temporary migration of unskilled and skilled workers increases human capital accumulation in the host country. We also show that the negative welfare effect of lower unskilled wages may be counterbalanced by deeper human capital formation.