David Aristei

Habits, Complementarities and Heterogeneity in Alcohol and Tobacco Demand: A Multivariate Dynamic Model

In this paper we test the existence of forward-looking behaviour in a multivariate model for alcohol and tobacco consumption. The theoretical framework, based on a dynamic adjustment cost model with forward-looking behaviour, is enhanced to include the intertemporal interactions between the two goods. The analysis of the within-period preferences completes the intertemporal model, allowing to evaluate the static substitutability/complementarity relationships. The empirical strategy consists in a two-step estimation procedure. In a first stage, we obtain the parameters of the demand system, while in a second stage Euler equations are estimated. Results, based on a cohort data set constructed from a series of cross-sections of the Italian Household Budget Survey, reveal a significant complementarity relationship between alcohol and tobacco. Estimation of the Euler equations does not lead to rejection of the hypothesis of intertemporal dependence, providing evidence for a forward-looking behaviour in alcohol and tobacco consumption. Moreover, we find significant intertemporal interactions that support the adjustment cost setting in a multivariate model with rational expectations.

Speed and Sequencing of Transition Reforms and Income Inequality: a Panel Data Analysis

An extensive literature has analysed the economic effects of transition patterns in Central and Eastern European and former Soviet Union countries. With few recent exceptions, analysis of the impacts of speed and sequencing of reforms has not concerned the dynamics of income inequality. In this paper we analyse the heterogeneous effects of transition reforms on inequality by explicitly considering their speed and sequencing. To this aim we identify seven transition models in which the 27 countries considered can be classified. The dynamic panel econometric analysis for the period 1989–2006 reveals that balanced transition patterns, which favoured a coordination of reforms especially in specific fields, were relatively less pro-inequality.

Effectiveness of R&D subsidies during the crisis: firm-level evidence across EU countries

ABSTRACT This paper is one of the first attempts in the literature to evaluate the effectiveness of R&D policies in Europe during the great crisis of the late 2000s. Using homogenous firm-level data for the largest EU Member States over the period 2007–2009, we test whether manufacturing firms receiving public subsidies spent more on R&D. The analysis is performed using both non-parametric techniques and parametric estimation methods accounting for the possible endogenous selectivity of R&D subsidies. The hypothesis of full crowding-out is rejected in all countries under exam as firms did not replace their own resources with public grants. However, these firms did not allocate additional funds to research and hence, differently from earlier works, we do not find evidence for additionality effects of R&D subsidies. Our estimates indicate that, albeit not expansive, public subsidies to R&D thwarted the reduction of firm R&D efforts in the aftermath of economic crisis.

Government Consumption and the Composition of Private Expenditure: A Conditional Error Correction Model

In this paper we provide empirical evidence of the relationship between government purchases and private expenditure by adopting a microeconomic approach. Using UK quarterly data, a long-run demand system conditioned to the public sector is obtained by specifying a vector error correction model in which government consumption is assumed as an exogenous I(1) forcing variable. Our findings reject the hypothesis of separability of individual preferences between public and private expenditures, with simultaneous crowding-out/in effects. Moreover, crowding-out effects of government consumption on private spending are found to be larger for those goods and services that produce similar utility.

Testing separability of public consumption in household decisions

In this paper we propose a sequential strategy, based on the microeconomic approach of the demand theory, in order to test for separability between private and public consumption. The aim of the present work is to verify, using a conditional almost ideal demand system, whether the different components of public consumption exert conditioning effects on the allocative structure of private spending. The empirical estimation of the model and the separability tests are developed for both a demand system in five functional categories of private spending, and for a demand system in six categories, where the private expenditures on those goods and services which can also be offered by the public sector are enclosed in a single functional category. The results of the separability tests, obtained using UK data for the 1974–2000 period, show that public individual consumption plays an important role in modifying consumer choices, while public collective consumption does not affect private consumption behaviours. The relationships between the different components of private spending and public individual consumption are both of substitutability and complementarity; in particular, we find that public individual consumption and the corresponding private expenditures on ‘Health, education, recreation and social protection’ are complements.

Social Preferences for Redistribution in Central Eastern Europe and in the Baltic Countries

An extensive literature has highlighted how aggregate (social) preferences for redistribution are the result of a complex interaction of many forces (Alesina and Giuliano, 2009). First of all, a large number of factors affect individual attitudes towards inequality. They include current income levels (Ravallion and Lokshin, 2000), expectations about future income and social mobility (Benabou and Ok, 2001), education (Isaksson and Lindskog, 2007), age (Corneo and Gruner, 2002), gender (Crozon and Gneezy, 2008), professional and employment status (Alesina and Glaeser, 2004), ideology (Alesina and Fuchs-Schuendeln, 2007), perception of fairness (Benabou and Tirole, 2006), attitude to act in accordance to public values (Corneo and Gruner, 2002), race and ethnic group (Alesina and Glaeser, 2004), personal history (Piketty, 1995), and religious beliefs (Scheve and Stasavage, 2006). In addition, countries differ in terms of collective features affecting attitudes towards inequality, such as the exposition to macroeconomic shocks (Giuliano and Spilimbergo, 2009), cultural norms (Giuliano, 2007) and family models (Alesina and Giuliano, 2007). As economic systems differ strongly in terms both of population composition and of collective features, remarkable crosscountry heterogeneity in aggregate preferences for redistribution is to be expected.

Income Mobility in the New EU Member States

In this chapter we investigate intragenerational income mobility in Central Eastern European Countries (CEECs) and Baltic Countries (BCs), vis-a-vis Western Europe, in the periods before and during the global crisis. Aspects related to individual income mobility are connected in a dynamic perspective to those of inequality since the movements of economic agents along the income ladder over time shapes income distributions and their changes. In these respects, the two fields of study are highly complementary, with income mobility allowing the identification of the microeconomic drivers of changes in absolute and relative economic positions. Despite the challenges posed by data availability, research on income mobility developed significantly over the past two decades, providing a variety of possible perspectives of analysis, with alternative aggregate indices of mobility reflecting different underlying conceptual and methodological approaches (see Fields, 2007). As regards the microeconomic determinants of income mobility, the literature has primarily emphasised the role of demographic factors such as age and gender of the individuals, and the size and demographic structure of the households (e.g., Shi et al., 2010). Attention has also been paid to physical and human capital endowments, labour market conditions and positions, and initial income levels (e.g., Woolard and Klasen, 2005). More recently, institutional aspects started receiving explicit consideration too, especially with respect to labour market institutional settings (e.g., Ayala and Sastre, 2008; Sologon and O’Donoghue, 2011).

A Blinder--Oaxaca decomposition for double-hurdle models with an application to migrants' remittance behaviour

This article extends the Blinder–Oaxaca decomposition to double-hurdle (DH) models. The proposed methodology focuses on a generalized non-Gaussian DH specification with correlated errors and allows decomposing the gaps in participation probabilities and outcome levels for a wide range of nested specifications. The decomposition technique is applied to analyse differences in remittance behaviour of temporary and permanent migrants.

The determinants of firm–bank relationships in Italy: bank ownership type, diversification and multiple banking relationships

This paper investigates the main features of the relationships between banks and non-financial firms in Italy. Based on detailed firm-level data, we analyse the role of firm-level characteristics, decision-making factors and local credit market indicators in shaping various aspects of corporate banking choices. Empirical results show that young and small firms have a higher probability of relationships with local banks, confirming the advantage of local credit institutions in dealing with informationally opaque firms. Large and internationally active firms tend to establish relationships with national and foreign banks, as they are able to provide more complex banking services that are crucial to access foreign markets. Moreover, firms that are more dependent on external financing are more likely to use multiple and differentiated banking relationships, as a way to diversify external financing sources and alleviate credit constraints.

Inequality aversion in post-communist countries in the years of the crisis

Abstract This article provides estimates for the parameters of inequality aversion for 10 post-communist economies of central and eastern Europe in the years of the crisis. To this aim, we employ the information on the level of tax progressivity available in the European Union Survey on Income and Living Conditions cross-sectional microdata, under the assumption that the principle of equal sacrifice drives the choices of governments on marginal tax rates. Results reveal a remarkable variety of preferences for redistribution across the countries during the time period considered (2008–2012), with some of them converging towards the generally higher inequality aversion levels of the western European Union, perhaps as a result of policy responses to the crisis.