Guglielmo Barone

Service Regulation and Growth: Evidence from OECD Countries

We study the effects of anti�?competitive service regulation by examining whether OECD countries with less anti�?competitive regulation see better economic performance in manufacturing industries that use less�?regulated services more intensively. Our results indicate that lower service regulation increases value added, productivity and export growth in downstream service�?intensive industries. The regulation of professional services and energy provision has particularly strong negative growth effects. Our estimates are robust to accounting for alternative forms of regulation (i.e. product and labour market regulation), alternative measures of financial development and a range of other specification checks.

With a little help from abroad: the effect of low-skilled immigration on the female labor supply

In this paper we examine whether and how the inflow of female immigrants who “specialize�? in household production affects the labor supply of Italian women. To identify the causal effect, we exploit the family reunification motive and the network effects - i.e. the tendency of newly arriving female immigrants to settle in places where males of the same country already live - as an instrument for the geographical distribution of female foreign workers. We find that the higher the number of immigrants who provide household services the more time native Italian women spend at work (intensive margin) without affecting their labor force participation (extensive margin). The impact is concentrated on the highly skilled women whose time has a higher opportunity cost. These results also hold after a battery of robustness checks. Some further evidence confirms that the impact passes through the substitution in household work rather than complementarities in the production sector. Finally, we show that immigration arises as a substitute to publicly provided welfare services, although this raises concerns about the fairness and the sustainability of this private and informal welfare model.

Tax morale and public spending inefficiency

Tax evasion is a widespread phenomenon and encouraging tax compliance is an important and much debated policy issue. Many studies have shown that tax cheating has to be attributed to a considerable extent to the tax morale of taxpayers. The aim of the present paper is to shed light on the relationship between the taxpayer and the public sector. Specifically, we investigate whether public spending inefficiency shapes individual tax morale. Combining data from Italian municipalities’ balance sheets with individual data from a properly designed survey on tax morale, we find that the attitude towards paying taxes is better when resources are spent more efficiently. This does not appear to be due to some confounding factors at the municipality level or to spatial sorting of citizens. It is also robust to alternative measures of both inefficiency and tax morale.

Switching Costs in Local Credit Markets

Switching costs are a key determinant of market performance. This paper tests their existence in the corporate loan market in which they are likely to play a central role because of the complexity of contracts and informational problems. Using very detailed data at bank-firm level on four Italian local credit markets we empirically show that firms tend to iterate their choice of the main bank over time. This inertia is not related to unobserved and time invariant preferences of firms across banks and can be attributed to the existence of switching costs. We also offer evidence that banks price discriminate between new and old borrowers by charging lower interest rates to the former in order to cover part of the switching costs. The discount is about 44 basis points, equal to 7 per cent of the average interest rate. These results prove robust to a number of other potential identification drawbacks.

Electoral rules and voter turnout

The paper investigates the effect of electoral rules on voter turnout. It focuses on Italian municipalities, where voting schemes are differentiated by the size of the city: a single ballot system applies to municipalities with less than 15,000 inhabitants, while a dual ballot system is in place above that threshold. By exploiting this discontinuity, the paper finds that the dual ballot increases participation at the local polls, with an estimated effect of about 1 percentage point. The increase in voter turnout is associated with wider political representation, politicians of higher quality, greater fiscal discipline, and more robust local development. Finally, we document that the higher political participation triggered by local electoral rules extends to nationwide voting contexts.

Natural Disasters, Growth and Institutions: A Tale of Two Earthquakes

We examine the impact of natural disasters on GDP per capita by applying the synthetic control approach. Our analysis encompasses two large-scale earthquakes that occurred in two different Italian regions in 1976 and 1980. We show that the short-term effects are negligible in both regions, though they become negative if we simulate the GDP that would have been observed in absence of financial aid. In the long-term, our findings indicate a positive effect in one case and a negative effect in the other, largely reflecting divergent patterns of the TFP. Consistently with these findings, we offer further evidence suggesting that a quake and related financial aids might either increase technical efficiency via a disruptive creation mechanism or reduce it by stimulating corruption, distorting the markets and deteriorating social capital. We finally show that the bad outcome is more likely to occur in areas with lower pre-quake institutional quality. As a result, our evidence suggests that natural disasters are likely to exacerbate differences in economic and social development.

Inequality and Trust: New Evidence from Panel Data

The relationship between inequality and trust has attracted the interest of many scholars who have found a negative relationship between the two variables. However, the causal link from inequality to trust is far from being identified and the existing empirical evidence admittedly remains weak, as the omitted variable bias, reverse causation and/or measurement error might be at work. In this paper, we reconsider the country-level evidence to address this issue. First, we exploit the panel dimension of the data, thus controlling for any country unobservable time-invariant variables. Second, we provide instrumental variable estimates using the predicted exposure to technological change as an exogenous driver of inequality. According to our findings, income inequality significantly and negatively affects generalised trust. However, this result only holds for developed countries. We also explore new insights on the effects of different dimensions of inequality, exploiting measures of both static inequality – such as the Gini index and top income shares – and dynamic inequality – proxied by intergenerational income mobility.

The Effect of Organized Crime on Public Funds

Organized crime is widely regarded as damaging to the economy, to say nothing of peoplei?½s lives. Yet little is known about the mechanism at work. This paper helps fill the gap by analyzing the impact of organized crime on the allocation of public subsidies to businesses. We assemble an innovative data set on Italian mafia crimes at municipal level and test whether organized crime diverts public funding. We exploit exogenous variations at the level of municipalities to instrument current mafia-style activity by using exogenous shifters of land productivity in the 19th century. Our results show that the presence of organized crime positively affects both the extensive margin (probability of funding) and the intensive margin (amount of public funding to enterprises). The impact is economically relevant and equal to at least one standard deviation of the dependent variable. Organized crime is also found to cause episodes of corruption in the public administration. A series of robustness checks confirm the findings. Our results suggest that geographically targeted aid policies should be careful to take local crime conditions into account.

Il trasporto aereo in Italia: ancora un caso di liberalizzazione incompiuta?

Since the end of the eighties in most European countries many transportation services underwent a process of deregulation. In Italy, this process has been particularly strong in the domestic air transport market, one of the largest in Europe. The end of state monopoly on the national routes and the development of local airports produced new entry, lower average prices and passengers increase. Still many obstacles to competition remain. The presence of a domestic monopolist operating with public subsidies and the rules governing slots allocation have been the main factors hampering the full play of competition and induced accommodating strategies among the players. A comparison with other major European domestic markets shows higher prices in Italy even controlling for service quality. This shows that the full effects of deregulation cannot be obtained only by eliminating regulation barriers on the main market. It is necessary to create efficient allocative mechanisms on the related slots market. Another important condition is a full consistency of public policies, which at the moment are giving wrong signals to the agents by promoting competition and at the same time are keeping on protecting rents.

The short-term effects of Emilia's earthquake on regional economic growth

Between May and June 2012 a series of earthquakes occurred in the Po Valley in Emilia, causing deaths and widespread damages to buildings and manufacturing plants. The negative economic consequences include, beyond direct damages, also indirect costs (e.g. economic loss through production chains with the damaged firms). This paper estimates the overall short-term impact on the GDP growth rate of Emilia-Romagna, the mostly affected region. Using a difference-in-differences approach and a coincident indicator of monthly economic cycle, we estimate a 0.2 percentage points reduction of economic growth rate.