Javier Ferri

Determinants of the demand for education in Spain

The aim of this paper is to estimate an equation for household demand for both secondary and university education, using an estimation of the opportunity cost associated with the decision to invest in education. Limited dependent variable models are applied to the data provided by the Family Budget Survey 1991 for Spain. The results show that the social and economic status of the family has a comparatively greater impact on household expenditure on secondary education than on university education. The opportunity cost is also shown to be a decisive variable in the decision to invest in secondary education, although the results are less conclusive in the case of university education.

Fiscal Devaluations in EMU

We use a small open economy general equilibrium model to analyse the effects of a fiscal devaluation in an EMU country. The model has been calibrated for the Spanish economy, which is a good example of the advantages of a change in the tax mix given that its tax system shows a positive bias in the ratio of social security contributions over consumption taxes. The preliminary empirical evidence for European countries shows that this bias was negatively correlated with the current account balance in the expansionary years leading up to the 2009 crisis, a period when many EMU members accumulated large external imbalances. Our simulation results point to significant positive effects of a fiscal devaluation on GDP and employment similar to the ones that could be obtained with an ex-change rate devaluation. However, although the effects in terms of GDP and employment are similar, the composition effects of fiscal and nominal devaluations are not alike. In both cases, there is an improvement in net exports, but the effects on domestic and external demand are quite different.

Household Leverage and Fiscal Multipliers

We study the size of fiscal multipliers in response to a government spending shock under different household leverage conditions in a general equilibrium setting with search and matching frictions. We allow for different levels of household indebtedness by changing the intensive margin of borrowing (loan-to-value ratio), as well as the extensive margin, defined as the number of borrowers over total population. The interaction between the consumption decisions of agents with limited access to credit and the process of wage bargaining and vacancy posting delivers two main results: (a) higher initial leverage makes it more likely to find output multipliers higher than one; and (b) a positive government expenditure shock always produces a positive multiplier for vacancies and employment. The latter result is in sharp contrast with models in which some households do not have access to the financial market (RoT consumers), in which the implied labor market responses to fiscal shocks are inconsistent with the empirical evidence. We also find that the impact on GDP of consolidations is lower when consumers have a more limited capacity to borrow, and that increasing government spending in an episode of intense private deleveraging can still generate positive and significant effects on consumption and output, although the fiscal output (employment) multiplier decreases (increases) with the intensity of the credit crunch. In the model with indebted impatient households we also observe that output (employment) multipliers decrease (increase) markedly with the degree of shock persistence and increase with the degree of price stickiness.

Household Debt and Fiscal Multipliers

We study the size of government spending multipliers in a general equilibrium model with search and matching frictions in which we allow for different levels of household indebtedness. The main results are: (a) the presence of impatient households and private debt helps to generate government spending multipliers greater than 1; (b) as financial conditions worsen, the size of the government spending multiplier falls; (c) conversely, employment, vacancies and unemployment multipliers are larger in a credit crunch; (d) the model explains the observed pattern of responses of labour market variables, housing prices and private debt to a fiscal shock reasonably well.

Instruments, rules and household debt: The effects of fiscal policy

In this paper we look at the interplay between the level of household leverage in the economy and fiscal policy. When the fiscal rule is defined on lump-sum transfers, government spending or consumption taxes, the impact multipliers of transitory fiscal shocks become substantially amplified in an environment of easy access to credit by impatient consumers. However, when the government reacts to debt deviations by raising distortionary taxes on income, labour or capital, the effects of household debt on the size of the impact output multipliers vanish or even reverse. We also find that differences in fiscal multipliers between high and low indebtedness regimes belong basically to the short run, whereas the long-run multipliers are barely affected by the level of household debt in the economy. Finally, we find that fiscal shocks exert an unequal welfare effect on impatient and patient households that can even be of opposite signs.

Estimation of an Extended SAM with household production for Spain 1995

Abstract This paper implements the conceptual framework sketched by Pyatt (1990) to construct an extended Social Accounting Matrix for Spain in 1995 (ESAM-95) to consider, in addition to the market economy, the production of services provided by households through unpaid work. In doing so, the ESAM-95 integrates the accounts related to market activities (ESA accounts) with non-market activities (non-ESA accounts) in a consistent way. Additional classifications are introduced in both ESA and non-ESA accounts in order to disaggregate the institutional accounts by household type and those of production factors by educational level and gender. The extended SAM is useful to calibrate CGE models in which the distribution of time between paid and unpaid work is a relevant variable.

Evaluating the Regional Impact of a New Road on Tourism

Ferri J. (2004) Evaluating the regional impact of a new road on tourism, Reg. Studies 38, 409–418. The aim of this work is to establish whether the opening of a motorway that extends along the east coast of Spain has significantly contributed to expanding hotel tourism in the Valencia region. Some of the most important tourist destinations in Spain, both domestic and international, are located in this region, such as Benidorm, Peñíscola and Gandía. The A-7 motorway, also part of the E-15 road network, is not only a faster and safer means of road communication for tourists but also provides a new gate to Europe, connecting with other motorways. Using monthly data on nights spent in hotels by residents in Spain and abroad, an intervention analysis has been performed for the three different provinces in the Valencia region: Valencia, Castellón and Alicante. Robustness of the results has been checked by means of three different approaches. The conclusion is that the impact on tourism of the motorway has been varied and depends on three factors: (1) the origin of the tourism; (2) the province of destination; and (3) the section of the motorway in question.

Time Use and Food Taxation in Spain

We evaluate the welfare impact of changing the VAT on food in a context in which households can produce home meals for own consumption that compete with meals served in restaurants. Home production of meals requires the combination of food and time inputs. The fiscal treatment in home production of both the inputs and the final product differs from market production of meals, generating different channels of inefficiency. We calibrate a simple general-equilibrium model for the Spanish economy that identifies three types of consumers according to their income, and simulate the effects of some experiments related to how food is taxed. The results suggest that if we focus only on aggregate welfare, the model fails to capture important distributional issues. We also present some caveats to previous simulation results on aggregate welfare that are related to the importance of the elasticity of substitution between food and time in the household production of meals.

Long-Run and Business Cycle Factors of the Spanish Economy

The construction of a model for simulation and policy evaluation of the Spanish economy constitutes a far-reaching project. This research task involves the specification of the behavioural equations that better describe the economy, as will be explained in the next chapter. Growth and cyclical regularities impose several restrictions on the specification and calibration of a useful general equilibrium model. For this reason much effort is needed in the analysis of the long-and short-run stylised factors of the Spanish economy. Thus throughout this chapter we shall study what has been behind the pattern of growth of the Spanish economy in recent decades, what has determined its labour productivity and what are the special features characterising business cycles in Spain.

Job Creation in Spain

The Spanish economy enjoyed a prolonged period of high growth between 1994 and 2007, characterised by extensive job creation. From the1960s to thee arly 1990s thenumbe r of jobs in theSpanish economy had fluctuated around a steady level of some 13 million. This led many people to support the idea that the Spanish economy could never break through this ceiling. However, between 1994 and 2007 the labour market saw an increase in employment from 13.3 to 20.6 million workers. This great modernation period brought the Spanish economy historically low interest rates and an expansion of credit facilities, which helped to sustain a vigorous and prolonged path of both private consumption and investment growth. Spain also managed to reduce public debt to a previously unknown level of around 30 per cent, and turned endemic public deficits into surpluses, reaching 2 percentage points of GDP in 2007. Throughout this expansionary process the labour force increased considerably as a result of sustained immigration flows; nevertheless, the unemployment rate converged to average European levels. In this sense, the rate of unemployment fell from around 20 per cent in the mid-1990s to a level of 8 per cent in 2007. For the first time since the first big oil price shock in the 1970s, Spanish unemployment was similar to the averagein theEurope an Union.