Judit Vall Castello

Bank Behavior with Access to Credit Risk Transfer Markets

One of the most important recent innovations in financial markets has been the development of credit derivative products that allow banks to more actively manage their credit portfolios than ever before.We analyze the effect that access to these markets has had on the lending behavior of a sample of banks, using a sample of banks that have not accessed these markets as a control group. We find that banks that adopt advanced credit risk management techniques (proxied by the issuance of at least one collateralized loan obligation) experience a permanent increase in their target loan levels of around 50%. Partial adjustment to this target, however, means that the impact on actual loan levels is spread over several years.Our findings confirm the general efficiency enhancing implications of new risk management techniques in a world with frictions suggested in the theoretical literature.

Measuring the (income) effect of disability insurance generosity on labour market participation

We analyze the employment effect of a law that provides for a 36 percent increase in the generosity of disability insurance (DI) for claimants who are, as a result of their lack of skills and of the labour market conditions they face, deemed unlikely to find a job. The selection process for treatment is therefore conditional on having a low probability of employment, making evaluation of its effect intrinsically difficult. We exploit the fact that the benefit increase is only available to individuals aged 55 or older, estimating its impact using a regression discontinuity approach. Our first results indicate a large drop in employment for disabled individuals who receive the increase in the benefit. Testing for the linearity of covariates around the eligibility age threshold reveals that the age at which individuals start claiming DI is not continuous: the benefit increase appears to accelerate the entry rate of individuals aged 55 or over. We obtain new estimates excluding this group of claimants, and find that the policy decreases the employment probability by 8 percent. We conclude that the observed DI generosity elasticity of 0.22 on labour market participation is mostly due to income effects since benefit receipt is not work contingent in the system studied.

Effects of the great recession on drugs consumption in Spain.

This paper presents evidence on how the consumption of legal and illegal drugs has changed in response to the Great Recession in Spain. We use a large scale survey from 2005 to 2011 to analyze the association between changes in local economic conditions and drug consumption among individuals aged 15-64. Although Spain was one of the countries hardest hit by the economic downturn, the crisis was unevenly felt across the country. Therefore, we exploit this difference in unemployment rates across provinces to identify the effects of business cycle variations on the consumption of legal and illegal drugs. To the best of our knowledge, this is the first study to find a relation between the deterioration of local economic conditions and a strong increase in the consumption of marihuana and cocaine. We also report a decrease in alcohol consumption but a significant escalation in abusive smoking behavior (smoking every day). We believe that these findings are important not only for the potential negative implications at the individual level but also for the costs to society as a whole.

Business cycle impacts on substance use of adolescents: A multi-country analysis

HighlightsWe study substance consumption patterns in response to macroeconomic conditions.We focus on adolescents in a large number of countries.Our results show that beer and wine consumption vary counter‐cyclically.However adolescent smoking prevalence varies pro‐cyclically.In another bullet point the last highlight would be: This is important as early substance initiators have worse neurological deficits. ABSTRACT Populations respond to changes in the economic climate in a variety of ways. The recent ‘Great Recession’ has brought attention to the vulnerability of many economies around the world to changes in non‐domestic macroeconomic fluctuations. However, empirical evidence on the responses of adolescents’ substance consumption behaviour when the economy deteriorates is very scarce. Thus, the focus of this paper is to analyse the substance consumption patterns displayed by adolescents in response to changes in macroeconomic conditions in a large number of countries. Our results show that beer and wine consumption vary counter‐cyclically (a 1pp increase in the unemployment rate increases the probability of drinking beer (wine) by 3% (5.5%)) while adolescent smoking prevalence varies pro‐cyclically (a 1pp increase in the unemployment rate decreases the probability of being a current smoker by 3.8%). More importantly, we find that the probability of ever being drunk increases by 1.3% for a 1pp increase in the unemployment rate. Further to this, substantial heterogeneous effects from the aggregate‐level results were found when analysing a variety of demographic and geographic dimensions. In light of the existing empirical evidence which outlines that early substance initiators demonstrate worse neurological deficits and suffer stronger labour market penalties (compared to later initiators or abstainers) these findings can aid policy makers in reducing these lasting adverse outcomes.

Health, Disability and Pathways to Retirement in Spain

In this paper we analyze the trends in labor force participation and transitions to benefit programs of older workers in relation to health trends as well as recent Social Security reforms. Our preliminary conclusions are pessimistic regarding the effect of health improvements on the labor market attachment of older workers since we show that despite the large improvements in the mortality rates among older individuals in Spain, the employment rates of individuals older than fifty-five remain lower than the ones observed in the late 1970s. Some caution should remain in our conclusions as the evidence on health trends is inconclusive. Regarding the effect of Social Security reforms, we find that both the 1997 and the 2002 reform decreased the stock into old-age benefits at the cost of an increased share of the participation into disability. Finally, we find that there was a significant increase in the outflow from employment into disability after the 2002 reform.

Pérdidas laborales ocasionadas por muertes prematuras en España: un análisis para el periodo 2005-2009

BACKGROUND The economic impact caused by diseases goes far beyond health care costs and, therefore it is transferred to the society through different dimensions. The aim of this study was to estimate the productivity losses due to premature deaths caused by diseases occurred in Spain during the period 2005-2009. METHODS We used data from several sources (Death Registry, Labour Force Survey and Wage Structure Survey) to develop a simulation model based on the human-capital approach that allowed us to estimate the labour productivity losses caused by premature deaths in the period analysed. Additionally, we also carried out two alternative scenarios in which we analysed how epidemiologic data influenced our results. RESULTS Our model showed the estimated loss of productivity due to premature death fell from 8,935 billion euros in 2005 to 8,073 billion euros in 2009. Nine diseases (traffic accidents, malignant tumour of the trachea, suicides, acute myocardial infarction, AIDS, cirrhosis, breast tumour, cerebrovascular disease and colon cancer) accounted for 35.6% of the total Years of Potential Productive Life Lost and 36.5% of the estimated productivity losses. The estimated losses represented 0.98%, 0.85% and 0.77% of Gross Domestic Product in 2005, 2007 and 2009, respectively. CONCLUSIONS The labour productivity losses caused by premature deaths decreased substantially in the period analysed. This reduction was mainly due to the epidemiological evolution of premature mortality.Background: The economic impact caused by diseases goes far beyond health care costs and, therefore it is transferred to the society through different dimensions. The aim of this study was to estimate the productivity losses due to premature deaths caused by diseases occurred in Spain during the period 2005-2009. Methods: We used data from several sources (Death Registry, Labour Force Survey and Wage Structure Survey) to develop a simulation model based on the human-capital approach that allowed us to estimate the labour productivity losses caused by premature deaths in the period analysed. Additionally, we also carried out two alternative scenarios in which we analysed how epidemiologic data influenced our results. Results: Our model showed the estimated loss of productivity due to premature death fell from 8,935 billion euros in 2005 to 8,073 billion euros in 2009. Nine diseases (traffic accidents, malignant tumour of the trachea, suicides, acute myocardial infarction, AIDS, cirrhosis, breast tumour, cerebrovascular disease and colon cancer) accounted for 35.6% of the total Years of Potential Productive Life Lost and 36.5% of the estimated productivity losses. The estimated losses represented 0.98%, 0.85% and 0.77% of Gross Domestic Product in 2005, 2007 and 2009, respectively. Conclusions: The labour productivity losses caused by premature deaths decreased substantially in the period analysed. This reduction was mainly due to the epidemiological evolution of premature mortality.

Business cycle and spillover effects on pre-retirement behavior in Spain

We test the hypothesis that exits from the labor market for pre-retirement individuals in Spain respond mainly to economic conditions and to incentives by analyzing two effects. First, we test the existence of spillover effects from a reform of the old-age pension system on transitions from employment to disability, unemployment and inactivity. We exploit the fact that the reform only affected individuals that had contributed between 15 and 25 years to the Social Security. Second, we estimate the effect of business cycle (BC) conditions at the local, sector and national level on these transitions. We find that both factors affect the exit timing and the choice of route out of the labor market.JEL classificationJ21, J22, R23