Luciana Echazu

Corruption with Heterogeneous Enforcement Agents in the Shadow Economy

We analyze the relationship between the underground (or shadow) economy and the formal or legal sector in the presence of corruption in both sectors. Firms choose between operating in the legal and in the underground economy. With morally heterogeneous law enforcement agents monitoring the underground economy, the equilibrium in both sectors depends critically on the incentives of honest enforcers and on the proportion of such agents. In particular, we show that an increase in the proportion of honest agents monitoring the shadow economy may have the adverse effect of increasing its size, together with concomitant increases in negative externalities.

Corruption and the Balance of Gender Power

This paper seeks to explain the negative relationship between female participation in a government and corruption found in empirical research. We propose that even if there are no innate gender differences towards moral values, the costs of corrupt behavior may still differ across genders and are related to the proportion of female participation in government agencies. Hence, females behave more honestly than males do, not because they are naturally prone to it, but because they cannot afford to be corrupt if they are a minority. In that sense, the total density of corruption is non-monotonic in the proportion of female participation.

A New Look into the Determinants of the Ecological Discount Rate: Disentangling Social Preferences

How should changes in environmental quality occurring in the future be discounted? To answer this question we consider a model of “ecological discounting”, where the representative consumer has a utility function defined over two attributes, consumption and environmental quality, which evolve stochastically over time. We characterize the determinants of the social discount rate and its behavior over time using a preference structure that disentangles attitudes towards intertemporal inequality, attitudes towards risk, and tastes over consumption and environmental quality. We show that the degree of substitutability between consumption and environmental quality, the degree of risk aversion, the degree of inequality aversion, and the rate at which these attitudes change as natural and man-made resources evolve over time are all important aspects of the ecological discount rate and its term structure. Our analysis suggests that over medium and long term horizons the ecological discount rate should be below the rate of time preference, supporting recent proposals for immediate action towards climate change mitigation.

PRIORITY SETTING IN HEALTH CARE: DISENTANGLING RISK AVERSION FROM INEQUALITY AVERSION: PRIORITY SETTING IN HEALTH CARE

In this paper, we introduce a tractable social welfare function that is rich enough to disentangle attitudes towards risk in health outcomes from attitudes towards health inequalities across individuals. Given this preference specification, we evaluate how the introduction of uncertainty over the severity of illness and over the effectiveness of treatments affects the optimal allocation of healthcare resources. We show that the way in which uncertainty affects the optimal allocation within our proposed specification may differ sharply from that in the standard expected utility framework.

Strategic Environmental Taxation and International Trade

Using a model of monopolistic competition with two countries, where we allow for technological asymmetries, we examine the relationship between intra-industry trade and environmental regulation. The decisions on emission standards set by each country show strong strategic interactions. We show that while regulations act as strategic substitutes in closed economies, this relationship may change once the countries open up to trade, depending on how the share of intra-industry trade between the two countries compares to the elasticity of substitution. While opening to trade unambiguously increases welfare, environmental regulations may increase or decrease depending on the share of intra-industry trade. In addition, we find a non-monotonic relationship between emissions and productivity.

Priority Setting in Health Care: Disentangling Risk Aversion from Inequality Aversion

In this paper we introduce a tractable social welfare function that is rich enough to disentangle preferences towards risk in health outcomes from preferences towards health inequalities across individuals. Given this preference specification we evaluate how uncertainty over the severity of illness and over the effectiveness of treatments affects the optimal allocation of health care resources. We show that the way in which uncertainty affects the optimal allocation within our proposed specification may differ sharply from that in the standard utilitarian framework. We also derive explicit solutions for the optimal allocation under risk for the case of a “Rawlsian” society.