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March 18, 2024
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The relationship between childcare provision and mothers’ labour supply decisions is highly debated due to the potential reverse causality and resultant empirical challenges. We contribute meaningfully to this debate by discussing the effects from a reform on Brazil’s primary education system on maternal labour supply. This reform, which advanced the compulsory children’s enrolment in primary education schools from the age of 7–6, is interpreted as the provision of free childcare. Due to the imperfect compliance of the reform implementation, children’s month of birth is used as an instrumental variable to control for the endogeneity present in any actual school enrolment. We show that the reform presented a positive effect on the labour supply of (1) the Brazilian single mothers and (2) the least educated mothers, increasing their participation in labour market by 12.9 % and furthermore a probability of becoming full time workers by 10.9 %.
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March 11, 2024
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Take-up of social welfare is key to its success in alleviating poverty. For a variety of reasons, including stigma, transaction costs and information asymmetry, take-up of welfare benefits is imperfect. This research note discusses the issue of take-up of social welfare and its measurement. We explore the difficulties of estimating welfare take-up, using the example of the Irish Working Family Payment (WFP) and two microsimulation models. We show how estimates of take-up can vary depending on the dataset used for simulation. We then estimate take-up of the WFP, updating the most recent estimate from 2005. Lastly, we discuss policy lessons.
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March 8, 2024
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We show that the presence of a public firm can deter private firms from relocating to foreign countries in response to high domestic taxation. We also examine partially privatized public firms showing that the higher the exogenous domestic profit tax, the larger the public ownership share needs to be to deter private firm mobility. We illustrate that deterring mobility increases domestic welfare.
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March 7, 2024
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Price strategies are essential to balance timely access to drugs with expenditure containment. This is especially true for personalised drugs, whose effectiveness is heterogeneous across patients. For these drugs, some authors suggest to use Indication Based Price schemes (IBPs), while others argue that Performance-Based managed entry Agreements (PBAs) are more appropriate. We develop a theoretical model to compare the welfare properties of IBPs and PBAs in an environment where effectiveness is uncertain. The manufacturer observes heterogeneity in patients responses, but this information may be non verifiable. By contrast, the regulator can only observe data presented for listing purposes. We show that IBPs may allow to treat the efficient number of patients only if the social value of the drug is entirely appropriated by the manufacturer. PBAs may allow a fairer distribution of the social value, but their success depends on the contract rules and on the degree of uncertainty.
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February 12, 2024
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We study the impact of the introduction of a pay as you throw tariff in Ferrara which presented a low status-quo level of waste recycling. We find that it increased the waste recycling share by 40 % points and decreased the total waste per capita by 30 % points. Our dataset allows the split of the overall effect on waste recycling, finding that 63 % of recycling is due to organic material and 37 % to multimaterial (paper, glass, and plastic). This result suggests that packaging does not constitute the major waste recycling collection. Moreover, we find both an increase in waste recycling and a decrease in total waste, contrary to other case studies with a higher starting level of waste recycling. This leads to the important conclusion that pricing waste is effective in reducing pollution if the waste recycling level is sufficiently low.
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Open Access
February 12, 2024
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Human capital investments at an early age appear crucial for individual outcomes. Family size might affect these investments influencing parental time and economic resources invested in children’s education. This feature is related to the children quantity-quality trade-off proposed by Becker that has been investigated only for a few countries because of data limitations. We investigate this issue for Italy – even in the absence of Census data relating family of origin to children’s educational outcomes – using many waves of the Survey on Household Income and Wealth of the Bank of Italy and focusing on the educational attainments of 19–23 years old. We use twin births as an instrumental variable to identify exogenous variations in family size. In contrast with the results from other developed countries, we find a significant negative effect of family size on children’s education, probably related to the low quality of education in some regions of the country and to the poor public assistance of families with children. We show that these findings are robust to a number of checks. The effects appear stronger for women, Southern regions, low-income families and when spacing between births is limited, suggesting that both time and financial constraints are mechanisms at work. We also find strong birth order effects.
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February 2, 2024
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This paper studies how firms in a duopoly market choose product qualities when facing two types of consumers: high-end consumers value quality more than low-end consumers. Firms’ highest possible quality (referred to as industrial technology boundary) is determined by an industrial common technology. I consider price competition and show that in equilibrium, an increase in the technology boundary can induce a decrease in the equilibrium quality of one firm. In this case, the firms enlarge their quality difference, triggering a market segmentation . In this market segmentation, the firm with a lower quality does not serve the high-end consumers and obtains higher profits from the low-end consumers, whereas the firm with a higher quality supplies both types of consumers and obtains higher profits as well. This market segmentation causes additional mismatch costs for high-end consumers, therefore lowering both consumer and social surplus.
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January 17, 2024
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This paper contributes to the understanding of how brand scandals related to a brand leader’s product affect the follower firm’s choice between copycatting and independent product development. In a model of vertical product differentiation, we show that it is optimal for the copycatter to follow a ‘safe distance’ strategy which guarantees a certain degree of protection against the negative spillovers associated with a brand scandal to the leader. Nevertheless, when the follower firm can choose between copycatting and decoupling, it chooses a higher quality for its copycat product because of the lower development costs. The decision for or against copycatting thus depends on a trade-off between development costs and the possibility of negative spillovers. Finally, we show that the threat of a scandal can lead to an additional indirect welfare cost because it diverts the follower’s choice away from a welfare-maximizing copycat strategy.
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January 15, 2024
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Performance-based regulation (PBR) has recently experienced increased popularity in North America and Europe. The genesis for this renewed interest in PBR is the potential to strengthen the regulated firm’s incentives for efficiency relative to traditional rate-of-return regulation. The strength of these incentives is referred to as the power of the regulatory regime (PRR). The PRR depends on the share of the efficiency gains retained by the regulated firm and the length of time that it retains them before being appropriated by the regulator acting as a surrogate for competition. Nonetheless, there are tradeoffs in the design of PBR plans that can render it inferior to traditional earning-based regulation in terms of incentive power. This may explain why the empirical evidence on the performance of PBR is best characterized as “mixed.”
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February 1, 2020
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This paper uses a unique data set on 143,000 poor households from Northern Bangladesh to analyze the effects of microfinance membership on a household’s ability to cope with seasonal famine known as Monga. We develop an identification and estimation strategy that exploits a jump and a kink at the 10-decimal land ownership-threshold driven by the Microfinance Institution screening process to ensure repayment by excluding the ultra-poor. Evidence shows that microfinance membership improves food security during Monga, especially for the poorest households who survive at the margin of one and two meals a day. The positive effects on food security are, however, not driven by higher income, as microcredit does not improve the ability to migrate for work, nor does it reduce dependence on distress sale of labor. The evidence is consistent with consumption smoothing being the primary mechanism behind the gains in food security of MFI households during the season of starvation.