I examine the effects of cognitive ability and personality traits on college graduation in a recent cohort of young Americans, and how the returns to these traits vary by family background, and find very substantial differences across family background groups in the personality traits that predict successful completion of college, particularly for men. The implications are two-fold. First, the returns to noncognitive traits may be highly context-dependent. Second, policy discussion concerning educational inequality should include, not just the possibilities for remediating the skill levels of poor children, but also approaches to changing the environments that limit their opportunities.

The College Type: Personality and Educational Inequality

We examine gender differences in career progression and promotions in central banking, a stereotypical male-dominated occupation, using confidential anonymized personnel data from the European Central Bank (ECB) during the period 2003-2017. A wage gap emerges between men and women within a few years of hiring, despite broadly similar entry conditions in terms of salary levels and other observables. We also find that women are less likely to be promoted to a higher salary band up until 2010 when the ECB issued a public statement supporting diversity and took several measures to support gender balance. Following this change, the promotion gap disappears. The gender promotion gap prior to this policy change is partly driven by the presence of children. Using 2012-2017 data on promotion applications and decisions, we explore the promotion process in depth, and confirm that during this most recent period women are as likely to be promoted as men. This results from a lower probability of women to apply for promotion, combined with a higher probability of women to be selected conditional on having applied. Following promotion, women perform better in terms of salary progression, suggesting that the higher probability to be selected is based on merit, not positive discrimination.

The gender promotion gap: evidence from central banking

We assess the international spillovers of US monetary policy with a large-scale global VAR which models the world economy as a network of interdependent countries. An expansionary US monetary policy shock contributes to the emergence of a Global Financial Cycle, which boosts macroeconomic activity worldwide. We also find that economies with floating exchange rate regimes are not fully insulated from US monetary policy shocks and, even though they appear to be relatively less affected by the shocks, the differences in responses across exchange rate regimes are not statistically significant. The role of US monetary policy in driving these macrofinancial spillovers gets even reinforced by the complex network of interactions across countries, to the extent that network effects roughly double the direct impacts of US monetary policy surprises on international equity prices, capital flows, and global growth. This amplification increases as countries get more globally integrated over time, suggesting that the evolving network is an important driver for the increasing role of US monetary policy in shaping the Global Financial Cycle.

The global financial cycle and us monetary policy in an interconnected world

espanolEn este documento se estudian los efectos de la politica fiscal y el espacio fiscal existente en una union monetaria compuesta por paises con distintos niveles de deuda publica. Desarrollamos un modelo de equilibrio general dinamico y estocastico (DSGE, por sus siglas en ingles) de una union monetaria de dos paises, calibrada a partir de las caracteristicas de Espana y Alemania, en el que la sostenibilidad de la deuda publica y su prima de riesgo se determinan de forma endogena segun el mecanismo propuesto por Bi (2012). En este modelo, las decisiones de politica economica modifican las expectativas de los mercados sobre los superavits futuros afectando directamente a la prima de riesgo soberana y a las respuestas de las principales variables macroeconomicas. En tiempos normales, el coste de una consolidacion fiscal basada en una reduccion del gasto publico en un pais miembro de la union con deuda elevada se ve reducido cuando esta mejora las perspectivas de sostenibilidad de su deuda publica. Una consolidacion fiscal simultanea en los dos miembros de la union reduce aun mas los tipos de interes reales, lo que amplifica la caida de la prima de riesgo en el pais mas endeudado y, pese a reducir la actividad economica del conjunto de la union en el corto plazo, puede suponer una mejora en el largo plazo. Por el contrario, cuando la politica monetaria esta restringida por haber alcanzado los tipos de interes nominales su cota inferior (ZLB, por sus siglas en ingles), el canal de la prima de riesgo ve muy reducida su efectividad. En esta situacion, una consolidacion fiscal genera expectativas deflacionarias que aumentan el tipo de interes real, lo que puede compensar total o parcialmente, segun la calibracion, los beneficios derivados de la menor prima de riesgo. Asi, la estrategia que proporconaria un mayor aumento de la actividad en el conjunto de la union en el ZLB seria una expansion fiscal en el pais menos endeudado y una consolidacion en el mas endeudado. Finalmente, el canal de prima de riesgo solo afecta de forma indirecta a los miembros de la union monetaria con un nivel de deuda medio o bajo, a traves de los efectos sobre la economia de los miembros con una deuda elevada. EnglishIn this paper we study fiscal policy effects and fiscal space for countries in a monetary union with different levels of public debt. We develop a dynamic stochastic general equilibrium (DSGE) model of a two-country monetary union, calibrated to match the characteristics of Spain and Germany, in which debt sustainability is endogenously determined a la Bi (2012) to shape the responses of the risk premium on public debt. Policy shocks change the market’s expectation about future primary surplus, producing a direct effect on the sovereign risk premium and macroeconomic responses of the economy. In normal times the costs of a government spending driven fiscal consolidation in the high-debt country are greatly diminished when this consolidation improves endogenously its debt sustainability prospects. Fiscal consolidations in both members of the monetary union decrease real interest rates and amplify the reduction in risk premium in the highly-indebted country, improving union-wide output in the long run, but at the cost of lower output in the low- debt country in the short term. On the contrary, when monetary policy is constrained at the zero lower bound, the risk premium channel arising from the endogenous determination of debt sustainability becomes muted. In the ZLB, a fiscal consolidation generates de flation expectations which increase the real interest rate and may compensate partially or completely, depending on the calibration, the benefits from a lower risk premium. In this context, a fiscal expansion in the low-debt country and a consolidation in the high- debt country delivers the greater positive impact on union-wide output. Finally, the risk premium channel only affects countries with medium or low levels of public debt indirectly through the negative spillovers from other high-debt members of the monetary union.

/pdf/debt-sustainability-and-fiscal-space-in-a-heterogeneous-8161l8tlkd.pdf

Debt sustainability and fiscal space in a heterogeneous Monetary Union: normal times vs the zero lower bound

Surveys of professional forecasters produce precise and timely point forecasts for key macroeconomic variables. However, the accompanying density forecasts are not as widely utilized, and there is no consensus about their quality. This is partly because such surveys are often conducted for “fixed events”. For example, in each quarter panelists are asked to forecast output growth and inflation for the current calendar year and the next, implying that the forecast horizon changes with each survey round. The fixed-event nature limits the usefulness of survey density predictions for policymakers and market participants, who often wish to characterize uncertainty a fixed number of periods ahead (“fixed-horizon”). Is it possible to obtain fixed-horizon density forecasts using the available fixed-event ones? We propose a density combination approach that weights fixed-event density forecasts according to a uniformity of the probability integral transform criterion, aiming at obtaining a correctly calibrated fixed-horizon density forecast. Using data from the US Survey of Professional Forecasters, we show that our combination method produces competitive density forecasts relative to widely used alternatives based on historical forecast errors or Bayesian VARs. Thus, our proposed fixed-horizon predictive densities are a new and useful tool for researchers and policy makers.

From Fixed-event to Fixed-horizon Density Forecasts: Obtaining Measures of Multi-horizon Uncertainty from Survey Density Forecasts

In this paper, we use administrative data on tax returns to characterize the distributions of before- and after-tax income, tax liabilities and tax credits in Spain for individuals and households. We use the most recent available data, 2015 for individuals and 2013 for households, but also discuss how the income distribution and taxes have changed since 2002. We also estimate effective tax functions that capture the underlying heterogeneity of the data in a parsimonious way. These parametric functions can be used to calculate after-tax incomes in surveys where this information is not directly available, and can also be used in quantitative work in macroeconomics and public finance.

/pdf/the-spanish-personal-income-tax-facts-and-parametric-3sul4c29ts.pdf

The Spanish personal income tax: facts and parametric estimates

This paper calibrates the full social optimal inheritance tax rate derived by Piketty and Saez (2013) and shows that different assumptions on the form of the social welfare function lead to very different optimal inheritance tax rates, ranging from negative (under a utilitarian criterion) to positive and large (even assuming joy of giving motives). The paper also calibrates the optimal tax rate by percentile of the distribution of bequest received, as Piketty and Saez do, but accounting for heterogeneity in wealth and labor income. The result is that the optimal tax rate from the perspective of the non-receivers varies significantly, contrary to the constant tax rate obtained by these authors.

The crucial role of social welfare criteria for optimal inheritance taxation

espanolEste documento presenta los modelos de microsimulacion desarrollados por el Banco de Espana para el estudio de reformas fiscales. Por un lado, describe la herramienta de microsimulacion que evalua cambios en el impuesto sobre la renta de las personas fisicas (IRPF). Por otro lado, explica la herramienta del impuesto sobre el valor anadido (IVA) y los impuestos especiales. Para cada una de estas dos herramientas, el documento detalla como se estructura, los datos usados y los resultados que genera. Tambien se muestran las capacidades de estas herramientas mediante ejemplos sencillos de reformas fiscales hipoteticas, presentadas exclusivamente para ilustrar el uso de estos simuladores. EnglishThis paper presents the microsimulation models developed at the Banco de Espana for the study of fiscal reforms, describing the tool used to evaluate changes in the Spanish personal income tax and also the one for the value added tax and excise duties. In both cases the structure, data and output of the model are detailed and its capabilities are illustrated using simple examples of hypothetical tax reforms, presented only to illustrate the use of these simulation tools.

Microsimulation tools for the evaluation of fiscal policy reforms at the Banco de España

How does the provision of public pension benefits impact private savings? We answer this question in the context of a reform in Denmark that altered old-age benefit payouts through a discontinuous increase in pension eligibility ages contingent on birthdate. Using detailed administrative data and a regression discontinuity design, we identify the causal effects of the policy, leveraging our setting to study essentially the entire financial portfolio. We document responses over two distinct time horizons. First, we show a lack of responses after the reform was announced but before it was implemented, inconsistent with the notion that future differences in pension eligibility impact savings. Second, we show large savings responses after implementation, when delayed benefit eligibility induces individuals to extend employment. Specifically, we find increased contributions to both employer-sponsored and personal retirement accounts, whereas we find no evidence of adjustments to other savings vehicles, such as bank or stock market accounts. Additional analyses point to inertia as a leading explanatory channel. The increased savings in personal retirement plans is entirely driven by those who made consistent contributions in the past. Moreover, the increased savings in employer-sponsored plans is largely explained by continuing to contribute at employer default rates, highlighting a role for firm policies in mediating responses to social security reform.

Public Pensions and Private Savings

Child skills are shaped by parental investments. When parents experience a health shock, their investments and therefore their children's skills may be affected. This paper estimates causal effects of severe parental health shocks on child socio-emotional skills. Drawing on a large-scale survey linked to hospital records, we find that socio-emotional skills of 11-16 year-olds are robust to parental health shocks, with the exception of significant but very small reductions in Conscientiousness. We study short-run effects with a child-fixed effects model, and dynamics around the shocks with event studies. A sibling comparison suggests some long-run build-up of effects of early shocks.

Esteban García-Miralles

Papers

The Spanish personal income tax: facts and parametric estimates

The crucial role of social welfare criteria for optimal inheritance taxation

Microsimulation tools for the evaluation of fiscal policy reforms at the Banco de España

Public Pensions and Private Savings

Are Children's Socio-Emotional Skills Shaped by Parental Health Shocks?