Working Papers
[Job Market Paper]
Quantifying the Macroeconomic Effects of Tax Competition: the Brazilian "Fiscal War"
This paper studies the role of tax competition among state governments in reducing aggregate public goods provision. To this end, I develop a spatial general equilibrium model with multiple sectors, endogenous state taxes, and firm location choices. Endogenous tax setting allows me to characterize tax competition as a Nash equilibrium among state governments. I estimate the model using novel state-level data on sector-specific tax exemptions in Brazil, and I use bilateral trade flows data and a simulated method of moments procedure to calibrate key model elasticities. My estimates and the theoretical framework jointly indicate that Brazilian tax competition is largely explained by state competition over manufacturing activity, whereas competition over services plays a limited role. Finally, relative to a harmonized tax regime, I find that tax competition reduces public goods provision by 11 percent, providing no aggregate gains in consumption. However, certain states lose tax revenues and consumption if tax competition is fully eliminated.
The Costs of Running a Minority Government
In non-parliamentary political systems, the executive and legislative branches can be controlled by opposing coalitions. I study how this political misalignment shapes fiscal and bureaucratic behavior. Using a regression discontinuity design for Brazilian municipalities, I find that mayors who govern with a legislative minority hire 53.7 percent more non-tenured civil servants and spend 70.7 percent more on their wages compared to mayors who hold a legislative majority. Survey evidence from teachers and school principals indicates that the rise in hiring is driven by the recruitment of inexperienced bureaucrats. Furthermore, municipalities governed by minority mayors subsequently experience a persistent decline in bureaucratic performance. Results from a three-dimensional regression discontinuity design show that these effects intensify as the share of legislative seats held by the mayor’s coalition decreases.
Work in Progress
Measuring Political Uncertainty: Implications for Sovereign Bond Spreads
Which Firms Benefit from Industrial Policy? Evidence from 10,000 Decrees (with Juan Ignacio Jacoubian)
Mercosur, Special Economic Zones, and Trade Policy (with Juan Ignacio Jacoubian)