Working Papers

Abstract: This paper makes three contributions. First, it presents a theoretical analysis of how social capital, formalized as trust in politicians, impacts on government performance and turnover, employing a political agency model with both moral hazard and adverse selection. Second, it presents novel measures of both local government performance and on social capital at the Italian municipality level, using administrative data and an online survey respectively. Third, empirical results are consistent with the main predictions of the theory; higher social capital improves both the discipline and selection effects of elections (performance both in the first and final terms in office), but also increases turnover of incumbent mayors.

Abstract: Italy became one nation only relatively recently and as such there remains significant regional variation in trust in government and society (so-called “social capital”) as well as in language and diet. In an experiment conducted across three Italian cities we exploit variation in family background generated through internal migration and make use of novel measures of social capital, language and diet to develop a new index of cultural heritage. Our new index predicts social capital, while self-reported identity does not. The missing link between the past and current identity seems to come through grandparents (especially maternal grandmothers) who have a strong role in developing the cultural identity of their grandchildren.

Abstract: The preferential taxation of income from intellectual property (IP) has become an increasingly popular policy instrument in the European Union and the US to attract mobile tax bases of multinational enterprises (MNEs) and to foster productivity. This paper estimates the size of the (un)intended effects of this new tax regime. We show that MNE affiliates that can benefit from the preferential taxation of IP income report 11.8 percent higher profits. The change in profit can be decomposed into two nearly equally-sized components: profit shifting (approximately 45%) and a productivity effect (about 55%). Surprisingly, the profit shifting response includes an unintended, reversed profit shifting out of the affiliate. Contrary to widely held beliefs, the overall behavioral adjustment might lower tax revenues patent box countries collect from IP-owning MNEs.

Abstract: We study the provision of information by local governments that supports individual compliance with nationwide regulation, and how this provision relates to the electoral process. We use information about individual mobility (compliance with the lockdown) and Facebook posts by Italian local governments during the Covid 19 pandemic. We show that in municipalities where mayors were up for reelection, local governments provided significantly more covid-related information. This information caused a significant decrease in mobility and excess mortality. However, these effects seem to arise only in the northern regions of the country, where the impact of the pandemic was more severe.