RATE‐CUTTING TAX REFORMS AND CORPORATE TAX COMPETITION IN EUROPE

While there is a large and growing number of studies on the determinants of corporate tax rates, the literature has so far ignored the fact that the behavior of governments in setting tax rates is often best described as a discrete choice decision problem. We set up an empirical model that relates a government's decision whether to cut its corporate tax rate to the country's own inherited tax and taxes in neighboring countries. Using comprehensive data on corporate tax reforms in Europe since 1980, we find evidence suggesting that the position in terms of the tax burden imposed on corporate income relative to geographical neighbors strongly affects the probability of rate‐cutting tax reforms. Countries are particularly likely to cut their statutory tax rate if the inherited tax is high and if they are exposed to low‐tax neighbors.     

Measuring Strategic Uncertainty in Coordination Games

This paper proposes a method to measure strategic uncertainty by eliciting certainty equivalents analogous to measuring risk attitudes in lotteries. We apply this method by conducting experiments on a class of one-shot coordination games with strategic complementarities and choices between simple lotteries and sure payoff alternatives, both framed in a similar way. Despite the multiplicity of equilibria in the coordination games, aggregate behaviour is fairly predictable. The pure or mixed Nash equilibria cannot describe subjects' behaviour. We present two global games with private information about monetary payoffs and about risk aversion. While previous literature treats the parameters of a global game as given, we estimate them and show that both models describe observed behaviour well. The global-game selection for vanishing noise of private signals offers a good recommendation for actual players, given the observed distribution of actions. We also deduce subjective beliefs and compare them with objective probabilities.     

Monetary Policy and Financial Stability: Cross‐Country Evidence

We explain the heterogeneous response of central banks to financial stability risks based on a financial stability orientation (FSO) index, which reflects statutory, regulatory, and discretionary components of central banks' monetary policy frameworks. Our baseline results from a cross‐country panel of modified Taylor rules suggest that central banks with a high FSO increase their policy rates in response to elevated financial stability risks by 0.27 percentage points more than central banks with a low orientation. Back‐of‐the‐envelope calculations suggest that this policy rate differential translates into a reduced crisis probability but also into considerably lower inflation and output growth rates.     

Money Laundering as a Crime in the Financial Sector: A New Approach to Quantitative Assessment,with an Application to Italy

This study provides an answer to the question of how much cash deposited via a financial institution can be traced back to criminal activities, by developing a new approach to measure money laundering and proposing an application to Italy. We define a model of cash in‐flows on current accounts considering, besides “dirty money” to be laundered, also the legal motivations to deposit cash and the role of the shadow economy. We find that the average amount of cash laundered in Italy is around 6% of GDP. These findings are coherent with estimates of the nonobserved economy obtained in previous studies.     

The Dynamics of Capital Flow Episodes

We first propose a novel methodology for identifying episodes of strong equity and bond flows using estimates from a regime-switching model that keeps context- and sample-specific assumptions to a minimum. We then assess the impacts of U.S. stock market volatility (VIX) and U.S. monetary policy shocks on equity and bond flow episodes. Our results indicate that the impacts of both shocks differ across in- and outflow episodes and, based on an assessment of equity flows, vary considerably over time. While VIX shocks are mostly associated with asymmetric impacts across episodes, U.S. monetary policy shocks generate such asymmetries primarily over time.     

Gender Sorting at the Application Interface

We document gender sorting of candidates into gender‐typed jobs at the point of initial application to a company. At this step of the hiring process, the firm has implemented a policy whereby organizational screeners’ discretion has been eliminated such that there is no opportunity for contact between hiring agents and applicants. Thus, the job choices studied here offer unique insight as they are uncontaminated by screeners’ steering of candidates toward gender‐typed jobs. Even in the absence of steering, we find clear patterns of gendered job choices that line up with gender stereotypes of job roles. Moreover, these gendered patterns recur both within individuals and within race groups. Comparing our findings to the pattern of job sorting in the external local labor market, we find that supply‐side factors do not fully account for the levels job sex segregation observed in the open labor market. Although probably not the entire story, we show clear evidence that supply‐side sorting processes are important factors contributing to job sex segregation.