Research Projects

To learn more about my projects, expand the section next to each figure or click on any underlined title to access the paper.

PUBLIC FINANCE

My main research agenda on tax enforcement and tax compliance with administrative micro-data.

Audit Rule Disclosure and Tax Compliance (Job Market Paper), with Matteo Paradisi

We show that tax authorities can stimulate tax compliance by strategically releasing audit-relevant information. We rely on the Sector Studies, an Italian policy disclosing to small firms and the self-employed that audit risk drops above file-specific revenue thresholds. This allows us to pursue two empirical strategies, leveraging more than 26 million Sector Study files submitted between 2007 and 2016. First, we estimate a structural model to match the heterogeneous bunching we observe on the low-risk side of the disclosed thresholds. Relative to scenarios where these thresholds are secret, we determine that disclosure results on average in 6.3-7.7% higher declared revenues, but modest welfare costs. Second, we exploit a staggered Sector Studies reform that widens the initial audit risk discontinuity. In line with our theory, taxpayers who benefit from greater audit exemptions above the threshold tend to reduce their relative compliance, while those originally below the threshold improve it. However, mean reported profits increase by 16.2% in treated sectors over six years.


Presented at the APPAM 42nd Annual Fall 2020 Research Conference and the NTA 114th Annual Conference on Taxation.

The Business Cost of Tax Audits (in progress)

How disruptive is tax auditing for small firms and the self-employed? How willing are taxpayers to avoid the costs associated with fiscal inspections? Even when audits detect no evasion, they can place undue burden on the day-to-day activity of small taxpayers. With micro-level administrative data over the 2007-2016 period, I study the revenue response of Italian firms and the self-employed across two types of auditing policies. On one hand, I explore the effect of a reduction in the length of on-site audits mandated since 2011. On the other, I assess the extent of bunching below the exemption threshold of Sector Studies as it evolves across sectors and years. Observed responses can inform us on the relative costs that firms associate to tax audits, and guide policy choices for the optimal design of modern tax enforcement systems.


We study the effects of a unique Italian reform incentivizing voluntary tax compliance among the self-employed and small businesses. Starting in 2011, taxpayers in a growing number of sectors were promised an increase in audit exemptions upon achieving a set of desirable conditions defined by the Revenue Agency. While policy rewards might induce a tax base rise among previously non-compliant filers, curbing audit risks for broad categories of the taxpaying population might prove revenue reducing. Over the first six years of implementation, our event-study analysis of more than 9 million anonymized records reveals a substantial expansion of average declared revenues, total costs, and gross profits, with little heterogeneity across macro-regions. Although aggregate compliance does not seem to improve by policy metrics, our distributional analysis shows that large gains obtain among taxpayers appearing non-compliant in the year before their sector's reform. We also provide a dynamic perspective on bunching at salient, audit-relevant revenue thresholds generated by the system. Relative revenue reshuffling from above and below these thresholds provide evidence that bunching in our context may emerge from both desirable and adversarial updating in compliance behavior.


Presented at the Italian tax administration meeting "Incontro ISA - Analisi dei dati ed iniziative per il futuro", June 17, 2020.

Optimal Audit Rules and Disclosure (in progress) with Luca Maini, Matteo Paradisi, and Elia Sartori

My upcoming projects in collaboration with the Italian Tax Police (Guardia di Finanza) explore the potential of machine learning for audit targeting, the determinants of evasion heterogeneity across firm types, sectors, and places, and the role of optimal audit strategies and information provision to taxpayers for business tax compliance.

Recipient of the 2021/2022 Molly and Domenic Ferrante Economics Research Fund at Harvard.

POLITICAL ECONOMY

My early work on public good provision and deficit dynamics in ethnically diverse and unstable societies.

In this paper, we develop and test a conceptual framework to link diversity in small-scale communities and local resource management, intended as the ability of a community to protect common resources. Diversity could reduce this ability by its adverse impact on the potential for collective action and the extent of individual attachment to the community. Using geocoded data on 1,600 Grade-3 gas leaks in 2016 across Boston and Cambridge, we show that block groups displaying higher degrees of ethno-racial and linguistic fractionalization in the most recent Census and American Community Survey enjoy a lower share of reparations of the local pool of leaks. In particular, the more robust and conservative estimates imply that moving from the 10th to the 90th percentile of the linguistic fractionalization distribution is associated with a decrease in the reparation share by 6.3 percentage points, compared to the baseline average of 3.7%. We address a number of empirical challenges inherent to the spatial nature of our data by estimating models at the leak level and accounting for spatial autocorrelation. Although we are able to confirm, through quantitative and qualitative evidence, that more fractionalized communities appear to be less endowed with social capital and individual attachment, measures of these concepts do not explain away the baseline results. We conclude by discussing possible reasons for this puzzle in the form of alternative mechanisms and other challenges to our approach.

Ethnic Business Cycles: A First Survey for Africa (2017)

Is there a link between ethnic favoritism and political business cycles? I test this hypothesis with micro-level data from 20 Sub-Saharan African countries over the 1999-2013 period. Preliminary results show that a set of individual economic well-being indicators from the Afrobarometer vary over the electoral cycle depending on the ethnic distance between survey respondents and their national leader, as proxied by a novel measure of linguistic proximity. The relationship is nonlinear for some consumption goods during election years and more generally in their immediate aftermath, suggesting the need for the ethnic favoritism literature to move beyond the use of binary indicators of individual-leader coethnicity. The presence of an “ethnic business cycle” in the data calls for further exploration of the political roots of Africa’s underdevelopment.

Manipulate to Survive: Political Budget Cycles in Hybrid Regimes (2014)

Do political budget cycles (PBCs) exist across starkly different regimes? The bulk of the empirical literature on electoral manipulation focuses on democratic settings and motives, but competitive elections are set up in a wide variety of political contexts, albeit with different meanings. I exploit a large panel of 94 developing countries over the 1989-2004 period to assess the intensity of budget deficit manipulation over the full range of an aggregate regime measure (the POLITY index). PBCs behave nonlinearly and peak among hybrid systems, that is, those regimes that mix autocratic and democratic features in the structure of central authority. Given that competition in these settings is often real but unfair, I explore the possibility that such cycles are induced by the risk of political instability and the threat of unrest faced by the incumbents. Probit and Poisson analyses reveal that electoral time is an especially volatile moment in these already fragile systems. Budget manipulation thus emerges as part of a set of instability management tools ensuring incumbent survival.