Template-type: ReDIF-Paper 1.0 Author-Name: Nikos Tsakiris Author-Name: Panos Hatzipanayotou Author-Name: Michael S. Michael Title: Tradable Emission Permits and Strategic Capital Taxation Classification-JEL: F18, F21, H21 Keywords: Emission Permits; Cross-border Pollution; Capital Tax Competition; Capital Tax Rules Abstract: In a model of two large asymmetric countries, we examine the effectiveness of the non-cooperative setting of tradable emission permits in reducing global pollution, under different rules of international taxation of capital earnings. Our key result is that, under certain conditions, the lowest Nash equilibrium level of global pollution is achieved when the policy-mix combines internationally, rather than nationally, tradable emission permits and either capital-tax exemptions or capital-tax credits. Length: 18 pages Creation-Date: 2022-01-14 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/01-2022.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:01-2022 Template-type: ReDIF-Paper 1.0 Author-Name: Shaun P. Hargreaves Heap Author-Name: Emma Manifold Author-Name: Konstantinos Matakos Author-Name: Dimitrios Xefteris Title: How does group identification affect redistribution in representative democracies? An Experiment Classification-JEL: C91, D63, D72, D90 Keywords: Identity; Inequality; Redistribution; Minority Representation; Representative Democracy; Voting Experiment Abstract: We test in the laboratory four mechanisms whereby group identification might affect redistribution in representative democracies. For voters, group identification can give rise to a preference for own-group payoffs, for electing an own-group candidate, and could be used to assess candidate-sincerity. For candidates, identity might affect the optimal campaign platform. There is evidence to support all four. The influence of own-group pay-offs has been studied before, but the other mechanisms have not. These new mechanisms combine to make redistribution depend on a hitherto unrecognized factor: the political representation of the minority group. Length: 61 pages Creation-Date: 2022-02-02 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/02-2022.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:02-2022 Template-type: ReDIF-Paper 1.0 Author-Name: Panayiota Lyssiotou Author-Name: Ruzica Savcic Title: Parents' Time Allocation in Different Phases of the Covid-19 Pandemic: Evidence from the UK and Implications for Gender Equality Classification-JEL: D13, J16, J21, J22 Keywords: time allocation; COVID-19; gender equity; labour supply; housework; childcare Abstract: We exploit the changes in the distancing measures instituted by the UK government in the different phases of the pandemic to identify the impact on the daily lives of couples with children and gender equality within the household. We estimate a weighted tobit simultaneous system of market, housework and child care hours of parents and correct for possible endogeneity of the wages. We find that once the restrictive measures were lifted there was a significant increase in the hours of paid work and decrease in the hours of housework and childcare of both parents. The changes were not significantly different among the two parents. These findings confirm previous evidence that access to market childcare services increases the working hours of mothers. They also indicate that the initial pandemic shock did not eliminate pre-pandemic inequalities in the labour market and division of housework and childcare among parents with underage children. The evidence tends to suggest that changes in gender norms for more equality within the family are more likely to occur when the shock is enforced by law or has a long enough duration to change the behaviour of men and women and shape the norms of the next generation. Length: 33 pages Creation-Date: 2022-05-10 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/03-2022.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:03-2022 Template-type: ReDIF-Paper 1.0 Author-Name: Jon Eguia Author-Name: Dimitrios Xefteris Title: Lognormal (Re)Distribution: A Macrofounded Theory of Inequality Classification-JEL: D72, H20, E62 Keywords: Income inequality; redistribution; lognormal distribution; macrofoundations Abstract: We study how political competition over redistribution determines income inequality under two macrofounded premises: a) the income distribution is approximately log-normal before and after any policy intervention; and b) voters' income and turnout rates are positively related. The unique equilibrium features substantial income inequality and less than maximal redistribution, even if the voters' median income is very low. Fitting our model to the US economy, we argue that either the efficiency cost of redistribution is higher than estimates in the literature, or else US's redistributive policies are optimal for an agent richer than the median voter. Length: 19 pages Creation-Date: 2022-05-25 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/04-2022.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:04-2022 Template-type: ReDIF-Paper 1.0 Author-Name: Dimitrios Xefteris Author-Name: Nicholas Ziros Title: The 'Invisible Hand' of Vote Markets Classification-JEL: D72 Keywords: Electoral competition; invisible hand; vote markets; mid-range voter; Downsian model Abstract: This paper studies electoral competition between two non-ideological parties when voters are free to trade votes for money. We find that allowing for vote trading has significant policy consequences, even if trade does not actually take place in equilibrium. In particular, the parties' equilibrium platforms are found to converge (hence, there is no reason for vote trading) to the ideal policy of the mid-range voter, instead of converging to the peak of the median voter (as they do when vote trading is forbidden). That is, a market for votes may not change the outcome only by redistributing the political power among voters when the parties' policy proposals are fixed (e.g., Casella, Llorente-Saguer, and Palfrey, 2012, etc.), but also by acting as an invisible hand - modifying parties' incentives when platform choice is endogenous. Length: 15 pages Creation-Date: 2022-05-27 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/05-2022.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:05-2022 Template-type: ReDIF-Paper 1.0 Author-Name: Eleni Aristodemou Title: Strictly log-concave probability distributions in discrete response models Keywords: Discrete Response Models; Strict Log-Concavity Abstract: This paper extends the results of Prekopa (1973, 1980) on strictly log-concave cumulative distributions to strictly log-concave probability distributions. It is shown that if a random variable follows a strictly logarithmic concave distribution, then the probability that the random variable is contained within a convex polytope is also strictly logarithmic concave. This formal result can be useful for identification and estimation of a general class of linear-index discrete response models, where the additively separable unobservable follows a strictly log-concave distribution. Length: 16 pages Creation-Date: 2022-07-06 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/06-2022.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:06-2022 Template-type: ReDIF-Paper 1.0 Author-Name: Andri Chassamboulli Author-Name: Demetris Koursaros Title: Career and Non-Career Jobs: Dangling the Carrot Classification-JEL: J31, J33, J64, E24 Keywords: career-jobs; promotions; job hierarchy; labor wedge; gender wage gap Abstract: We develop a model of the labor market with career and non-career jobs. Workers in career jobs start at the low rank and can be promoted to a higher rank. Non-career jobs have the typical single-rank structure. We show that it is optimal for career firms to incentivize their employees through the option value of a promotion. By increasing the wage spread between low and top positions they can elicit more effort from the mass of the workers in low ranks, while rewarding handsomely only the very few that get promoted. We explore the macroeconomic implications of this hierarchical payment structure. We show how our model can provide interesting insights into various puzzles such as the wage gap between men and women, the cyclicality of the labor wedge and the low volatility of the real wage relative to hours and output along the business cycle, without imposing ad-hoc nominal wage rigidities. Length: 65 pages Creation-Date: 2022-10-07 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/07-2022.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:07-2022 Template-type: ReDIF-Paper 1.0 Author-Name: Florentine Schwark Author-Name: Andreas Tryphonides Title: Digitalization and Resilience to Disaggregate Shocks Classification-JEL: E1, E23, E25, O33 Keywords: Digitalization; Productivity; Elasticity of substitution; Domar weights; Resilience; Production Networks Abstract: How does digital technology affect the transmission of idiosyncratic shocks to the gross domestic product? We show that shock amplification depends on the elasticity of substitution and the relative abundance of inputs. Using an IV approach, we find a positive effect of digital intensity on substitution elasticities between capital and labor and between value-added and intermediate inputs, respectively. We interpret our empirical results through the lens of the technology choice literature, attributing the effect to a change in the curvature of the technology frontier. We show that whether a higher elasticity of substitution dampens the propagation of sectoral shocks or not depends on a simple sufficient statistic, the relative abundance of intermediate inputs. Based on the latter, our estimates suggest that many sectors in selected European economies amplify shocks after digitalization, with a deteriorating trend in resilience between 1995 and 2017. Length: 48 pages Creation-Date: 2022-10-11 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/08-2022.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:08-2022 Template-type: ReDIF-Paper 1.0 Author-Name: David M. Brasington Author-Name: Marios Zachariadis Title: Fiscal policy and economic activity: New Causal Evidence Classification-JEL: E62, H30, H72, R11 Keywords: Balanced budget, government spending, tax levies, exogenous variation Abstract: We identify an exogenous cut in local taxes accompanied by an equivalent reduction in local government spending, and estimate the impact of these exogenous changes on income by applying a novel regression discontinuity design. This exploits a unique regional dataset that combines local income data with local voting outcomes on renewals of current expense tax levies. We find that balanced budget reductions in taxes and spending cause a large drop in local incomes, suggesting that government expenditure effects on income are larger than fiscal revenue effects. Importantly, this effect of local tax-financed government spending is prominent in low-income areas. Overall, our results regarding the effect of locally tax-financed government spending on income are suggestive of the importance of mechanisms related to the prevalence of liquidity constrained agents. Length: 44 pages Creation-Date: 2022-11-18 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/09-2022.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:09-2022