Research Papers

Abstract: This paper studies the role of a policy of inducing selective supervision in combating collusion within organizations or in regulatory setups. In a mechanism design problem involving a principal-supervisor-agent we show the role of endogenous selection of supervisory activity by the principal. One simple example is a mechanism in which the agent bypasses the supervisor and contracts directly with the principal in some states of the world. If collusion between supervisor and agent can occur only after they have decided to participate in the mechanism, this can costlessly eliminate collusion. This result is robust to alternative information structures, collusive behaviors and specification of agent's types. Applications include self reporting of crimes, tax amnesties, immigration amnesties, work contracts specifying different degrees of discretion, mechanisms based on recommendation letters, embassies issuing immigration permits, and hiring committees.

Abstract: National saving rates differ enormously across developed countries.  But these differences obscure a common trend, namely a dramatic decline over time.  France and Italy, for example, saved over 17 percent of national income in 1970, but less than 7 percent in 2006.  Japan saved 30 percent in 1970, but only 8 percent in 2006.  And the U.S. saved 9 percent in 1970, but only 2 percent in 2006.  What explains these international and intertemporal differences?  Is it demographics, government spending, productivity growth or preferences?  Our answer is preferences.  Developed societies are placing increasing weight on the welfare of those currently alive, particularly contemporaneous older generations.  This conclusion emerges from estimating two models in which society makes consumption and labor supply decisions in light of uncertainty over future government spending, productivity, and social preferences.  The two models differ in terms of the nature of preference uncertainty and the extent to which current society can control future societies' spending and labor supply decisions. 

Abstract: This paper analyses the impact of self reporting on law enforcement when officers are corruptible. The threat of corruption highlights two additional advantages to the use of self reporting. First, by allowing individuals to self report their unlawful act, the government is able to increase welfare by eliminating rents to its officers. Second, due to the reduction in corruption costs, the introduction of self reporting allows governments to fully eliminate corruption.

Abstract: This paper studies the optimal compensation policy for a corruptible inspector, in charged with monitoring evasion from a taxpayer. Namely, I discuss how the optimal compensation policy varies according to the timing of collusion, which is allowed to occur either before or after inspection takes place. This paper shows that increasing the bonus rate is a better policy than increasing the penalty rate when corruption occurs after inspection. The contrary is true when the collusive agreement is established before the inspection. Implications for privatization of law enforcement are analyzed.

Abstract: This paper analyzes a simple modification of a standard mechanism in hierarchical centralized structures with hard-information supervision. The supervisor receives a signal about the productive agent’s technology. With some probability the supervisor learns the true agent’s technology, otherwise she learns nothing. Our design lets the productive agent choose between two competing contracts, a “secure” contract or a grand contract subject to uncertainty. The mechanism eliminates agency costs by providing the productive agent with the possibility of avoiding inspection. When productive agent is risk averse, our mechanism also provides him with an insurance coverage: as a consequence, this mechanism would be worthwhile even abstracting from collusion.

Work in Progress

Abstract: This paper develops a dynamic structural life-cycle model, wherein agents can choose to consume standard goods alongside with relational goods, i.e. time spent with other people. The model is estimated using the SMM (simulated method of moments) on SHARE dataset, a cross-national microeconomic database that provides detailed information on socioeconomic status and social networks of individuals aged 50 or over. The main contribution of the paper is to provide an estimate of two parameters: first, the relative risk aversion parameter for consumption of relational goods. Second, the substitution parameter, which indicates whether individuals become less willing to substitute standard and relational consumption across time. This paper also investigates the possibility that consumption of relational goods might be path-dependant, i.e. accumulation of hours of social interaction may partially determine future patterns of relational consumption.

Chapter in Books

"Functionings, Capacities and Social Interactions", 2006 in Pierluigi Sacco and Stefano Zamagni (Ed.) Economic Theory and Interpersonal Relationships, Il Mulino.