Charles Gottlieb

This paper quantifies the individual, aggregate and welfare effects of the Earned Income Tax Credit (EITC). In particular, we analyze the labor supply and saving responses to changes in tax credit generosity and their implications for prices and welfare. Our results show that the EITC is a subsidy on labor income and a tax on savings. An increase in EITC generosity raises labor force participation, reduces savings for many and provides insurance to working poor households. The EITC reduces earnings inequality but increases the skill premium and wealth inequality. A 10% increase in tax credit generosity increases welfare by 0.31% and benefits the majority of the population.

We use worker-level data on the task content of jobs to measure the ability to work-from-home (WFH) in developing countries. We show that the ability to WFH is low in developing countries and document significant heterogeneity across and within occupations, and across worker characteristics. Our measure suggests that educated workers, wage employees and women have a higher ability to WFH. Using data from Brazil, Costa Rica and Peru, we show that our measure is predictive of actual WFH both in terms of overall levels and variation with occupation and individual characteristics, as well as employment outcomes. Our measure can thus be used to predict WFH outcomes in developing countries.

We use a simple theoretical framework, a building block of many macroeconomic models, to study the prominently debated relationship between the model parametrisation of the Frisch elasticity and the reduced-form evidence on the elasticity of labour. Focusing on tax holidays, we show that the elasticity measured with a reduced-form approach is only equal to the Frisch-elasticity parameter if there are no income or general equilibrium effects. Furthermore, for a wide range of standard values of the Frisch-elasticity parameter, the response of labour generated by a tax holiday in the model is aligned with the reduced-form evidence.

We measure the effect of lockdown policies on employment and GDP across countries using individual- and sector-level data. Employment effects depend on the ability to work from home, which ranges from about half of total employment in rich countries to around 35% in poor countries. This gap reflects differences in occupational composition, self-employment levels, and individual characteristics across countries. GDP effects of lockdown policies also depend on countries' sectoral structure. Losses in poor countries are attenuated by their higher value- added share in essential sectors, notably agriculture. Overall, a realistic lockdown policy implies GDP losses of 20-25% on an annualized basis.

In this chapter, we examine the feasibility and implications of working from home in developing countries. As a large number of countries have implemented social distancing policies, the share of employment which can be done at home will play a critical role in determining economic outcomes during the pandemic. We first show that the share of employment that can be done from home varies significantly with countries’incomes: in urban areas, this share is only about 20% in poor countries, compared to close to 40% in rich ones. This result is largely driven by the prevalence of self-employed workers in low-income countries. We further show that educational attainment, formal employment status and household wealth are positively associated with the possibility of working from home, reflecting the vulnerability of various groups of workers. We remark on the importance of rapidly identifying vulnerable workers across countries to design adequate policies to combat the negative employment impacts of Covid-19.

Communal land tenure is prevalent across many developing countries. It implements a “use it or lose it” principle that allows owners to farm their land but restricts their right to transfer it away. This paper measures the distortionary impact of communal land in a dynamic general equilibrium model of occupational selection, calibrated to Ethiopia. We find that lifting communal land tenure increases GDP by 9% and lowers agricultural employment by 18 percentage points. While agricultural productivity increases, that of non-agriculture drops. Communal land tenure helps rationalizing about one-half of the relative agricultural productivity gap in the poorest economies. Its impact on aggregate productivity, though, is comparatively minor.

Using error-free data on life-cycle portfolio allocations of a large sample of Norwegian households, we document a double adjustment as households age: a rebalancing of the portfolio composition away from stocks as they approach retirement and stock market exit after retirement. When structurally estimating an extended life-cycle model, the parameter combination that best fits the data is one with a relatively large risk aversion, a small per-period participation cost, and a yearly probability of a large stock market loss in line with the frequency of stock market crashes in Norway.