santiago pinto - Academia.edu (original) (raw)
Papers by santiago pinto
Federal Reserve Bank of Richmond Working Papers, 2017
It is well-known that competition for factors of production, including competition for residents,... more It is well-known that competition for factors of production, including competition for residents, affects the public services provided in the communities. This paper considers the determination of local investment in urban transport systems. Many specialists question the effectiveness of the current U.S. top-to-bottom transportation institutional arrangement in which the federal government plays a dominant role and recommend a shift toward a decentralized organization. We examine how such a shift would affect the levels of transport investment. Specifically, we consider a model of two cities, and assume, as in Brueckner and Selod (2006), that transport systems are characterized by different time and money costs. We compare the outcomes reached when the transport system is decided by a central authority (a state or federal government) to the one decided by each jurisdiction in a decentralized way. In the latter case, city or local transportation authorities choose the system that maximizes residents' welfare, taking as given the decisions made elsewhere, essentially competing for residents (or workers). Our analysis shows that even though a shift toward a decentralized arrangement of the transportation system would generally lead to overinvestment (relative to the centralized case), the extent of this bias depends on the specific factors that drive transport authorities in deciding the transportation system, on the landownership structure, and on the financing arrangements in place. The paper also shows that, in a more general setup, when the two cities differ in their productivity levels, the more productive city will tend to overinvest in transportation systems that connect the two cities, and the less productive city will tend to underinvest in those systems.
Economic Quarterly, 2019
racking economic activity and interpreting economic phenomena are the most basic functions of eco... more racking economic activity and interpreting economic phenomena are the most basic functions of economic research. However, obtaining an accurate description of the economy-in the form of economic data-is a challenging endeavor. Basic economic variables such as gross domestic product, consumption expenditures, investment, real wages, and others are available at the aggregate level. They are useful for time-series analysis but not to study issues such as wage or wealth inequality. To study heterogeneity, economists rely on household-level data from sources like the Panel Study of Income Dynamics (PSID), the Survey of Consumer Finances, or the Consumption Expenditure Survey. However, these typically include only a sample of the population and are often subject to measurement errors. For this reason, economists have recently started to incorporate alternative sources that provide granular or disaggregated data, for example, websites that o¤er job and recruiting services. A growing number of sites give online information about di¤erent jobs around the US and worldwide. The websites collect, at the same time, personal and …nancial data from users. In light of this recent phenomenon, a question naturally arises: Can economists view these websites as a reliable source of new information?
SSRN Electronic Journal, 2015
Illegal Immigration and Fiscal Competition * Reflecting recent enforcement policy activism of US ... more Illegal Immigration and Fiscal Competition * Reflecting recent enforcement policy activism of US states, this paper examines federal-state overlap of illegal immigration policy in a spatial context. Keeping the US-Mexico context in mind, we assume that labor from a source nation enters a host nation through bordering states. Once in the host, illegal immigrants may stay in the state of entry or move to another state. The host nation's federal government and/or the state governments choose border and internal enforcement policies, and also provide local goods. As a benchmark, we define the completely centralized solution as the case where the federal government chooses all the policies, while the state governments are passive. At higher levels of decentralization (i.e., as states take more responsibility in deciding some of the policies), the overlap of federal and state policies is associated with both vertical and horizontal externalities. Among other results, we find that if interstate mobility is costless, internal enforcement is overprovided, and border enforcement and local goods are under-provided under decentralization, leading to relatively high levels of illegal immigration. While interstate migration costs moderate such overprovision/under-provision, extreme levels of interstate immobility may lead to too little illegal immigration, and an overprovision of local goods.
Economic Quarterly, 2019
he Richmond Fed conducts monthly surveys of business conditions in the Fifth Federal Reserve Dist... more he Richmond Fed conducts monthly surveys of business conditions in the Fifth Federal Reserve District in order to obtain timely information about economic conditions and to provide context to data obtained from other sources. The survey instruments allow respondents to enter free-form comments. This article employs basic text analytic techniques to quantify the sentiment embodied in those survey comments. An important portion of the information collected and received by regional Reserve Banks is communicated in an unstructured or textual form. The qualitative data conveyed through surveys, or gathered at roundtable meetings with business …rms or Bank directors, are very valuable pieces of information for the Banks. This information is generally used to corroborate and provide context to other sources of data. However, the data also re ‡ect sentiment or attitudes derived from economic conditions, a perspective that constitutes a key determinant of …rms'and households'economic decisions as supported by an extensive academic literature. 1 Quantifying and measuring sentiment is not straightforward. Recent development of text analytic tools, however, could be useful. Dif
Economic Quarterly, 2016
nformation on the state of U.S. economic activity compiled by statistical agencies, such as the B... more nformation on the state of U.S. economic activity compiled by statistical agencies, such as the Bureau of Labor Statistics (BLS), the Bureau of Economic Analysis, or even sections of the Federal Reserve Board, is often released with a one-month lag and is subject to further revisions, typically at the three-month and one-year mark. 1 Moreover, information on economic activity collected by these agencies at a more regional level is limited, so that data on wages, inventories, or shipments at the level of a U.S. state, for example, are not easily obtainable in real time. In part to compensate for this lack of information, several regional Federal Reserve Banks, including Atlanta, Dallas, Kansas City, New York, Philadelphia, and Richmond, produce survey-based di¤usion indices that attempt to monitor in real time the direction of change in various regional economic conditions. In this article, we provide an assessment of this e¤ort by the Federal Reserve Bank of Richmond (FRBR) based on ex-post sectoral information related to employment and wages for the Fifth Federal Reserve District. We also provide an assessment of the extent to which more disaggregated regional di¤usion indices, not currently constructed but under We wish to thank R.
SSRN Electronic Journal, 2015
We study diffusion indices constructed from qualitative surveys to provide real-time assessments ... more We study diffusion indices constructed from qualitative surveys to provide real-time assessments of various aspects of economic activity. In particular, we highlight the role of diffusion indices as estimates of change in a quasi extensive margin, and characterize their distribution, focusing on the uncertainty implied by both sampling and the polarization of participants' responses. Because qualitative tendency surveys generally cover multiple questions around a topic, a key aspect of this uncertainty concerns the coincidence of responses, or the degree to which polarization comoves, across individual questions. We illustrate these results using micro data on individual responses underlying different composite indices published by the Michigan Survey of Consumers. We find a secular rise in consumer uncertainty starting around 2000, following a decade-long decline, and higher agreement among respondents in prior periods. Six years after the Great Recession, uncertainty arising from the polarization of responses in the Michigan Survey stands today at its highest level since 1978, coinciding with the weakest recovery in U.S. postwar history. The formulas we derive allow for simple computations of approximate confidence intervals, thus affording a more complete real-time assessment of economic conditions using qualitative surveys.
Journal of Public Economic Theory, 2011
We develop a dynamic model of the political economy of foreign direct investment. We model the in... more We develop a dynamic model of the political economy of foreign direct investment. We model the interaction between an incumbent government who holds partisan motivations, and foreign investors who aim at obtaining the most favorable investment conditions while minimizing the probability of opportunistic behavior by the host government. This setting allows us to capture under a common framework the predictions from the most prevalent models in the political economy of foreign investment, as well as empirical regularities described in the extant literature. Allowing for varying costs of redeployment leads to a well-known problem in research on optimal capital taxation: the incentive to tax capital more heavily once investment decisions have been made. The problem informs the basic intuition behind the obsolescing bargain hypothesis (Kindleberger 1969; Vernon 1971). As investors face higher costs of redeployment the likelihood of opportunistic host government behavior increases as predicted by these traditional accounts. Yet our model shows that the obsolescing bargain hypothesis emerges as a special case of the partisan model of investment. Moreover, the incentives to raise taxes on capital facing high adjustment costs is either exacerbated or mitigated by the host's distributive motivations. The link between institutional constraints and incentives to invest-a purported solution to the commitment problem on which a vast body of empirical literature is based-also arises as a special case. The propositions derived from our model seem to be consistent with a series of empirical regularities documented in recent work on the politics of FDI including the emergence of partisan cycles in the allocation of foreign investment.
In this paper, we argue that the signing of BITs can be explained by its differential impact on w... more In this paper, we argue that the signing of BITs can be explained by its differential impact on welfare and the distributive consequences of regulating and enforcing investment standards at the international level. In our model, governments compete for a fixed supply of domestic and foreign investment. We assume that investing abroad involves higher costs and risks than at home. Investors' decisions are the outcome of a mean-variance optimization problem that explicitly accounts for this home country bias. The interaction between governments is modeled as a network formation process where nodes (countries) choose which arcs to add (treaties to sign). We explicitly model the main provisions of BITs as an enforcement technology that reduces costs and risk, and has the potential to increase the return to investors. In deciding which treaties to sign, governments also internalize the potential effects of inward investment on the return to domestic factors of production. One of the central corollaries derived from our model is that main effect of BITs is on the mean and the variance of the return to investors from the counterpart in the agreement. In equilibrium-when all the potentially beneficial agreements have been signed and the network reaches a level of saturation-the signing and ratification of BITs would be consistent with a limited reallocation of investment capital across countries, or even no reallocation at all if BIT signing is defensive. We would expect some transitional changes in the allocation of capital in favor of countries that are BIT signatories in the transition to that stage, a prediction that seems to be borne out in statistical analyses of US outward FDI stock. We do expect BITs to have an effect on risk and return to investors, which are hard to observe. Hence we develop an empirical strategy to estimate the effect of BITs on risk and return from a structural model of FDI allocation. The model and preliminary empirical findings presented in the paper help explain the contradictory results in the empirical literature on the effects of BITs on FDI flows.
Annual Meeting of the American Political …, 2007
In this paper, we extend the model developed by Pinto & Pinto (2006) by considering the simultane... more In this paper, we extend the model developed by Pinto & Pinto (2006) by considering the simultaneous effects of foreign investment flows on both wages and employment. We model the host government's objective function as a convex combination of wages, employment and profits. Next, we solve for the optimal policy bundle of taxes offered by the incumbent to foreign investors and the level of unemployment benefits offered to workers in different sectors of the economy. The entry of foreign investment in the model is conditioned to the outcome of a wage bargaining process between firms and labor in each idustry. This modeling strategy allows us to derive the following results: First, pro-labor (pro-capital) governments will favor the entry of foreign investment when labor (domestic capital) and foreign investment are complements in production. Second, the endogenously determined amounts of foreign investment flowing into different sectors of the host country have qualitatively different effects on wages and employment levels in those sectors. When foreign investment and labor are substitutes in production, the restrictions on foreign capital imposed by a pro-labor host government could lead to higher wages and either an increase or a decrease in employment levels in each sector of the host country. When labor and foreign investment are complements, on the other hand, lower restrictions on foreign capital offered by the pro-labor government leads to higher inflows that result in higher or lower wages combined with positive or negative changes in sectoral employment levels. The ambiguity is driven by different degrees of complementarity between labor and foreign investment. Third, in general workers and domestic capitalists will clash on their preferred foreign investment regime. The model also predicts the conditions under which we would expect the emergence of a cross-class coalition around the regulation of foreign investment. Yet we find that under no conditions will higher restrictions to foreign investment in a specific sector be unanimously supported by owners of labor and capital.
European Economic Review, 2017
Reflecting upon recent enforcement policy activism of US states and countries within the EU towar... more Reflecting upon recent enforcement policy activism of US states and countries within the EU towards unauthorized workers, we examine the overlap of centralized (federal) and decentralized (state or regional) enforcement of immigration policies in a spatial context. Among other results, we find that if interstate mobility is costless, internal enforcement is overprovided, and border enforcement and local goods are underprovided when regions take more responsibility in deciding policies. This leads to higher levels of unauthorized immigration under decentralization. Interregional migration costs moderate such over/underprovision. Moreover, income distributive motives in the host country may shape the design of immigration policies in specific ways. The basic model is extended in several ways. First, we study how the policies change when regions can exclude unauthorized immigrants from the consuming of regionally provided goods or services. Second, we assume that the potential number of unauthorized immigrants is endogenous. And finally, we examine the effect of considering an alternative spatial configuration that includes border and "interior" regions.
Federal Reserve Bank of Richmond Working Papers, 2017
It is well-known that competition for factors of production, including competition for residents,... more It is well-known that competition for factors of production, including competition for residents, affects the public services provided in the communities. This paper considers the determination of local investment in urban transport systems. Many specialists question the effectiveness of the current U.S. top-to-bottom transportation institutional arrangement in which the federal government plays a dominant role and recommend a shift toward a decentralized organization. We examine how such a shift would affect the levels of transport investment. Specifically, we consider a model of two cities, and assume, as in Brueckner and Selod (2006), that transport systems are characterized by different time and money costs. We compare the outcomes reached when the transport system is decided by a central authority (a state or federal government) to the one decided by each jurisdiction in a decentralized way. In the latter case, city or local transportation authorities choose the system that maximizes residents' welfare, taking as given the decisions made elsewhere, essentially competing for residents (or workers). Our analysis shows that even though a shift toward a decentralized arrangement of the transportation system would generally lead to overinvestment (relative to the centralized case), the extent of this bias depends on the specific factors that drive transport authorities in deciding the transportation system, on the landownership structure, and on the financing arrangements in place. The paper also shows that, in a more general setup, when the two cities differ in their productivity levels, the more productive city will tend to overinvest in transportation systems that connect the two cities, and the less productive city will tend to underinvest in those systems.
Economic Quarterly, 2019
racking economic activity and interpreting economic phenomena are the most basic functions of eco... more racking economic activity and interpreting economic phenomena are the most basic functions of economic research. However, obtaining an accurate description of the economy-in the form of economic data-is a challenging endeavor. Basic economic variables such as gross domestic product, consumption expenditures, investment, real wages, and others are available at the aggregate level. They are useful for time-series analysis but not to study issues such as wage or wealth inequality. To study heterogeneity, economists rely on household-level data from sources like the Panel Study of Income Dynamics (PSID), the Survey of Consumer Finances, or the Consumption Expenditure Survey. However, these typically include only a sample of the population and are often subject to measurement errors. For this reason, economists have recently started to incorporate alternative sources that provide granular or disaggregated data, for example, websites that o¤er job and recruiting services. A growing number of sites give online information about di¤erent jobs around the US and worldwide. The websites collect, at the same time, personal and …nancial data from users. In light of this recent phenomenon, a question naturally arises: Can economists view these websites as a reliable source of new information?
SSRN Electronic Journal, 2015
Illegal Immigration and Fiscal Competition * Reflecting recent enforcement policy activism of US ... more Illegal Immigration and Fiscal Competition * Reflecting recent enforcement policy activism of US states, this paper examines federal-state overlap of illegal immigration policy in a spatial context. Keeping the US-Mexico context in mind, we assume that labor from a source nation enters a host nation through bordering states. Once in the host, illegal immigrants may stay in the state of entry or move to another state. The host nation's federal government and/or the state governments choose border and internal enforcement policies, and also provide local goods. As a benchmark, we define the completely centralized solution as the case where the federal government chooses all the policies, while the state governments are passive. At higher levels of decentralization (i.e., as states take more responsibility in deciding some of the policies), the overlap of federal and state policies is associated with both vertical and horizontal externalities. Among other results, we find that if interstate mobility is costless, internal enforcement is overprovided, and border enforcement and local goods are under-provided under decentralization, leading to relatively high levels of illegal immigration. While interstate migration costs moderate such overprovision/under-provision, extreme levels of interstate immobility may lead to too little illegal immigration, and an overprovision of local goods.
Economic Quarterly, 2019
he Richmond Fed conducts monthly surveys of business conditions in the Fifth Federal Reserve Dist... more he Richmond Fed conducts monthly surveys of business conditions in the Fifth Federal Reserve District in order to obtain timely information about economic conditions and to provide context to data obtained from other sources. The survey instruments allow respondents to enter free-form comments. This article employs basic text analytic techniques to quantify the sentiment embodied in those survey comments. An important portion of the information collected and received by regional Reserve Banks is communicated in an unstructured or textual form. The qualitative data conveyed through surveys, or gathered at roundtable meetings with business …rms or Bank directors, are very valuable pieces of information for the Banks. This information is generally used to corroborate and provide context to other sources of data. However, the data also re ‡ect sentiment or attitudes derived from economic conditions, a perspective that constitutes a key determinant of …rms'and households'economic decisions as supported by an extensive academic literature. 1 Quantifying and measuring sentiment is not straightforward. Recent development of text analytic tools, however, could be useful. Dif
Economic Quarterly, 2016
nformation on the state of U.S. economic activity compiled by statistical agencies, such as the B... more nformation on the state of U.S. economic activity compiled by statistical agencies, such as the Bureau of Labor Statistics (BLS), the Bureau of Economic Analysis, or even sections of the Federal Reserve Board, is often released with a one-month lag and is subject to further revisions, typically at the three-month and one-year mark. 1 Moreover, information on economic activity collected by these agencies at a more regional level is limited, so that data on wages, inventories, or shipments at the level of a U.S. state, for example, are not easily obtainable in real time. In part to compensate for this lack of information, several regional Federal Reserve Banks, including Atlanta, Dallas, Kansas City, New York, Philadelphia, and Richmond, produce survey-based di¤usion indices that attempt to monitor in real time the direction of change in various regional economic conditions. In this article, we provide an assessment of this e¤ort by the Federal Reserve Bank of Richmond (FRBR) based on ex-post sectoral information related to employment and wages for the Fifth Federal Reserve District. We also provide an assessment of the extent to which more disaggregated regional di¤usion indices, not currently constructed but under We wish to thank R.
SSRN Electronic Journal, 2015
We study diffusion indices constructed from qualitative surveys to provide real-time assessments ... more We study diffusion indices constructed from qualitative surveys to provide real-time assessments of various aspects of economic activity. In particular, we highlight the role of diffusion indices as estimates of change in a quasi extensive margin, and characterize their distribution, focusing on the uncertainty implied by both sampling and the polarization of participants' responses. Because qualitative tendency surveys generally cover multiple questions around a topic, a key aspect of this uncertainty concerns the coincidence of responses, or the degree to which polarization comoves, across individual questions. We illustrate these results using micro data on individual responses underlying different composite indices published by the Michigan Survey of Consumers. We find a secular rise in consumer uncertainty starting around 2000, following a decade-long decline, and higher agreement among respondents in prior periods. Six years after the Great Recession, uncertainty arising from the polarization of responses in the Michigan Survey stands today at its highest level since 1978, coinciding with the weakest recovery in U.S. postwar history. The formulas we derive allow for simple computations of approximate confidence intervals, thus affording a more complete real-time assessment of economic conditions using qualitative surveys.
Journal of Public Economic Theory, 2011
We develop a dynamic model of the political economy of foreign direct investment. We model the in... more We develop a dynamic model of the political economy of foreign direct investment. We model the interaction between an incumbent government who holds partisan motivations, and foreign investors who aim at obtaining the most favorable investment conditions while minimizing the probability of opportunistic behavior by the host government. This setting allows us to capture under a common framework the predictions from the most prevalent models in the political economy of foreign investment, as well as empirical regularities described in the extant literature. Allowing for varying costs of redeployment leads to a well-known problem in research on optimal capital taxation: the incentive to tax capital more heavily once investment decisions have been made. The problem informs the basic intuition behind the obsolescing bargain hypothesis (Kindleberger 1969; Vernon 1971). As investors face higher costs of redeployment the likelihood of opportunistic host government behavior increases as predicted by these traditional accounts. Yet our model shows that the obsolescing bargain hypothesis emerges as a special case of the partisan model of investment. Moreover, the incentives to raise taxes on capital facing high adjustment costs is either exacerbated or mitigated by the host's distributive motivations. The link between institutional constraints and incentives to invest-a purported solution to the commitment problem on which a vast body of empirical literature is based-also arises as a special case. The propositions derived from our model seem to be consistent with a series of empirical regularities documented in recent work on the politics of FDI including the emergence of partisan cycles in the allocation of foreign investment.
In this paper, we argue that the signing of BITs can be explained by its differential impact on w... more In this paper, we argue that the signing of BITs can be explained by its differential impact on welfare and the distributive consequences of regulating and enforcing investment standards at the international level. In our model, governments compete for a fixed supply of domestic and foreign investment. We assume that investing abroad involves higher costs and risks than at home. Investors' decisions are the outcome of a mean-variance optimization problem that explicitly accounts for this home country bias. The interaction between governments is modeled as a network formation process where nodes (countries) choose which arcs to add (treaties to sign). We explicitly model the main provisions of BITs as an enforcement technology that reduces costs and risk, and has the potential to increase the return to investors. In deciding which treaties to sign, governments also internalize the potential effects of inward investment on the return to domestic factors of production. One of the central corollaries derived from our model is that main effect of BITs is on the mean and the variance of the return to investors from the counterpart in the agreement. In equilibrium-when all the potentially beneficial agreements have been signed and the network reaches a level of saturation-the signing and ratification of BITs would be consistent with a limited reallocation of investment capital across countries, or even no reallocation at all if BIT signing is defensive. We would expect some transitional changes in the allocation of capital in favor of countries that are BIT signatories in the transition to that stage, a prediction that seems to be borne out in statistical analyses of US outward FDI stock. We do expect BITs to have an effect on risk and return to investors, which are hard to observe. Hence we develop an empirical strategy to estimate the effect of BITs on risk and return from a structural model of FDI allocation. The model and preliminary empirical findings presented in the paper help explain the contradictory results in the empirical literature on the effects of BITs on FDI flows.
Annual Meeting of the American Political …, 2007
In this paper, we extend the model developed by Pinto & Pinto (2006) by considering the simultane... more In this paper, we extend the model developed by Pinto & Pinto (2006) by considering the simultaneous effects of foreign investment flows on both wages and employment. We model the host government's objective function as a convex combination of wages, employment and profits. Next, we solve for the optimal policy bundle of taxes offered by the incumbent to foreign investors and the level of unemployment benefits offered to workers in different sectors of the economy. The entry of foreign investment in the model is conditioned to the outcome of a wage bargaining process between firms and labor in each idustry. This modeling strategy allows us to derive the following results: First, pro-labor (pro-capital) governments will favor the entry of foreign investment when labor (domestic capital) and foreign investment are complements in production. Second, the endogenously determined amounts of foreign investment flowing into different sectors of the host country have qualitatively different effects on wages and employment levels in those sectors. When foreign investment and labor are substitutes in production, the restrictions on foreign capital imposed by a pro-labor host government could lead to higher wages and either an increase or a decrease in employment levels in each sector of the host country. When labor and foreign investment are complements, on the other hand, lower restrictions on foreign capital offered by the pro-labor government leads to higher inflows that result in higher or lower wages combined with positive or negative changes in sectoral employment levels. The ambiguity is driven by different degrees of complementarity between labor and foreign investment. Third, in general workers and domestic capitalists will clash on their preferred foreign investment regime. The model also predicts the conditions under which we would expect the emergence of a cross-class coalition around the regulation of foreign investment. Yet we find that under no conditions will higher restrictions to foreign investment in a specific sector be unanimously supported by owners of labor and capital.
European Economic Review, 2017
Reflecting upon recent enforcement policy activism of US states and countries within the EU towar... more Reflecting upon recent enforcement policy activism of US states and countries within the EU towards unauthorized workers, we examine the overlap of centralized (federal) and decentralized (state or regional) enforcement of immigration policies in a spatial context. Among other results, we find that if interstate mobility is costless, internal enforcement is overprovided, and border enforcement and local goods are underprovided when regions take more responsibility in deciding policies. This leads to higher levels of unauthorized immigration under decentralization. Interregional migration costs moderate such over/underprovision. Moreover, income distributive motives in the host country may shape the design of immigration policies in specific ways. The basic model is extended in several ways. First, we study how the policies change when regions can exclude unauthorized immigrants from the consuming of regionally provided goods or services. Second, we assume that the potential number of unauthorized immigrants is endogenous. And finally, we examine the effect of considering an alternative spatial configuration that includes border and "interior" regions.