Embedded Files
Job Market Paper
Job Market Paper
Power Distribution and Efficiency: Theory and Evidence from Unionized Firms
Power Distribution and Efficiency: Theory and Evidence from Unionized Firms
Abstract: Power is irrelevant for efficiency in a complete contract world. This paper studies how powerless groups, engaging in noncontractible coercive actions, affect the distribution and size of organizational surplus. I show that, by transferring bargaining power, powerful groups can mitigate coercive actions and enhance their welfare. I investigate this dynamic in union-management disputes, examining how an increase in labor unions' bargaining power affects firms' profits. This offers early causal evidence of power's efficiency effects in incomplete contract settings. Using administrative records from a Chilean labor code reform, I run an event study based on a quasi-random treatment assignment. It reveals that while profits were unaffected, remunerations of nonmanagerial workers increased, the number of hours worked did not fall, and unionization rates declined. Heterogeneous effects based on prepolicy bargaining power indicate that firms' profits are concave, while remunerations and unionization rates are convex, in unions' bargaining power. A Nash-bargaining model explains these findings, characterizing Pareto-efficient bargaining power distributions; demonstrating that management's welfare decreases with its bargaining power when the disputed surplus is sufficiently small; and showing that management generally prefers not to minimize the union's coercive actions. A model calibration indicates a union’s surplus share increase from 0.39 (prereform) to 0.48 (postreform) without harming profits.
Working Papers
Working Papers
Partisan Colleges and Political Donations
Partisan Colleges and Political Donations
Submitted. SSRN WP #4611160 (with Franco Calle)
[Link to paper] [Link to SSRN]
Abstract: This paper provides evidence that educational institutions shape political ideologies and activism. Using population data from Chilean college applications and political donations from 2004 to 2021, we explore the causal impact of attendance of universities with different ideological leanings on political donations. Leveraging score-based discontinuities in Chile's centralized college application system as an instrumental variable, we find that attending left-leaning universities significantly impacts political donation behaviors. Specifically, our fuzzy RDD outcomes indicate that enrollment at left-leaning institutions bolsters political activism, elevating the likelihood of donating to any political party by 0.69 pp (a magnitude equivalent to 60% of the share of donations in the population) and 0.92 pp for compliers. This uptick predominantly stems from a surge of 0.48 pp in donations favoring left-wing campaigns (equivalent to 52% of all donations caused by attendance at a left-leaning college going to leftist campaigns, 18% going to the right, and 30% to the center). Eighty percent of the donations to leftist campaigns from alumni of left-leaning colleges are attributable to the causal effect of attending a left-leaning college. No significant effects are found for graduates of right-oriented colleges.
United We Stand: Bargaining Units Size and Wage Setting
United We Stand: Bargaining Units Size and Wage Setting
(with José Miguel Pascual)
[Link to Paper]
Abstract: This paper examines the impact of expanding collective bargaining units across firms on workers’ wages. We exploit a 2014 reform to the Chilean labor code that prevented corporations from fragmenting their workforce into separate legal entities, thereby increasing the potential size of bargaining units. Using a dynamic difference-in-differences strategy, we compare treated firms to unaffected firms within the same industries. The reform led to higher average wages and greater wage dispersion among full-time workers, with no significant effects on employment or firm profitability. Effects were strongest among corporations that initially employed fewer workers and whose legal entities were located in the same municipality, highlighting the importance of coordination costs. These findings suggest that broader collective bargaining enhances the bargaining power and welfare of full-time workers.
Work in Progress
Work in Progress
(Un)Ethical Allocations in Democratic Competition: A Dynamic Probabilistic Voting Model
(Un)Ethical Allocations in Democratic Competition: A Dynamic Probabilistic Voting Model
Abstract: Ethical preferences significantly influence individuals' judgments on political actions and policies, and deviations from perceived ethical standards lead to political dissatisfaction. This paper explores the conditions under which democratic competition fails to implement ethical allocations, using a dynamic probabilistic voting model to understand how candidates learn about citizens’ ethical preferences. This study characterizes a set of ethically consistent redistribution policies (allocations), defined as equilibrium outcomes implementable by a social welfare function —ranging from Rawlsian to utilitarian— derived from normative axioms consistent with a particular ethical framework. Through a communication game, continuous learning by politicians leads to a steady-state convergence, identifying society’s true preference profile and implementing a utilitarian optimum (as in classic probabilistic voting models). However, a sequence of uninformative election outcomes, termed as 'uninformative traps', can obstruct this learning process, leading to potentially unethical allocations. The paper investigates the role of communication frictions, like voluntary voting and authoritarian regimes, in impeding the learning process, while highlighting how high-quality institutions can facilitate accurate learning and ethically consistent allocations. The findings underline the importance of informed electoral processes and institutional quality in promoting ethically consistent policies, contributing to satisfaction with democratic outcomes.
Non-Consequentialist Social Choice
Non-Consequentialist Social Choice
[Draft coming soon]
Abstract: This paper develops a formal framework for collective decision-making in societies where individuals may hold non-consequentialist moral views. Standard social choice theory and welfare economics typically evaluate outcomes solely in terms of the welfare they produce. In contrast, many individuals care about both the moral quality of outcomes and the procedures by which they are produced. I extend the Arrow–Sen framework to incorporate such ethical pluralism by modeling a two-stage process: a meta-level selection of institutional rules and an operational-level implementation of social choices. I introduce two axioms — Outcome Non-Consequentialism (ONC) and Procedural Non-Consequentialism (PNC) — to capture moral commitments beyond consequences. I prove that any social choice function (SCF) or meta-social choice function (MSCF) satisfying either ONC or PNC must violate weak Pareto efficiency and neutrality. I also introduce a Consistency Axiom requiring alignment between meta- and operational-level decisions, and show that ethical disagreement across agents leads to the impossibility of coherent institutional design. The MSCF framework can accommodate any mechanism or aggregation procedure that implements social states, including game-form rights (Nozick), evolutionary bargaining (Binmore), and other abstract institutional designs (Rawls). The results highlight the normative and institutional limits of deontological approaches and the structural tension between procedural legitimacy and social efficiency.
Publications (Pre - Ph.D.)
Publications (Pre - Ph.D.)
Earned income tax credit: a public policy against inequality
with Andrés Hernando
Estudios Publicos, 146: 49-85, May 2017.
Earned income tax credit: a public policy against inequality
with Andrés Hernando
Estudios Publicos, 146: 49-85, May 2017.
Abstract: This article presents the earned income tax credit (EITC), an instrument that consists of topping up lower-paid workers’ earnings with cash transfers. As a social policy, it has the advantage of being an effective mechanism for tackling inequality that does not greatly interfere with the trade-off between leisure and work but encourages labor market participation and formalization, cuts poverty, and reduces the stigma attached to being a social program beneficiary. This instrument is offered for two purposes: (i) as an actual policy option and (ii) as a benchmark for contrasting the potential cost-effectiveness of any other public policy intended to reduce inequality. The paper applies a genetic algorithm for numerical optimization to evaluate the parameters that optimally minimize income inequality and shows that, for example, spending 5,000 million dollars a year would reduce the Gini by between 4.7 and 6.1 points, which is more than the entire reduction recorded in Chile between 1990 and 2015.
An Inequality Trap: the consequences of assortative matching on income distribution
Estudios Publicos, 144: 61-107, October 2016.
An Inequality Trap: the consequences of assortative matching on income distribution
Estudios Publicos, 144: 61-107, October 2016.
[Link to paper — In Spanish] [Media Coverage 1] [Media Coverage 2]
Abstract: This paper looks at the effects of assortative mating on education for variables such as inequality, income, and the level of education in society. For Chile, it simulates a scenario where the parents of this generation would have mated randomly, without regard to their mate’s level of education. It demonstrates that in that hypothetical scenario, the inequality of household income, measured using the Gini coefficient, would fall from 0.48 to 0.43, a drop equivalent to the reduction in inequality between 1990 and 2013 (for this same variable). On average, income would simultaneously fall 15 percent, the uneducated would decrease by 5 percent, and the college graduates would also drop 5 percent.
My research has been generously supported by the following institutions:
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