Javier Cortés Orihuela

We compare the efficiency of corporate and dividend tax cuts in alleviating the double taxation of corporate income. Exploiting a double kink created by the 2006 Canadian dividend tax reform in a difference-in-bunching design, we find that dividend tax cuts induce a response in corporate taxable income close to 40% of that generated by corporate taxes, thereby reducing their fiscal cost through positive spillovers onto the corporate tax base. These advantages relative to corporate tax cuts, however, are attenuated once re-timing and relabeling of dividends into capital gains or owner wages are taken into account.

Despite the importance of excess mortality estimates for assessing the scale of a pandemic and informing policy decisions, little attention has been paid to the statistical properties of the methods used to generate them. In this paper, we show that the empirical coverage of prediction intervals for 24-month cumulative excess mortality produced by two of the most influential approaches falls well below the nominal 95% level. The World Health Organization (WHO) methodology, for example, exhibits coverage as low as 30%. We propose two models for estimating excess mortality, one frequentist and one Bayesian, both of which are variants of the WHO model and produce prediction intervals with empirical coverage close to the nominal levels. Moreover, we introduce a simple correction method that can be applied to any model for which pre-pandemic death-count time series are observed. The correction calibrates prediction intervals using the historical validation environment, allowing researchers to address undercoverage on average across units and periods. We provide two concrete examples illustrating the practical importance of working with prediction intervals with correct coverage. First, we focus on the underreporting gap, defined as excess deaths minus reported COVID-19 deaths. Using the WHO method, uncorrected estimates suggest that 41 of 51 U.S. jurisdictions and 13 of 30 European countries experienced a significantly positive underreporting gap. In contrast, applying our correction reduces these numbers to 22 and 6, respectively. These findings indicate that the statistical evidence for a positive gap between excess deaths and reported COVID-19 deaths is weaker and far less widespread than suggested by methods with overly narrow prediction intervals. Second, we show that rankings of groups of countries or regions based on excess death rates, defined as excess death counts per 100,000 inhabitants, are considerably less informative than previously thought and should therefore be used with caution when evaluating different policies across countries. Compared to the standard WHO methodology, our frequentist model increases the average number of statistically indistinguishable units at a given rank from 6.2 to 27.1 among the 30 European countries in our database, and from 13.1 to 49.0 among the 51 U.S. jurisdictions.

We examine a free college tuition program in a country with widespread access to state-backed loans and scholarships. Using a regression discontinuity design targeting Chilean students in the lower 50% income bracket, we find that the policy primarily shifted students across institutions, increasing enrollment in universities that participated in the policy at the expense of non-participants. New enrollment was limited to students marginally ineligible for loans. Recomposition occurred across most academic levels, excluding high achievers, with no effect on dropout. These findings suggest that in contexts with existing aid, free tuition policies minimally expand access but significantly reshape student composition.

How has U.S. tax progressivity evolved since 1913? We recover residual progression, the elasticity of after-tax income with respect to pre-tax income, from grouped income shares, and show that our estimates closely track microdata benchmarks. Applied to WID and IRS tabulations, the method reveals opposing patterns. Top progressivity followed an inverted U, rising through World War II and declining after the 1970s. Below the top decile, progressivity is U-shaped, rising after the mid-1980s. The increase is strong in WID but muted in IRS, reflecting transfers and differences in income concepts. These findings reconcile competing accounts of declining and rising U.S. tax progressivity.

We show that the inconsistency of the Two-Sample Two-Stage Least Squares (TSTSLS) Intergenerational Earnings Elasticity (IGE) estimator is a two-way prediction problem involving the replication of (i) the variance of unobserved parental earnings, and (ii) the endogeneity of unobserved parental earnings in the equation of children’s earnings. Concretely, we show that the TSTSLS estimator asymptotically recovers the OLS IGE when the first-stage R-squared, i.e., the share of explained variance of parental earnings, equals the share of explained endogeneity of parental earnings in the child’s earnings equation. This condition leads to two notable outcomes with respect to previous findings in the literature: (i) perfect prediction of parental earnings is a specific instance of our condition, indicating that consistency can be attained even when parental earnings are predicted imperfectly and (ii) exogenous instruments alone are insufficient to guarantee asymptotic equivalence between TSTSLS and OLS IGE estimates. Furthermore, our condition suggests that strong first-stage instruments might amplify TSTSLS bias if they are also strongly endogenous in the child’s earnings equation. This last result provides a formal criterion for choosing first-stage predictors under the assumption that TSTSLS IGE estimates exhibit upward bias. Additionally, we theoretically study the biases of the two-sample stochastic multiple imputation and cell multiple imputation (MI) procedures, identifying conditions under which MI procedures outperform the traditional TSTSLS estimator. Finally, we validate our results through an empirical Monte Carlo exercise using administrative data from the Chilean formal private sector.

This paper provides the first estimates of intergenerational earnings mobility in Chile using administrative data linking parents’ and children’s earnings from the formal private sector. We calculate mobility measures across the earnings distribution, revealing high mobility in the bottom 80% and 65% of the parents’ and children’s distribution, respectively. However, we observe significant persistence in the upper tail of the earnings distribution. Additionally, we identify notable gender heterogeneities in these mobility patterns. Specifically, the intergenerational mobility gender gap shows a nonlinear relationship with respect to parental earnings. Furthermore, we find that differences in mobility between the upper tail of the earnings distribution and the rest of the population are more pronounced for daughters than for sons. These findings suggest that the dynamics of gender-based mobility at the upper tail of the earnings distribution differ from those observed in the rest of the population.

This paper revisits the Two-Sample Two-Stage Least Squares (TSTSLS) method, commonly used to estimate intergenerational mobility measures without linked parent-child earnings data. First, we study the TSTSLS intergenerational earnings elasticity (IGE) by decomposing it into the IGE estimated via OLS with linked parent-child earnings data, a projection bias, and a variance bias. We propose a parsimonious procedure, the doubly corrected TSTSLS (DC-TSTSLS), to i) eliminate the variance bias and ii) reduce the prediction bias. Our method provides a lower bound for the IGE estimate via OLS with linked earnings data. Second, we formally study the rank-rank correlation estimated through TSTSLS by decomposing the estimator into the rank-rank correlation estimated through OLS with linked data and a projection bias. We deliver analytical conditions for when this estimate is a lower-bound of the OLS rank-rank correlation estimated using linked data. Finally, we use parent-child linked administrative data from a developing country to test our lower-bound method through an empirical Monte Carlo approach, confirming its validity. Our doubly corrected IGE and rank-rank TSTSLS estimators are informative lower bounds of their respective OLS intergenerational mobility estimates computed using linked data. Our results suggest that the following practices should be implemented when the TSTSLS method is used to estimate intergenerational mobility measures: i) report the estimates of the rank-rank correlation computed through TSTSLS, and ii) implement our lower-bound methodology when facing data constraints, i.e., only a few controls are available to impute parental earnings.

This paper studies the relationship between intergenerational economic persistence and preferences for the provision of public goods. Specifically, we develop a simple theoretical model in which a public good is financed through proportional taxation, and that predicts a lower provision of public goods given an increase in the intergenerational earnings elasticity (IGE), which is widely recognized as a measure of the degree of economic persistence from one generation to the next in society. We test this model empirically using the results of the 2020 Chilean national plebiscite, which asked about the replacement of the standing constitution by a new one that would potentially expand the role of the state in the provision of public goods. Our estimates suggest the existence of a positive association between the IGE and the share of the vote against a new constitution, even after controlling for median income and income inequality. These findings are consistent with our model and suggest that sectors of society that exhibit higher degrees of economic persistence also show greater reluctance towards redistributive policies that increase public goods provision.

We estimate spatially disaggregated measures of intergenerational mobility in Chile through an administrative dataset linking child’s and their parent’s earnings from the formal private labour sector. We report remarkable heterogeneity as we find higher and lower upward mobility in mining and agricultural regions, respectively, corroborating Connolly et al. (2019) with the distinction that Chile is a unitary form of government, implying that factors other than institutional differences shape mobility.

Javier Cortés Orihuela

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