Alessandra Pelloni

Is Volatility Good for Growth?. Evidence from the G7

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We provide empirical support for an analytical DSGE model with nominal wage stickiness where growth is driven by learning-by-doing and money shocks and their variance are allowed to impact on long-run output growth. In our theoretical model the variance of monetary shocks has a negative effect on growth, while output volatility is good for growth as a positive relationship exists. Using a bivariate GARCH-M model we test the empirical conditional mean and variance relationships of nominal money and production growth rates in the G7 countries. We corroborate the theoretical model predictions with evidence from Bonferroni multiple tests across the G7.

ANDREOU – PELLONI – SENSIER – Is volatility good for growth. Evidence from the G7

Factor Income Taxation in a Horizontal Innovation Model

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We consider the optimal factor income taxation in a standard R&D model with technical change represented by an increase in the variety of intermediate goods. We show that the model has no transitional dynamics. Redistributing the tax burden from labor to capital will in most cases increase the employment rate in equilibrium. This has opposite e¤ects on two distortions in the model, one due to monopoly power, the second to the incomplete appropriability of the bene…ts of inventions. Their relative momentum determines the sign of the welfare e¤ect of the redistribution. We show that, for parameter values consistent with available estimates, the optimal tax rate on capital will be sizable.

LONG – PELLONI – Factor income tax in a horizontal innovation model

What are we learning from the life satisfaction literature ?

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The recent availability of cross-sectional and longitudinal survey data on life satisfaction in a large number of countries gives us the opportunity to verify empirically (and not just to assume) what matters for individuals and what economists and policymakers should take into account when trying to promote personal and societal wellbeing. The wide array of econometric findings available in this booming literature display evidence, generally robust to different cultural backgrounds, on the effects of some important happiness drivers (income, unemployment, marital status) which can be considered “quasi stylized facts” of happiness. If economic policies, for many obvious reasons, cannot maximize self declared life satisfaction as such, we are nonetheless learning a lot from these contributions. In particular, results on the relevance and the risk of crowding out of relational goods, on the revisited inflation/unemployment trade off and, more in general, on the measurement of the shadow value of non market goods obtained with life satisfaction estimates, are conveying relevant information about individual preferences and what is behind utility functions. Such findings suggest us to move beyond anthropological reductionism toward behavioral complexity and to refocus target indicators of economic policies in order to minimize the distance between economic development and human wellbeing.

BECCHETTI – PELLONI – What are we learning from the life satisfaction literature

Productivity growth and volatility: how important are wage and price rigidities?

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We study the implications of having diferent sources of nominal rigidities on the relationship between productivity growth and shocks volatility in a model with procyclical R&D and imperfect competition in goods and labour markets. We show that the efects of uncertainty on long-term growth not only depends on the source of ‡fluctuations, as recent literature shows, but also, and crucially, on whether prices and/or wages are rigid.

ANNICCHIARICO – PELLONI – Productivity growth and volatility: how important are wage and price rigidities?.