Andre Victor Luduvice

Andre Victor Luduvice
Job Market Paper

The Macroeconomic Effects of Universal Basic Income Programs

What are the consequences of a nationwide reform of a transfer system based on means-testing towards one of unconditional transfers? I answer this question with a quantitative model to assess the general equilibrium, inequality, and welfare effects of substituting the current U.S. income security system with a Universal Basic Income (UBI) policy. To do so, I develop an overlapping generations model with idiosyncratic income risk that incorporates intensive and extensive margins of labor supply, on-the-job learning, and child-bearing costs. The tax-transfer system closely mimics the U.S. design. I calibrate the model to the U.S. economy and conduct counterfactual analyses that implement reforms towards a UBI taking into account the transitional dynamics. I find that an expenditure-neutral reform has moderate impacts on the labor supply response of agents but induces aggregate capital and output to grow due to larger precautionary savings. A UBI of $ 1,000 monthly requires a substantial increase in the tax rate of consumption used to clear the government budget and leads to an overall decrease of the macroeconomic aggregates, stemming from a sharp drop in labor. In both cases, the economy has more disposable income but less consumption at the bottom. The UBI economy constitutes a welfare loss of -3.75% at the transition if expenditure-neutral and results in a gain of 1.25% in the second scenario. The welfare gains in the latter are more significant at the bottom of the income distribution and smaller at the top, driven by the redistribution of consumption and leisure. Despite relative losses, a majority votes in favor of both UBI reforms.

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Other Research

Unemployment Insurance Design in an Economy with Informal Markets (with Gustavo Souza)

Emerging and developing countries have on average 50% of their employment being held in informal markets generating a key aspect to be taken into account on the UI design: beneficiaries are able to simultaneously work on side jobs during their unemployment spell. At the same time, workers face a trade-off when considering the search for jobs in the informal sector, as the UI eligibility tenure is only attained via enrollment in formal jobs. This paper develops a heterogeneous agents model with sectoral choice and history-dependent UI benefits built on stylized facts of the Brazilian economy in order to quantitatively evaluate the UI program design. We outline a program characterized by three variables: a replacement ratio, a limit on how many months the worker can receive benefits and a tenure requirement on past formal jobs. In a preliminary numerical analysis, we find that a decrease in the replacement ratio reduces the wage in the informal sector, an increase in the number of monthly payments augments enrollment in the program and an increase in the requirement induces workers to move from the formal to the informal sector.

Adjustment Costs, Financial Constraints, and the Persistence of Misallocation in China (with Gustavo Camilo)

Using firm level data in the years 2000-2013 on all Chinese publicly traded manufacturing firms divided among private, state-owned and privatized enterprises, we document the presence of misallocation in the Chinese economy. We then develop a dynamic investment model with physical and financial frictions where firms make their financing decisions in the presence of operating, equity issuance, adjustment and financing costs where the latter are captured by a collateral constraint that allows lenders to discriminate among firms according to their ownership. Using the firm level data, we estimate the structural parameters of the model which is able to generate TFP losses relative to the efficient allocation of 59% and dispersion in TFPR that closely matches the data. We explore a counterfactual analysis comparing the levels of aggregate productivity to the efficient level when adjustment costs are removed and find that 35% of the misallocation generated by the model in baseline economy disappears without the presence of such costs. Finally, we observe that adjustment costs and a tight financing restriction interact to amplify misallocation losses by spreading firms' size distribution.

The Aggregate Effects of Cash Transfers on Earnings Risk: Evidence from Millions of Brazilian Workers (with Tomás Martínez)

The Rise of Dual-Earner Families and Male-Based Recessions (with Ayse Imrohoroglu and Martín López-Daneri)

Teaching Experience

Introduction to Microeconomics, University of Pennsylvania, Teaching Assistant for Prof. Rebecca Stein (Spring 2016)

Introduction to Microeconomics, University of Pennsylvania, Teaching Assistant for Prof. Anne Duchene (Fall 2015)

Other Information

Presentations

ESEM (2019), NASMES (2019), Midwest Macro (Spring 2019), Philadelphia Fed (2019), LACEA/LAMES (2018, 2017), Bonn Summer School of Macroeconomics of Inequality (2018), EPGE-FGV/RJ (2017) 

Professional and Research Experience

Federal Reserve Bank of Philadelphia, Graduate Research Analyst (2016 to present)

Publications

Modeling Default Probabilities: The Case of Brazil, Journal of International Financial Markets, Institutions and Money, Volume 21, Issue 4, p. 513-534, 2011 (with Benjamin Tabak and Daniel O. Cajueiro)

Interests

Macroeconomics, Public Finance, Labor Economics

Phone

+1 (215) 873-3673

Email

luduvice@sas.upenn.edu

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Advisors

Dirk Krueger

References

Professor Dirk Krueger (Advisor)

Department of Economics

University of Pennsylvania

+1 (215) 573-1424

dkrueger@econ.upenn.edu

 

Professor Jesús Fernández-Villaverde

Department of Economics

University of Pennsylvania

+1 (215) 573-1504

jesusfv@econ.upenn.edu

 

Senior Economist Ryan Michaels

Economic Research Department

Federal Reserve Bank of Philadelphia

+1 (215) 574-6110

ryan.michaels@phil.frb.org

 

Professor Martín López-Daneri

Department of Economics

Temple University

+1 (215) 204-5026

martin.lopez-daneri@temple.edu

 

Job Market Candidate Status
I am on the job market and I will be available for interviews at the ASSA Annual Meeting in San Diego in January 2020 and at the European Job Market in Rotterdam in December 2019.