François Gerard

I am a Professor in the Department of Economics at University College London (on leave from Queen Mary, University of London)

Curriculum Vitae (here)  

Work in Progress and Working Papers

Job Displacement Insurance in Developing Countries (joint with Gustavo Gonzaga and Joana Naritomi) NEW!

(prepared for The Handbook on Social Protection: Local Solutions for Global Poverty, edited by Rema Hanna and Ben Olken)

This chapter highlights how a small but growing body of work has started to shed light on the need for and the design of Job Displacement Insurance policies in developing countries. Much of this evidence uses data from Brazil, which allows us to discuss various aspects of Job Displacement Insurance policies while holding constant the institutional context. We also discuss evidence from other settings whenever it is available and highlight important evidence gaps for future research. 

Cash Transfers and Formal Labor Markets: Evidence from Brazil (joint with Joana Naritomi and Joana Silva) 

CEPR Discussion Paper #16286

Revise & Resubmit at Econometrica

Cash transfer programs have expanded widely in developing countries and have been credited for sizable reductions in poverty. However, their potential disincentive effects on beneficiaries’ labor supply have spurred a heated policy debate. This paper studies the impact of a large-scale program (Bolsa Familia in Brazil) on local labor markets in a context where such concerns could be particularly strong: eligibility is means-tested and we focus on the formal labor market, where earnings are more easily verifiable. Yet, we find that an expansion of Bolsa Familia increased local formal employment, using variation in the size of the reform across municipalities. The evidence is consistent with multiplier effects of cash transfers in the local economy, which dominate potential negative effects on formal labor supply among beneficiaries.

VoxDev article: Cash transfer programmes can stimulate the local economy: Evidence from Brazil (August 2022)

Mitigating the consequences of job-loss in low-income countries: Experimental evidence from Ethiopia (joint with Girum Abebe, Stefano Caria, and Lukas Hensel) 

Racial Inequality, Minimum Wage Spillovers, and the Informal Sector (joint with Ellora Derenoncourt, Lorenzo Lagos, and Claire Montialoux)

Collective Bargaining, Inequality, and Earnings Gaps (joint with Ellora Derenoncourt, Lorenzo Lagos, and Claire Montialoux)

Dual Tax Systems and Firms: Evidence from Brazil (joint with Joana Naritomi, Arthur Seibold, and Bruno Zulian)

Greener on the Other Side? Spatial Discontinuities in Property Tax Rates and their Effects on Tax Morale (with Michael Best, Evan Kresch, Joana Naritomi and Laura Zoratto)

Published and Forthcoming Papers

Sanitation and Property Tax Compliance: Analyzing the Social Contract in Brazil (joint with Evan Plous Kresch, Mark Walker, Michael Carlos Best, and Joana Naritomi)

Journal of Development Economics (2023), vol. 160, 102954. doi: 10.1016/j.jdeveco.2022.102954

This paper investigates the role that sanitation plays in upholding the social contract, whereby citizens pay taxes in exchange for governments providing goods and services. We study the case of Manaus, Brazil, where sewer connections vary considerably across the city and property taxes are calculated in a presumptive manner that does not account for a household's access to sanitation. We find that households with access to the city sewer system are signicantly more likely to pay their property tax, relative to households that only have access to latrines or lack access to improved sanitation entirely. Our evidence is consistent with a role for the social contract in this decision, as households with sewer systems are more likely to have positive attitudes towards the municipal government.

Summary in Nature Water: Sewage system access and tax compliance.

VoxDev article: Sanitation and Property Tax Compliance: Analyzing the Social Contract in Brazil (January 2024)

Assortative Matching or Exclusionary Hiring? The Impact of Firm Policies on Racial Wage Differences in Brazil (joint with Lorenzo Lagos, Edson Severnini, and David Card) 

NBER Working Paper #25176

American Economic Review (2021), vol. 111, no. 10, pp. 3418-3457. doi: 10.1257/aer.20181596

We measure the effects of firm policies on racial pay differences in Brazil. Nonwhites are less likely to be hired by high-wage firms, explaining about 20% of the racial wage gap for both genders. Firm-specific pay premiums for nonwhites are also compressed relative to whites, contributing another 5% for that gap. A counterfactual analysis reveals that about two-thirds of the under-representation of nonwhites at higher-wage firms is explained by race-neutral skill-based sorting. Non-skill-based sorting and differential wage setting are largest for college-educated workers, suggesting that the allocative costs of discriminatory hiring and pay policies may be relatively large in Brazil.

Informal Labor and the Efficiency Cost of Social Programs: Evidence from Unemployment Insurance in Brazil (joint with Gustavo Gonzaga) 

NBER Working Paper #22608

American Economic Journal: Economic Policy (2021), vol. 13, no. 3, pp. 167-206. doi: 10.1257/pol.20180072

(Winner of the Prêmio Haralambos Simeonidis - Categoria Artigos; received by Gustavo Gonzaga)

It is widely believed that the presence of a large informal sector increases the effi.ciency cost of social programs in developing countries. We evaluate such claims for the case of Unemployment Insurance (UI) by combining an optimal UI framework with comprehensive data from Brazil. Using quasi-experimental variation in potential UI duration, we find clear evidence for the usual moral hazard problem that UI reduces incentives to return to a formal job. Yet, the associated effi.ciency cost is lower than in the U.S., and is lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are lower to begin with where informality is higher, so that a larger share of workers would draw UI benefits absent any moral hazard. In sum, efficiency concerns may actually become more relevant as an economy formalizes.

Additional material: Web Appendix

Hysteresis and the Welfare Effect of Corrective Policies: Theory and Evidence from an Energy-Saving Program (joint with Francisco Costa) 

NBER Working Paper #24608

Journal of Political Economy (2021), vol. 129, no. 6, pp. 1705-1743. doi: 10.1086/713729

This paper provides stark evidence of hysteresis – the failure of an effect to reverse itself as its underlying cause is reversed – in energy demand. We estimate that half of the 23%-reduction in residential electricity use caused by a 9-month-long policy that was imposed on millions of Brazilians has persisted for at least 12 years. We examine the implications of our finding by extending the traditional welfare analysis of corrective policies to allow for hysteresis. Our estimate highlights that failing to take hysteresis into account could severely bias the welfare evaluation of policies aimed at reducing (long-run) energy demand.

Additional material: Web Appendix

VoxDev article: The Welfare Effect of Inducing Persistent Changes in Behaviours (August 2018)

Job Displacement Insurance and (the Lack of) Consumption-Smoothing (joint with Joana Naritomi) 

NBER Working Paper #25789

American Economic Review (2021), vol. 111, no. 3, pp. 899-942. doi: 10.1257/aer.20190388

We study the spending profile of workers who experience both a positive transitory income shock (lump-sum severance pay) and a negative permanent income shock (layoff). Using de-identifi.ed expenditure and employment data from Brazil, we show that workers increase spending at layoff by 35% despite experiencing a 14% long-term loss. We find high sensitivity of spending to cash-on-hand across consumption categories and for several sources of variation, including predictable income drops. A model with present-biased workers can rationalize our findings, and highlights the importance of the timing of benefit disbursement for the consumption-smoothing gains of job displacement insurance policies.

Additional material: Web Appendix

VoxDev article: The value of job displacement insurance programmes in developing countries: Evidence from Brazil (February 2021)

Bounds on Treatment Effects in Regression Discontinuity Designs with a Manipulated Running Variable (joint with Miikka Rokkanen and Christoph Rothe) 

NBER Working Paper #22892

Quantitative Economics (2020), vol. 11, pp. 839-870. doi:10.3982/QE1079

The key assumption in regression discontinuity analysis is that the distribution of potential outcomes varies smoothly with the running variable around the cutoff. In many empirical contexts, however, this assumption is not credible; and the running variable is said to be manipulated in this case. In this paper, we show that while causal effects are not point identified under manipulation, one can derive sharp bounds under a general model that covers a wide range of empirical patterns. The extent of manipulation, which determines the width of the bounds, is inferred from the data in our setup. Our approach therefore does not require making a binary decision regarding whether manipulation occurs or not, and can be used to deliver manipulation-robust inference in settings where manipulation is conceivable, but not obvious from the data. We use our methods to study the disincentive effect of unemployment insurance on (formal) reemployment in Brazil, and show that our bounds remain informative, despite the fact that manipulation has a sizable effect on our estimates of causal parameters.

For R and STATA packages, see: https://github.com/francoisgerard/rdbounds/  

Policy Papers

Social Protection Response to the COVID-19 Crisis: Options for Developing Countries  (joint with Clement Imbert and Kate Orkin)

Economics for Inclusive Prosperity, Policy Brief (April 2020)

Oxford Review of Economic Policy (2020), vol. 36 (Issue Supplement 1), pp. S281-S296.

Social Protection and Job Displacement in Developing Countries (joint with Joana Naritomi)

International Growth Centre Policy Brief (August 2019)

Across the development path, social insurance programmes such as job displacement insurance schemes become an increasingly important part of governments’ role. This brief uses unique administrative data from São Paulo, Brazil, to study displaced workers’ need for insurance and the insurance value of the two most common government-mandated job displacement insurance programmes: severance pay (SP) and unemployment insurance (UI). The results show the need for job displacement insurance is sizable, even in a context of high informality. Moreover, we find that the insurance value provided by these programmes can be very sensitive to their disbursement policy. This is particularly relevant for SP schemes, which are much more common than UI schemes in developing countries. The authors make three policy recommendations relevant to policymakers across the developing world.

Value Added Tax in developing countries: Lessons from recent research (joint with Joana Naritomi)

International Growth Centre (IGC), Policy Brief (May 2018)

Today, Value Added Taxes (VAT) exist in more than 160 countries, including in many developing countries that have modernized their tax systems in the past decades. Eighty percent of countries in sub-Saharan Africa have adopted the VAT, and it is now responsible for typically raising around one-quarter of all tax revenue. Moreover, countries continue to adapt and reform their VAT systems, sometimes substantially, such as India and Ghana did in 2017. This brief discusses lessons from several studies, which have shed new light on the strengths and weaknesses of VAT systems. It also highlights important topics that could benefit from better evidence.