Research

Working Papers

• College Quality and Tuition Subsidies in Equilibrium with Alvaro Cox [Job Market Paper]

  In this paper, we study how demand-side subsidies interact with the equilibrium level of price and quality in the higher education sector in Brazil. More precisely, we consider two policies that assist low-income students in attending private institutions: scholarships and subsidized student loans. First, we develop a quality measure for undergraduate programs using value-added models, where a student’s post-graduation outcome is determined by their pre-enrollment characteristics. To do so, we link multiple administrative datasets to track individual students before enrollment, during college, and after college. We consider two post-graduation outcomes: a standardized “exit” exam, which tests students’ major-specific knowledge, and income from a matched employer-employee database. We document key patterns and correlations of our quality measure and extensively validate it. Next, we develop a static equilibrium model of demand, pricing, and quality provision. We consider two counterfactuals: decreasing the supply of loans by 10% and decreasing the supply of scholarships by 10%. We find similar patterns under both scenarios but much stronger effects for scholarships. Specifically, by lowering the supply of scholarships by 10% in each program across the country, there would be 13 thousand fewer students in college, corresponding to 80% of the total reduction in scholarships. Most programs would have an incentive to decrease quality and price, with a median change in value-added of -5% and of -0.7% in price.

Work in Progress

• Ownership Effect on Productivity and Investment: Water Utilities in Brazil with Rodrigo Naumann

  Access to treated water and sanitation is essential for public health and economic development. However, many developing countries still face the challenge of serving a large fraction of their population. This project investigates how a water utility’s ownership type, i.e., private or public, affects its productivity and incentives for coverage expansion. First, we use a panel of municipalities to run an event-study analysis of municipalities who switched their operators from public to private. We find that switchers were substantially more diligent in charging customers as they sharply increased the number of meters and fraction of billed water. Moreover, municipalities that switched to private operators show a substantial increase in new connections to treated water networks but without a sizeable increase in average price. Next, we propose a production function model that incorporates the firm’s ownership type. In our model, we posit that utilities value a combination of profits and non-pecuniary benefits to rationalize their choice and allow such valuation to vary by ownership type. We also investigate how the ownership type affects the flexible input choices and unobserved productivity.

Pre-Doctoral Publications

• Long-term Yields Implied by Stochastic Discount Factor Decompositions [Brazilian Review of Econometrics, Vol. 39 No. 1 (2019)] with Caio Almeida

  We use the framework developed by Christensen (2017) and Hansen and Scheinkman (2009) to study the long-term interest rates in the US and Brazil. We apply a nonparametric estimator to US and Brazilian data to identify how the yield of a long-term zero-coupon bond responds to the initial state of the economy. Using a flexible specification for the state process leads to an interesting non-linear response of the yield to changes in the initial state. As a by-product of our work, we assess the performance of Christensen’s estimator using Monte Carlo simulations based on two widely adopted asset pricing models (rare disasters and habit formation). Adopting US and Brazilian data on aggregate consumption and dividends, we also provide an empirical analysis based on the different asset pricing models analyzed and further including the Epstein-Zin model with unitary elasticity of substitution adopted by Christensen (2017). While long-term yields for the rare disasters and habit models appear to be too high, we identify plausible values for those yields when adopting the Epstein–Zin model, respectively of 5.7% (US) and 5.4% (Brazil) per year.

• Just Words? A Quantitative Analysis of the Communication of the Central Bank of Brazil [Revista Brasileira de Economia 67, December 2013; SSRN update in 2014] with Carlos Viana de Carvalho and Juliana Vargas

  We quantify the informational content of statements issued by the interest-rate setting committee of the Central Bank of Brazil (COPOM), building on the methodology developed by Lucca and Trebbi (2011). Using Google search queries, we measure the extent to which each COPOM statement is perceived to be associated with more “hawkish” or “dovish” language. This allows us to construct a time-series of the informational content of COPOM statements, which we then use in regressions to explain changes in the term-structure of interest rates around COPOM meetings – together with a market-based measure of interest-rate surprises. We find that, during Governor Tombini’s tenure, interest-rate surprises started to be “passed through” one-to-one (or more) even at long maturities, as markets seem to have bought into the idea that the interest-rate cuts that began in mid-2011 would lead to lower yields in Brazil into the foreseeable future. Most importantly, changes in the informational content of COPOM statements seem to have meaningful effects on yields at short-to-medium maturities. However, this result only holds for the period prior to Tombini’s tenure.