Juan Rios
Job Market Candidate

Stanford University
Department of Economics
579 Serra Mall
Stanford, CA 94305
650-380-8825
juanfrr@stanford.edu

Curriculum Vitae

Fields:
Public Economics
Expected Graduation Date:
June, 2018

References:
Douglas Bernheim (co-Primary):
bernheim@stanford.edu

Raj Chetty (co-Primary):
chetty@stanford.edu

Florian Scheuer:
scheuer@stanford.edu

Luigi Pistaferri:
pista@stanford.edu

Job Market Paper

Welfare Analysis of Transfer Programs with Jumps in Reported Income: Evidence from the Brazilian Bolsa Familia
Transfer programs based on income often generate non-convex kinks in budget sets, particularly in their phase-out regions. In such settings, optimizing agents may respond to changes in the schedule by "jumping" from one bracket of a tax and transfer schedule to another, a behavior that is ruled out by the widely used "first-order" approach in optimal tax theory. This paper presents evidence that such jumps are empirically important using administrative data on reported income that spans a reform in the Brazilian anti-poverty program Bolsa Familia. I develop a theoretical framework that allows for such jumping behavior and show that an additional set of "jumper shares" coupled with standard parameters yield sufficient statistics for the welfare analysis. Estimating these shares in the Brazilian data, I show that for every marginal real (R$) transferred by the reform, 12 cents were lost in the efficiency costs of jumping behavior. Simulations suggest that "jumping" behavior substantially affects the welfare analysis of more general reforms.

Publications

Optimal Tax Mix with Income Tax Non-compliance (with Jason Huang)
Journal of Public Economics (December 2016).
Although developing countries face high levels of income inequality, they rely more on consumption taxes, which tend to be linear and are less effective for redistribution than a non-linear income tax. One explanation for this pattern is that the consumption taxes are generally more enforceable in these economies. This paper studies the optimal combination of a linear consumption tax with a non-linear income tax for redistributive purposes. In our model, households might not comply with the income tax code by reporting income levels that differ from their true income. However, the consumption tax is fully enforceable. We derive a formula for the optimal income tax schedule as a function of the consumption tax rate, the recoverable elasticities, and the moments of the taxable income distribution. Our equation differs from those of Mirrlees (1971) and Saez (2001) because households face a consumption tax and they respond to income tax not only through labor supply but also through mis-reporting their incomes. Both aspects are empirically relevant to our calibration of the optimal top rate in the Russian economy. We then characterize the optimal mix between a linear consumption tax rate and a non-linear income tax schedule. Finally, we find that the optimal consumption tax rate is non-increasing in the redistributive motives of the social planner.

Working Papers

Propagating Formality via Value Added Tax Networks: Evidence from India (with Ishuwar Setharam)
A major challenge faced by governments in developing countries is to increase their tax base by formalizing the economy. In this paper, we investigate whether Value Added Taxes (VAT) can increase formality. Firms in the VAT scheme have incentives to buy inputs from formal suppliers to collect input tax rebates. Therefore, informal upstream businesses in the supply chain may want to formalize in order to sell to the downstream firms in the VAT. Using administrative records from the state of Karnataka, India, we document that small firms are willing to pay 1 to 4% higher taxes to join the VAT regime. Only firms operating in upstream sectors, such as manufacturing and wholesale, are paying this "VAT Premium", consistent with the mechanism explored in this paper.

Equality of Opportunity and Optimal School Financing Structure
This paper studies the problem of redistributing resources across districts to maximize equality of opportunity as defined in Roemer (2012). In the model, parents that are heterogeneous in their degree of altruism towards their children select in which school district to live and take the distribution of school resources as given. The planner chooses the allocation of resources taking into account local governments investments financed by the property tax. The optimal school financing structure is a function of the elasticities of house prices with respect to public school investments and of the adult-wages of children with respect to these same investments.

Political Dynasties and the Quality of Government (with Arthur Bragança and Claudio Ferraz)
This paper examines whether dynastic politicians -- politicians that had relatives in office in the past-- affect the quality of government. We use a regression discontinuity design with electoral data for mayors in Brazil and examine whether dynastic politicians implement different policies compared to non-dynastic politicians. We find that dynastic politicians spend more resources, specially in investment in urban infrastructure, health and sanitation. However, we do not find improvements in economic growth and changes in the quality of public services.