Recent Spanish tax reform granted regions the authority to set income tax rates, resulting in substantial tax differentials. We use individual-level information from Social Security records over a period of one decade. Conditional on moving, taxes have a significant effect on location choice. A one percent increase in the net of tax rate for a region relative to others increases the probability of moving to that region by 1.7 percentage points. Focusing on the stock of top-taxpayers, we estimate an elasticity of the number of top taxpayers with respect to net-of-tax rates of 0.85. Using this elasticity, a theoretical model implies that the mechanical increase in tax revenue due to higher tax rates is larger than the loss in tax revenue from the outflow of migration.

Agrawal,D.R., Foremny, D. (IEB, XREAP)

XREAP2018-09.pdf

This paper analyzes the historical determinants and long-term persistence of social capital, as well as its effect on economic development, by looking at the legacy of the commons in a Spanish region. In medieval times, common goods were granted to townships and were managed collectively by local citizens. This enabled the establishment of institutions for collective action and self-government. Common goods persisted until the second half of the nineteenth century. We argue that the experience of cooperation among villagers, repeated over the centuries, increased the social capital in each local community. In 1845, a law forced small villages to merge with others, a fact which generated exogenous variation in the number of mergers (i.e., cooperative networks) that each modern municipality was required to have. We exploit this change in an IV and RD setting and find that current municipalities formed by a greater number of old townships have a denser network of associations. We also find that higher social capital is associated with more economic development.

Montolio, D. (IEB, XREAP); Tur-Prats, A.

XREAP2018-08.pdf

The economic crisis of 2008 led to a significant erosion of trust in those countries that were hit hardest. However, whether this fall in trust can best be explained by external economic factors or by the lack of response on the part of the institutions to civic needs and demands is unclear. This study seeks to address this question by examining the specific case of Spain. Its aim is to analyse in comparison with other factors, the effect of increasing socioeconomic precariousness upon levels of interpersonal and institutional trust. The study examines the respective impact of these factors upon different social groups according to their degree of exposure to the effects of the crisis. Our results show that the deterioration suffered by household economies has important consequences in terms of interpersonal trust. Those most severely affected by the recession lose a great deal of trust in others. We also find that a deterioration in socioeconomic conditions has different effects in relation to institutional trust. The perception of the overall state of the economy is important for all types of institutional trust. Without calling into question the importance of institutional performance on levels of institutional trust, our research sheds new light on the importance of different economic factors for social cohesion.

Torrente, D.; Caïs, J.; Bolancé, C. (RISKCENTER, XREAP)

XREAP2018-07.pdf