Research

My research evolves around taxation, education and pension issues.

Intergenerational consequences of gradual pension reforms (with Arno Baurin). Balancing the government budget in an aging economy may require adjusting gradually pension benefits. Such policy change can take two forms:adjusting the accrual rate (the rate at which individuals built-up pension entitlements while working) or the indexation rate (the rate a which accrued entitlements are linked to nominal wage growth). We compare the consequences of such gradual policies across cohorts. We identify a fundamental generational trade-off between democracy and equality. In particular, we show that for Belgium, 80% of the population alive at the time of the reform prefers the accrual to the indexation reform, with the implication that the youngest half of the population would bear 85% of the total adjustment cost. The indexation reform provides more generational equality because the phasing in over time has larger base and thus benefit cut can be smaller per capita. We then consider other reforms improving the generational equality, showing that all those reforms fail to gain majority support. Finally, considering labor incentives, we show that the indexation reform is also more efficient than the accrual reform. Efficiency meets generational equality. European Journal of Political Economy, December 2022
The incidence of VAT reforms in electricity market: Evidence from Belgium (with Valerio Serse). In April 2014, the Belgian government reduced the VAT rate on the electricity price from 21% to 6% to support low-income families. In September 2015, the tax cut was repealed, and the VAT rate was reinstated to 21% in the context of a change of government. This paper investigates the impact of such temporary and (plausibly) exogenous VAT reform on the Belgian electricity market. We study the pass-through of the VAT reform to electricity prices and the effect of this (exogenous) price change on electricity demand. We estimate the VAT pass-through on residential electricity prices by a difference-in-differences method, using business electricity prices (not subject to VAT) as a control group. Our findings reveal that both the tax cut and the tax hike were entirely shifted to the electricity price (100% pass-through). To assess the impact of the VAT change on demand, we perform a counterfactual demand analysis of the electricity flowing monthly over the grid at the network operator level. Exploiting VAT and non-VAT related price variations, our results show a price elasticity of residential demand for electricity between -0.09 and -0.17. Interestingly, we also find that demand reacted quickly and symmetrically to the VAT cut and the subsequent VAT hike. International Journal of Industrial Organization, vol 80, January 2022
Unequal school opportunity and social mobility (with Andreu Arenas), We analyse the impact of unequal school opportunity on intergenerational income mobility and human capital accumulation. Building upon the classical Becker–Tomes–Solon framework, we use a regime-switch model allowing for differences in income transmission across groups. We find that unequal school opportunity raises average human capital because of assortative matching. However, because income dispersion tends to be higher at the top, in most cases unequal school opportunity decreases intergenerational mobility. Calibrating the model to the USA, simulations suggest that school equalisation and desegregation policies have positive effects on mobility at relatively small efficiency costs. The Economic Journal, 131, 1027-1050, May 2021. Showcased in The Economics of Education and Education Policy, Oxford University Press, 2023.
Taxing multinationals: the scope for enforcement cooperation (with Yukihiro Nishimura), Policymakers seeking to raise more tax revenues from multinational enterprises have two alternatives: to raise tax rates or to devote more resources to improve tax compliance. Tougher tax enforcement increases the cost of profit shifting, and thus mitigates tax competition. We present a tax‐competition model with two policy instruments (the corporate tax rate and the tightness of tax enforcement). In line with the OECD’s Base Erosion and Profit Shifting project, we analyze the scope for enforcement cooperation among asymmetric countries, considering that taxes are set non-cooperatively. We show that the low‐tax country may fail to cooperate if asymmetry is large enough and that tax havens would never agree to cooperate.Then we identify two drivers for enforcement cooperation. The first driver of cooperation is the complementarity of enforcement actions across countries. This is because the efficiency loss from enforcement dispersion is greater under complementarity. The second driver of cooperation is tax leadership by the high‐tax country, which acts as a level‐playing field in the tax competition and reduces the extent of disagreement on enforcement. Journal of Public Economic Theory, vol 23, 487-509, June 2021
Heterogeneity in the tax pass-through to spirit retail prices: evidence from Belgium (with Valerio Serse), On 1st November 2015, the Belgian government increased the excise tax on alcoholic beverages. For spirits with 40% of alcohol and bottle size of 70 cl, this tax change is equivalent to an amount of 2,43 € per bottle of spirits. This paper studies the impact of this tax reform at the store level on the (posted) retail price of six major brands of spirits, using a difference-in-differences method. The estimation is based on a balanced panel of scanner data from a major supermarket chain (with a 33% market share) and uses the retail prices of the same brands sold in France by the same supermarket chain as a control group. Having information on each store location, we show spatial variations in the tax pass-through for homogeneous products. We find that these variations are strongly related to the intensity of local competition and to a lesser extent to the proximity to the borders (mainly with Luxembourg which is the low-price country). We find that the tax was quickly passed through during the first month of tax implementation and that it was mostly over-shifted. However, we also find that both the border and the competition effects are not instantaneous, but arise several months after the tax reform. These findings have important implications for alcohol control policies as they highlight that the incidence of alcohol taxation can vary greatly across space and affect differently households depending on where they live. Journal of Public Economics, 176-142-160, 2019
An international comparison of school systems based on social mobility (with Mattéo Godin). We propose an international comparison of school systems in OECD countries in terms of social mobility in education based on the PISA test scores in mathematics between 2003 and 2015. For each country, we calculate the students social mobility in education by comparing their ranking test score ranking to their social ranking. We compare this social mobility index in education to those generally used in OECD reports (the slope and the intensity of the social gradient, percentage of resilient students). We estimate the « Great Gatsby curve in education » that relates social mobility to inequality. We find strong correlation between social mobility in education and educational inequality between students and between schools. France and Belgium display low social mobility and high educational inequality by contrast to Finland and Canada. We also find that countries with high social mobility are associated with high educational achievement. Economics and Statistics, 499,61-78, June 2018