European Center for Advanced Research in Economics and Statistics

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Title: The Skill Premium Puzzle in Portugal

Abstract: This project studies the evolution of the aggregate skill premium in Portugal, by using Quadros de Pessoal, a comprehensive employer-employee dataset. Between 1995-2021, the skill premium dropped by 26 percent, in stark contrast to the increasing skill premium observed in the US. To rationalise this, we study how well the Krusell et al. (2000) model, characterised by capital-skill complementarity, accounts for the Portuguese data. Compared to the original model, we estimate a higher degree of complementarity between skilled labour and capital equipment, and a lower degree of substitutability between skilled and unskilled labour in the Portuguese case. Moreover, the model can account for the recent drop in the labor share. We also observe that the relative quantity effect was stronger than the capital-skill complementarity effect during this period, which explains the fall in the skill premium.

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Title : An Axiomatization of the Random Priority Rule

Abstract : We study the problem of assigning indivisible objects to agents where each is to receive one object. To ensure fairness in the absence of monetary compensation, we consider random assignments. Random Priority, also known as Random Serial Dictatorship, is the only mechanism that satisfies (i) fairness in the sense of equal-treatment-of-equals, (ii) ex post efficiency, and (iii) probabilistic (Maskin) monotonicity -- whenever preferences change so that a given deterministic assignment is ranked weakly higher by all agents, the probability of that assignment being chosen should be weakly larger. Probabilistic monotonicity implies strategy-proofness for random assignment problems and is equivalent on a general social choice domain; for deterministic rules it coincides with Maskin monotonicity.

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Title  : The Dynamics of Agricultural Production

Abstract : Agricultural productivity is low in rural economies compared to that of developed economies, and there is disparity in measured productivity across farms. The dispersion of measured productivity might reflect (i) volatile conditions and (ii) sluggish adjustments in agricultural production to such conditions, e.g., due to market frictions or technological constraints. This paper sheds light on the existence and nature of such imperfect adjustments by measuring the adjustment of production (factors, inputs and cropping patterns) to large shocks affecting the returns to different crops, and by estimating a dynamic structural model of farm production. We use the model to quantify the extent to which market frictions and technological constraints respectively limit the ability of farmers to adjust their production to changing conditions. We find that both technological and market frictions are quantitatively relevant, the latter implying that a significant part of sluggish adjustments can be interpreted as misallocation in factors and in cropping patterns