Asset exemption in bankruptcy and access to credit. With Pasqualina Arca and Gianfranco Atzeni. R&R. PDF
Abstract. Under the US personal bankruptcy law, exempt assets are not liquidated following bankruptcy. Entrepreneurs can undo such a protection by posting collateral. We provide a complete characterization of the interplay between asset exemption from liquidation upon default and adverse selection in a competitive credit market. Severe adverse selection induces separation, with safer entrepreneurs choosing loan contracts characterized by high collateral requirements, lower cost of credit and credit rationing for wealth-constraints applicants. Irrespective of adverse selection, poor safe entrepreneurs pool as they face too much rationing, otherwise. Higher exemption makes collateral more informative. Evidence from the SSBF survey supports our theory.
Bank Recovery and Resolution planning, Liquidity Management and Fragility. (with Ettore Panetti). Submitted. PDF
Abstract. Do banks manage liquidity against financial fragility? To answer this question, we study an economy where banks undertake maturity transformation and insure their depositors against idiosyncratic and aggregate shocks. Moreover, strategic complementarities might trigger depositors’ self-fulfilling runs, modeled as "global games". During runs, if depositors' risk aversion is sufficiently high, the banks engage either in liquidity hoarding when the productive asset in portfolio is sufficiently liquid, or in liquidity cushioning when it is sufficiently illiquid. Ex ante, if the probability of the idiosyncratic shock is sufficiently large, banks hold extra precautionary liquidity, and narrow banking is not viable.
Market power and welfare effects of immigration. With Gianfranco Atzeni, Marco Delogu, and Dimitri Paolini. PDF
Abstract. We analyze the effects of migration allowing for endogenous labor supply in a standard two-region model with monopolistically competitive producers and love for variety. We find that the welfare effects of migration depend on firms’ market power in the final good markets. If market power is sufficiently high, migration of low-skill individuals positively affects the welfare of native high skill individuals in the destination region, while low skill individuals are unaffected. Natives of the origin region are always better off, irrespective of their skills. Differently, if market power is sufficiently low, low skill migration makes both high and low individuals native of the destination region better off.
Determinants of politicians' party loyalty. With Fabio Cerina and Andrea Caria. In progress.
Skill premia, education race and the credit market. With Dimitri Paolini. In progress.