Florian Hoffmann

Associate Professor

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Graduate Student Supervision

Doctoral Student Supervision (Jan 2008 - April 2022)
Essays in labour economicsca (2021)

Chapter 2 demonstrates how individual income tax structures incentivize a more coordinatedlabour supply response to childbirth within married households: a joint selectionout of the wage-paying sector and into self-employment. In a parallel analysis of longitudinaladministrative and survey data from Canada, I show that the birth of a first childis associated with an increase in both maternal and paternal self-employment in marriedhouseholds; explained largely by an increase in co-employment. I develop a novel simulatedinstrument research design, which exploits exogenous tax variation, to show thatthis strategic re-organization of the household is partly incentivized by income splittingtax savings. Finding a reduced form elasticity of 0.5, these savings can account for halfthe increase in co-employment after childbirth. Beyond tax avoidance, this paper presentsincome splitting as a subsidy to the creation of flexible, tax-optimizing family firms thatprovide stable, long-run employment to households.Chapter 3 provides the first causal evidence on the impact of incorporation on the laboursupply and hiring practices of self-employed professionals. It exploits staggered reformsacross professions in each province to permit the registration of professional corporations inCanada. I found no evidence of a labour supply response to the significant tax implicationsof incorporation. However, for female professionals, incorporation increases the likelihoodof hiring at least one employee. This result is consistent with the cash flow benefits ofretained corporate earnings that enable to business owners to ensure against uncertainrevenue.Chapter 4 extends the DiNardo, Fortin, and Lemieux (1996) study of the links betweenlabour market institutions and wage inequality in the United States and updates the analysisto the 1979 to 2017 period. A notable extension quantifies the magnitude and distributionalimpact of spillover effects linked to minimum wages and the threat effects of unionization.A distribution regression framework is used to estimate both types of spillover effects.Accounting for spillover effects doubles the contribution of de-unionization to the increasein male wage inequality. It raises the explanatory power of declining minimum wages totwo-thirds of the increase in inequality at the bottom end of the female wage distribution.

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On dynamic choice models, agent's beliefs and unobserved heterogeneity (2021)

Chapter 2 provides a tractable model that separates firms’ incentive problems and coordinationproblems during the initiation of collusion. In the Chilean pharmaceutical industry, firms colludethrough price leadership. Collusion gradually diffuses among markets: firms collusively raiseprices in a couple of markets per week. We propose a model of price leadership under the dynamic pricing game framework to incorporate the coordination problems by allowing firms’ beliefs about competitors’ conduct to be biased towards a competitive equilibrium. As firms observe supracompetitive prices, they adaptively learn that competitors are willing to collude. We show that gradualism is explained by the heterogeneous market characteristics as well as firms’ learning to coordinate.Chapter 3 develops the likelihood-ratio based test of the null hypothesis of a m₀-componentmodel against an alternative of (m₀+1)-component model in the normal mixture panel regression.I show that the normal mixture panel regression does not suffer from the Fisher Information matrixdegeneracy under the reparameterization proposed in Kasahara and Shimotsu [89]. As a result, the likelihood ratio test statistic can be approximated by a local quadratic expansion of squares and products of the reparameterized parameters. Moreover, I obtain the data-driven penalty function via computational experiments to attend to the unbounded likelihood ratio. In addition, I apply the test to random coefficient Cobb-Douglas production function estimation following the framework of Gandhi et al. [63] and Kasahara and Shimotsu [90]. The empirical findings suggest evidence of heterogeneous production technology beyond the Hicks-neutral technology factor.Chapter 4 develops a modified expectation-maximization(EM) algorithm to incorporate unobservedheterogeneity for the dynamic discrete choice model that does not require the finite dependenceproperty. Following the Euler Equation(EE) representation of dynamic discrete decision problems, we provide an alternative conditional choice probability (CCP) value function representationthat relies only on the CCP of one action. We illustrate the computational gains with MonteCarlo simulations.

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