NICOLA PAVONI

Italian version

Publications

The Political Implications of Reference-Dependent Preferences (2026)


PAVONI NICOLA (joint with Fausto Panunzi and Guido Tabellini)
Journal of the European Economic Association, 2026 (open access)

This paper studies electoral competition over redistributive taxation between a safe incumbent and a risky opponent. With reference-dependent preferences, economically disappointed voters become risk lovers, and hence are attracted by the more risky candidate. We show that the equilibrium can display policy divergence: the intrinsically more risky candidate proposes lower taxes and is supported by a coalition of very rich and very disappointed voters, while the safe candidate proposes higher taxes. This can explain why right-wing populist parties are often supported by economically dissatisfied voters and yet they run on policy platforms of low redistribution.

Published version: https://doi.org/10.1093/jeea/jvag028



Last change 02/10/2026

Economic Shocks and Populism (10/2024)


PAVONI NICOLA (joint with Fausto Panunzi and Guido Tabellini)
Economic Journal, 134(663), October 2024: 3047-3061 (open access)

Published version: https://doi.org/10.1093/ej/ueae042



Last change 02/10/2026

Optimal Delegation and Information Transmission under Limited Awareness (01/2024)


PAVONI NICOLA (joint with Sarah Auster)
Theoretical Economics, 19(1), January 2024: 245-284

We study the delegation problem between a principal and an agent, who not only has better information about the performance of the available actions but also has superior awareness of the set of actions that are actually feasible. The agent decides which of the available actions to reveal and which ones to hide. We provide conditions under which the agent finds it optimal to leave the principal unaware of relevant options. By doing so, the agent increases the principal’s cost of distorting the agent’s choices and thereby increases the principal’s willingness to grant him higher information rents. We also consider communication between the principal and the agent after the contract is signed and the agent receives information. We show that limited awareness of actions improves communication in such signalling games: the principal makes a coarser inference from the recommendations of the privately informed agent and accepts a larger number of his proposals.

Published version: https://doi.org/10.3982/TE5117

Working paper version: main manuscript (PDF) · online appendix (PDF)



Last change 02/10/2026

Reflecting on the First 20 Years of the Journal of the European Economic Association (10/2023)


PAVONI NICOLA (joint with P. Dubois, J. Hjort, G. Lorenzoni, G. Peri, V. Skreta, R. Wacziarg and A. Weber)
Journal of the European Economic Association, 21(5), 2023: e1-e33

Published version: https://doi.org/10.1093/jeea/jvad045



Last change 02/10/2026

Efficient Child Care Subsidies (01/2020)


PAVONI NICOLA (joint with Christine Ho)
American Economic Review, 110(1), January 2020: 162-199

We study the design of child care subsidies in an optimal welfare problem with heterogeneous private market productivities. The optimal subsidy schedule is qualitatively similar to the existing US scheme. Efficiency mandates a subsidy on formal child care costs, with higher subsidies paid to lower income earners and a kink as a function of child care expenditure. Marginal labor income tax rates are set lower than the labor wedges, with the potential to generate negative marginal tax rates. We calibrate our simple model to features of the US labor market and focus on single mothers with children aged below 6. The optimal program provides stronger participation but milder intensive margin incentives for low-income earners with subsidy rates starting very high and decreasing with income more steeply than those in the United States.

Published version: https://doi.org/10.1257/aer.20170581



Last change 02/10/2026

The Precautionary Saving Effect of Government Consumption (30/10/2018)


PAVONI NICOLA (joint with Valerio Ercolani)
The B.E. Journal of Macroeconomics, 2018 (Frontiers)

We study a largely neglected channel through which government expenditures can boost private consumption. We set up a dynamic model in which households are subject to health shocks. We take the model to the data and estimate a negative impact of public health care on household consumption dispersion, wealth and saving. According to our model, this result is explained by a change in the level of precautionary saving, with public health care acting as a form of consumption insurance. We compute the implied consumption multipliers by simulating the typical government consumption shock within a calibrated general equilibrium version of our model, with flexible prices. The impact consumption multiplier generated by the decrease in the level of precautionary saving is positive and sizable. When we include the effect of taxation, the sign of the impact multiplier depends on a few features of the model, such as the persistence of the health shocks. The long-run cumulative multiplier is negative across all calibrations.

 

Published version: https://doi.org/10.1515/bejm-2017-0147



Last change 02/10/2026

The Dual Approach to Recursive Optimization: Theory and Examples (01/2018)


PAVONI NICOLA (joint with M. Messner and C. Sleet)
Econometrica, 86(1), January 2018: 133-172

Published version: https://doi.org/10.3982/ECTA11905



Last change 02/10/2026

The Evolution of Belief Ambiguity During the Process of High School Choice (04/2017)


PAVONI NICOLA (joint with Pamela Giustinelli)
Review of Economic Dynamics, 25, April 2017: 93-120

Published version: https://doi.org/10.1016/j.red.2017.01.002

Working paper version: IGIER Working Paper no. 574 (PDF)



Last change 02/10/2026

Intergenerational Disagreement and Optimal Taxation of Parental Transfers (07/2017)


PAVONI NICOLA (joint with Hakki Yazici)
Review of Economic Studies, 84(3), July 2017: 1264-1305

Published version: https://doi.org/10.1093/restud/rdw036



Last change 02/10/2026

The Design of 'Soft' Welfare Programs (20/03/2016)


PAVONI NICOLA (joint with O. Setty and G. Violante)
Review of Economic Dynamics, 20, March 2016: 160-180

Published version: https://doi.org/10.1016/j.red.2015.01.001



Last change 02/10/2026

Optimal Income Taxation when Asset Taxation is Limited (05/03/2016)


PAVONI NICOLA (joint with A. Ábráham and S. Koehne)
Journal of Public Economics, 136, April 2016: 14-29

Published version: https://doi.org/10.1016/j.jpubeco.2016.02.003



Last change 02/10/2026

Optimal Life-cycle Capital Taxation under Self-Control Problems (06/2017)


PAVONI NICOLA (joint with H. Yazici)
Economic Journal, 127(602), June 2017: 1188-1216

Published version: https://doi.org/10.1111/ecoj.12323



Last change 02/10/2026

Recursive Methods for Incentive Problems (10/2012)


PAVONI NICOLA with M. Messner & C. Sleet
Review of Economic Dynamics, 15(4), October 2012: 501-525

Published version: https://doi.org/10.1016/j.red.2012.07.002



Last change 02/10/2026

Risk Sharing in Private Information Models with Asset Accumulation: Explaining the Excess Smoothness of Consumption (07/2011)


PAVONI NICOLA with O. Attanasio
Econometrica, 79(4), July 2011: 1027-1068

Published version: https://doi.org/10.3982/ECTA7063



Last change 02/10/2026

On the First-order Approach in Principal-Agent Models with Hidden Borrowing and Lending (07/2011)


PAVONI NICOLA with A. Abraham and S. Koehne
Journal of Economic Theory, 146(4), July 2011: 1331-1361

Published version: https://doi.org/10.1016/j.jet.2011.03.002



Last change 02/10/2026

Optimal Unemployment Insurance, with Human Capital Depreciation, and Duration Dependence (05/2009)


PAVONI NICOLA
International Economic Review, 50(2), May 2009: 323-362

Published version: https://doi.org/10.1111/j.1468-2354.2009.00532.x



Last change 02/10/2026

Efficient Allocations with Moral Hazard and Hidden Borrowing and Lending: A Recursive Formulation (10/2008)


PAVONI NICOLA with A. Abraham
Review of Economic Dynamics, 11(4), October 2008: 781-803

Published version: https://doi.org/10.1016/j.red.2008.05.001



Last change 02/10/2026

Social Preferences, Skill Segregation and Wage Dynamics (01/2008)


PAVONI NICOLA with A. Cabrales and A. Calvo-Armengol
Review of Economic Studies, 75(1), January 2008: 65-98

Published version: https://academic.oup.com/restud/article-abstract/75/1/65/1630491



Last change 02/10/2026

Optimal Welfare-to-Work Programs (01/2007)


PAVONI NICOLA with G. Violante
Review of Economic Studies, 74(1), January 2007: 283-318

Published version: https://academic.oup.com/restud/article/74/1/283/1596863



Last change 02/10/2026

On Optimal Unemployment Compensation (2007)


PAVONI NICOLA
Journal of Monetary Economics, 54, 2007: 1612-1630

Published version: https://doi.org/10.1016/j.jmoneco.2006.06.006



Last change 02/10/2026

The Efficient Allocation of Consumption under Moral Hazard and Hidden Access to the Credit Market (2005)


PAVONI NICOLA with A. Abraham
Journal of the European Economic Association, 3(2-3), 2005: 370-381

Published version: https://doi.org/10.1162/jeea.2005.3.2-3.370



Last change 02/10/2026

Optimal Income Taxation and Hidden Borrowing and Lending: The First-Order Approach in Two Periods (2008)


PAVONI NICOLA with A. Abraham
Carlo Alberto Notebooks, No. 102


Last change 21/11/2011

On the Recursive Saddle Point Method (06/2016)


PAVONI NICOLA with Matthias Messner
Dynamic Games and Applications, 6(2), June 2016: 161-173 (download: IGIER Working Paper no. 255, 200

Published version: https://doi.org/10.1007/s13235-015-0137-3



Last change 02/10/2026

Inefficiencies in Dynamic Family Decisions: An Incomplete Contracts Approach to Labor Supply (1998)


PAVONI NICOLA
Working Paper no. 6/2000, Center for Household, Income, Labour and Demographic Economics (CHILD)


Last change 02/10/2026

Last change 08/09/2011