Isaac Baley (Universitat Pompeu Fabra, UPF) has obtained an ERC Starting Grant 2021. During his project MacroTaxReforms (The Macroeconomic Effects of Corporate Tax Reforms) he will study the macroeconomic effects of corporate taxation and delineate and quantify the trade-offs associated with different reforms.

Isaac Baley is an Assistant Professor of Economics at Universitat Pompeu Fabra, an Associated Researcher at CREI, an Affiliated Professor at the Barcelona School of Economics, and a Research Affiliate of CEPR. He received his PhD in Economics from New York University and a Master in Economic Theory from Instituto Tecnológico Autónomo de México.

His research has the objective to understand how agents behave in environments with information frictions and the implications of these choices for macroeconomic outcomes. His work spans a wide range of topics including firm pricing behaviour, monetary policy, international trade, and labour markets.  Isaac’s work has been published in Econometrica, Journal of Political Economy, American Economic Journal: Macroeconomics, and the Journal of International Economics. He has been awarded the Marie Curie Individual Fellowship from the European Commission, a British Academy Visiting Fellowship, and Caixa Research Grant for Socioeconomic Wellbeing. 

Previously he was an economic advisor at the Mexican Ministries of Economics and Finance, where he was responsible for designing and implementing policies to expand access to financial markets.

Which are the main objectives of MacroTaxReforms?

Corporate taxes have large economic effects via their impact on private investment, which is a key driver of short-run fluctuations and long-run growth. Recently, policymakers renewed their interest in corporate taxation as a tool to tackle the massive government debts accumulated during the pandemic, the secular increase in business profits, and the exhaustion of monetary policy. Since it is increasingly clear that corporate taxation will be a key component of fiscal policy in the years to come, the project’s objective is to understand the macroeconomic effects of corporate taxation and delineate and quantify the trade-offs associated with different reforms. 

The project research agenda will contribute on three main fronts:

  1. Methodologically, by studying how corporate tax reforms affect aggregate productivity, firm valuation, and business cycle dynamics using new structural frameworks with rich heterogeneity and empirically-relevant investment frictions.
  2. Empirically, by providing systematic evidence on the macroeconomic impact of corporate tax reforms using a combination of theory and cross-country firm-level investment data.
  3. With regard to policy, by providing a novel perspective for the design and evaluation of corporate tax reforms with a long-run macroeconomic perspective that considers the interaction with monetary policy.

Why did you decide to carry out your research at Pompeu Fabra University?

I have been an assistant professor at UPF since 2015. It is the top department in Economics in Spain and one of the top departments in Europe. I believe UPF provides me with full intellectual freedom and adequate resources to conduct my research.  I am fortunate to be surrounded by very smart and friendly colleagues, always eager to give advice, as well as excellent graduate students. Besides UPF, I am part of a larger research community that includes CREI, Universitat Autònoma de Barcelona, and the Institut of Anàlisi Econòmica, all under the Barcelona School of Economics. 

How do you expect this grant will affect your professional career?

I expect the ERC grant to have a very large positive impact on my career. This grant is extremely competitive and obtaining one is a clear signal that the profession thinks highly of the awarded research. The generosity of the grant will allow me to expand the research frontier while building and training a team of young economists. The visibility of the grant will allow me to disseminate the results to a large audience, maximize its impact, and hopefully, aid policymakers in their decisions. 

Are you planning to open research positions in your group?

Yes, I plan to open at least one full-time and one part-time research position. In terms of profiles, I expect to open a pre-doc position and a PhD position. 

Are you planning any collaborations?

I plan to collaborate with my long-term co-author Andres Blanco from the University of Michigan. Additionally, I expect to continue and expand my current collaborations with other researchers in institutions in the US, Europe, and Britain. 

Where can we learn more about you and your project?



Twitter: @isaacbaley

Selected publications

Mismatch Cycles. I. Baley, A. Figueiredo and R. Ulbricht. Journal of Political Economy, Forthcoming (2022)

Aggregate Dynamics in Lumpy Economies. I. Baley and A. Blanco. Econometrica, Vol. 89 (3), 1235 – 1264 (2021)

During the following weeks, we will be presenting those researchers working at Spanish institutions that have obtained an ERC Starting or Consolidator Grant 2021 and their projects. You can check their profiles HERE.