nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2014‒07‒28
twenty papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Mountains on the move: recent trends in national and EU-wide income dynamics in old and new EU Member States By Tim Goedemé; Diego Collado; Leen Meeusen
  2. A note on firm age and the margins of exports: First evidence from Germany By Joachim Wagner
  3. Does Job Insecurity Deteriorate Health? A Causal Approach for Europe By Caroli, Eve; Godard, Mathilde
  4. Workplace Health Promotion and Labour Market Performance of Employees By Huber, Martin; Lechner, Michael; Wunsch, Conny
  5. A note on quality of a firm’s exports and distance to destination countries: First evidence from Germany By Joachim Wagner
  6. Migration in Italy is Backing the Old Age Welfare By Del Boca, Daniela; Venturini, Alessandra
  7. Do Hiring Credits Work in Recessions? Evidence from France By Cahuc, Pierre; Carcillo, Stéphane; Le Barbanchon, Thomas
  8. Household electricity demand in Spanish regions. Public policy implications By Desiderio Romero-Jordán; Pablo del Río; Cristina Peñasco
  9. What effect does increasing the retirement age have on the employment rate older women? Empirical evidence from retirement age hikes in Hungary during the 2000s By Zsombor Cseres-Gergely
  10. Should I Stay or Should I Go? An Investigation of Graduate Regional Mobility in the UK and its Impact upon Early Career Earnings By Kidd, Michael; O'Leary, Nigel C.; Sloane, Peter J.
  11. Unemployment or Overeducation: Which is a Worse Signal to Employers? By Baert, Stijn; Verhaest, Dieter
  12. The impact of R&D subsidies on R&D employment composition By Sergio Afcha; Jose García-Quevedo
  13. Great expectations The unintended consequences of educational choices By Francesco Ferrante
  14. The Gender Wage Gap: Does a Gender Gap in Reservation Wages Play a Part? By Caliendo, Marco; Lee, Wang-Sheng; Mahlstedt, Robert
  15. Life Cycle Earnings, Education Premiums and Internal Rates of Return By Bhuller, Manudeep; Mogstad, Magne; Salvanes, Kjell G.
  16. Is Subsidizing Companies in Difficulties an Optimal Policy? An Empirical Study on the Effectiveness of State Aid in the European Union By Nicole Nulsch
  17. Cross-National Differences in Wealth Portfolios at the Intensive Margin: Is There a Role for Policy? By Doorley, Karina; Sierminska, Eva
  18. The economic burden of cancer survivorship in the UK: a patient-level analysis By Joachim Marti; Peter Hall; Patrick Hamilton; Claire Hulme; Helen Jones; Galina Velikova; Laura Ashley; Penny Wright
  19. The Public Sector Wage Premium in Spain: Evidence from Longitudinal Administrative Data By Hospido, Laura; Moral-Benito, Enrique
  20. Publish or Perish: An Analysis of the Academic Job Market in Italy By Daniele Checchi; Gianni De Fraja; Stefano Verzillo

  1. By: Tim Goedemé; Diego Collado; Leen Meeusen
    Abstract: In European poverty research, poverty is usually measured with a poverty line defined as a percentage of the national median income. However, for grasping trends in social cohesion in the European Union (EU), and identifying options and pitfalls for social policy initiatives at the EU level, EU-wide income differences are at least as important as national income differences. Therefore, in this paper we document recent trends in national and EU-wide income poverty dynamics. We analyse to what extent household incomes have converged in the EU and how this has impacted upon poverty dynamics using both national and EU-wide poverty lines, before and during the current economic crisis. We pay particular attention to disentangling the contribution of both ‘old’ and ‘new’ EU Member States to EU-wide poverty dynamics. For doing so, we make use of four waves of EU-SILC data (2005-2011), the EU reference source for information on income and living conditions in Europe. We find that poverty dynamics using national and EU-wide poverty lines have evolved very differently in the period 2005-2011. Whereas national poverty stagnated during 2005-2009, mainly due to substantial increases in median incomes, EU-wide poverty substantially decreased in the same period. In contrast, although income poverty has increased between EU-SILC 2009 and EU-SILC 2011 when measured with national poverty lines, the crisis seems to have halted, but not (yet) substantially reversed the convergence trend of the lowest incomes in the EU towards the EU-wide median income. Finally, we find that when the new Member States joined the EU in 2004, poverty measured with a pan-European poverty threshold was predominantly a problem of the Eastern European EU Member States, whereas by the end of the period EU-wide poverty is at least as much a problem of low incomes of part of the population living in the EU15.
    Keywords: poverty, inequality, convergence, divergence, Europe, EU-SILC, social cohesion, EU
    JEL: D31 O52 I32
    Date: 2014–07
  2. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This note uses a new tailor-made data set to investigate the link between firm age and the extensive and intensive margins of exports empirically for the first time for Germany. Results turn out to be fully in line with the theoretical considerations. Older firms are more often exporters, export more and more different goods to more different destination countries, and export to more distant destination markets.
    Keywords: Exports, firm age, export margins, Germany
    JEL: F14
    Date: 2014–07
  3. By: Caroli, Eve (Université Paris-Dauphine); Godard, Mathilde (CREST)
    Abstract: This paper estimates the causal effect of perceived job insecurity – i.e. the fear of involuntary job loss – on health in a sample of men from 22 European countries. We rely on an original instrumental variable approach based on the idea that workers perceive greater job security in countries where employment is strongly protected by the law, and relatively more so if employed in industries where employment protection legislation is more binding, i.e. in industries with a higher natural rate of dismissals. Using cross-country data from the 2010 European Working Conditions Survey, we show that when the potential endogeneity of job insecurity is not accounted for, the latter appears to deteriorate almost all health outcomes. When tackling the endogeneity issue by estimating an IV model and dealing with potential weak-instrument issues, the health-damaging effect of job insecurity is confirmed for a limited subgroup of health outcomes, namely suffering from headaches or eyestrain and skin problems. As for other health variables, the impact of job insecurity appears to be insignificant at conventional levels.
    Keywords: job insecurity, health, instrumental variables
    JEL: I19 J63
    Date: 2014–06
  4. By: Huber, Martin (University of St. Gallen); Lechner, Michael (University of St. Gallen); Wunsch, Conny (University of Basel)
    Abstract: This paper investigates the average effects of (firm-provided) workplace health promotion measures in form of the analysis of sickness absenteeism and health circles/courses on labour market out-comes of the firms' employees. Exploiting linked employer-employee panel data that consist of rich survey-based and administrative information on firms, workers and regions, we apply a flexible propensity score matching approach that controls for selection on observables as well as on time-constant unobserved factors. While the effects of analysing sickness absenteeism appear to be rather limited, our results suggest that health circles/courses increase tenure and decrease the number of job changes across various age groups. A key finding is that health circles/courses strengthen the labour force attachment of elderly employees (51-60), implying potential cost savings for public transfer schemes such as unemployment or early retirement benefits.
    Keywords: firm health policies, health circles, health courses, analysis of sickness absenteeism, matching
    JEL: I10 I19 J32
    Date: 2014–06
  5. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This note uses a tailor-made new data set to investigate for the first time the link between the quality of a firm’s exports and the distance to destination countries for Germany. To anticipate the most important result, it is shown that the quality of exported goods and the distance to destination countries are not statistically positively correlated.
    Keywords: Exports, export quality, distance, Germany
    JEL: F14
    Date: 2014–07
  6. By: Del Boca, Daniela (University of Turin); Venturini, Alessandra (University of Turin)
    Abstract: Our research analyzes the effect of changes in migration policies and the accession to the European Union of former countries of emigration, considering the crucial role played by migrants in an aging society. We focus on the demand of family-care workers by using the last five years of the Italian Labour Force Survey dataset. Our results show that especially during the last years of recession, foreign labor (mostly female) has become fundamental in the family sector, favoring the participation of Italian skilled women in the labor market.
    Keywords: migration, aging, women's work
    JEL: J6 J15
    Date: 2014–07
  7. By: Cahuc, Pierre (Ecole Polytechnique, Paris); Carcillo, Stéphane (OECD); Le Barbanchon, Thomas (CREST)
    Abstract: This paper evaluates the impact of an unexpected temporary hiring credit targeted at workers paid below 1.6 times the minimum wage in firms with less than 10 employees in France from December 2008 to December 2009. Using rich administrative data covering all French firms, we find that the program has had a strong and rapid impact on employment. The net cost per job created for the government was around zero. The employment effect was stronger in areas where recruitment was easier. Although the hiring credit was not conditional on net job creation, it did not increase churning of workers. Nevertheless, we estimate that a credit conditional on net job creation above the employment growth threshold of -1%; would have maximized job creation, and created 1.8 times more jobs, at constant budget, provided that take-up had remained the same.
    Keywords: hiring credit, labor demand
    JEL: C31 C93 J6
    Date: 2014–07
  8. By: Desiderio Romero-Jordán (Universidad Rey Juan Carlos); Pablo del Río (Institute of Public Goods and Policies. Consejo Superior de Investigaciones Científicas (CSIC)); Cristina Peñasco (Institute of Public Goods and Policies. Consejo Superior de Investigaciones Científicas (CSIC))
    Abstract: This paper analyses the determinants of household electricity demand with a panel data, partial adjustment model of Spanish regions in the 1998-2009 period. The results show that electricity demand responds positively and significantly to electricity demand in the previous year, income, temperature range, penetration of electric water heating in households and the number of heating and cooling degree days. It is significantly and negatively related to electricity prices, gas prices, penetration of electric heating in households and whether households have at least one member being 64 years or older. Price elasticities in the preferred model are -0.26 (short-term) and -0.37 (long-term). Income elasticities are 0.31 (short-term) and 0.43 (long-term). Several implications for electricity-efficiency policies are derived from the results of the analysis.
    Keywords: Electricity demand, residential sector, partial adjustment model
    JEL: Q41 Q43 Q55
    Date: 2014
  9. By: Zsombor Cseres-Gergely (Institute of Economics, Center for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: This paper provides empirical evidence on the effect of changing the retirement age on employment. Base on individual data from Hungary, a country where a number of hikes increased the retirement age between 1997 and 2009, this analysis benefits from substantial variation in pension eligibility during a relatively short time. It is based on a difference-in-difference approach and supported by independent variation in the age-based eligibility rule contributing to the causal identification of the effect. Results suggest that the effect of the changes in early retirement age is substantial, amounting to 5-7.4 percentage point increase in the 45 per cent employment rate at the retirement age for women. Changes in the normal retirement age do not seem to have such employment effect because increases in disability pension claims have counteracted them.
    Keywords: retirement age, older workers, employment
    JEL: H31 H55 J14 J26
    Date: 2014–04
  10. By: Kidd, Michael (Queensland University of Technology); O'Leary, Nigel C. (Swansea University); Sloane, Peter J. (Swansea University)
    Abstract: This paper uses HESA data from the Destination of Leavers from Higher Education survey 2003/04 to examine whether more mobile students in terms of choice of institution and location of employment earn more than those who are less mobile. The clear finding is that mobility is associated with superior earnings outcomes, but principally through mobility as it relates to students extending their horizon of job search. A bivariate probit analysis also confirms that there is a positive relationship between regional mobility both in the choice of attending university and the choice of where to take up employment.
    Keywords: location by residence, academic institution and employment, graduates, earnings
    JEL: J24 J31
    Date: 2014–07
  11. By: Baert, Stijn (Ghent University); Verhaest, Dieter (K.U.Leuven)
    Abstract: This study aims at estimating the stigma effect of unemployment and overeducation within one framework. To this end, we conduct a field experiment in the Belgian labour market. We send out trios of fictitious male job applications to real vacancies. These applications differ only by the labour market history of the candidates. By monitoring the subsequent reactions from the employer side, we find evidence for a larger stigma effect of unemployment than overeducation. The stigma effect of overeducation is found to occur for permanent contract jobs but not temporary ones.
    Keywords: unemployment signalling, overeducation signalling, transitions in youth
    JEL: J24 J60 C93
    Date: 2014–07
  12. By: Sergio Afcha (Pontificia Universidad Católica del Perú); Jose García-Quevedo (University of Barcelona & IEB)
    Abstract: In this paper we examine the impact of subsidies granted at national and regional levels on a set of R&D employment variables and, specifically, we seek to identify the existence of the behavioural additionality effects of these public subsidies on firms’ R&D human resources. We begin by assessing the effects of public funds on R&D private expenditures and on the number of R&D employees, and then focus on their impact on the composition of human resources engaged in R&D as classified by occupation and level of education. The data used correspond to the Spanish Technological Innovation Panel for the period 2006-2011. To control for selection bias and endogeneity, a combination of non-parametric matching techniques are implemented. After ruling out the existence of crowding out effects, our results show that R&D subsidies increase the number of R&D employees. However, no increase is found in the average level of qualification of R&D staff members in subsidized firms. All in all, the effects of public support are heterogeneous being dependent on the source of the subsidy and the firms’ characteristics.
    Keywords: R&D subsidies, R&D employment, matching estimators, technology policy
    JEL: O38 J24 H25 C14
    Date: 2014
  13. By: Francesco Ferrante (University of Cassino, AlmaLaurea)
    Abstract: Human capital is invariably found to be an important explanatory variable of various proxies for well being (WB), i.e. income, happiness, job and life satisfaction, health status. Nevertheless, to date few systematic efforts have been made to explain its various and interconnected functions. The U-shaped age/SWB relation found by many empirical studies suggests that investigating the pattern of different measures of WB over people’s life cycles may yield important information and provide useful insights into the main mechanisms connecting human capital and WB. In this paper I contend that there are four such links. First, human capital improves decision making skills in different life domains. Second, it improves the skills and knowledge in doing things and enjoying life. Third, human capital shapes our identity/personality traits and, fourth, by doing so, it fuels our aspirations in different life domains. The first two effects can be expected to improve people’s performance and subjective well being. Building on Ferrante (2009), more ambiguous is the impact exerted by human capital through the joint action of people’s identity and aspirations. In this paper, I explore data drawn from the Survey on Household Income and Wealth (SHIW) conducted by the Bank of Italy (2008), containing rich information on people’s socioeconomic and educational backgrounds, educational and skill mismatches in the workplace and various measures of WB such as income, happiness, job satisfaction and health status. The tentative explanations for my empirical findings are: (a) people experience large mismatches in aspirations/expectations early in adult life; (d) the latter mismatches depend on education and are largely confined to the labour market; (c) the curvature of the U-shaped age/happiness relationship depends on the level of education. The suggested interpretation of this results is that education affects both people’s expectations and the way in which they react to unfulfilled aspirations.
    Keywords: aspirations, expectations, education, well being
    JEL: A13 D1 D60 H11 I2 J13 J24 I38
    Date: 2014–07
  14. By: Caliendo, Marco (University of Potsdam); Lee, Wang-Sheng (Deakin University); Mahlstedt, Robert (IZA)
    Abstract: This paper focuses on re-examining the gender wage gap and the potential role that reservation wages play. Based on two waves of rich data from the IZA Evaluation Dataset Survey we examine the importance of gender differences in reservation wages to explain the gender gap in realized wages for a sample of newly unemployed individuals actively searching for a full-time job in Germany. The dataset includes measures for education, socio-demographics, labor market history, psychological factors and job search characteristics allowing us to perform a decomposition analysis including these potentially influential factors. Our results suggest that the gender wage gap disappears once we control for reservation wages. We also find a close correspondence between the two gaps for certain subgroups. For example, those with low labor market experience show no gender gap in reservation wages and also no corresponding gap in observed wages. In an attempt to better understand how the initial gender gap in reservation wages arises, we also decompose the gender gap in reservation wages and draw some preliminary conclusions on the nature of the unobservable traits that reservation wages might be capturing.
    Keywords: wages, gender gap, reservation wages, discrimination
    JEL: J16 J31
    Date: 2014–07
  15. By: Bhuller, Manudeep (Statistics Norway); Mogstad, Magne (University of Chicago); Salvanes, Kjell G. (Norwegian School of Economics)
    Abstract: What do the education premiums look like over the life cycle? What is the impact of schooling on lifetime earnings? How does the internal rate of return compare with opportunity cost of funds? To what extent do progressive taxes attenuate the incentives to invest in education? This paper exploits Norwegian population panel data with nearly career long earnings histories to answer these important questions. We provide a detailed picture of the causal relationship between schooling and earnings over the life cycle, following individuals over their working lifespan. To account for endogeneity of schooling, we apply three commonly used identification strategies. Our estimates show that additional schooling gives higher lifetime earnings and steeper age-earnings profile, in line with predictions from human capital theory. These estimates imply an internal rate of return of around 10 percent, after taking into account income taxes and earnings-related pension entitlements. Under standard conditions, this finding suggests it was financially profitable to take additional schooling because the rates of return were substantially higher than the market interest rates. By comparison, Mincer regressions understate substantially the rates of return. We explore the reasons for this downward bias, finding that it is driven by Mincer's assumptions of no earnings while in school and exogenous post-schooling employment.
    Keywords: education premium, internal rate of return, life cycle earnings
    JEL: J24 J31
    Date: 2014–07
  16. By: Nicole Nulsch
    Abstract: Even though state aid in order to rescue or restructure ailing companies is regularly granted by European governments, it is often controversially discussed. The aims for rescuing companies are manifold and vary from social, industrial and even political considerations. Well-known examples are Austrian Airlines (Austria) or MG Rover (Great Britain). Yet, this study aims to answer the question whether state aid is used effectively and whether the initial aim why aid has been paid has been reached, i.e. the survival of the company. By using data on rescued companies in the EU and applying a survival analysis, this paper investigates the survival rates of these companies up to 15 years after the aid has been paid. In addition, the results are compared to the survival rates of non-rescued companies which have also been in difficulties. The results suggest that despite the financial support, business failure is often only post-poned; best survival rates have firms with long-term restructuring, enterprises in Eastern Europe, smaller firms and mature companies. However, non-funded companies have an even higher ratio to go bankrupt.
    Keywords: European competition policy, state aid, firm survival, survival analysis
    JEL: K21 L49 L59
    Date: 2014–07
  17. By: Doorley, Karina (IZA); Sierminska, Eva (CEPS/INSTEAD)
    Abstract: Using harmonized wealth data and a novel decomposition approach in this literature, we show that cohort effects exist in the income profiles of asset and debt portfolios for a sample of European countries, the U.S. and Canada. We find that the association between household wealth portfolios at the intensive margin (the level of assets) and household characteristics is different from that found at the extensive margin (the decision to own). Characteristics explain most of the cross-country differences in asset and debt levels, except for housing wealth, which displays large unexplained differences for both the under-50 and over-50 populations. However, there are cohort differences in the drivers of wealth levels. We observe that younger households' levels of wealth, given participation, may be more responsive to the institutional setting than mature households. Our findings have important implications, indicating a scope for policies which can promote or redirect investment in housing for both cohorts and which promote optimal portfolio allocation for mature households.
    Keywords: wealth portfolios, decomposition, institutions, demographics
    JEL: G11 G21 J10
    Date: 2014–07
  18. By: Joachim Marti (Leeds Institute of Health Sciences, University of Leeds); Peter Hall (Leeds Institute of Health Sciences, University of Leeds); Patrick Hamilton (Leeds Institute of Health Sciences, University of Leeds); Claire Hulme (Leeds Institute of Health Sciences, University of Leeds); Helen Jones (Leeds Institute of Cancer and Pathology, Bexley Wing, St James University Hospital, Beckett Street, Leeds); Galina Velikova (Leeds Institute of Cancer and Pathology, Bexley Wing, St James University Hospital, Beckett Street, Leeds); Laura Ashley (School of Social, Psychological and Communication Sciences, Faculty of Health and Social Sciences, Leeds Metropolitan University); Penny Wright (Leeds Institute of Cancer and Pathology, Bexley Wing, St James University Hospital, Beckett Street, Leeds)
    Abstract: Purpose: To describe the economic burden of cancer survivorship for disease-free breast, colorectal and prostate cancer patients in the UK, one year post-diagnosis. Methods: Patient-level data were collected over a three months period 12-15 months post diagnosis to estimate the monthly societal costs incurred by disease-free cancer survivors. Self-reported resource utilisation data were obtained via the electronic Patient-reported Outcomes from Cancer Survivors (ePOCS) system and included community-based health and social care, medications, travel costs and carers’ time. Hospital costs were retrieved through data linkage with the patient-level information and costing systems (PLICS). Patients also provided information on their pre-diagnostic and current employment status. Multivariate regression analysis was used to examine cost predictors. Results: Overall 296 patients were included in the analysis, including 135 breast cancer, 83 colorectal cancer and 78 prostate cancer patients. The average monthly societal cost was £260 (95% CI: £198-£322) and was incurred by 92% of patients. These were divided into costs to the NHS (mean: £177, 95% CI: £131-£224), patients’ out-of-pocket (OOP) costs (mean: £25, 95% CI: £9-£42) and costs of informal care (mean: £70, 95% CI: £38-£102).The distribution of societal costs was skewed with a small number of patients incurring very high monthly costs. Of 144 patients working pre-diagnosis, 110 (76.4%) were still working 15 months post-diagnosis. Multivariate analyses showed higher NHS costs for breast cancer patients. Significant predictors of OOP costs included age and socioeconomic status. Conclusions: In the UK, the population of cancer survivors is increasing and the full economic consequences of the disease are still poorly understood. This study found that the economic burden of cancer survivorship is unevenly distributed in the population and that disease-free cancer survivors still required substantial support from family and friends over 1 year post-diagnosis. In addition, this study illustrates the feasibility of using an innovative online data collection platform to routinely collect patient-reported resource utilisation information.
    Keywords: cancer survivorship; societal cost; resource use; out-of-pocket expenses; informal care; patient-reported outcomes; online data collection;
    Date: 2014
  19. By: Hospido, Laura (Bank of Spain); Moral-Benito, Enrique (Bank of Spain)
    Abstract: This paper studies the public sector wage gap in Spain, by gender, skill level and type of contract, using recent administrative data from tax records. We estimate wage distributions in the presence of covariates separately for men and women in the public and in the private sectors, and we take advantage of the longitudinal structure of the data to control for selection. We find a positive public wage premium for men and women even after accounting for characteristics and endogenous selection; the observed average gap in hourly wages of 35 log points is reduced to 20 when accounting for observed characteristics, and to 10 once endogenous selection is also taken into consideration. We also find substantial variation in the public premium along the wage distribution once observed characteristics are accounted for. This variation, however, is offset by opposite patterns of selection into the public sector: while we observe positive selection into the public sector at the bottom of the wage distribution, workers at the top of the distribution select negatively into the public sector.
    Keywords: public sector wage gap, quantile regression, wage distribution, panel data
    JEL: C21 C23 J31 J45
    Date: 2014–07
  20. By: Daniele Checchi; Gianni De Fraja; Stefano Verzillo
    Abstract: We derive a theoretical model of effort in the presence of career concern based on the multi-unit all-pay auction, and closely inspired by the Italian academic market. In this model, the number of applicants, the number of new posts, and the relative importance of the determinants of promotion determine academics' effort. Because of the specific characteristics of Italian universities, where incentives operate only through promotion, and where all appointment panels are drawn from strictly separated and relatively narrow scientific sectors, the model fits well Italian academia, and we test it in a newly constructed dataset which collects the journal publications of all Italian academics working in universities. We find that individual researchers respond to incentives in the manner predicted by the theoretical model: more capable researchers respond to increases in the importance of the measurable determinants of promotion and in the competitiveness of the scientific sector by exerting more effort; less able researchers do the opposite.
    Keywords: Career concerns, Applied auction theory, Publications, Academic job market, Nepotism JEL Numbers: D44, I23, I21, M51
    Date: 2014–07

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