nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2015‒02‒28
twenty-two papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. How Many Educated Workers for Your Economy? European Targets, Optimal Public Spending, and Labor Market Impact By Lebon, Isabelle ; Rebiere, Therese
  2. Moving up a Gear: The Impact of Compressing Instructional Time into Fewer Years of Schooling By Mathias Huebener ; Jan Marcus
  3. Earnings Returns to Different Educational Careers: The Relative Importance of Type vs. Field of Education By Curdin Pfister ; Simone Tuor Sartore ; Uschi Backes-Gellner
  4. Education, Health and Subjective Wellbeing in Europe. By Leonardo, Bechetti ; Conzo, Pierluigi ; Pisani, Fabio
  5. Does sector-specific experience matter? The case of European higher education ministers By Julien Jacqmin ; Mathieu Lefebvre
  6. Globalization and the working poor By Joel Hellier ; Ekaterina Kalugina
  7. SPAIN: FROM IMMIGRATION TO EMIGRATION? By Mario Izquierdo ; Juan F. Jimeno ; Aitor Lacuesta
  8. The Financial Crisis and Consumers' Income and Pension Expectations By Luc Bissonnette ; Arthur van Soest
  9. What Explains Immigrant-native gaps in European Labor Markets: The Role of Institutions By Martin Guzi ; Martin Kahanec ; Lucia Mýtna Kureková
  10. Do changes in regulation affect temporary agency workers' job satisfaction? By Busk, Henna ; Jahn, Elke J. ; Singer, Christine
  11. Changing labour market opportunities for young people in Italy and the role of the family of origin By Gabriella Berloffa ; Francesca Modena ; Paola Villa
  12. Your very private job agency: Job referrals based on residential location networks By Hawranek, Franziska ; Schanne, Norbert
  13. From the cradle to the grave : the effect of family background on the career path of italian men By Michele Raitano ; Francesco Vona
  14. The Feminization of Occupations and Change in Wages: A Panel Analysis of Britain, Germany and Switzerland By Emily Murphy ; Daniel Oesch
  15. A decomposition analysis of the German gender pension gap By Hänisch, Carsten ; Klos, Jonas
  16. The impact of the minimum wage on job separations and working hours among young people in Poland By Anna Baranowska-Rataj ; Iga Magda
  17. Language Skills and Labor Market Performance of Immigrants in the Netherlands By Yuxin Yao ; Jan C. van Ours
  18. The Impact of Immigrants on Public Finances: A Forecast Analysis for Denmark By Hansen, Marianne Frank ; Schultz-Nielsen, Marie Louise ; Tranæs, Torben
  19. Inequality of opportunity in Europe before and after the Great Recession By Michal Brzezinski
  20. Is caring for elderly parents detrimental to women’s mental health? The influence of the European North-South gradient By Elenka Brenna ; Cinzia Di Novi
  21. Innovation and Productivity in Services: Evidence from Germany, Ireland and the United Kingdom By Bettina Peters ; Rebecca Riley ; Iulia Siedschlag ; Priit Vahter ; John McQuinn
  22. FDI and Heterogeneous Performance of European Enterprises By Valeria Gattai ; Giorgia Sali

  1. By: Lebon, Isabelle (University of Caen ); Rebiere, Therese (CNAM, Paris )
    Abstract: This paper studies optimal taxation schemes for education in a search-matching model where the labor market is divided between a high-skill and a low-skill sector. Two public policy targets – maximizing the global employment level and optimizing the social surplus – are studied according to three different public taxation strategies. We calibrate our model using evidence from fourteen European countries, and compare our results with the target from the Europe 2020 Agenda for achievement in higher education. We show that, with current labor market characteristics, the target set by governments seems compatible with the social surplus maximization objective in some countries, while being too high for other countries. For all countries, maximizing employment would imply higher educational spending than that required for the social surplus to reach its maximum.
    Keywords: educational policy, job search, matching model, optimal taxation
    JEL: H21 H52 J21 J64
    Date: 2015–02
  2. By: Mathias Huebener ; Jan Marcus
    Abstract: Policy-makers face a trade-off between the provision of higher levels of schooling and earlier labour market entries. A fundamental education reform in Germany tackles this trade-off by reducing high school by one year while leaving the total instructional time unchanged. Employing administrative data on all high school graduates in 2002-2013 in Germany, we exploit both temporal and regional variation in the implementation of the reform and study the overall effectiveness of this reform. We find that compressing the high school track by one year reduces the mean high school graduation age by about 10 months. The probability to repeat a grade level in the course of high school increases by 21 percent (3 percentage points), peaking in the final three years before graduation. However, the high school graduation rate is not affected. The results indicate the reform’s success in reducing the graduation age, though it stays behind its potential benefits for labour markets and social security schemes because of higher grade repetition rates.
    Keywords: G12, G8, graduation age, grade repetition, grade retention, graduation rates, learning intensity, diff-in-diff, human capital, instructional time
    JEL: I28 J18 D04
    Date: 2015
  3. By: Curdin Pfister (Department of Business Administration, University of Zurich ); Simone Tuor Sartore (Department of Business Administration, University of Zurich ); Uschi Backes-Gellner (Department of Business Administration, University of Zurich )
    Abstract: The two choices that students in many Western European countries must make during their educational career are the type of education (vocational vs. academic) and the subject area (the specific field of education). However, most studies on the effect of education on earnings consider only one of these two factors. In addition, most of these studies focus exclusively on average returns and neglect the variance of the returns, thus overlooking important aspects of the nature of the returns to education such as the risk in human capital investments. In this study, we consider both factors type of education and subject area at the same time to estimate earning returns and to examine how much these two factors contribute to the variance of earnings in later careers. We use the Swiss Adult Education Survey from 2011 and construct a sample of individuals with tertiary level educational degree, estimating earnings regressions and decomposing the variance in earnings for type of education and subject area. Decomposition results show that field of education, relative to subject area, explains double the variation in earnings. Given our findings that earnings relate more to subject area than to type of education, the question of which type of education—academic or vocational—an individual chooses is less relevant than the question of which field he or she chooses to specialize in.
    JEL: I21 J24
    Date: 2015–02
  4. By: Leonardo, Bechetti ; Conzo, Pierluigi ; Pisani, Fabio (University of Turin )
    Abstract: The productive and allocative theories predict that education has positive impact on health: the more educated adopt healthier life styles and use more efficiently health inputs and this explains why they live longer. We find partial support for these theories with an econometric analysis on a large sample of Europeans aged above 50 documenting a significant and positive correlation among education years, life styles, health outputs and functionalities. We however find confirmation for an anomaly already observed in the US, namely the more educated are more likely to contract cancer. Our results are robust when controlling for endogeneity and reverse causality in IV estimates with instrumental variables related to quarter of birth and neighbours’ cultural norms.
    Date: 2015–02
  5. By: Julien Jacqmin ; Mathieu Lefebvre
    Abstract: This paper looks at the relationship between higher education ministers and the performance of the sector that they govern. Using an original panel dataset with the characteristics of European higher education ministers, we find that having a past experience in the sector leads to a higher level of performance, as measured by ranking data. Making a parallel with the literature about the impact of education on the educated, we discuss potential explanations behind the impact of this on-the-job learning experience. As we find that this characteristic has no impact on the spendings of the sector, we argue that this academic experience makes them more prone to introduce adequate reforms. Furthermore, we find that this result is driven by ministers with both this sector-specific and an electoral experience, the latter measured by a succesful election at the regional or national level. This tends to show that political credibility should not be overshadowed by the importance of the sector-specific experience of ministers.
    Date: 2015–02
  6. By: Joel Hellier (EQUIPPE University of Lille 1 and LEMNA University of Nantes ); Ekaterina Kalugina (EPEE University of Evry Val d’Essonne-TEPP )
    Abstract: We analyse the effect of globalisation on the incidence of in-work poverty in advanced European countries. We firstly develop an analytical framework that provides bases for the empirical work. Using the EU-SILC database between 2005 and 2010 supplemented by macro-data, we apply both a fixed effect model at the country level and a multilevel model at the individual level. In line with the analytical predictions, trade with emerging countries has a positive and significant effect on in-work poverty whereas the effect of trade with developed countries is non-significant. The impact of social protection indicators is non-significant as well, which suggest that the efficiency effect and the compensation effect could balance each other. Hence, globalization has a positive effect on in-work poverty, which is essentially based on trade with emerging countries.
    Keywords: Working poor, globalisation, Europe.
    JEL: H26 I32 J31 J32
    Date: 2015–01
  7. By: Mario Izquierdo (Banco de España ); Juan F. Jimeno (Banco de España ); Aitor Lacuesta (Banco de España )
    Abstract: Since the start of the Great Recession the unemployment rate in Spain has risen by almost 18 percentage points. The unemployment crisis is affecting all population groups, including the more highly educated; but it is even more acute for the foreign population, whose unemployment rate is close to 40%. This situation follows a period of very high immigration flows (1995-2007) that set the number of foreigners living in Spain at 11% of the population. This paper documents the characteristics of recent migration flows to Spain and compares how foreign and Spanish nationals are moving abroad and across Spanish regions in response to the unemployment crisis. Building on this comparison, we shed some light on the selection of migrants by educational level and offer conjecture as to the implications of the migration outflows observed in recent years.
    Keywords: migration inflows and outflows, unemployment, educational selection of migrants.
    JEL: F22 J64 J61
    Date: 2015–02
  8. By: Luc Bissonnette ; Arthur van Soest
    Abstract: The expectations of economic agents play a crucial role in almost any inter-temporal economic model. A period of economic crisis may make consumer expectations more pes- simistic and affect their saving or retirement plans and decisions. Using 2009-2012 panel data for a representative sample of the Dutch population, we analyze consumers’ per- ception of the crisis and its expected impact on the household. Second, we analyze the deviations between short run income expectations and realizations, and how they are shaped by how people perceive the crisis. Finally, we study how crisis perceptions affect retirement age and income expectation.
    Keywords: Subjective probabilities, retirement, replacement rates
    JEL: D84 H55 J26
    Date: 2015
  9. By: Martin Guzi ; Martin Kahanec ; Lucia Mýtna Kureková
    Abstract: The role of institutions in immigrant integration remains underexplored in spite of its essential significance for integration policies. This paper adopts the Varieties of Capitalism framework to study the institutional determinants of immigrant-native gaps in host labor markets. Using the EU LFS we first measure immigrant-native gaps in labor force participation, unemployment, low-skilled employment and temporary employment. We distinguish the gaps that can be explained by immigrant-native differences in characteristics from those that cannot be explained by such differences, as these require different integration policy approaches. In the second stage we measure the effects of institutional and contextual variables on explained and unexplained immigrant-native gaps. Our findings confirm that institutional contexts play a significant role in immigrant integration, and highlight the importance of tailoring policy approaches with regard to the causes of immigrant-native gaps.
    Keywords: immigrant integration, integration policy, discrimination, labor market, Varieties of Capitalism
    JEL: J15 J18 J61
    Date: 2015–01–09
  10. By: Busk, Henna ; Jahn, Elke J. (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] ); Singer, Christine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] )
    Abstract: "This paper evaluates the impact on temporary agency workers' job satisfaction of a reform that considerably changed regulations covering the temporary help service sector in Germany. We isolate the causal effect of this reform by combining a difference- in-difference and matching approach and using rich survey data. We find that the change of the law substantially decreased agency workers' job satisfaction while regular workers' job satisfaction remained unchanged. Further analysis reveals that the negative effect on agency workers' job satisfaction can be attributed to a decrease in wages and an increase in perceived job insecurity. These results are also robust to the use of different specifications and placebo tests." (Author's abstract, IAB-Doku) ((en))
    Keywords: Zeitarbeit, Leiharbeit, Leiharbeitnehmer, Arbeitszufriedenheit, Arbeitnehmerüberlassungsgesetz - Reform
    JEL: J28 J41 J88
    Date: 2015–02–17
  11. By: Gabriella Berloffa (University of Trento ); Francesca Modena (Bank of Italy ); Paola Villa (University of Trento )
    Abstract: This paper considers the increased incidence of insecure job conditions for young individuals entering the Italian labour market and their chances of moving to a more secure job after a reasonable period of time. In particular, we investigate empirically whether and how long-term changes in labour market institutions and conditions have altered the role of the family of origin in both labour market entry and subsequent transitions. We use the Italian Households Longitudinal Study (Ilfi) and show that employment opportunities have changed significantly in Italy over the past three decades (from the late 1970s to the early 2000s). For an increasing share of young adults precariousness extends over a fairly long period of their working life. The family of origin reduced the probability of insecurity both in the early 1980s and during the 1990s, but in a different way: in the early 1980s, it had an effect in the entry year, but not subsequently; after the implementation of the Treu reform, its effect appeared only in the years following that of entry. Our overall results suggest that the rapid expansion of insecure contractual arrangements in the 1990s-early 2000s has increased the difficulty of transitioning to a “better” job condition (i.e. secure employment). This has enhanced the role of the family of origin in overcoming the difficulty and generated new inequalities among young Italians.
    Keywords: youth occupational outcomes, precarious employment, family of origin, Italy
    JEL: D6 J2
    Date: 2015–01
  12. By: Hawranek, Franziska ; Schanne, Norbert
    Abstract: This paper analyzes job referral effects that are based on residential location. We use geo-referenced record data for the entire working population and the corresponding establishments in the German Rhine-Ruhr metropolitan area. We estimate the propensity of two persons to work at the same place when residing in the same neighborhood (reported with an accuracy of 500m×500m grid cells), and compare the effect to people living in adjacent neighborhoods. We find a significant increase in the probability of working together when living in the same neighborhood, which is stable across various specifications. We differentiate these referral effects for socioeconomic groups and find especially strong effects for migrant groups from former guest-worker countries and new EU countries. Further, we investigate a number of issues in order to deepen the insight on actual job referrals: distinguishing between the effects on working in the same neighborhood and working in the same establishment - probably the more accurate measure for job referrals - shows that the latter yield larger relative effects. Besides, we find that clusters in employment although having a significant positive effect play only a minor role for the magnitude of the referral effect. We find evidence that informal job markets play the biggest role in small firms and are least important in large firms. When we exclude short distance commuters, we find the same probabilities of working together, which reinforces our interpretation of this probability as a network effect.
    Keywords: Job referrals; Labor market; Neighborhood effects; Network effects; Social interaction
    Date: 2015–02–18
  13. By: Michele Raitano (Sapienza University of Rome ); Francesco Vona (OFCE )
    Abstract: This paper investigates the influence of parental education on the returns to experience of Italian men using a new longitudinal dataset that contains detailed information on individual working histories. Our favourite panel estimates indicate that an additional year of parental education increases sons' weekly wages by 11.7% after twenty years of experience and that 71% of this effect emerges during the career. We show that this effect holds irrespective of individual abilities, and it appears the result of both a glass ceiling effect, due to the complementarity between parental education and son’s abilities, and a parachute effect, associated with family labour market connections.
    Keywords: intergenerational inequality; parental education; experience -earnings profiles
    JEL: J62 J24 J31
    Date: 2015–02
  14. By: Emily Murphy ; Daniel Oesch
    Abstract: In the last four decades, women have made major inroads into occupations previously dominated by men. This paper examines whether occupational feminization is accompanied by a decline in wages: Do workers suffer a wage penalty if they remain in, or move into, feminizing occupations? We analzye this question over the 1990s and 2000s in Britain, Germany and Switzerland, using longitudinal panel data to estimate individual fixed effects for men and women. Moving from an entirely male to an entirely female occupation entails a loss in individual earnings of twelve percent in Britain, six percent in Switzerland and three percent in Germany. The impact of occupational feminization on wages is not linear, but sets apart occupations holding less than 50 percent of women from those with more than 60 percent of women. Only moving into the latter incurs a wage penalty. Contrary to the prevailing idea in economics, differences in productivity – human capital, job-specific skill requirements and time investment – do not fully explain the wage gap between male and female occupations. Moreover, the wage penalty associated with working in a female occupation is much larger where employer discretion is large -the private sector – than where wage setting is guided by formal rules – the public sector. These findings suggests that wage disparities across male and female occupations are due to gender devaluation.
    Keywords: occupations, gender, wages, discrimination, sex-segregation
    JEL: J16 J21 J23 J24 J31
    Date: 2015
  15. By: Hänisch, Carsten ; Klos, Jonas
    Abstract: This paper discusses the gap in own old-age incomes of men and women and explores the causes for these differences by means of decomposition methods using German micro-data of the survey 'Alterssicherung in Deutschland' (ASID). The Gender Pension Gap has decreased but still amounts to about 60% as of 2007. We find that this gap is mainly explained by differences in labor market experience and education. The gap is especially high at the lower end of the pension income distribution. The contribution of differing labor market experiences to the explained gap is particularly pronounced for retires with low pensions.
    Keywords: Social Security,Public Pensions,Pension Gap,Decomposition
    Date: 2014
  16. By: Anna Baranowska-Rataj (Institute of Statistics and Demography, Warsaw School of Economics ); Iga Magda (Department of Economics, Warsaw School of Economics )
    Abstract: The aim of this paper is to investigate the impact of the minimum wage on the risk of job separation and changes in working hours among young people in Poland. To this end, we use longitudinal data from the Labour Force Survey 2003-2011 and a difference-in-differences matching estimator based on the changes in the individual position in the wage distribution. Specifically, we test the impact of the minimum wage by distinguishing between individuals who experienced a transition to the below-the-minimum-wage regime. Our results indicate that when the minimum wage was increased, employment levels, but not the number of hours of worked, declined among young people. We also found that the number of hours worked actually increased among those young people who remained employed after the minimum wage was raised. However, these effects of a hike in the minimum wage were found to have differed across various groups of workers, with men, students, and individuals who were working under a fixed-term contract being most likely to have either lost a job or increased their working longer hours.
    Keywords: minimum wage, youth unemployment, difference-in-differences matching
    JEL: J21 J24 J63
    Date: 2015
  17. By: Yuxin Yao (Tilburg University ); Jan C. van Ours (Tilburg University )
    Abstract: Many immigrants in the Netherlands have poor Dutch language skills. They face problems in speaking and reading Dutch. Our paper investigates how these problems affect their labor market performance in terms of employment, hours of work and wages. We find that for female immigrants language problems have significantly negative effects on hourly wages but not on employment probability and hours of work. For male immigrants language problems do not affect employment probability, hours of work or hourly wages.
    Keywords: Language skills, immigrants, labor market performance
    JEL: J24 J15
    Date: 2015–02
  18. By: Hansen, Marianne Frank (Danish Rational Economic Agents Model (DREAM) ); Schultz-Nielsen, Marie Louise (Rockwool Foundation Research Unit ); Tranæs, Torben (Rockwool Foundation Research Unit )
    Abstract: All over Europe, ageing populations threaten nations' financial sustainability. In this paper we examine the potential of immigration to strengthen financial sustainability. We look at a particularly challenging case, namely that of Denmark, which has extensive tax-financed welfare programmes that provide a high social safety net. The analysis is based on a forecast for the entire Danish economy made using a dynamic computable general equilibrium model with overlapping generations. Net contributions to the public purse are presented both as cross-sectional figures for a long time horizon and as average individual life-cycle contributions. The main conclusion is that immigrants from richer countries have a positive fiscal impact, while immigrants from poorer countries have a large negative one. The negative effect is caused by both a weak labour market performance and early retirement in combination with the universal Danish welfare schemes.
    Keywords: immigration, sustainable fiscal policy, welfare benefits
    JEL: F22 E62 J61
    Date: 2015–02
  19. By: Michal Brzezinski (University of Warsaw, Poland )
    Abstract: This paper is a follow-up to Marrero and Rodriguez (2012), who estimated the inequality of opportunity (IO) in Europe in 2005. We use the EU-SILC 2005 and 2011 databases to com-pare the IO in 23 European countries before and after the Great Recession. The parametric procedure of Ferreira and Gignoux (2011) is used to measure IO. Results show that between 2004 and 2010 both absolute and relative IO increased in Belgium and Slovakia, while de-creased in Portugal and Lithuania. In addition, relative IO rose in Austria, Hungary and Greece.
    Keywords: Inequality of opportunity, Great Recession, EU-SILC, circumstances, Europe.
    JEL: D63 E24 O15 O52
    Date: 2015–01
  20. By: Elenka Brenna (Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore ); Cinzia Di Novi (Università Ca’ Foscari, Dipartimento di Economia, Venezia )
    Abstract: In the last decades, both the lengthening of life expectancy and an accentuated decline in birth rates have reduced the consistency of the younger generational cohorts. Due to an ageing population, the burden of care giving is expected to intensify in the next quarter of the century in Europe, especially for mature women. This paper investigates the impact of the provision of constant care for elderly parents on the mental health of adult daughters, between the ages of 50 and 65, living in different European countries. Data is collected from the Survey of Health, Ageing and Retirement in Europe (SHARE). Information on mental health status is provided by Euro-D depression scale, a standardized measure of depression employed across European countries. We focus on differences in the effects according to a North–South gradient: we test whether the relationship between informal caregiving and mental health differs across European macro- regions. Our results reveal the presence of a North-South gradient in the effect of caring on women’s mental health.
    Keywords: caregiver burden, depression, parent care, LTC systems, mature women
    JEL: I10 I12 D10
    Date: 2013–11
  21. By: Bettina Peters (Centre for European Economic Research (ZEW) ); Rebecca Riley (National Institute for Economic and Social Research of London ); Iulia Siedschlag (European Commission JRC-IPTS ); Priit Vahter (University of Tartu ); John McQuinn (Cambridge Econometrics )
    Abstract: This paper examines the links between innovation and productivity in service enterprises. For this purpose, we use micro data from the Community Innovation Survey 2008 in Germany, Ireland and the United Kingdom, and estimate an augmented structural model. Our results indicate that innovation in service enterprises is linked to higher productivity. In all three countries analysed, among the innovation types that we consider, the strongest link between innovation and productivity was found for marketing innovations. Our empirical evidence highlights the importance of internationalisation in the context of innovation outputs in all three countries. The determinants of innovation in service enterprises appear remarkably similar to the determinants of innovation in manufacturing enterprises.
    Keywords: Internationalisation of services; innovation; productivity
    JEL: L25 O31
    Date: 2014
  22. By: Valeria Gattai ; Giorgia Sali
    Abstract: This paper investigates the link between internationalization and performance in Europe. It takes a microeconomic perspective and studies how Foreign Direct Investment (FDI) experience relates with European firms’ economic, innovation and financial performance. Drawing on a large longitudinal database, our multinomial logit estimates suggest that FDI really matters. Indeed, firms experiencing some FDI (either inward, outward or both) enjoy a superior performance compared with purely domestic enterprises. Moreover, within the class of FDI players, firms engaged in inward and outward FDI turn out to be better than those engaged only in outward FDI, which are better than those engaged only in inward FDI. These results are robust to several performance measures and alternative specifications including firm, industry and country controls.
    Keywords: FDI, Heterogeneous firms, Europe
    JEL: F23 L25 O52
    Date: 2015–02

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