nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2017‒06‒11
23 papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Does neighbour’s grass matter? Exploring spatial dependent heterogeneity in technical efficiency of Italian hospitals By Cavalieri, M.; Di Caro, P.; Guccio, C.; Lisi, D.;
  2. The Impact of Free Early Childhood Education and Care on Educational Achievement: a Discontinuity Approach Investigating Both Quantity and Quality of Provision By Jo Blanden; Emilia Del Bono; Kirstine Hansen; Birgitta Rabe
  3. To switch or not to switch? Understanding German consumers' willingness to pay for green electricity tariff attributes By Sauthoff, Saramena; Danne, Michael; Mußhoff, Oliver
  4. Health effects of instruction intensity: Evidence from a natural experiment in German high-schools By Quis, Johanna Sophie; Reif, Simon
  5. Real Estate and Corporate Investmeent: Theory and Evidence of Heterogeneous Effects Across Firms By D. Fougère; R. Lecat; S. Ray
  6. Parental Leave, (In)formal Childcare and Long-term Child Outcomes By Danzer, Natalia; Halla, Martin; Schneeweis, Nicole; Zweimüller, Martina
  7. Community Energy in Italy: Heterogeneous institutional characteristics and citizens engagement By Chiara Candelise; Gianluca Ruggieri
  8. The gender gap in early career wage growth: the role of Children, job mobility and occupational mobility By Abrar Reshid, Abdulaziz
  9. How Useful Is the Concept of Skills Mismatch? By McGuinness, Seamus; Pouliakas, Konstantinos; Redmond, Paul
  10. Beggar-Thy-Neighbour Tax Cuts: Mobility after a Local Income and Wealth Tax Reform in Switzerland By MARTINEZ Isabel
  11. Less Welfare or Fewer Foreigners? Immigrant Inflows and Public Opinion towards Redistribution and Migration Policy By Murard, Elie
  12. Exit, Voice or Loyalty? An Investigation into Mandated Portability of Front-Loaded Private Health Plans By Juan Pablo Atal; Hanming Fang; Martin Karlsson; Nicolas R. Ziebarth
  13. The Role of Foreign and Domestic Investment in Promoting Exports and Imports. A Dynamic Panel Approach By Oana Cristina Popovici; Adrian Cantemir Călin
  14. Do toll-free highways foster firm formation and employment growth? Results from a quasi-natural experiment By Audretsch, David B.; Dohse, Dirk; dos Santos, João Pereira
  15. Regional variation of innovation activity in Poland. The positive role of location in metropolitan areas affirmed By Tomasz; Anna Golejewska
  16. Well-being, dual commitment and job insecurity of Italian agency workers. Some Evidence from a National Study on the Temporary Work Agency Industry By Stefano Consiglio; Luigi Moschera; Mariavittoria Cicellin; Laura Borgogni; Chiara Consiglio; Pietro Menatta
  17. Intra-couple income distribution and subjective well-being: the moderating effect of gender norms By Gabor Hajdu; Tamas Hajdu
  18. A variety of indicators evaluated for two implementation methods for a Citizen’s Basic Income By Torry, Malcolm
  19. How fast can one overcome the paradox of the energy transition? A predictive physico-economic model for the European power grid By Laurent Pagnier; Philippe Jacquod
  20. Economic Effects of the EU External Aviation Policy By Megerska Abate; Panayotis Christidis
  21. Debt of high-income consumers may reflect leverage rather than poor cognitive reflection By Da Silva, Sergio; Da Costa Jr, Newton; Matsushita, Raul; Vieira, Cristiana; Correa, Ana; De Faveri, Dinorá
  22. Real-Estate Agent Commission Structure and Sales Performance By Pieter Gautier; Arjen Siegmann; Aico van Vuuren
  23. The Spike at Benefit Exhaustion in the Finnish Labor Market By Kyyrä, Tomi; Pesola, Hanna; Verho, Jouko Kullervo

  1. By: Cavalieri, M.; Di Caro, P.; Guccio, C.; Lisi, D.;
    Abstract: With respect to the other dimensions of hospital behaviour, studying the presence of interaction effects on efficiency involves the issue of which approach is most appropriate to incorporate the spatial dependence in the empirical efficiency model. Using a large sample of Italian hospitals, this paper explores the presence of spatial dependence in technical efficiency. To this purpose, we employ a Spatial Stochastic Frontier Analysis (SSFA) that allows us to robustly estimate the efficiency of each hospital while considering the presence of spatial dependence. Furthermore, we employ both standard spatial contiguity matrix and spatial matrixes exploring the idea of institutional contiguity. Overall, the results suggest an insignificant role for spatial dependence in the efficiency of Italian hospitals, regardless of the specific form of spatial dependence implicit in the weights matrix.
    Keywords: technical efficiency; hospitals; spatial dependence; SSFA;
    JEL: C21 I11 D61
    Date: 2017–06
  2. By: Jo Blanden (University of Surrey, CEP, LSE); Emilia Del Bono (ISER, University of Essex); Kirstine Hansen (University College London); Birgitta Rabe (ISER, University of Essex)
    Abstract: In this paper we analyse whether entitlement to free part-time early childhood education and care at 3 years old affects educational attainment in the first year of primary school. Our identification strategy exploits date-of-birth discontinuities that lead to some children born just a few days apart being entitled to different amounts of free pre-school (up to 3.5 months) while starting school at the same time and within the same cohort. Using administrative data on all state school pupils in England, we carry out a regression discontinuity analysis and find that eligibility to free part-time early education and care results in a zero overall effect on educational achievement at age 5. This is true for advantaged and disadvantaged groups and for children attending high and low quality provision.
    Date: 2017–06
  3. By: Sauthoff, Saramena; Danne, Michael; Mußhoff, Oliver
    Abstract: In order to achieve an environmentally friendly and sustainable energy supply, it is necessary that this goal is supported by society. In different countries worldwide it has been shown that one way consumers want to support the energy transition is by purchasing green electricity. However, few people make the leap from their intention to a buying decision. This study explores parameters that influence whether German consumers decide to switch to a green electricity tariff. We conducted a quota-representative online survey including a discrete choice experiment with 371 private households in Germany in 2016. For the econometric analysis, a generalized multinomial logit model in willingness to pay (WTP) space was employed, enabling the estimation of WTP values to be as realistic as possible. The results show that consumers' decision regarding whether or not to make the switch to green energy is influenced by many underlying drivers, such as the source of green energy, whether a person can outsource the switching process, and a person's attitude towards the renewable energy sources levy that currently exists in Germany. Implications for policy makers and recommendations for the marketing of green energy tariffs are provided.
    Keywords: energy transition,green energy,tariff switch,discrete choice experiment,generalised multinomial logit model,WTP space
    Date: 2017
  4. By: Quis, Johanna Sophie; Reif, Simon
    Abstract: A large literature aims to establish a causal link between education and health using changes in compulsory schooling laws. It is however unclear how well more education is operationalized by marginal increases in school years. We shed a new light on this discussion by analyzing the health effects of a reform in Germany where total years of schooling for students in the academic track were reduced from nine to eight while keeping cumulative teaching hours constant by increasing instruction intensity. The sequential introduction of the reform allows us to implement a triple difference-in-differences estimation strategy with data from the German Socio-Economic Panel. We find that increased weekly instruction time has negative health effects for females while they are still in school. However, after graduation, females even seem to benefit from reduced school years. We find no effects on males' health.
    Keywords: education and health,instruction intensity,natural experiment,SOEP
    JEL: I19 I21 I28
    Date: 2017
  5. By: D. Fougère; R. Lecat; S. Ray
    Abstract: in this paper, we investigate the effect of real estate prices on productive investment. We build a simple theoretical framework of firms’ investment with credit rationing and real estate collateral. We show that real estate prices affect firms’ borrowing capacities through two channels. An increase in real estate prices raises the value of the firms’ pledgeable assets and mitigates the agency problem characterizing the creditor-entrepreneur relationship. It simultaneously cuts the expected profit due to the increase in the cost of inputs. While the literature only focuses on the first channel, the identification of the second channel allows for heterogeneous effects of real estate prices on investment across firms. We test our theoretical predictions using a large French database. We do find heterogeneous effects of real estate prices on productive investment depending on the position of the firms in the sectoral distributions of real estate holdings. Our preferred estimates indicate that a 10% increase in real estate prices causes a 1% decrease in the investment rate of firms in the first decile of the distribution but a 6% increase in the investment rate of firms belonging to the last decile.
    Keywords: Firms’ investment, Real estate prices, Collateral channel, Financial constraints.
    JEL: D22 G30 O52 R30
    Date: 2017
  6. By: Danzer, Natalia (Ifo Institute for Economic Research); Halla, Martin (University of Innsbruck); Schneeweis, Nicole (University of Linz); Zweimüller, Martina (University of Linz)
    Abstract: We provide a novel interpretation of the estimated treatment effects from evaluations of parental leave reforms. Accounting for the counterfactual mode of care is crucial in the analysis of child out-comes and potential mediators. We evaluate a large and generous parental leave extension in Austria exploiting a sharp birthday cutoff-based discontinuity in the eligibility for extended parental leave and geographical variation in formal childcare. We find that estimated treatment effects on long-term child outcomes differ substantially according to the availability of formal childcare and the mother's counter-factual work behavior. We show that extending parental leave has significant positive effects on chil-dren's health and human capital outcomes only if the reform induces a replacement of informal child-care with maternal care. We conclude that care provided by mothers (or formal institutions) is superior to informal care-arrangements.
    Keywords: parental leave, formal childcare, informal childcare, child development, maternal labor supply, fertility
    JEL: J13 H52 J22 J12 I38
    Date: 2017–05
  7. By: Chiara Candelise; Gianluca Ruggieri
    Abstract: Community energy (CE) initiatives for investments in the energy sector have been progressively spreading across Europe and are increasingly proposed as innovative and alternative approaches to guarantee higher citizens participation in the transition toward cleaner energy systems. This paper focuses the attention on Italy, a Southern European country characterized by relatively low CE sector development. It fills a gap in the literature by eliciting and presenting novel and comprehensive evidence on the recent Italian CE sector development. Through a step-wise approach it systematically map and review Italian CE initiatives, exploring heterogeneity in their institutional characteristics and analysing implications in terms of outcomes delivered and citizens' engagement. It finds a very novel CE sector, still at its niche level and characterized by a wide diversity of implementation approaches. The analysis allows to identify two alternative patterns in institutional characteristics which differently shape citizens engagement and outcomes delivered. The role of policy and its relevance for a renewed CE sector growth is also highlighted and discussed.
    Keywords: Community energy, Institutional characteristics, Renewable energy, Citizen participation, Energy cooperatives
    JEL: O13 O35 P13 P32 Q4
    Date: 2017
  8. By: Abrar Reshid, Abdulaziz (Department of Economics and Statistics, Linneaus University)
    Abstract: During the first 10 years in the Swedish labor market, male university graduates experience a faster wage growth than their female counterparts. This paper investigates the role of job mobility and upward occupational mobility in explaining the gender gap in early career wage growth. The analysis reveals that although job mobility and upward occupational mobility significantly contribute to the early career wage growth of both men and women, the size of the wage growth effect of both types of mobility is significantly lower for women. This female mobility penalty persists even after accounting for gender differences in observed individual and job characteristics, as well as unobserved individual specific heterogeneity. We further investigate to what extent this mobility penalty of women is explained by parental status. We find that the female penalty in returns to upward occupational mobility is largely linked to the timing of childbirth and childcare, which suggests the presence of a trade-off between work and family. Regarding job mobility, a significant female penalty is found among the childless as well as among parents, and anticipation of parenthood within the next year is found to exacerbate the female penalty in returns to job mobility even further.
    Keywords: gender gap; wage growth; job mobility; occupational mobility and children
    JEL: J13 J16 J31 J62
    Date: 2017–05–29
  9. By: McGuinness, Seamus (Economic and Social Research Institute, Dublin); Pouliakas, Konstantinos (European Centre for the Development of Vocational Training (Cedefop)); Redmond, Paul (ESRI, Dublin)
    Abstract: The term skill mismatch is very broad and can relate to many forms of labour market friction, including vertical mismatch, skill gaps, skill shortages, field of study (horizontal) mismatch and skill obsolescence. In this paper we provide a clear overview of each concept and discuss the measurement and inter-relatedness of different forms of mismatch. We present a comprehensive analysis of the current position of the literature on skills mismatch and highlight areas which are relatively underdeveloped and may warrant further research. Using data from the European Skills and Jobs Survey, we assess the incidence of various combinations of skills mismatch across the EU. Finally, we review the European Commission's country specific recommendations and find that skills mismatch, when referring to underutilised human capital in the form of overeducation and skills underutilisation, receives little policy attention. In cases where skills mismatch forms part of policy recommendations, the policy advice is either vague or addresses the areas of mismatch for which there is the least available evidence.
    Keywords: skill mismatch, overeducation, skill shortages, skill gaps, European skills and jobs survey, policy
    JEL: J24 I20 I28
    Date: 2017–05
  10. By: MARTINEZ Isabel
    Abstract: This paper analyzes mobility responses to a large, regressive local income tax cut benefiting the top 1% in the Swiss Canton of Obwalden in 2006. DiD estimations comparing Obwalden with neighboring cantons confirm that the reform was successful in increasing the share of rich taxpayers in the canton (+20-30%). Using individual tax data, I find a large elasticity of the inflow of rich taxpayers with respect to the average net-of-tax rate ranging from 3.2 to 6.5. DiD estimates of cantonal revenue, however, show that the tax cuts did not lead to an increase in cantonal tax revenue per capita. This is in line with a theoretical analysis suggesting Obwalden was not on the wrong side of the Laffer curve before the reform.
    Keywords: Mobility; Personal income tax; Tax competition; Local taxes; Regressive income tax
    JEL: H31
    Date: 2017–05
  11. By: Murard, Elie (IZA)
    Abstract: I examine the effect of immigrant inflows in Europe on natives' individual attitudes towards redistribu-tion and immigration policy over the last decade. Unlike previous studies, I analyze the evolution over time of these two types of attitudes in a joint empirical framework. Using migration data at the NUTS regional level from the European Labor Force Survey and individual attitudes data from the European Social Survey, I exploit variation over time and across regions in the size and composition of immigrant inflows. I address the endogeneity of immigrant inflows by using a shift share instrument and within-country specification. I find evidence coherent with a theoretical model in which individual attitudes depend essentially on how immigration is perceived to affect wages and net welfare benefits. Specifi-cally, I find that, when immigrants tend to compete with natives for jobs (due to having similar skills or occupations), natives prefer policies that support welfare and put restrictions on migration. When mi-grants are mostly low-skilled (high-skilled), European citizens typically favor lower (higher) levels of redistribution.
    Keywords: immigration, welfare state, political economy
    JEL: F22 F1 J61
    Date: 2017–05
  12. By: Juan Pablo Atal; Hanming Fang; Martin Karlsson; Nicolas R. Ziebarth
    Abstract: We study theoretically and empirically how consumers in an individual private long-term health insurance market with front-loaded contracts respond to newly mandated portability requirements of their old-age provisions. To foster competition, effective 2009, German legislature made the portability of standardized old-age provisions mandatory. Our theoretical model predicts that the portability reform will increase internal plan switching. However, under plausible assumptions, it will not increase external insurer switching. Moreover, the portability reform will enable unhealthier enrollees to reoptimize their plans. We find confirmatory evidence for the theoretical predictions using claims panel data from a big private insurer.
    JEL: G22 I11 I18
    Date: 2017–06
  13. By: Oana Cristina Popovici (Institute for Economic Forecasting, Romanian Academy); Adrian Cantemir Călin (Institute for Economic Forecasting, Romanian Academy)
    Abstract: The goal of this paper is to evaluate weather domestic or foreign investments are involved in the promotion of exports and imports in eight of the newest European Union member states. We apply the dynamic panel data model for identifying the determinants of both exports and imports in the period 1999-2013. Our main result point that there is a complementary relationship between FDI and both exports and imports. The EU membership is significant for the expansion of the trade activity, but is more relevant for the export activity than for the import one.
    Keywords: dynamic panel model, export, import, FDI, domestic investment
    JEL: C36 F14 F21
    Date: 2017–01
  14. By: Audretsch, David B.; Dohse, Dirk; dos Santos, João Pereira
    Abstract: The paper studies the impact of a switch from free to charged highway provision on firm numbers and private sector employment in a cross-section of Portuguese municipalities. It exploits the fact that highway tolls in Portugal were unexpectedly raised in reaction to the financial crisis to establish causality. Results from a difference-in-differences analysis indicate a significantly negative effect of highway tolls on number of firms and employment in treated municipalities vis-à-vis the control group. We also find negative effects of tolls in municipalities not directly traversed by the treated highways, with larger firms and manufacturing firms being most strongly affected.
    Keywords: infrastructure provision,regional economic development,quasi-natural experiment
    JEL: R48 L25 R12
    Date: 2017
  15. By: Tomasz (Faculty of Economics, University of Gdansk; Institute for Development); Anna Golejewska (Faculty of Economics, University of Gdansk)
    Abstract: Poland’s innovation performance is unsatisfactory. In the context of the required shift of the present mostly-extensive growth paradigm to more knowledge and innovation-intensive one has to take into account the regional variation in innovative and economic activity in this middle-sized open economy in order to fine-tune its regional development and innovation policies. Using the firm-level data for manufacturing sector aggregated to NUTS3 regions as well as firm-level data from a unique qualitative survey carried out by the Institute for Development we try to identify the determinants of variation in innovative activity of firms within Poland in order to account for regional differences in particular between metropolitan and non-metropolitan regions. The analysis at aggregated NUTS3 level does not bring satisfactory results. The difference between metropolitan and non-metropolitan regions is statistically insignificant and the overall results are mixed. In the second step, we apply more sophisticated econometric methods controlling for firm-specific, sector-specific and region-specific features as suggested in the literature of the subject identifying the positive effect of location within metropolitan regions on the innovative performance of companies. Furthermore, the results point to the significance of firm-specific, internal, as well as region-specific – factors external to a firm, nonetheless, supporting the notion of regional innovation systems in which firms are embedded.
    Keywords: innovation, regional innovation system, regional economic performance, firm-level, logit model, Poisson model, negative binomial model
    JEL: O30 R11 R12 R58 C21
    Date: 2017–05
  16. By: Stefano Consiglio; Luigi Moschera; Mariavittoria Cicellin; Laura Borgogni; Chiara Consiglio; Pietro Menatta (-)
    Abstract: Although the use of agency contracts has become the norm in all public and private organizations, existing studies are mostly cross-sectional in nature, generally comparing behavioral differences between permanent full time workers with the plethora of all contingent workers, making difficult to generalize results. Few empirical investigations have so far studied attitudes and behaviors of agency workers and how the peculiar type of contract influences their work-related attitudes. In particular, there is no consensus about how agency contract affects individual behavioral and psychological variables as affective dual commitment, job insecurity, satisfaction, turnover intention. In order to fill this gap, the main goal of the study we present in this paper is to analyze well-being of Italian temporary and permanent agency workers, according to a perspective that emphasize positive aspects. We aim to understand how workers experience to be agencies, enhancing also critical implications against well-being.
    Keywords: agency workers, TWAs, well-being, dual commitment, job insecurity, Job Acts. holders
    Date: 2017–03–05
  17. By: Gabor Hajdu (Institute for Sociology, Centre for Social Sciences, Hungarian Academy of Sciences and MTA-ELTE Peripato Comparative Social Dynamics Research Group, Hungary); Tamas Hajdu (Institute of Economics, Research Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: This paper examines the relationship between intra-couple income distribution and subjective well-being, using nationally representative data from Hungary. We show that the association between the woman’s relative income (the woman’s share of the couple’s total earnings) and life satisfaction is negative not only for men, but for women as well. Because we control for financial disadvantages on the individual and household level, as well as for socio-economic and job characteristics of the respondent and their partner, the result can be interpreted as the impact of traditional gender roles and the persistence of the traditional male breadwinner mentality. In addition, we show that gender norms moderate this negative association. Among those with low levels of traditional norms, the woman’s relative income has no effect on life satisfaction, whereas among those who prefer traditional gender roles, the negative association is stronger. Our results suggest that conflicts between the gender norms and the social and economic reality reduce life satisfaction.
    Keywords: intra-couple income distribution; life satisfaction; gender norms; relative income
    JEL: I31 D10 J16
    Date: 2017–04
  18. By: Torry, Malcolm
    Abstract: Debate about Citizen’s Basic Income – an unconditional and nonwithdrawable income for every individual – is shifting in character. An earlier phase related to the proposal’s desirability; then followed debate about its feasibility; and now attention is turning to questions of implementation. A significant symptom of this new phase is the recent consultation on implementation of a Citizen’s Basic Income held by the Institute of Chartered Accountants in England and Wales. The consultation considered four implementation methods. This working paper operationalises characteristics of two of the implementation models in terms of changes that might be required in existing UK tax and benefits systems, and evaluates the implementation methods in relation to a wider variety of indicators than previous exercises of this kind: poverty and inequality indices, tax rate rises required for revenue neutrality, household disposable income gains and losses, households’ abilities to escape from means-testing, and marginal deduction rates. The advent of EUROMOD G4.0+ and updated FRS data enables the results to be more up to date as well as more comprehensive.
    Date: 2017–05–31
  19. By: Laurent Pagnier; Philippe Jacquod
    Abstract: The paradox of the energy transition is that, because of the low marginal costs of new renewable energy sources (RES), it drags electricity prices down and discourages investments in flexible productions that are needed to compensate for the lack of dispatchability of the new RES - the energy transition discourages the investments that are required for its own harmonious expansion. To investigate how this paradox can be overcome, we argue that future electricity prices can be accurately modeled from the residual load obtained by subtracting the sum of inflexible productions from the load. Armed with the resulting quantitative economic indicator, we investigate future revenues for power plants with various degree of flexibility under different scenarios for the energy transition in the European power grid. We find that flexible productions will be financially rewarded better and sooner if the energy transition proceeds faster but at more or less constant total production, i.e. by reducing the production of thermal power plants at the same rate as the production of RES increases. Less flexible productions, on the other hand, will see their revenue grow more moderately. Our results advocate for a faster energy transition with a quicker withdrawal of baseload thermal power plants.
    Date: 2017–06
  20. By: Megerska Abate (The World Bank); Panayotis Christidis (European Commission – JRC)
    Abstract: This report investigates the economic effects of EU’s external aviation policy with third countries. In particular, focusing on 27 countries with which the EU has an Air Services Agreement (ASA) of varying degree of liberalization, we assessed changes in fare, flight frequency and capacity utilization. We find that the implementation of the EU external aviation policy results in lower fare levels and higher load factors (capacity utilization). The effect of the policy on frequency, however, is not statistically significant. Our findings suggest that further liberalization can lead to more benefits to consumers.
    Keywords: Transport economics, transport policy, aviation, air transport, EU, Africa
    JEL: R40 R41 R49
    Date: 2017–05
  21. By: Da Silva, Sergio; Da Costa Jr, Newton; Matsushita, Raul; Vieira, Cristiana; Correa, Ana; De Faveri, Dinorá
    Abstract: A recent population-wide study for Germany, where credit lines on current accounts are available to 80 percent of the population, finds that overdraft debt is more likely for people who give intuitive but incorrect answers on a cognitive reflection test. This suggests those consumers in debt have poorer cognitive reflection and, thus, lack of self control. The Germany study finds that “surprisingly, the level of income does not play a central role.” Here we discriminate the consumers in terms of their income by considering two experiments. In the first (pilot) experiment we do not discriminate consumers in terms of income and, as result, replicate the Germany study. In a follow-up experiment, which assembles a high-quality sample of high-income consumers, we find debt can no longer be explained by poor cognitive reflection. Apparently, high-income consumers treat debt as mere leverage, as companies do.
    Keywords: consumer behavior, consumer indebtedness, debt, overdraft, cognitive reflection
    JEL: D03
    Date: 2017
  22. By: Pieter Gautier (VU Amsterdam and Tinbergen Institute, The Netherlands); Arjen Siegmann (VU Amsterdam, The Netherlands); Aico van Vuuren (University of Gothenburg)
    Abstract: Do higher real-estate agent fees imply better performance? This study uses a nation-wide data set of residential real-estate transactions in the Netherlands from 1985 to 2011 to provide evidence against this. Brokers with a flat-fee structure who charge an up-front fee (which is substantially lower than the average fee of traditional brokers) and leave the viewings to the seller sell faster and at - on average - 2.7 percent higher prices. We correct for fixed house- and time effects. We provide additional evidence that the price dfference is not due to a seller-selection effect.
    Keywords: real-estate brokers, broker incentives, housing, agency
    JEL: D80 L10 L80 R20 R30
    Date: 2017–05–31
  23. By: Kyyrä, Tomi (VATT, Helsinki); Pesola, Hanna (VATT, Helsinki); Verho, Jouko Kullervo (VATT, Helsinki)
    Abstract: Many studies have found that the exit rate from unemployment increases in the vicinity of the exhaus-tion day of unemployment insurance benefits. The extent to which this "spike" is driven by job search behavior is important for assessing the distortionary effect of unemployment insurance. Card, Chetty and Weber (American Economic Review 2007; 97: 113-118) find a large spike in the exit rate from regis-tered unemployment but only a very small spike in the job finding rate in Austria. We replicate their analysis using matched register data for Finland. We find a large spike also in the job finding rate at the time of benefit exhaustion, even though it is clearly smaller than the spike in the exit rate from unem-ployment benefits. In addition, we demonstrate difficulties in measuring the time to benefit exhaus-tion when the benefit entitlement can elapse at a reduced rate during activation measures or part-time working. Unless the remaining benefit entitlement is directly observed in the data, the resulting measurement error can lead to downward biased estimates of the spikes at benefit exhaustion.
    Keywords: unemployment insurance, layoffs, hazard rates
    JEL: C41 J64 J65
    Date: 2017–05

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