nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2017‒10‒22
37 papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. The Post-Reform Effectiveness of the New German Start-Up Subsidy for the Unemployed By Bellmann, Lutz; Caliendo, Marco; Tübbicke, Stefan
  2. Asymmetric wage adjustment and employment in European firms By Marotzke, Petra; Anderton, Robert; Bairrao, Ana; Berson, Clémence; Tóth, Peter
  3. Are the Spanish Long-Term Unemployed Unemployable? By Samuel Bentolila; J. Ignacio García-Pérez; Marcel Jansen
  4. How Green Self Image Affects Subjective Well-Being: Pro-Environmental Values as a Social Norm By Heinz Welsch; Jan Kuehling
  5. What Are You Voting For? Proximity to Refugee Reception Centres and Voting in the 2016 Italian Constitutional Referendum By Bratti, Massimiliano; Deiana, Claudio; Havari, Enkelejda; Mazzarella, Gianluca; Meroni, Elena Claudia
  6. Preschool child care and child well-being in Germany: Does the migrant experience differ? By Kaiser, Micha; Bauer, Jan M.
  7. Mortgaging Europe’s periphery By Joan Costa Font; Valentina Zigante
  8. Has the Push for Equal Gender Representation Changed the Role of Women on German Supervisory Boards? By Bozhinov, Viktor; Koch, Christopher; Schank, Thorsten
  9. Should the unemployed care for the elderly? The effect of subsidized occupational and further training in geriatric care By Lang, Julia; Dauth, Christine
  10. University Selectivity and the Relative Returns to Higher Education: Evidence from the UK By Walker, Ian; Zhu, Yu
  11. The Price of Inattention: Evidence from the Swedish Housing Market By Repetto, Luca; Solis, Alex
  12. On the Effects of Infrastructure Investments on Industrial CO2 Emissions in Portugal By Alfredo Marvão Pereira; Rui Manuel Pereira
  13. Analysis of Housing Equity Withdrawal by its Forms By Declan French; Donal McKillop; Tripti Sharma
  14. The effect of house prices on the long-term care market: Evidence from England By Bilotkach, Volodymyr; Braakmann, Nils; Gonzalo-Almorox, Eduardo; Wildman, John
  15. Skill Premiums and the Supply of Young Workers in Germany By Albrecht Glitz; Daniel Wissmann
  16. The Impact of Ethnic Communities on Immigrant Entrepreneurship: Evidence from Sweden By Tavassoli, Sam; Trippl, Michaela
  17. Wage flexibility of older workers and the role of institutions - evidence from the German LIAB data set By Kerndler, Martin
  18. The ‘Healthy Worker Effect’: Do Healthy People Climb the Occupational Ladder? By Costa Font, Joan; Ljunge, Martin
  19. Retirement and Informal Care-giving: Behavioral Patterns among Older Workers By Raab, Roman
  20. Luxembourg: reaping the benefits of a diverse society through better integration of immigrants By Álvaro Pina
  21. The Gender Wage Gap among College Graduates in Italy By Piazzalunga, Daniela
  22. Optimal taxation under different concepts of justness By Jessen, Robin; Metzing, Maria; Rostam-Afschar, Davud
  23. Balancing the Equity-efficiency Trade-off in Personal Income Taxation: An Evolutionary Approach By Simone Pellegrino; Guido Perboli; Giovanni Squillero
  24. The Dynamics of Solo Self-Employment: Persistence and Transition to Employership By Daniel S.J. Lechmann; Christoph Wunder
  25. Product Market Competition and Employer Provided Training in Germany By Heywood, John S.; Jirjahn, Uwe; Pfister, Annika
  26. Firm's level labour intensity in Italy after the Great Recession By Enrico D'Elia; Alessandra Righi
  27. The Origins of Common Identity: Division, Homogenization Policies and Identity Formation in Alsace-Lorraine By Sirus Dehdari; Kai Gehring
  28. Detailed RIF decomposition with selection: The gender pay gap in Italy By Töpfer, Marina
  29. The Structure of Cigarette Excises in the EU: From Myths to Reality By Marko Primorac; Silvija Vlah Jeric
  30. The recent rise of labor force participation of older workers in Sweden By Laun, Lisa; Palme, Mårten
  31. Subjective and physiological measures of well-being: an exploratory analysis using birth-cohort data By Andrén, Daniela; Clark, Andrew E; D´Ambrosio, Conchita; Karlsson, Sune; Pettersson, Nicklas
  32. Plan Responses to Diagnosis-Based Payment: Evidence from Germany's Morbidity-Based Risk Adjustment By Sebastian Bauhoff; Lisa Fischer; Dirk Göpffarth; Amelie C. Wuppermann
  33. Literacy skills, equality of educational opportunities and educational outcomes: an international comparison By Jovicic, Sonja
  34. Firm Heterogeneity and Exports in The Netherlands: Identifying Export Potential By Steven Brakman; Harry Garretsen; Raoul van Maarseveen; Peter Zwaneveld
  35. Determinants of regional growth and convergence in Germany By K. Haaf; C.J.M. Kool
  36. Understanding productivity dynamics:a task taxonomy approach By Tiago Fonseca; Francisco Lima; Sonia C. Pereira
  37. Does Fiscal Equalization Lead to Higher Tax Rates? Empirical Evidence from Germany By Krause, Manuela; Büttner, Thiess

  1. By: Bellmann, Lutz (Institute for Employment Research (IAB), Nuremberg); Caliendo, Marco (University of Potsdam); Tübbicke, Stefan (University of Potsdam)
    Abstract: Start-up subsidies for the unemployed have long been an important active labor market policy strategy in Germany. The current subsidy program underwent a major reform in 2011 that changed its key parameters: support was lowered, eligibility criteria were tightened and entitlement was abandoned by granting caseworkers the right to reject applications. Ex-ante predictions on the post-reform effectiveness of the program are ambiguous, and knowledge about the importance of institutional details of such a program is very limited, making a new evaluation necessary. In our descriptive analysis, we compare personal and business characteristics of participants before and after the reform and we find significant differences in terms of gender composition, educational attainment and industry-specific experience. Post-reform participants also perform better in terms of subsequent labor market integration and show signs of higher commitment. These findings give us some indication for interpreting our estimates of causal effects of the post-reform program. We find that for both men and women, employment and income effects of the post-reform program are positive, sizable, and larger than what was estimated for the pre-reform program. All in all, the programs effectiveness seems to have improved through the reform. Potential reasons for this are discussed and include better screening of participants by caseworkers, higher rates of commitment and changes in macroeconomic conditions.
    Keywords: start-up subsidies, policy reform, matching, effect heterogeneity
    JEL: J68 H43 C14 L26
    Date: 2017–09
  2. By: Marotzke, Petra; Anderton, Robert; Bairrao, Ana; Berson, Clémence; Tóth, Peter
    Abstract: We explore the impact of wage adjustment on employment with a focus on the role of downward nominal wage rigidities. We use a harmonised survey dataset, which covers 25 European countries in the period 2010-2013. These data are particularly useful for this paper given the firm-level information on the change in economic conditions and collective pay agreements. Our findings confirm the presence of wage rigidities in Europe: first, collective pay agreements reduce the probability of downward wage adjustment; second, the rise in the probability of downward base wage responses following a decrease in demand is significantly smaller than the rise in the probability of an upward wage response associated with an increase in demand. Estimation results point to a negative effect of downward wage rigidities on employment at the firm level. JEL Classification: J23, J30
    Keywords: demand shocks, employment, wage rigidity
    Date: 2017–10
  3. By: Samuel Bentolila; J. Ignacio García-Pérez; Marcel Jansen
    Abstract: Long-term unemployment reached unprecedented levels in Spain in the wake of the Great Recession and it still affects around 57% of the unemployed. We document the sources that contributed to the rise in long-term unemployment and analyze its persistence using state-of-the-art duration models. We find pervasive evidence of negative duration dependence, while personal characteristics such as mature age, lack of experience, and entitlement to unemployment benefits are key to understand the cross-sectional differences in the incidence of long-term unemployment. The negative impact of low levels of skill and education is muted by the large share of temporary contracts, but once we restrict attention to employment spells lasting at least one month these factors also contribute to a higher risk of long-term unemployment. Surprisingly, workers from the construction sector do not fare worse than similar workers from other sectors. Finally, self-reported reservation wages are found to respond strongly to the cycle, but much less to individual unemployment duration. In view of these findings, we argue that active labour market policies should play a more prominent role in the fight against long-term unemployment while early activation should be used to curb inflows.
    Keywords: long-term unemployment, great recession, duration models, survival probability, Spain
    JEL: J63 J64 J65 C41
    Date: 2017
  4. By: Heinz Welsch (University of Oldenburg, Department of Economics); Jan Kuehling (University of Oldenburg, Department of Economics)
    Abstract: Recent literature has found that individuals holding a greener self-image display higher levels of life satisfaction. We extend the single-country setting of that research to a transnational perspective and explore whether a relationship exists between green self-image (GSI) and life satisfaction (LS), both European-wide and at the national level. In order to explain differences in the GSI-LS relationship across nations and time, we study the role of pro-environmental values as a shared social norm. We find a significantly positive GSI-LS relationship in a pool of 35 European countries and in the majority of individual countries. In addition, we show that the well-being benefit of holding a green self-image is greater in societies that are less divided with respect to environmental attitudes, that is, where being green is a shared social norm.
    Keywords: green self-image; subjective well-being; life satisfaction; social norm; social division
    Date: 2017–10
  5. By: Bratti, Massimiliano (University of Milan); Deiana, Claudio (University of Essex); Havari, Enkelejda (European Commission, Joint Research Centre); Mazzarella, Gianluca (University of Padova); Meroni, Elena Claudia (European Commission, Joint Research Centre)
    Abstract: In December 2016, in the middle of the "European refugee crisis", the Italian electorate voted for a referendum on crucial constitutional reform promoted by the governing party. The official aims of the reform were both to improve the country's governability and stability and to simplify the institutional setup. Despite not strictly being a political vote, as in the case of Brexit, the referendum was largely perceived as an assessment of the Prime Minister's work and the activity of his government. Using Italian municipality data, we provide novel empirical evidence on the impact of geographical proximity to refugee reception centres on voting behaviour. Our analysis demonstrates that being closer to refugee centres increased (1) the referendum turnout and (2) the proportion of anti-government votes. This evidence is consistent with the fact that the main opposition parties exploited the anti-immigration sentiments that were mounting in the population to influence people's voting. It also casts doubts on the political choice to put key decisions, such as changes in the Constitution of the Italian Republic (or leaving the European Union, as in the case of Brexit), to the popular vote at times when there are significant political emergencies to be faced.
    Keywords: proximity, voting, refugee reception centres, referendum, Constitution, Italy
    JEL: P16 R23 D72
    Date: 2017–09
  6. By: Kaiser, Micha; Bauer, Jan M.
    Abstract: Because the value of preschool child care is under intensive debate among both policymakers and society in general, this paper analyzes the relation between preschool care and the well-being of children and adolescents in Germany. It also examines differences in outcomes based on child socioeconomic background by focusing on the heterogeneous effects for migrant children. Our findings, based on data from the German Health Interview and Examination Survey of Children and Adolescents, suggest that children who have experienced child care have a slightly lower well-being overall. For migrant children, however, the outcomes indicate a positive relation.
    Keywords: child care,migrants,preschool,well-being,education inequality
    JEL: J13 J15 I28
    Date: 2017
  7. By: Joan Costa Font; Valentina Zigante
    Abstract: The public funding of long-term care (LTC) programs to support the frail elderly is still underdeveloped compared to other areas of social protection for old age. In Europe, any moves to broaden entitlements to LTC are impeded by increasing demand for care coinciding with constrained public finances. We examine a set of conditions that facilitate modifications to the financial entitlement to LTC and elaborate the concept of ‘implicit partnerships’: an implicit (or ‘silent’) agreement, encompassing the financial co-participation of public funders and the time and/or financial resources of users and their families. We argue that the successful building of ‘implicit partnerships’ opens the door to potential reform of financial entitlements, either through ‘user partnerships’ relying on users’ co-payments, or ‘caregiver partnerships’ relying on informal care provision. We examine entitlements over time in seven European countries; the EU-5, the Netherlands and Sweden. Furthermore, we show that public attitudes towards financing and provision of LTC support the country specific financial entitlements and the type of implicit partnership we identify.
    Keywords: implicit partnership, partial insurance, cost sharing, long-term care, financial sustainability, family, Europe.
    Date: 2017–10
  8. By: Bozhinov, Viktor (University of Mainz); Koch, Christopher (University of Mainz); Schank, Thorsten (University of Mainz)
    Abstract: In Germany, an intensive public debate about increasing female participation in leadership positions started in 2009 and proceeded until the beginning of 2015, when the German parliament enacted a board gender quota. In that period, the share of women on supervisory boards for 111 German publicly listed and fully codetermined companies (i.e. those which are affected by the quota law) more than doubled from 10.6 percent in 2009 to 22.6 percent in 2015. In 2016, the first year when the law was effective, the female share increased again by 4.5 percentage points. Using a hand-collected dataset, we investigate whether the rise in female board representation was accompanied by a change in gender differences in board member characteristics and board involvement. We do not find evidence for the "Golden Skirts" phenomenon, i.e., the rise in the female share was not achieved via a few female directors holding multiple board memberships. After controlling for firm heterogeneity, the remuneration of female shareholder (employee) representatives is about 16 (9) percent lower than for males. We interpret this as an overall indication that women are not only underrepresented in German supervisory boards, they are even more underrepresented in important board positions. Indeed, women are less likely to become a chairman and are less often assigned to board committees (except for the nominating committee). Moreover, in 2016 the disadvantage of women (as compared to men) to obtain a committee membership is even larger than in 2009.
    Keywords: gender diversity, women on boards, gender quota, board remuneration, committee membership
    JEL: G34 G38 J16 J30
    Date: 2017–09
  9. By: Lang, Julia; Dauth, Christine
    Abstract: This study analyzes the effectiveness of subsidized training in elderly care professions for the unemployed in Germany. We find that shorter further training increases employment but hardly affects wages. Retraining, which entails a vocational degree as geriatric nurse, causes strong lock-in effects, but afterwards substantial positive wage and employment effects that exceed those of further training. Yet, large shares of the estimated employment effects are attributable to part-time employment.
    JEL: I11 J24 J68
    Date: 2017
  10. By: Walker, Ian; Zhu, Yu
    Abstract: We study the labour market wage outcomes of university graduates by course (i.e. by subject and institution) in the UK using the Labour Force Survey (LFS). We match this data to a measure of course “selectivity” (the mean standardised admission scores at the course level) using data on high school achievement scores of students admitted to these courses. Unlike earlier UK studies, we are able to consider the effect of differences across undergraduate degree subjects, and in particular the selectivity of both the subject studied and of the Higher Education Institution (HEI) attended. Our results show that selectivity of undergraduate degree programmes plays an important role in explaining the variation in the relative graduate wages across HEIs and subjects. In fact, much of the observed differential in relative wage outcomes across courses is due to the quality of students that HEIs select. That is not to say that the effect of course selectivity on wages implies that degrees are just signals of existing ability differences.
    Keywords: College selectivity,relative returns to higher education
    JEL: I23
    Date: 2017
  11. By: Repetto, Luca (Department of Economics); Solis, Alex (Department of Economics)
    Abstract: Do behavioral biases affect prices in a high-stake market? We study the role of left-digit bias in the purchase of an apartment, one of the most important assets in a household’s portfolio. Left-digit bias is the inability to fully process digits after the first, perceiving prices just below a round number (such as $3.99) as cheaper than their round counterpart ($4). We start by documenting that apartments listed at just-below asking prices are sold at a 3-5% higher final price after an auction. This effect appears not to be driven by i) differences in observable characteristics; ii) differences in real estate agents’behavior; or iii) institutional characteristics of the market. We show that apartments using just-below prices attract more bidders and bids, leading to higher competition and to a higher final price. Our results suggest that inattentive buyers might be losing roughly half a year of disposable income.
    Keywords: Housing market; auctions; inattention; first-digit bias
    JEL: C78 D44 D83 R31
    Date: 2017–09–27
  12. By: Alfredo Marvão Pereira (Department of Economics, The College of William and Mary, Williamsburg VA 23187); Rui Manuel Pereira (Department of Economics, The College of William and Mary, Williamsburg VA 23187)
    Abstract: We estimate how infrastructure investments affect industrial CO2 emissions in Portugal. Using empirical evidence on the economic effects of twelve types of infrastructure investments at the industry level, we consider twenty-two industries and the respective CO2 emission factors. Our conclusions are as follows. First, given the current emission factors for each industry, almost all types on infrastructure investments help the emissions intensity of the economy. Only for investments in airports and in health facilities are such positive effects absent. Second, the relevance of the economic effects of the different types of infrastructure investments on the electrical power industry is central in determining the overall effects on emissions. This is not surprising, given that electric power accounts for nearly 35% of CO2 emissions in Portugal and the extremely high emissions factor of this industry amplifies even small economic effects. Third, under an alternative scenario in which the emissions from the electric power industry have been eliminated – due to the use of renewable energy in production, for example – , or are otherwise ignored, we still see that most infrastructure investments lead to a decline in the CO2 emissions intensity. In this case, however, investments in national roads leave the emissions intensity essentially unchanged, while investments in health infrastructure have adverse effects on emissions. There are several important policy implications of these results when we consider infrastructure investment strategies that are mindful of their CO2 emission effects. Consider, for instance, transportation infrastructures. Given the present electric power generating mix, investment in national roads would be an appropriate policy recommendation from an environmental perspective, while investments in airport infrastructure should be avoided. Under a scenario of aggressive use of renewable energy sources in the production of electricity, however, the best investments would be in railroads and airports, two industries highly dependent on the use of electricity
    Keywords: Infrastructure Investment, CO2 Emissions, Industry-level Economic Effects, Industry-level Emission Effects, VAR, Portugal
    JEL: C32 E22 H54 L90 O52 Q43 Q58
    Date: 2017–10
  13. By: Declan French; Donal McKillop; Tripti Sharma
    Abstract: Using the household level data from the UK Wealth and Asset Survey for years 2006-2014, we explore a household’s decision to use one particular method of withdrawing home equity from a range of options available to them. These options include financial products such as remortgage contracts and equity release schemes (reverse mortgage and home reversion schemes) and informal mediums carried out by individual households themselves, for example downsizing of homeownership. The results show that homeowners prefer using formal channels of equity withdrawal. This tendency persists when controlling for household characteristics such as age profile, marital status and demographics and levels of housing wealth, income, savings and unsecured and secured debts. Our findings support the argument that while the decision to withdraw home equity conforms to consumption smoothing motives, the choice of an equity withdrawal medium goes beyond those motives and depends on the circumstances facing individual households.
    Keywords: Equity release schemes; Reverse mortgage; Refinancing; Downsizing; Housing; Homeownership; Retirement; Wealth de-accumulation
    JEL: D14 E21 G21 J14 R21
    Date: 2017–10
  14. By: Bilotkach, Volodymyr; Braakmann, Nils; Gonzalo-Almorox, Eduardo; Wildman, John
    Abstract: High house prices are often considered to be beneficial for the elderly due to the accumulation of wealth. However, as land is an input in the provision of public services, the elderly might be harmed by them, for example, due to a shortage of local care homes. Alternatively, care home providers might be attracted by asset-rich potential clients, which could lead to a positive effect of house prices on the provision of care. Applying an instrumental variables approach on English data, we show that higher house prices lead to fewer care homes, fewer entries into the market as well as fewer available beds.
    Keywords: Care homes, house prices, long-term care, England
    JEL: I11 R31
    Date: 2017–10–16
  15. By: Albrecht Glitz; Daniel Wissmann
    Abstract: In this paper, we study the development and underlying drivers of skill premiums in Germany between 1980 and 2008. We show that the significant increase in the medium to low skill wage premiums since the late 1980s was almost exclusively concentrated among the group of workers aged 30 or below. Using a nested CES production function framework which allows for imperfect substitutability between young and old workers, we investigate whether changes in relative labor supplies could explain these patterns. Our model predicts the observed differential evolution of skill premiums very well. The estimates imply an elasticity of substitution between young and old workers of about 8, between medium- and low-skilled workers of 4 and between high-skilled and medium/low-skilled workers of 1.6. Using a cohort level analysis based on Microcensus data, we find that long-term demographic changes in the educational attainment of the native (West-)German population – in particular of the post baby boomer cohorts born after 1965 – are responsible for the surprising decline in the relative supply of medium-skilled workers which caused wage inequality at the lower part of the distribution to increase in recent decades. We further show that the role of (low-skilled) migration is limited in explaining the long-term changes in relative labor supplies.
    Keywords: cohorts, baby boom, labor supply, labor demand, skill-biased technological change, wage distribution, wage differentials
    JEL: J11 J21 J22 J31
    Date: 2017
  16. By: Tavassoli, Sam (RMIT University); Trippl, Michaela (University of Vienna)
    Abstract: This paper seeks to provide novel insights into the effects of ethnic communities on immigrants’ entrepreneurial activities. We investigate to what extent the decision of an employed immigrant to become an entrepreneur is associated with his or her embeddedness in ethnic networks in the host region. We capture such embeddedness through various mechanisms. Using longitudinal registered-data from Sweden and employing a Logit model, we find that merely being located in an ethnic community does not have an influence on immigrant entrepreneurship; rather what matters is being located in ethnic communities that have a high share of entrepreneurs themselves.
    Keywords: Immigrants; entrepreneurship; ethnic communities; embeddedness; social capital
    JEL: D83 J61 M13
    Date: 2017–10–12
  17. By: Kerndler, Martin
    Abstract: High and rigid wages are a threat for employment, especially for older workers. While wage levels of job stayers in many countries are not decreasing in late working life, little is known about the evolution of wage flexibility over the lifecycle. Using the German LIAB data set, this paper investigates the age pattern of wage flexibility with respect to permanent and transitory shocks to firm productivity. Works councils are found to have an important effect on wage flexibility of older workers.
    JEL: J14 J31 J41 J51
    Date: 2017
  18. By: Costa Font, Joan (London School of Economics); Ljunge, Martin (Research Institute of Industrial Economics (IFN))
    Abstract: The association between occupational status and health has been taken to reveal the presence of health inequalities shaped by occupational status. However, that interpretation assumes no influence of health status in explaining occupational standing. This paper documents evidence of non-negligible returns to occupation status on health (which we refer to as the ‘healthy worker effect’). We use a unique empirical strategy that addressed reverse causality, namely an instrumental variable strategy using the variation in average health in the migrant’s country of origin, a health measure plausibly not determined by the migrant’s occupational status. Our findings suggest that health status exerts significant effects on occupational status in several dimensions; having a supervising role, worker autonomy, and worker influence. The effect size of health is larger than that of an upper secondary education.
    Keywords: Occupational status; Self-reported health; Immigrants; Work autonomy; Supervising role
    JEL: I18 J50
    Date: 2017–10–06
  19. By: Raab, Roman (European Commission – JRC)
    Abstract: This paper uses panel data from the Survey of Health, Aging and Retirement in Europe (SHARE) to study the effect of care-giving on retirement. The findings suggest that care- and support-giving contributes to the retirement decision, in particular for men. While the frequency of care activities is more influential in the male retirement decision, the most important factor for both genders turns out to be out-of-household care.
    Keywords: informal care-giving, retirement, economics of aging, panel data
    JEL: I19 J26 J22
    Date: 2017–10
  20. By: Álvaro Pina (OECD)
    Abstract: Luxembourg’s large foreign-born population is a pillar of the country’s prosperity: they have brought skills and knowledge to many sectors of the economy. They also tend to successfully find jobs, with a higher employment rate than natives. However, not all immigrants have done well. The minority from non-EU origin (about 10% of the country’s population) suffers from high unemployment, large gender gaps in activity and below-average incomes. Refugees are particularly vulnerable. Other integration shortcomings go beyond disadvantaged minorities. Pervasive labour market segmentation is well illustrated by the marked under-representation of the foreign-born in public sector jobs. Political participation of immigrants at local level is modest. At school, their children are often put at a disadvantage by an education system which tends to perpetuate socio-economic inequality. The diversity of Luxembourg’s society contributed by immigrants should be seen as an asset for economic growth and well-being. Initiatives such as the diversity charter can help private and public organisations to reap the benefit of diversity through the inclusion of outsiders and the strengthening of social cohesion. Learning the languages of Luxembourg, developing social capital and having foreign qualifications validated are key preconditions for successful integration. Education requires both general equity-enhancing reforms, starting at early childhood, and targeted support to disadvantaged students, including upgraded vocational studies. Furthermore, job matching and social cohesion would benefit from greater immigrant participation in public sector employment and civic life. Avoiding that asylum seekers undergo protracted inactivity is also a concern. This Working Paper relates to the 2017 OECD Economic Survey of Luxembourg ( y-luxembourg.htm).
    Keywords: asylum seekers, early childhood education and care, equity in education, labour market segmentation, public employment, school tracking
    JEL: H52 I24 I28 J15 J45 J48 J61
    Date: 2017–10–11
  21. By: Piazzalunga, Daniela (IRVAPP)
    Abstract: The paper investigates the gender wage gap among recently graduated people, controlling for job and academic variables and for the field of study, as women lag in highly remunerative majors. The raw gender gap in hourly wages is 5.6%. Although including academic variables and the field of study, on top of job-related variables, slightly reduces the unexplained gap, the latter still accounts for most of the total difference. Using quantile decomposition, the paper shows that the unexplained gap increases along the wage distribution, indicating a glass ceiling effect. Heterogeneities arise across fields of study: the largest total gap emerges in Law, Political-Social sciences, and Economics-Statistics. In most disciplines, there is a significant unexplained gap – from 3.3% (Medicine), to 8.7% (Law), up to 9.6% (Agriculture) – which constitutes the largest share of the difference, confirming that most of the wage gap remains unexplained also by major. Finally, I use geographical differences to explore the influence of institutional and macro-economic variables, as well as of attitudes towards gender norms. Results indicate that childcare and part-time availability are correlated with lower gender wage gaps, while traditional gender norms are associated with higher gaps.
    Keywords: gender wage gap, Oaxaca-Blinder decomposition, college graduates, quantile decomposition, field of study, regional differences
    JEL: J16 J31 J71
    Date: 2017–09
  22. By: Jessen, Robin; Metzing, Maria; Rostam-Afschar, Davud
    Abstract: A common assumption in the optimal taxation literature is that the social planner maximizes a welfarist social welfare function with weights decreasing with income. However, high transfer withdrawal rates in many countries imply very low weights for the working poor in practice. We reconcile this puzzle by generalizing the optimal taxation framework by Saez (2002) to allow for alternatives to welfarism. We calculate weights of a social planner's function as implied by the German tax and transfer system based on the concepts of welfarism, minimum absolute and relative sacrifice, as well as subjective justness. For the latter we use a novel question from the German Socio-Economic Panel. We find that the minimum absolute sacrifice principle is in line with social weights that decline with net income. Absolute subjective justness is roughly in line with decreasing social weights, which is reflected by preferences of men, West Germans, and supporters of the grand coalition parties.
    Keywords: Justness,Optimal Taxation,Income Redistribution,Equal Sacrifice,Inequality,Subjective Preferences
    JEL: D63 D60 H21 H23 I38
    Date: 2017
  23. By: Simone Pellegrino (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy); Guido Perboli (Department of Control and Computer Engineering, Politecnico di Torino, Italy); Giovanni Squillero (Department of Control and Computer Engineering, Politecnico di Torino, Italy)
    Abstract: In this paper we propose a multi-objective evolutionary algorithm for supporting the definition of a personal income tax reform. As a case study, we apply this methodology to the Italian income tax, and consider a recently implemented tax cut. Our optimization algorithm is able to determine a set of tax structures that maximize the redistributive effect of the tax while minimizing its inefficiency - considering for the former the Reynolds-Smolensky index and for the latter the weighted average of taxpayers' effective marginal tax rates. The approach also takes into account two additional factors: the tax has to guarantee a specific revenue and to minimize the share of losing taxpayers with respect to the pre-reform situation. Experimental results clearly demonstrate that the methodology we employ can support the policy-maker's decisions in complex, real- world situations.
    Keywords: Personal Income Tax, Evolutionary Algorithms, Multi-Objective Optimization
    JEL: H23 H24
    Date: 2017–10
  24. By: Daniel S.J. Lechmann; Christoph Wunder
    Abstract: This study examines dynamics of solo self-employment. In particular, we investigate the extent of true state dependence and cross state dependence, i.e., whether experiencing solo selfemployment causally affects the probability of becoming an employer in the future. We use data from the German Socio-Economic Panel to estimate dynamic multinomial logit models. Our results show that the extent of true (cross) state dependence is rather small. The observed persistence in solo self-employment as well as transitions from solo self-employment to employership can largely be explained by observed and unobserved heterogeneity.
    Keywords: state dependence, dynamic multinomial logit, solo self-employment, own-account worker, stepping stone, German SOEP
    JEL: J23 J62
    Date: 2017
  25. By: Heywood, John S.; Jirjahn, Uwe; Pfister, Annika
    Abstract: Using German establishment data, this paper examines the relationship between product market competition and the extent of employer provided training. We demonstrate that high product market competition is associated with increased training except when the competition is so severe as to threaten liquidation to a firm. We take this as evidence of an inverted U-shaped relationship. We also make clear that while this relationship is very evident for the service sector it is largely missing for manufacturing where we confirm earlier results of no relationship.
    Keywords: Competition,Employer Provided Training,Manufacturing,Services
    JEL: J24 L00 M53
    Date: 2017
  26. By: Enrico D'Elia; Alessandra Righi
    Abstract: A special qualitative questionnaire attached to the Business Surveys carried on in February 2016 by Istat sheds some light on the labour demand after the Great Recession, also related to the output perspectives, the utilized productive capacity and the specific conditions and strategies of the firms. An ordered logit model is used to analyse the characteristics of the firms with different levels of employment response to a 10% permanent output increase. The first result is that the employment elasticity to output lies only between 0.10 and 0.25, with little differences by sector and firm’s size. It could be a sign that labour intensity of output is low and possibly reducing (and that productivity is increasing as well), or that jobs are created mainly by newborn firms (necessarily underrepresented in the survey sample). The estimated models also support the relevance of thresholds in firm’s behavior. For instance, capacity utilization and firm’s size apparently raise employment only if the former exceeds 80%-90% and the latter 50 employed persons. However, the heterogeneity among firms’ labour intensity remains huge even after controlling for many firm’s specific factors. It follows that one-size-fits-all incentives are expectedly inefficient.
    Keywords: Ordered Logit Model, Labour Demand, Business Survey, Firm’s Level Data
    JEL: D22 J23
    Date: 2017–03
  27. By: Sirus Dehdari; Kai Gehring
    Abstract: We exploit the fact that disagreements in the German leadership after the Franco-Prussian War in 1870 led to a quasi-exogenous division of Alsace and Lorraine to provide rare evidence of group identity formation within historically homogeneous regions. In line with the rejection-identification hypothesis, people in the treated area which experienced a change in nation-status and were exposed to repressive homogenization policies express a stronger regional identity and support more regional autonomy today. On average, subjects with a stronger regional also express a stronger European identity, which we exploit in a regression discontinuity design at the municipal level to reveal whether these identity differences are causal. We find that support for the European Union is significantly stronger in two crucial referenda, a result that is robust across different specifications and bandwidths, and not driven by language differences, large agglomerations or distance to foreign countries. The effect seems to be the strongest for the first two age cohorts after World War II and diminishes for later generations.
    Keywords: group identity, identity formation, homogenization policies, assimilation, rejection-identification hypothesis, persistence of preferences, Alsace-Lorraine
    JEL: D91 H70 H80 N40 Z19
    Date: 2017
  28. By: Töpfer, Marina
    Abstract: In this paper, we estimate the gender pay gap along the wage distribution using a detailed decomposition approach based on unconditional quantile regressions. Non-randomness of the sample leads to biased and inconsistent estimates of the wage equation as well as of the components of the wage gap. Therefore, the method is extended to account for sample selection problems. The decomposition is conducted by using Italian microdata. Accounting for labor market selection may be particularly relevant for Italy given a comparably low female labor market participation rate. The results suggest not only differences in the income gap along the wage distribution (in particular glass ceiling), but also differences in the contribution of selection effects to the pay gap at different quantiles.
    Keywords: Gender Pay Gap,Detailed Decomposition,Unconditional Quantile Regression,Sample Selection
    JEL: J7 J13 J31
    Date: 2017
  29. By: Marko Primorac; Silvija Vlah Jeric
    Abstract: Although it may at first seem unimportant, the structure of excise taxes on cigarettes greatly affects the price of cigarettes, the structure of the consumption, but also the amount of the tax revenue. EU Directive 2011/64/EU prescribes the combination of the specific and the proportional (ad valorem) excise tax on cigarettes. However, Member States independently determine the shares of one or another component in the overall excise tax structure, whereby the EU directive only prescribes the upper and the lower limit. The purpose of this article is to challenge several myths related to the cigarette taxation in the EU. The first one is that an increase of the specific component of the cigarette excise negatively affects the consumption of cigarettes, whereas this does not hold for the proportional component. The second assumption empirically tested in the paper is that an increase of the specific excise increases the government revenue from cigarette excises, whereby this can not be confirmed for the proportional component. Lastly, since both previous hypotheses have been confirmed, we tried to delve into reasons why certain countries – despite obvious advantages of the specific in relation to proportional excise – still predominantly rely on the latter. To this end, we tested the assumption that countries with domestic production of tobacco increasingly use proportional excises to increase the price gap between domestic (usually cheaper) and more expensive (imported/international) brands. The results of the empirical analysis were consistent with this hypothesis and confirmed that domestic tobacco production is a significant determinant of the structure of cigarette excises.
    Keywords: cigarette excises, excise taxes, tax revenue, tax harmonization, EU
    JEL: H20 H30
    Date: 2017
  30. By: Laun, Lisa (IFAU - Institute for Evaluation of Labour Market and Education Policy); Palme, Mårten (Department of economics, Stockholm University)
    Abstract: This paper studies the background to the increase in labor force participation of older workers in Sweden since 2000. In the first part, we study how the characteristics of the elderly have changed with respect to health, education level and work environment, as well as the impact of joint decision-making within the household. In the second part, we study the importance of institutional changes, including a major reform of the old-age pension system, introduction of tax credits for older workers, changes of the mandatory retirement age and stricter eligibility criteria in the disability insurance program. We find that the rise in labor force participation has coincided with improvements in health and educational attainment across birth cohorts as well as increased screening stringency in the disability insurance program.
    Keywords: retirement; NDC pension plans; disability insurance
    JEL: I10 J26
    Date: 2017–09–19
  31. By: Andrén, Daniela (Örebro University School of Business); Clark, Andrew E (Paris School of Economics (PSE)); D´Ambrosio, Conchita (University of Luxembourg); Karlsson, Sune (Örebro University School of Business); Pettersson, Nicklas (Örebro University School of Business)
    Abstract: We use a rich longitudinal data set following a cohort of Swedish women from age 10 to 49 to analyse the effects of birth and early-life conditions on adulthood outcomes. These latter include both well-being and the stress hormone cortisol. Employment and marital status are important adult determinants of well-being. Log family income and absence from school also predict adult well-being, although their importance falls when controlling for adult and birth characteristics. Among the birth characteristics, we find that high birth weight (>4.3kg) affects adult well-being. We predict the level of adult cortisol only poorly, and suggest that the relationship between life satisfaction and cortisol is non-monotonic: both high and low cortisol are negatively correlated with life satisfaction. The results from an OLS life satisfaction regression and a multinomial logit of high or low cortisol (as compared to medium) are more similar to each other.
    Keywords: life satisfaction; cortisol; birth-cohort data; adult; child and birth outcomes; multivariate imputation by chained equations
    JEL: A12 D60 I31
    Date: 2017–10–12
  32. By: Sebastian Bauhoff; Lisa Fischer; Dirk Göpffarth; Amelie C. Wuppermann
    Abstract: Many competitive health insurance markets adjust payments to participating health plans according to their enrollees’ risk – including based on diagnostic information. We investigate responses of German health plans to the introduction of morbidity-based risk adjustment in the Statutory Health Insurance in 2009, which triggers payments based on “validated†diagnoses by providers. Using the regulator’s data from office-based physicians, we estimate a difference-in-difference analysis of the change in the share and number of validated diagnoses for ICD codes that are inside or outside the risk adjustment but are otherwise similar. We find a differential increase in the share of validated diagnoses of 2.6 and 3.6 percentage points (3-4%) between 2008 and 2013. This increase appears to originate from both a shift from not-validated toward validated diagnoses and an increase in the number of such diagnoses. Overall, our results indicate that plans were successful in influencing physicians’ coding practices in a way that could lead to higher payments.
    Keywords: health plan payment, risk adjustment, managed competition, diagnostic coding, German Statutory Health Insurance
    JEL: H51 I10 I13 I18
    Date: 2017
  33. By: Jovicic, Sonja
    Abstract: This paper assesses the role of literacy skills as an equalizer in both educational outcomes and educational opportunities. First, by linking two surveys of adult skills for 11 OECD countries (PIAAC - Survey of Adult Skills (conducted in mid-90s) and IALS - International Adult Literacy Survey (conducted in 2011)), the relationship between performance (average literacy test scores) across countries and within-country skill inequality (dispersion in literacy test scores) is examined...
    JEL: I21 J62 J68 H52
    Date: 2017
  34. By: Steven Brakman; Harry Garretsen; Raoul van Maarseveen; Peter Zwaneveld
    Abstract: Stimulating firms to become exporters is of interest to policy makers, as exporters are in general more productive than non-exporters. However, selecting high export potentials is difficult in practice. The contribution of this paper is to characterize and identify these (high) export potentials. According to the Melitz (2003) model, potential exporters have to be productive enough to overcome the entry costs of foreign markets. Once firms pass this productivity threshold, they all export. Empirical evidence, however, indicates that a substantial share of high-productive firms does not export. In this paper, we focus specifically on this group of high-productive non-exporters. We employ a large micro-dataset for Dutch firms both in services and manufacturing for 2010-2014. Our findings are threefold. First, high productivity is an important, but not a sufficient condition for exporting. Firm size (substitute for productivity), import status, and foreign ownership are also important. Second, firm location is crucial. A location in peripheral areas prevents high productive firms from exporting; especially a location in the Northern part of the Netherlands reduces the probability to export. Third, the manufacturing sector differs from the services sector. Given that the median exporter in our sample is a services firm; this sector should be included in export research.
    Keywords: firm heterogeneity, export behavior, location
    JEL: F12 F14
    Date: 2017
  35. By: K. Haaf; C.J.M. Kool
    Abstract: In this paper, we analyse the sources of real per capita income growth and convergence in the 16 German states over the period 1995-2014 using a panel approach. The empirical analysis applies the popular growth – initial income equation. We augment the basic model specification with a trend term and a crisis dummy. We then augment the model with additional explanatory variables and account for non-linear interaction effects. Overall, we find evidence of slow but significant convergence once the crisis and a trend are appropriately accounted for. Internal migration has a positive impact on growth in the East and thus contributes to the convergence between Eastern and Western states. Horizontal tax equalisation is ineffective in promoting growth and convergence, but we do find some evidence that federal supplementary grants have contributed to convergence between grant receiving and non-receiving states. Structural funding is found to have opposing growth effects on Eastern and Western states and has significantly promoted convergence.
    Keywords: Internal migration, Fiscal equalisation, Structural funding, Panel approach, Interaction effects
    Date: 2017–09
  36. By: Tiago Fonseca (World Maritime University; CEG-IST, Instituto Superior Técnico, Universidade de Lisboa); Francisco Lima (CEG-IST, Instituto Superior Técnico, Universidade de Lisboa); Sonia C. Pereira (Barnard College, Columbia University and Columbia School of Social Work)
    Abstract: As job markets have been polarizing, firms have been changing their labor inputs.By using matched employer-employee data for Portugal, we examine whether labor market polarization has occurred within or across firms and how labor input upgrades have contributed to overall productivity growth. We develop a firm taxonomy based on worker’s occupational data. Firms can be focused on one task – Abstract, Manual or Routine – on a combination of tasks, or none. Results show that Abstract firms are the most productive and their share has increased over time. Manual firms, the least productive, have had a stable share throughout the period. Routine firms have seen their share decline over time. The dynamic decomposition of the estimated productivity reveal that productivity growth is propelled by increased market shares of the most productive incumbents and exiting of the least productive, especially for Abstract firms. Notwithstanding these productivity growth drivers, they fail to avert the productivity stagnation observed in Portugal between 2004 and 2009 due to the overall decline in productivity of incumbent firms, especially Routine. We discuss the policy implications of our results which are relevant to other European economies also lagging behind in terms of knowledge and innovation capabilities.
    Keywords: Taxonomy, productivity, routinization, technological change, polarization
    JEL: D24 L23 O33
    Date: 2017–09
  37. By: Krause, Manuela; Büttner, Thiess
    Abstract: This paper explores the role of fiscal equalization as a driver of states’ tax policy in Germany. We argue that fiscal redistribution of tax revenues provides an incentive for states to increase their tax rates. The analysis exploits differences in the degree of fiscal redistribution among the states over time. The results show a significant effect on tax policy: with full equalization of revenues from the real estate transfer tax the tax rate is about one percentage point higher than without.
    JEL: H20 H26 R38
    Date: 2017

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