nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2019‒01‒07
23 papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Hospital Competition in the National Health Service: Evidence from a Patient Choice Reform By Brekke, Kurt R.; Canta, Chiara; Straume, Odd Rune; Siciliani, Luigi
  2. Understanding processes of path renewal and creation in thick specialized regional innovation systems. Evidence from two textile districts in Italy and Sweden By Chaminade, Cristina; Bellandi, Marco; Plechero, Monica; Santini, Erica
  3. Making Employment More Inclusive in the Netherlands By Mark Baker; Lindy Gielens
  4. Election Outcomes and Individual Well-being: Evidence from British Panel Data By Daniel Gray; Harry Pickard; Luke Munford
  5. The effect of compulsory service on life satisfaction and its channels By Collischon, Matthias; Eberl, Andreas; Jahn, Kerstin
  6. The Changing Geography of Intergenerational Mobility By Brian Bell; Jack Blundell; Stephen Machin
  7. Impacts of consumers' electricity price misperceptions By Baikowski, Martin
  8. Women’s Labor Market Responses to their Partners’ Unemployment and Low-Pay Employment By Carina Keldenich; Andreas Knabe
  9. Immigrants' Wage Performance in a Routine Biased Technological Change Era: France 1994-2012 By Catherine Laffineur; Eva Moreno Galbis; Jeremy Tanguy; Ahmed Tritah
  10. Eco-Innovation: Drivers, Barriers and Effects – A European Perspective By Sandra M. Leitner
  11. The Role of Obstacles to Innovation on Innovative Activities: an Empirical Analysis By Daniel Goya; Andrés Zahler
  12. Unemployment, spell duration and the burden of unemployment in Spain during the XXI Century By Francisco José Goerlich Gisbert; Alba Miñano
  13. The impact of CO2 taxation on Swiss households' heating demand By Laurent Ott; Sylvain Weber
  14. Inflation Expectations and Firm Decisions: New Causal Evidence By Olivier Coibion; Yuriy Gorodnichenko; Tiziano Ropele
  15. Prenatal care and socioeconomic status: effect on cesarean delivery By Carine Milcent; Saad Zbiri
  16. Firms' Exports, Volatility and Skills: Evidence from France By Maria Bas; Pamela Bombarda; Sébastien Jean; Gianluca Orefice
  17. Individual Credit Market Experience and Perception of Aggregate Bank Lending. Evidence from a Firm Survey By Jarko Fidrmuc; Christa Hainz; Werner Hölzl
  18. Collusive Tax Evasion by Employers and Employees: Evidence from a Randomized Field Experiment in Norway By Marie Bjørneby; Annette Alstadsæter; Kjetil Telle
  19. The Boomerang of Female40: seniority pensions in Hungary, 2011–2018 By Andras Simonovits
  20. Competitive Permit Storage and Market Design: An Application to the EU-ETS By Simon Quemin; Raphael Trotignon
  21. The Sources of the Union Wage Gap: The Role of Worker, Firm, Match, and Jobtitle Heterogeneity By John T. Addison; Pedro Portugal; Hugo Vilares
  22. Progressive tax reforms in flat tax countries By Salvador Barrios; Viginta Ivaskaite-Tamosiune; Anamaria Maftei; Edlira Narazani; Janos Varga
  23. The price of transition: an analysis of the economic implications of carbon taxing By Gerbert Hebbink; Laurien Berkvens; Maurice Bun; Henk van Kerkhoff; Juho Koistinen; Guido Schotten; Ad Stokman

  1. By: Brekke, Kurt R. (Dept. of Economics, Norwegian School of Economics and Business Administration); Canta, Chiara (Toulouse Business School); Straume, Odd Rune (University of Bergen, Department of Economics and University of Minho, Department of Economics/NIPE); Siciliani, Luigi (University of York)
    Abstract: We study the impact of exposing hospitals in a National Health Service (NHS) to non-price competition by exploiting a patient choice reform in Norway in 2001. The reform facilitates a difference-in-difference research design due to geographical variation in the scope for competition. Using rich administrative data covering the universe of NHS hospital admissions from 1998 to 2005, we find that hospitals in more competitive areas have a sharper reduction in AMI mortality, readmissions, and length of stay than hospitals in less competitive areas. These results indicate that competition improves patient health outcomes and hospital cost efficiency, even in the Norwegian NHS with large distances, low fixed treatment prices, and mainly public hospitals.
    Keywords: Patient Choice; Hospital Competition; Quality; Cost-efficiency
    JEL: I11 I18 L13
    Date: 2018–12–06
  2. By: Chaminade, Cristina (Lund University); Bellandi, Marco (University of Florence); Plechero, Monica (University of Florence); Santini, Erica (Fondazione per la Ricerca e l’Innovazione)
    Abstract: The type of regional innovation system (RIS) strongly affects possibilities of paths of industrial transformation. This paper argues that traditional manufacturing districts, corresponding to specialized RISs and characterised by various nuclei of specialization and know-how, may foster different trajectories in combination with extra-regional networks. In particular, the paper analyses the interplay between regional and national innovation systems, providing an overview of the effect that different multilevel dynamics have on local trajectories. The cases of the textile districts in Prato (Italy) and Borås (Sweden) show SRISs can display not only path extension but also path renewal and creation strategies.
    Keywords: path development; regional innovation system; textile; knowledge nuclei; innovation policy; industrial district
    JEL: O19 O30 R11 R12
    Date: 2018–12–13
  3. By: Mark Baker; Lindy Gielens
    Abstract: The Dutch labour market has recovered and the unemployment rate has been converging towards pre-crisis levels. Non-standard forms of work have expanded with a strong trend towards self-employment and an increased reliance on temporary contracts. These developments may reflect a preference of some individuals for a more flexible working relationship, but they could also lower job security and job quality for others. Policies need to protect vulnerable groups in the more dynamic working environment without creating barriers to labour mobility and flexibility of the overall labour market. To improve the fairness of the tax system, policies should ensure a more level playing field between workers on different types of contracts. Regulatory policies should aim at raising labour market mobility to improve the matching of skills to jobs by easing the protection on permanent employment contracts and through a more targeted approach to activation policies for disadvantaged groups. Finally, measures should improve the skills of individuals in vulnerable groups to enhance their opportunities to find better jobs.This Working Paper relates to the 2018 OECD Economic Survey of the Netherlands 2018( netherlands.htm).
    Keywords: labour market policy, non-standard work, skills, tax and benefits, work incentives
    JEL: J08 J21 J24 J32 J68
    Date: 2018–12–19
  4. By: Daniel Gray (Department of Economics, University of Sheffield, UK); Harry Pickard (Department of Economics, University of Sheffield, UK); Luke Munford (School of Health Sciences, University of Manchester, UK)
    Abstract: Given the recent seismic changes in the political landscape across Europe and in the US, it is important to understand how voting behaviour and election results in influence an individual's subjective well-being. Exploiting novel longitudinal data on individuals in the UK matched to their parliamentary constituency, we find that supporting the incumbent political party exerts a positive influence on individual well-being. This relationship is different across overall life satisfaction and psychological well-being, gender and personal characteristics. Potential endogeneity concerns are addressed in two ways; we employ an instrumental variable approach and a regression discontinuity in time design to estimate the impact of a quasi-natural experiment. The results relating to the instrumental variable approach support the positive relationship between national and constituency incumbency support and well-being. In the regression discontinuity in time design, we identify a causal relationship by exploiting the timing of survey questions around the 2010 election date. We find that Liberal Democrat supporters have approximately one-unit higher level of overall life satisfaction after their party's surprise electoral success.
    Keywords: Election Results; Subjective Well-being; United Kingdom; Voting Behaviour
    JEL: D0 D1 D6 H1
    Date: 2018–12
  5. By: Collischon, Matthias; Eberl, Andreas; Jahn, Kerstin (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Compulsory military service is still a prominent feature of young people's careers in many countries. We use the abolition of compulsory military and civil service for males in 2011 in Germany as a natural experiment to identify effects of institutionalized career disruptions on life satisfaction. Drawing on data from the SOEP, we apply a difference-in-differences design (comparing young males and females) to assess the causal effect of this reform on individual life satisfaction. Our results show a significant and robust positive effect of the abolition of compulsory service on young males' life satisfaction. Furthermore, we provide empirical evidence that reductions in career disruptions, forgone earnings, uncertainty regarding the future, and forced labor contribute to this effect." (Author's abstract, IAB-Doku) ((en))
    JEL: I31 I38 J18
    Date: 2018–12–17
  6. By: Brian Bell; Jack Blundell; Stephen Machin
    Abstract: Does the importance of your family background on how far you get in adulthood also depend on where you grow up? For many countries, Britain included, a paucity of data has made this a question with very little reliable evidence to answer. To redress this evidence lacuna, we present a new analysis of intergenerational mobility across three cohorts in England and Wales using linked decennial census microdata. As well as testing the robustness of existing survey evidence on mobility trends over time, this large dataset permits analysis to be undertaken at a more geographically disaggregated level than was previously feasible. Evidence is presented on occupational wages, home ownership and education. Our new analysis shows a slight decline in occupation-wage mobility and a substantial decline in home ownership mobility over the late 20th century in England and Wales, while the picture for educational mobility is less clear. Focusing on the most recent cohort, we find marked geographic differences in mobility. We find that occupation-wage mobility is exceptionally high in London, while ex-industrial and mining areas experience the lowest rates of mobility. Areas with low occupation-wage mobility were more likely to vote to leave the European Union in the 2016 referendum. Home ownership mobility is negatively correlated with house prices and not correlated with occupation-wage mobility, suggesting that geographical comparisons based on one dimension of mobility need not always align with those based on alternative measures.
    JEL: J62 R23 R31 I24
    Date: 2018–12
  7. By: Baikowski, Martin
    Abstract: Empirical findings indicate that a large share of households misperceives electricity prices and is not able to make deliberate choices in energy service consumption, which leads to biased consumption decisions and thus to inefficient energy use. To investigate the impact of misperceived electricity prices on the derived demand for electricity, the economy and domestic CO2 emissions, we make use of a computable general equilibrium (CGE) model. The model allows us to take the narrow interweaving of production and consumption sectors into account to investigate the repercussions on supply and demand in Germany and Europe. Providing information on electricity prices or the most efficient utilisation can stimulate reductions in electricity consumption if households are aware of possible trade-offs. However, if consumers perceive the electricity price to be much higher than it actually is, providing information on the true electricity price might turn out to be counter-productive in terms of electricity consumption and domestic CO2 emissions.
    Keywords: residential energy consumption,energy efficiency,behavioural inefficiency,electricity price misperception,consumer inattention
    JEL: D58 Q41 Q43
    Date: 2018
  8. By: Carina Keldenich; Andreas Knabe
    Abstract: This paper revisits the added worker effect. Using bivariate random-effects probit estimation on data from the German Socio-Economic Panel we show that women respond to their partners’ unemployment with an increase in labor market participation, which also leads to an increase in their employment probability. Our analysis considers within- and between-effects separately, revealing differences in the relationships between women’s labor market statuses and their partners’ unemployment in the previous period (within-effect) and their partners’ overall probability of being unemployed (between-effect). Furthermore, we demonstrate that partners’ employment in low-paid jobs has an effect on women’s labor market choices and outcomes similar to that of his unemployment.
    Keywords: added worker effect, labor supply, family economics, unemployment, low-pay employment
    JEL: D12 D13 J22
    Date: 2018
  9. By: Catherine Laffineur (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique); Eva Moreno Galbis (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Jeremy Tanguy (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Ahmed Tritah (GAINS-TEPP - UM - Le Mans Université)
    Abstract: Over the period 1994-2012, immigrants' wage growth in France has outperformed that of natives on average by more than 14 percentage points. This striking wage growth performance occurs despite similar changes in employment shares along the occupational wage ladder. In this paper we investigate the sources of immigrants' relative wage performance focusing on the role of occupational tasks. We first show that immigrants' higher wage growth is not driven by more favorable changes in general skills (measured by age, education and residence duration), and then investigate to what extent changes in task-specific returns to skills have contributed to the differential wage dynamics through two different channels: different changes in the valuation of skills ("price effect") and different occupational sorting ("quantity effect"). We find that the wage growth premium of immigrants is not explained by different changes in returns to skills across occupational tasks but rather by the progressive reallocation of immigrants towards tasks whose returns have increased over time. Immigrants seem to have taken advantage of ongoing labor demand restructuring driven by globalization and technological change. In addition im- migrants' wages have been relatively more affected by minimum wage increases, due to their higher concentration in this part of the wage distribution.
    Keywords: wage dynamics,tasks,immigrants,skills
    Date: 2018–11
  10. By: Sandra M. Leitner (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper determines the key drivers, barriers and effects of eco-innovation, in comparison to innovation in general. It further distinguishes between different types of eco-innovations to better capture their heterogeneous nature. It uses two different data sets (1) the Community Innovation Survey 2014 (CIS-2014) for a large sample of EU Member States, further split up into three groups in accordance with their eco-innovation performance; (2) the German Mannheim Innovation Panel to address additional drivers the CIS-2014 is unable to capture. Results show that both R&D investments and complementary fixed capital investments are key drivers of eco-innovation, with differences across country groups. Results from the German sample further emphasise that expected future demand, rising costs for energy and other resources and the wish to improve one’s reputation and the need to meet industry standards help spur eco-innovation, while public policy is only of limited importance. In contrast, international market orientation turns out to be a barrier for eco-innovation. By and large, eco‑innovations also have a productivity-enhancing effect which is however lower as compared to innovations in general.
    Keywords: eco-innovation, demand pull, technology push, public policy, Europe
    JEL: Q55 O33 O38
    Date: 2018–12
  11. By: Daniel Goya; Andrés Zahler
    Abstract: We study the effect of different types of barriers to innovation (financial, demand, knowledge, market, cooperation, and regulatory barriers) on firm level innovation inputs and outputs. Using a pooled sample of three Chilean innovation surveys, based on an instrumental variables approach, we find that the probability of generating innovation outcomes is significantly reduced by demand and financial barriers. Regarding inputs for innovation, we find a clear negative relationship between financial and demand obstacles and the propensity to incur (non-R&D) innovation expenditures, but not with its intensity. We also provide evidence of heterogeneous effects across sectors, finding that knowledge obstacles are relevant for manufacturing and market structure obstacles for services, while demand and financial obstacles appear to matter across the board.
    Keywords: Financial and non-financial barriers to innovation, sectoral heterogeneity in innovation barriers, potential innovators, instrumental variables.
    JEL: D22 O31 O32
    Date: 2018–12
  12. By: Francisco José Goerlich Gisbert (Instituto Valenciano de Investigaciones Económicas - Ivie); Alba Miñano (Universitat de València)
    Abstract: This paper presents the families of unemployment indexes sensitive to unemployment duration developed by Sengupta (2009) and Shorrocks (2009a, 2009b). They pick-up in a single index the 3 dimensions of unemployment: incidence, intensity and inequality. An application with the Spanish Labor Force Survey for the period 2001-2017 is offered, and some interesting results arise. In particular, when unemployment duration is taken into account, a less optimistic view of the recent recovery appears, since one of the consequences of the Great Recession has been the huge increase in the very long-term unemployed. Moreover, vulnerable groups in the society should also be measured taking into account not only the incidence of unemployment, but also intensity and inequality, and when we do so other highly vulnerable groups emerge.
    Keywords: measurement of unemployment, spell duration, Spanish labour market.
    JEL: D30 D63 I31 J64
    Date: 2018–12
  13. By: Laurent Ott; Sylvain Weber
    Abstract: This paper investigates the impacts of the Swiss CO2 levy on households' heating demand. Using a difference-in-differences approach combined with inverse probability of treatment weighting, we test whether the 2016 carbon tax rate increase had a short-term impact on Swiss households' heating consumption and propensity to renovate. Micro-level data from the 2016 and 2017 waves of the Swiss Household Energy Demand Survey (SHEDS) are used to estimate the models. In both cases, no statistically significant effect can be detected across a variety of specifications. Even though further research is needed to investigate possible long-run impacts, our findings question the relevance of this policy instrument under its current form to lower households' greenhouse gas emissions. Additional measures might be implemented to improve its efficiency.
    Keywords: Carbon tax, energy consumption, fossil fuel, policy evaluation, inverse probability of treatment weighting, difference-in-differences
    JEL: C21 C23 H23 Q41 Q58
    Date: 2018–12
  14. By: Olivier Coibion; Yuriy Gorodnichenko; Tiziano Ropele
    Abstract: We use a unique design feature of a survey of Italian firms to study the causal effect of inflation expectations on firms’ economic decisions. In the survey, a randomly chosen subset of firms is repeatedly treated with information about recent inflation (or the European Central Bank’s inflation target) whereas other firms are not. This information treatment generates exogenous variation in inflation expectations. We find that higher inflation expectations on the part of firms leads them to raise their prices, increase their utilization of credit, and reduce their employment. However, when policy rates are constrained by the effective lower bound, demand effects are stronger, leading firms to raise their prices more and no longer reduce their employment.
    JEL: E2 E3
    Date: 2018–12
  15. By: Carine Milcent (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Saad Zbiri (RISCQ - Risques cliniques et sécurité en santé des femmes et en santé périnatale - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines)
    Abstract: Cesarean deliveries are widely used in many high- and middle-income countries. This overuse both increases costs and lowers quality of care and is thus a major concern in the healthcare industry. The study first examines the impact of prenatal care utilization on cesarean delivery rates. It then determines whether socioeconomic status affects the use of prenatal care and thereby influences the cesarean delivery decision. Using exclusive French delivery data over the 2008–2014 period, with multilevel logit models, and controlling for relevant patient and hospital characteristics, we show that women who do not participate in prenatal education have an increased probability of a cesarean delivery compared to those who do. The study further indicates that attendance at prenatal education varies according to socioeconomic status. Low socioeconomic women are more likely to have cesarean deliveries and less likely to participate in prenatal education. This result emphasizes the importance of focusing on pregnancy health education, particularly for low-income women, as a potential way to limit unnecessary cesarean deliveries. Future studies would ideally investigate the effect of interventions promoting such as care participation on cesarean delivery rates.
    Keywords: I18,I14,Cesarean delivery,Pregnancy care,Health education,Socioeconomic position,Socioeconomic position JEL classification: I12
    Date: 2018–12
  16. By: Maria Bas; Pamela Bombarda; Sébastien Jean; Gianluca Orefice
    Abstract: Inequalities between workers of different skills have been growing in the era of globalization. Firms' internationalization mode has an impact on job stability. Exporting firms are not only exposed to different foreign shocks, they also pay skill-intensive fixed costs to serve foreign markets. This implies that, for larger exporters, the labor demand for skilled workers is expected to be less volatile than for unskilled workers. In this paper we study the relationship between firms' export activity and job stability across employment skills. Relying on detailed firm-level data from France for the period 1996-2007, we show that firms with higher export intensity exhibit a lower volatility of skilled labor demand relative to the volatility of unskilled labor demand. Our identification strategy is based on an instrumental variable approach to provide evidence on the causal effect of the export performance of the firm on the volatility of employment of different skills. Our findings suggest that exporting increases the stability of skilled jobs, but feeds the precariousness of unskilled ones.
    Keywords: Exports;Employment Volatility;Skiller Labor;Firm-level Data
    JEL: F1 F16 L25 L60
    Date: 2018–12
  17. By: Jarko Fidrmuc; Christa Hainz; Werner Hölzl (WIFO)
    Abstract: We show that firms' credit market experience determines their perception of aggregate bank lending policy using panel data from the Austrian Business Survey between 2011 and 2016. Loan rejections have a strongly negative and persistent effect on perceptions. Interestingly, firms that receive a loan at worse than anticipated conditions show a similarly negative effect. Firms that do not need a loan tend to perceive lending policy as neutral and revise their perceptions less often. Our findings are in line with theories on sticky information, rational inattention and pessimism bias and suggest considering experience for the aggregation of perceptions.
    Keywords: Perception of lending policy, formation of perceptions, sticky information, rational inattention, pessimism bias, behavioral macroeconomics
    Date: 2018–12–20
  18. By: Marie Bjørneby; Annette Alstadsæter; Kjetil Telle
    Abstract: Third-party reporting and employers’ tax withholding are powerful compliance mechanisms, as long as the employer and employee do not collude to evade. Using data from randomly assigned on-site audits among 2,462 Norwegian firms, we provide evidence of collusive tax evasion. We find that firms assigned to be audited increased their subsequent wage reporting on behalf of their employees by 18 percent relative to firms assigned to the control group. The effect is more pronounced among small firms with few employees. Our results document the limitations of third-party reporting, but also that these limitations can be counteracted by relatively inexpensive on-site audits.
    Keywords: collaborative tax evasion, collusive tax evasion, random audits, undeclared work, third-party reporting
    JEL: E26 H26 H32
    Date: 2018
  19. By: Andras Simonovits (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences also Mathematical Institute of Budapest University of Technology)
    Abstract: In 2011, the Hungarian government introduced seniority pensions (Female40): females, who have been accumulating at least 40 years of eligibility (related to the length of contributions), can retire at any age without actuarial benefit reduction. The elimination of other early retirement scheme in 2012 and slowly rising real wages made the program even more popular: the lifetime benefit was maximized at the earliest retirement. Since 2016, real wages have been growing rather fast; making delay attractive. Without being recognized, Female40 has become a boomerang: immediate retirement from 2014 causes loss rather than gain to the retiree of Female40.
    Keywords: public pension, early retirement, seniority pensions, optimal retirement age
    JEL: H55
    Date: 2018–12
  20. By: Simon Quemin (Paris-Dauphine University & Climate Economics Chair); Raphael Trotignon (Climate Economics Chair)
    Abstract: We develop a model of competitive inter-temporal emissions trading under uncertainty that features the core design elements of the EU-ETS to assess the recent market reform, essentially the market stability reserve. Modeling novelties include the introduction of myopia on the part of covered firms, of their ability to understand the interaction between their decisions and the MSR actions over time, as well as the implementation of a recursive procedure to solve for the certainty-equivalent market equilibrium solution. We calibrate the model on 2008-2017 market data to match observed price and banking paths. We find that the MSR always raises the permit price and never preserves the overall cap integrity, irrespective of the permit cancellation provision. Our results also suggest that the purported MSR responsiveness to demand shocks (e.g. recession, renewable deployment) would be limited, especially when firms are unable to anticipate future MSR-driven supply changes.
    Keywords: Inter-temporal emissions trading, EU-ETS reform, Supply responsiveness design, Rational expectations equilibrium, Heuristic
    JEL: Q58 Q54 H23 E63
    Date: 2018–12
  21. By: John T. Addison; Pedro Portugal; Hugo Vilares
    Abstract: Using matched employer-employee-contract data for Portugal – a country with near-universal union coverage – we find evidence of a sizable effect of union affiliation on wages. Gelbach's (2016) decomposition procedure is next deployed to ascertain the contributions of worker, firm, match, and job-title heterogeneity to the union wage gap. Of these the most important is the firm fixed effect, followed at some distance by union workers gaining from elevated job titles and/or more generous promotion policies. For its part, unobserved worker quality plays only a very weak role, while there is even less suggestion that improved match quality bolsters the union premium.
    Keywords: union density, union wage gap, worker/form/job-title fixed effects, match quality, Gelbach decomposition, Portugal
    JEL: J31 J33 J41 J51 J52
    Date: 2018
  22. By: Salvador Barrios (European Commission - JRC); Viginta Ivaskaite-Tamosiune (European Commission - JRC); Anamaria Maftei (European Commission - JRC); Edlira Narazani (European Commission - JRC); Janos Varga (European Commission - ECFIN)
    Abstract: Much of the literature on flat tax reforms has highlighted the benefits of introducing flat personal income tax systems in transition economies. The advocated benefits of flat tax systems range from their simplicity, higher compliance and lower distortionary effects on growth and employment. These arguments have often been cited to support policy recommendations favouring the adoption of flat tax systems in Central and Eastern European (CEE) countries in the 1990s and the 2000s. However since income inequality is notoriously high in these countries, the question of introducing some progressivity in the tax system has come to the fore in both policy and academic circles. In this paper, we analyse the fiscal, redistributive and macroeconomic impact of (re-) introducing progressivity in a number of CEE countries with flat tax systems. Combining microsimulation and macro models, we find that a significant reduction in income inequality can be achieved by moving from a flat to a progressive tax system with positive, albeit negligible, macroeconomic and employment impact. The magnitude of these effects depends on country-specificities and tax system characteristics, due in particular to the existence of tax allowances and tax credits.
    Keywords: Flat tax, microsimulation model, DSGE model, inequality progressivity, employment, growth
    JEL: H24 H31 I32 D63
    Date: 2018–12
  23. By: Gerbert Hebbink; Laurien Berkvens; Maurice Bun; Henk van Kerkhoff; Juho Koistinen; Guido Schotten; Ad Stokman
    Abstract: In the summer of 2018, the House of Representatives of the Netherlands supported the legislative proposal for a Climate Act. The Climate Act stipulates that in 2050, greenhouse gas emissions must have been reduced by 95% relative to their 1990 level. To achieve this objective, the government is aiming to reduce emissions by 49% in 2030. This requires ambitious climate policies, which also include the option of introducing a direct tax on carbon emissions. An efficient way of reducing harmful emissions is to assign a price to the external effects of emissions. Data evidences that compared with other countries, Dutch enterprises emit large quantities of greenhouse gases and are paying relatively little for these emissions. The most straightforward approach would be to introduce a European carbon tax, after the example of the European Emissions Trading System (ETS). The option of introducing a national policy, with the Netherlands leading the field in terms of imposing a direct carbon tax on corporations, requires more insight into its impact on production costs, international price competitiveness and sales. This study addresses this, distinguishing between the various industry sectors within the Dutch economy.
    Date: 2018–12

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