nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2019‒03‒11
twenty-one papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. The Political Economy of Higher Education Finance: How Information and Design Affect Public Preferences for Tuition By Lergetporer, Philipp; Woessmann, Ludger
  2. Horizontal Mismatch and Vocational Education By Juerg Schweri; Annina Eymann; Manuel Aepli
  3. The efficiency and distributive effects of local taxes: evidence from Italian municipalities By Rubolino, Enrico
  4. Intellectual Property Protection Mechanisms and the Characteristics of Founding Teams By Sara Amoroso; Albert N. Link
  5. Bundling and exporting: evidence from German SMEs By Aquilante, Tommaso; Vendrell-Herrero, Ferran
  6. Does tax competition drive cooperation in local economic development policies? Evidence on inter-local business parks in Germany By Ivo Bischoff; Simon Melch; Eva Wolfschuetz
  7. The Roots of Health Inequality and The Value of Intra-Family Expertise By Yiqun Chen; Petra Persson; Maria Polyakova
  8. Refugees welcome? Understanding the regional heterogeneity of anti-foreigner hate crimes in Germany By Entorf, Horst; Lange, Martin
  9. Language skills and homophilous hiring discrimination: Evidence from gender and racially differentiated applications By Anthony Edo; Nicolas Jacquemet; Constantine Yannelis
  10. Age Diversity and Innovation: Do mixed teams of old and experienced and young and restless employees foster companies innovativeness? By Hammermann, Andrea; Niendorf, Matthias; Schmidt, Jörg
  11. Do voluntary environmental programs reduce emissions? EMAS in the German manufacturing sector By Kube, Roland; von Graevenitz, Kathrine; Löschel, Andreas; Massier, Philipp
  12. Subsidies and Agricultural Productivity: CAP payments and labour productivity (convergence) in EU agriculture By Maria Garrone; Dorien Emmers; Alessandro Olper; Johan Swinnen
  13. Works Councils and Workplace Health Promotion in Germany By Stephen Smith; Uwe Jirjahn; Jens Mohrenweiser
  14. Heterogeneous Regional Innovation Spillovers of Universities of Applied Sciences By Tobias Schlegel; Curdin Pfister; Dietmar Harhoff; Uschi Backes-Gellner
  15. Inter-municipal cooperation in administrative tasks– the role of population dynamics and elections By Ivo Bischoff; Eva Wolfschuetz
  16. Some causal effects of an industrial policy By Criscuolo, Chiara; Martin, Ralf; Overman, Henry G.; Van Reenen, John
  17. Political Hedgehogs: The Geographical Sorting of Refugees in Sweden By Wennström, Johan; Öner, Özge
  18. The Relationship between Age and Subjective Well-Being: Estimating Within and Between Effects Simultaneously By Philipp Biermann; Juergen Bitzer; Erkan Goeren
  19. The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment By Ricardo Perez-Truglia
  20. Effects of labour and product market regulation on worker flows: Evidence for the euro area using micro data By Robert Anderton; Benedetta Di Lupidio
  21. Understanding Intergenerational Mobility: The Role of Nature versus Nurture in Wealth and Other Economic Outcomes and Behaviors By Black, Sandra; Devereux, Paul J.; Lundborg, Petter; Majlesi, Kaveh

  1. By: Lergetporer, Philipp (ifo Institute at the University of Munich); Woessmann, Ludger (ifo and LMU Munich)
    Abstract: Public preferences for charging tuition are important for determining higher education finance. To test whether public support for tuition depends on information and design, we devise several survey experiments in representative samples of the German electorate. The electorate is divided, with a slight plurality opposing tuition. Providing information on the university earnings premium raises support for tuition by 7 percentage points, turning the plurality in favor. The opposition-reducing effect persists two weeks after treatment. Information on fiscal costs and unequal access does not affect public preferences. Designing tuition as deferred income-contingent payments raises support by 16 percentage points, creating a strong majority favoring tuition. The same effect emerges when framed as loan payments. Support decreases with higher tuition levels and increases when targeted at non-EU students.
    Keywords: tuition; higher education; political economy; survey experiments; information; earnings premium; income-contingent loans; voting;
    JEL: I22 H52 D72 D83
    Date: 2019–02–27
  2. By: Juerg Schweri; Annina Eymann; Manuel Aepli
    Abstract: Recent literature suggests that vocational education provides individuals with smoother transitions into the labor market but lower wages over the lifecycle. A possible mechanism explaining lower wages is horizontal mismatch, defined as a mismatch between qualifications acquired by individuals and those required for their current job. Some studies have found higher mismatch wage penalties when individuals' education is more specific. Therefore, we analyze horizontal mismatch in Switzerland, the country with the highest proportion of firm-based vocational education and training in the OECD. We use subjective and objective measures of mismatch from the Swiss Household Panel. While we find sizeable mismatch wage penalties in OLS estimations, effects are small or insignificant in fixed-effects regressions. This holds for workers with vocational and general education background alike. We conclude that vocational education is more transferable than often assumed. We finish with recommendations on concept and methods for future analyses of horizontal mismatch.
    Keywords: Horizontal mismatch, Overeducation, Qualification, Switzerland, Training, Vocational Education, Wages
    JEL: I21 J24 J31 J62
    Date: 2019–02
  3. By: Rubolino, Enrico
    Abstract: This paper analyzes the effect of local income taxation on taxable income, inequality and internal migration in Italy using two tax reforms and several administrative data sources. These reforms, introduced in 2007 and 2011, granted municipalities the authority to switch from a flat to a progressive local income tax. I obtain two main results. First, the progressive tax reduced taxable income by 5 percent and the income share held by the top percentile of the municipal income distribution by 6 percent. Second, I find compelling evidence of a positive effect of net-of-tax rate differentials across provinces on changing fiscal residence.
    Date: 2019–02–25
  4. By: Sara Amoroso (European Commission – JRC); Albert N. Link (Bryan School of Business and Economics University of North Carolina-Greensboro)
    Abstract: Intellectual property protection mechanisms (IPPMs) are critical to fostering innovation and their relevance has grown enormously with the increased trade in goods and services involving intellectual property. Scholars have investigated what factors facilitate or hinder the use of such IP protection strategies, identifying country, sector, and firm characteristics. However, the extant literature has overlooked the role of founding team characteristics on the choice of IPPMs. Using data from a large sample of European small and young entrepreneurial firms, we show that controlling for size, R&D intensity, and other firms and market effects, the founding team characteristics such as gender and education greatly influence the choice of IPPMs.
    Keywords: IP choice, patents, appropriability, entrepreneurship, knowledge intensive firms, gender, AEGIS survey
    JEL: M13 L26 O34
    Date: 2019–01
  5. By: Aquilante, Tommaso (Bank of England); Vendrell-Herrero, Ferran (University of Birmingham)
    Abstract: This paper studies the effect of bundling products and services on the export performance of firms. Using a unique sample, we document several facts about German small and medium enterprises (SMEs). First, bundling is a relatively rare activity, which is unevenly spread across sectors. Second, SMEs that bundle products and services are more productive than those selling products and services separately. Third, these firms tend to be more internationally oriented. While most of the existing literature focuses on large firms, we contribute to the literature by uncovering a robust positive relation between product-service bundling and exporting in SMEs. Importantly, the competitiveness-enhancing effect of bundling goes beyond manufacturing, affecting non-manufacturing firms also. To mitigate endogeneity concerns, we exploit the panel structure of the data and implement several (doubly robust) propensity score matching techniques.
    Keywords: Bundling; innovation; export; SMEs
    JEL: D22 F10 F14 F23 L80
    Date: 2019–03–01
  6. By: Ivo Bischoff (University of Kassel); Simon Melch (University of Kassel); Eva Wolfschuetz (University of Kassel)
    Abstract: An increasing number of municipalities cooperates in the field of economic development. In this paper, we focus on a specific instrument in this field, namely the development of joint business parks. We apply a hazard model to data from West-German municipalities between 2000 and 2015. We find inter-local business parks to be more frequent among small municipalities and in constellations where suitable land is scarce. Our main focus rests on the role of tax competition. An analogy building on the literature on international tax coordination supports the hypothesis that inter-local business parks are more likely in regions where tax competition is intense. The evidence is affirmative: We find that the likelihood of inter-local business park formation to increase in the intensity of local tax competition.
    Keywords: Inter-local business parks, inter-municipal cooperation, tax competition, hazard model, Germany
    JEL: H77 H71 R58 R14
    Date: 2019
  7. By: Yiqun Chen; Petra Persson; Maria Polyakova
    Abstract: Mounting evidence documents a stark correlation between income and health, yet the causal mechanisms behind this gradient are poorly understood. This paper examines the impact of access to expertise on health, and whether unequal access to expertise contributes to the health-income gradient. Our empirical setting, Sweden, allows us to shut down inequality in formal access to health care; we first document that strong socioeconomic gradients nonetheless persist. Second, we study the effect of access to health-related expertise – captured by the presence of a health professional in the extended family – on health. Exploiting “admissions lotteries” into medical schools and variation in the timing of degrees, we show that access to intra-family medical expertise has far-reaching health consequences, at all ages: It raises longevity, improves drug adherence and reduces the occurrence of lifestyle-related disease in adulthood, raises vaccination rates in adolescence, and reduces tobacco exposure in utero. Third, we show that the effects of expertise are larger at the lower end of the income distribution – precisely where access to expertise is scarcer. Unequal access to health-related expertise can account for as much as 18% of the health-SES gradient, and may thus play a significant role in sustaining health inequality.
    JEL: D12 D83 G22 H1 H4 I13 I14
    Date: 2019–02
  8. By: Entorf, Horst; Lange, Martin
    Abstract: In this article, we examine anti-foreigner hate crime in the wake of the large influx of asylum seekers to Germany in 2014 and 2015. By exploiting the quasi-experimental assignment of asylum seekers to German regions, we estimate the causal effect of an unexpected and sudden change in the share of the foreign-born population on anti-foreigner hate crime. Our county-level analysis shows that not simply the size of regional asylum seeker infl ows drives the increase in hate crime, but the rapid compositional change of the residential population: Areas with previously low shares of foreign-born inhabitants that face large-scale immigration of asylum seekers witness the strongest upsurge in hate crime. Economically deprived regions and regions with a legacy of anti-foreigner hate crimes are also found to be prone to hate crime against refugees. However, when we explicitly control for East-West German differences, the predominance of native-born residents at the local level stands out as the single most important factor explaining the sudden increase in hate crime.
    Keywords: hate crime,immigration,natural experiment,regional conditions
    JEL: J15 R23 K42
    Date: 2019
  9. By: Anthony Edo (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Constantine Yannelis (Stanford University - Department of Economics - Department of Economics)
    Abstract: This paper investigates the importance of ethnic homophily in the hiring discrimination process. Our evidence comes from a correspondence test performed in France in which we use three different kinds of ethnic identification: French sounding names, North African sounding names, and "foreign" sounding names with no clear ethnic association. Within the groups of men and women, we show that all non-French applicants are equally discriminated against when compared to French applicants. Moreover, we find direct evidence of ethnic homophily: recruiters with European names are more likely to call back French named applicants. These results show the importance of favoritism for in-group members. To test for the effect of information about applicant's skills, we also add a signal related to language ability in all resumes sent to half the job offers. The design allows to uniquely identify the effect of the language signal by gender. Although the signal inclusion significantly reduces the discrimination against non-French females, it is much weaker for male minorities.
    Keywords: Correspondence testing,Gender discrimination,Racial discrimination,Ethnic homophily,Language skills JEL Classification: J15,J64,J71
    Date: 2019–03
  10. By: Hammermann, Andrea; Niendorf, Matthias; Schmidt, Jörg
    Abstract: "In Germany, the labour force is ageing rapidly. At the same time, age heterogeneity within companies is rising. The literature on diversity argues that heterogeneity can have a positive as well as a detrimental effect on team outputs. Our paper sheds light on the impact of age diversity on the likelihood of a company to create product or process innovations. Based on our analysis of the Linked Employer-Employee-Data from the Institute for Employment Research (IAB) over the 2009-2013 period, we focus on different indicators of age diversity within a company's workforce (variety, separation and disparity). We find that a rise in the average age of a company's workforce has a negative impact on innovation, but age diversity measured by the standard deviation of age or the average age gap increases the probability of a company to create innovations. In addition, the uniformity of the age distribution does not affect innovativeness. Different results for age and tenure diversity suggest a higher importance of generalised human capital for creativity processes compared to company-specific knowledge gained during employment within a company." (Author's abstract, IAB-Doku) ((en))
    JEL: J14 J24 M14
  11. By: Kube, Roland; von Graevenitz, Kathrine; Löschel, Andreas; Massier, Philipp
    Abstract: Voluntary environmental management programs for firms have become an increasingly popular instrument of environmental policy. However, the literature's conclusion on the effectiveness of such programs is ambiguous, and for the European region there is a lack of evidence based on a large control group. We seek to fill this gap with an evaluation of the Eco-Management and Audit Scheme (EMAS), introduced in 1995 by the European Union as a premium certification of continuous pro-environmental efforts above regulatory minimum standards. It is more demanding than other voluntary programs due to annual public reports of the environmental performance and targets for improvements. We use official firm-level production census data on the German manufacturing sector, a major energy consumer and emitter in Europe. To account for the self-selection of firms, we combine the Coarsened Exact Matching approach with a Difference-in-Differences estimation. Our results do not suggest reductions of firms' CO2 intensity and energy intensity neither before nor after certification. Moreover, program participants do not increase renewable energy consumption or investments into the protection of the environment and climate. Our results are robust to a variety of checks and call into question the effectiveness of the EMAS program concerning these particular outcome variables.
    Keywords: Voluntary Environmental Programs,Firm-level Energy Behavior,Matching Difference-in-Differences
    JEL: Q58 Q54 Q48
    Date: 2019
  12. By: Maria Garrone; Dorien Emmers; Alessandro Olper; Johan Swinnen
    Abstract: This paper investigates the relationship between EU agricultural subsidies and agricultural labour productivity by estimating a conditional growth equation. We use more representative subsidy indicators and a wider coverage (panel data from 213 EU regions over the period 2004- 2014) than have been used before. We find that, on average, CAP subsidies increase agricultural labour productivity, and the effect is almost entirely due to decoupled Pillar I payments. Coupled Pillar I payments have no impact. The impact of Pillar II is mixed.
    Date: 2018
  13. By: Stephen Smith (George Washington University); Uwe Jirjahn (University of Trier, GLO, and IZA); Jens Mohrenweiser (Bournemouth University)
    Abstract: From a theoretical viewpoint, there can be market failures resulting in an underprovision of occupational health and safety. Works councils may help mitigate these failures. Using establishment data from Germany, our empirical analysis confirms that the incidence of a works council is significantly associated with an increased likelihood that the establishment provides more workplace health promotion than required by law. This result also holds in a recursive bivariate probit regression accounting for the possible endogeneity of works council incidence. Furthermore, analyzing potentially moderating factors such as collective bargaining coverage, industry, type of ownership, multi-establishment status and product market competition, we find a positive association between works councils and workplace health promotion for the various types of establishments examined. Finally, we go beyond the mere incidence of workplace health promotion and show that works councils are positively associated with a series of different measures of workplace health promotion.
    Keywords: Non-union employee representation, works council, codetermination, worker voice, occupational health and safety, workplace health promotion
    JEL: I18 J28 J50 J81
    Date: 2019–01
  14. By: Tobias Schlegel (University of Zurich); Curdin Pfister (University of Zurich); Dietmar Harhoff (Max Planck Institute for Innovation and Competition); Uschi Backes-Gellner (University of Zurich)
    Abstract: This paper investigates whether differences in regional economic preconditions lead to heterogeneity of innovation spillovers from newly established universities of applied sciences (UASs). Exploiting a quasi-random establishment of UASs in the 1990s in Switzerland, we analyse the heterogeneity of innovation spillovers from these UASs due to differences in regional economic preconditions — i.e. economic strength, industry structure and economic density. Our estimations show that stronger and denser regional economies and regions with high tech intensive industries exhibited significantly more innovation spillovers from new UASs than regions with less favourable economic preconditions. One possible explanation are agglomeration effects favouring innovation spillovers. Our results imply that nearby UASs do not have positive effects on innovation per se, a finding that is of particular interest for policy makers who decide on the location of public applied research institutions.
    Keywords: Research Institutions, Innovation, Regional Economic Activity
    JEL: I23 O38 R12
    Date: 2019–02
  15. By: Ivo Bischoff (University of Kassel); Eva Wolfschuetz (University of Kassel)
    Abstract: We analyze the factors driving the emergence of inter-municipal cooperation (IMC) in tasks of internal administration in West-Germany between 2001 and 2014. In line with the Institutional Collective Action Approach, we find similarities in political ideology to foster cooperation. Cost pressure drives IMC. Given substantial cost hysteresis in administrative tasks, we expect IMC to be more frequent among shrinking municipalities. Our results supports this notion. However, there is no evidence that municipalities make use of complementarities from divergent population dynamics. We apply a hazard model that allows us to analyze the timing of IMC arrangements. We find state subsidies for IMC are an important driving force behind IMC. IMC agreements are less likely to emerge in election years when municipalities face low cost pressure while the opposite is true for municipalities with high cost pressure.
    Keywords: Inter-municipal cooperation, public administration, elections, hazard model, Germany, survey
    JEL: H77 D72
    Date: 2019
  16. By: Criscuolo, Chiara; Martin, Ralf; Overman, Henry G.; Van Reenen, John
    Abstract: We exploit changes in the area-specific eligibility criteria for a program to support jobs through investment subsidies. European rules determine whether an area is eligible for subsidies, and we construct instrumental variables for area eligibility based on parameters of these rule changes. Areas eligible for higher subsidies significantly increased jobs and reduced unemployment. A 10-percentage point increase in the maximum investment subsidy stimulates a 10 percent increase in manufacturing employment. This effect exists solely for small firms: large companies accept subsidies without increasing activity. There are positive effects on investment and employment for incumbent firms but not Total Factor Productivity.
    JEL: E24 G31 H25 L25 L52 R23
    Date: 2019–01–01
  17. By: Wennström, Johan (Research Institute of Industrial Economics (IFN)); Öner, Özge (University of Cambridge, Department of Land Economy)
    Abstract: This study shows that in Sweden, contrary to other European countries, refugees have been disproportionately placed in peripheral and rural areas with high unemployment and rapid native depopulation where the prospects for integration, both socially and economically, are poor. We explore and evaluate some potential reasons for this outcome. Factors such as an intimidating political and intellectual climate in favor of receiving large numbers of asylum seekers and immigrants and the economic support given by the central government to municipalities that accept refugees are not sufficient to understand the actions of rural local governments. Instead, we argue that Tetlock’s seminal work on “expert political judgment” may provide a useful approach for understanding the seemingly irrational actions of local politicians in rural and peripheral municipalities.​
    Keywords: Immigration; Social capital; Political judgment; Rational choice; Urbanization
    JEL: J15 J61 O15 R58
    Date: 2019–02–26
  18. By: Philipp Biermann (Otto von Guericke University Magdeburg); Juergen Bitzer (University of Oldenburg, Department of Economics); Erkan Goeren (University of Oldenburg, Department of Economics)
    Abstract: Based on data from the German Socio-Economic Panel (SOEP), we used a correlated random effects econometric framework to simultaneously estimate the within and between effects of age on subjective well-being. The proposed approach overcomes the ambiguity in the relationship between age and subjective well-being reported in a series of studies based on cross-sectional and/or longitudinal panel data. Our results suggest that a cubic-type functional relationship between well-being and age fits the data best, leading to highly significant coefficient estimates associated with the age variables, and consistent within and between effects of age on subjective well-being. A linear or quadratic functional relationship between well-being and age is not empirically supported, as the between and within estimates of age on well-being differ significantly from each other. The main findings are robust to the inclusion of a broad range of individual-level sociological, demographic, and economic controls, and to the inclusion of various interviewer controls such as survey experience, survey type, and interviewer fixed effects.
    Keywords: Subjective Well-Being, Life Cycle Happiness, Cohort Effects, Mundlak Approach, Correlated Random Effects, Fixed Effects, Between- and Within-Person Effects
    Date: 2019–03
  19. By: Ricardo Perez-Truglia
    Abstract: In 2001, Norwegian tax records became easily accessible online, allowing everyone in the country to observe the incomes of everyone else. According to the income comparisons model, this change in transparency can widen the gap in well-being between richer and poorer individuals. We test this hypothesis using survey data from 1985–2013. Using multiple identification strategies, we show that the higher transparency increased the gap in happiness between richer and poorer individuals by 29%, and it increased the life satisfaction gap by 21%. We provide suggestive evidence that some, although probably not all, of this effect relates to changes in self-perceptions of relative income. We provide back-of-the-envelope estimates of the importance of income comparisons, and discuss implications for the ongoing debate on transparency policies.
    JEL: D03 D31 D60 D83 I31 Z10
    Date: 2019–02
  20. By: Robert Anderton; Benedetta Di Lupidio
    Abstract: Evidence using macroeconomic data shows that employment-output elasticities in the euro area increased during the recovery from the crisis, especially in those countries where reforms aimed to facilitate labour market adjustments. In this paper, we investigate whether similar Okun-style empirical relationships show similar changes at the micro level. We econometrically estimate the responsiveness of individual worker flows (i.e. flows of individuals from employment to unemployment and from unemployment to employment) to GDP dynamics in euro area countries during the period 2000-2015; we also investigate whether structural reforms implemented in those countries are associated with a change in the flexibility of job transitions after the crisis. The econometric specifications include, in addition to GDP, micro (individual-level) explanatory variables from the Eurostat Labour Force Survey (EU-LFS) – i.e., socio-demographic variables such as gender, age, and education – in order to capture the key determinants of the individual flows. Overall, the results presented in this paper are consistent with previous results using aggregate data and show a higher responsiveness of individual worker flows to changes in GDP after the crisis, particularly for a group of euro area countries which implemented significant reforms. Moreover, we find that a number of measures which decrease the stringency of regulation (such as reforms which reduce employment protection legislation, product market regulation, and collective bargaining) increase the flexibility of the labour market as they have a positive and statistically significant impact on worker flows.
    Keywords: Worker flows, Linear probability model, Labour market regulations, Structural reforms, Great Recession
    Date: 2019
  21. By: Black, Sandra; Devereux, Paul J.; Lundborg, Petter; Majlesi, Kaveh
    Abstract: Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for pre-birth factors and we find little evidence that nature/nurture interactions are important. When bequests are taken into account, the role of adoptive parental wealth becomes much stronger. Our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that, even in relatively egalitarian Sweden, wealth begets wealth. We further build on the existing literature by providing a more comprehensive view of the role of nature and nurture on intergenerational mobility, looking at a wide range of different outcomes using a common sample and method. We find that environmental influences are relatively more important for wealth-related variables such as savings and investment decisions than for human capital. We conclude by studying consumption as an overall measure of welfare and find that, like wealth, it is more determined by environment than by biology.
    Keywords: intergenerational mobility; Wealth Inequality
    JEL: J00
    Date: 2019–02

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