nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2019‒04‒01
24 papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Empower the consumer! Energy-related financial literacy and its socioeconomic determinants By Julia Blasch; Nina Boogen; Claudio Daminato; Massimo Filippini
  2. Higher Education Supply, Neighbourhood effects and Economic Welfare. By Elena Cottini; Paolo Ghinetti; Simone Moriconi
  3. Sources and implications of resource misallocation: new evidence from firm-level marginal products and user costs By Simone Lenzu; Francesco Manaresi
  4. The impact of sanctions for young welfare recipients on transitions to work and wages and on dropping out By van den Berg, Gerard J.; Uhlendorff, Arne; Wolff, Joachim
  5. The Impact of Young People Neither In Employment nor In Education or Training Rate on the People at Risk of Poverty Rate after Social Transfers in European Union By Jianu, Ionuț
  6. Immigration and Right-Wing Populism: Evidence from a Natural Experiment By Mehic, Adrian
  7. The Effect of Maternal Education on Offspring's Mental Health By Daniel Graeber; Daniel D. Schnitzlein
  8. Effects of market structure and patient choice on hospital quality for planned patients By Giuseppe Moscelli; Hugh Gravelle; Luigi Siciliani
  9. Do companies benefit from public research organizations? The impact of the Fraunhofer Society in Germany By Comin, Diego; Licht, Georg; Pellens, Maikel; Schubert, Torben
  10. Employment relations and dismissal regulations: does employment legislation protect the health of workers? By Barlow, Pepita; Reeves, Aaron; McKee, Martin; Stuckler, David
  11. Childhood Circumstances and Young Adulthood Outcomes: The Role of Mothers' Financial Problems By Marta Barazzetta; Andrew E. Clark; Conchita D'Ambrosio
  12. Decomposition of Labor Earnings Growth: Recovering Gaussianity? By Pierre Pora; Lionel Wilner
  13. Optimism, Pessimism and Life Satisfaction: An Empirical Investigation By Alan Piper
  14. Marriage Market Equilibrium, Qualifications, and Ability By Dan Anderberg; Jesper Bagger; V. Bhaskar; Tanya Wilson
  15. The relationship of policy induced R&D networks and inter-regional knowledge diffusion By Marcel Bednarz; Tom Broekel
  16. WORKING CONDITIONS IN GLOBAL VALUE CHAINS.EVIDENCE FOR EUROPEAN EMPLOYEES By Dagmara Nikulin; Joanna Wolszczak-Derlacz; Aleksandra Parteka
  17. Unemployment Duration Variance Decomposition a la ABS: Evidence from Spain By Güell, Maia; Lafuente, Cristina
  18. Improving Educational Pathways to Social Mobility: Evidence from Norway’s “Reform 94” By Marianne Bertrand; Magne Mogstad; Jack Mountjoy
  19. The European framework for regulating telecommunications: a 25-year appraisal By Cave, Martin; Genakos, Christos; Valletti, Tommaso
  20. Taxes, frictions and asset shifting: when Swedes disinherited themselves By Escobar, Sebastian; Ohlsson, Henry; Selin, Håkan
  21. Minority Salience and Political Extremism. By Tommaso Colussi; Ingo Isphording; Nico Pestel
  22. Lowering Welfare Benefits: Intended and Unintended Consequences for Migrants and their Families By Lars Højsgaard Andersen; Christian Dustmann; Rasmus Landersø
  23. French GPs’ willingness to delegate tasks: may financial incentives balance risk aversion? By Jean-Baptiste Simon Combes; Alain Paraponaris; Yann Videau
  24. Challenges for EU Merger Control By Massimo Motta; Martin Peitz

  1. By: Julia Blasch (Institute for Environmental Studies (IVM), VU University Amsterdam); Nina Boogen (ETH Zurich, Switzerland); Claudio Daminato (ETH Zurich, Switzerland); Massimo Filippini (ETH Zurich, Switzerland)
    Abstract: To be aware of the potential for energy savings in their homes, individuals need specific energy-related and financial knowledge. In addition, they also need the cognitive skills to apply this knowledge, for example when it comes to the calculation of the lifetime cost of household appliances or energy-efficient renovations. This set of knowledge and skills is related to two literacy concepts, i.e. energy and financial literacy. In this paper, we propose a new concept of literacy that we call “energy-related financial literacy”. Further, we present information on the level of financial literacy as well as on the level of energy-related financial literacy for a sample of European households. In the empirical part of the paper we estimate several ordered probit models in order to analyse the determinants of the level of energy-related financial literacy, with a particular interest to understanding the role of gender. Our results show that the level of energy-related financial literacy is relatively low and heterogeneous across the European countries. Moreover, the results confirm previous findings about the gender gap in financial literacy, with males being associated with higher levels of the index. We also identify such a gender gap for energy-related financial literacy.
    Keywords: Energy literacy, financial literacy, energy-related financial literacy, consumer awareness, energy knowledge
    JEL: D12 D91 Q40
    Date: 2018–05
  2. By: Elena Cottini (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Paolo Ghinetti; Simone Moriconi
    Abstract: This paper uses an own built dataset on the history of universities in Italy during 1861- 2010 to estimate neighbourhood effects in the local supply of higher education, and incorporate them in a welfare analysis. We implement an instrumental variables approach that exploits initial conditions in the pre-unitarian Italian states, interacted with post-unification university reforms. We provide robust evidence of local displacement between higher education supply in neighbouring provinces. These e ects are mostly concentrated within the same field of study, the same region, and a spatial reach of 90 Km. We show that accounting for these displacement forces is important to evaluate the local economic returns related to higher education supply. On average, these explain more than 4% of local value added per capita. Economic returns are very localised, and larger in provinces that host university hubs.
    Keywords: neighbourhood effects; higher education supply; historical data; initial conditions; economic welfare.
    JEL: I23 I28 N00 R1
    Date: 2019–02
  3. By: Simone Lenzu (NYU Stern); Francesco Manaresi (Bank of Italy)
    Abstract: Using micro-data on firm-specific borrowing costs and wages, we demonstrate that distortions in firms’ policies can be empirically measured using firm-level gaps between marginal revenue products and user costs (MRP-cost gaps). We estimate MRP-cost gaps for 4.7 million firm-year observations in Italy between 1997 and 2013: their variation is closely related to the extent of credit and labor market frictions. Using the MRP-cost gaps, we assess the scope of input misallocation in Italy, and its impact on aggregate output and total factor productivity (TFP). The Italian corporate sector could produce 6% to 8% more output by reallocating resources toward higher-value users. Output losses from misallocation are larger (i) during episodes of financial instability, (ii) in non-manufacturing industries, (iii) in areas with less developed institutions and (iv) among high-risk firms. We highlight an important gain/risk tradeoff: gains from reallocation might come at the expense of increasing aggregate financial fragility, because maximizing reallocation gains requires a transfer of resource from large, old, and low-risk firms toward small, young, and high-risk firms.
    Keywords: total factor productivity, economic development, policy distortions
    JEL: O16 O40 E24
    Date: 2019–03
  4. By: van den Berg, Gerard J. (IFAU - Institute for Evaluation of Labour Market and Education Policy); Uhlendorff, Arne (CREST, CNRS, IAB Nuremberg, DIW Berlin, IZA); Wolff, Joachim (Institute for Employment Research (IAB) of the German Federal Employment Agency (BA))
    Abstract: The reintegration of young welfare recipients into the labor market is a major policy goal in many European countries. In this context monitoring and sanctions are important policy tools. In this paper, we analyze the impact of strict sanctions on job search outcomes for young welfare recipients in Germany. The German benefit system is characterized by harsh sanctions for this group. Strict sanctions effectively take away the benefits for three months if young welfare recipients do not comply with their job search requirements. We jointly analyze the impact of these sanctions on job search outcomes and on dropping out of the labor force based on administrative data on a large inflow sample of young male jobseekers into welfare. We estimate multivariate duration models taking selection based on unobservables into account. Our results indicate that there is a trade off between an increased job entry rate and an increased withdrawal from the labor force as well as lower entry wages. Sanctions increase the probability of finding a job, but these jobs go along with lower earnings. Moreover, sanctions significantly increase the probability of dropping out.
    Keywords: social assistance; unemployment; sanctions; post unemployment outcomes; youth unemployment
    JEL: C21 C41 J64 J65
    Date: 2019–03–06
  5. By: Jianu, Ionuț
    Abstract: This paper aims to assess the impact of young people neither in employment nor in education or training (neets rate) on the people at risk of poverty rate in the European Union, since young unemployment rate was one of the main channels through which the financial crisis has affected population income. Also, the educational system deficiencies includind the isuues related to the lack of correlation between educational skills and those needed on the labour market have intensified the impact of neets on poverty in the EU member states. The variables used cover 2010-2016 data for the EU-28 member states. Regarding the methodology, I used Panel Estimated Generalized Least Squares method, weighted by Period SUR option. Finally, this paper confirms the positive impact of the neets rate on the poverty rate in the European Union, as well as the inverse relationship between the evolution of the social government expenditures and the dynamic of the endogenous above mentioned. One of the most important drivers of the people at risk of poverty rate in the EU proved to be the inwork poverty rate.
    Keywords: poverty,education,employment,social,panel
    Date: 2018
  6. By: Mehic, Adrian (Department of Economics, Lund University)
    Abstract: Between the 2014 and 2018 Swedish parliamentary elections, the vote share of the anti-immigration Sweden Democrats increased significantly. To evaluate the possibility of a causal link between immigration and the right-wing populist vote, this paper uses data from a nationwide policy experiment, under which refugees are allocated randomly to every municipality in the country, creating exogenous variation in the number of refugees between municipalities. Overall, I find a positive and significant impact of immigration on the anti-immigration vote. In areas with strong anti-immigration sentiments during the 1990s refugee wave, the effect is magnified significantly. However, when considering immigration of a particular refugee group dominated by young men, the relationship is considerably weaker. I show that this is because immigration of young men has a balancing effect on the right-wing populist vote among immigration-friendly voter groups.
    Keywords: immigration; right-wing populism; natural experiment
    JEL: D72 J15 P16
    Date: 2019–03–19
  7. By: Daniel Graeber; Daniel D. Schnitzlein
    Abstract: We estimate the causal effect of maternal education on the mental health of mother’s children in late adolescence and adulthood. Theoretical considerations are ambiguous about a causal effect of maternal education on children’s mental health. To identify the causal effect of maternal education, we exploit exogenous variation in maternal years of schooling, caused by a compulsory schooling law reform in West Germany. Based on data from the German Socio-Economic Panel, we find no evidence of a causal protective effect of maternal education on children’s mental health. Instead, our empirical results suggest a moderate negative effect of maternal education on the daughters’ mental health. We find no effects for the sons. Our investigation of potential mechanisms is consistent with the hypothesis that the negative effect of higher maternal labor supply outweighs the positive effect of an expansion in household resources.
    Keywords: Mental health, education, compulsory schooling reform, intergenerational mobility
    JEL: I10 I21 J62
    Date: 2019
  8. By: Giuseppe Moscelli (Economics of Social and Health Care Research Unit, Centre for Health Economics,University of York, UK and School of Economics, University of Surrey, Guildford, UK.); Hugh Gravelle (Economics of Social and Health Care Research Unit, Centre for Health Economics, University of York, UK); Luigi Siciliani (Economics of Social and Health Care Research Unit, Centre for Health Economics, University of York, UK and Department of Economics and Related Studies, University of York, York, UK)
    Abstract: We investigate the change in the effect of market structure on planned hospital quality for three high-volume treatments, using a quasi difference in differences approach based on the relaxation of patient constraints on hospital choice in England. We employ control functions to allow for timevarying endogeneity from unobserved patient characteristics. We find that the choice reforms reduced quality for hip and knee replacement but not for coronary bypass. This is likely due to hospitals making a larger loss on hip and knee replacements, since robustness checks rule out changes in length of stay, new competitors’ entry and hospital-level mortality as possible confounders.
    Keywords: competition, quality, hospital, choice, endogeneity, difference in difference, control function.
    JEL: H51 I11 I18 L32 L33
    Date: 2019–03
  9. By: Comin, Diego; Licht, Georg; Pellens, Maikel; Schubert, Torben
    Abstract: Among available policy levers to boost innovation, investment in applied research organisations has received little empirical attention. In this paper, we analyse the case of the Fraunhofer Society, the largest public applied research organization in Germany. We analyse whether project interaction with Fraunhofer affects the performance and strategic orientation of firms. To that end, we assemble a unique dataset based on the confidential Fraunhofer-internal project management system and merge it with the German contribution to the Community Innovation Survey (CIS), which contains panel information on firm performance. Using instrumental variables that exploit the scale heteroscedasticity of the independent variable (Lewbel, 2012), we identify the causal effects of Fraunhofer interactions on firm performance and strategies. We find a strong, positive effect of project interaction on growth in turnover and productivity. In particular, we find that a one percent increase in the size of the contracts with FhG leads to an increase in growth rate of sales by 1.3 percentage points, and to an increase in the growth rate of productivity by 0.8 percentage points in the short-run. We also provide evidence of considerable long-run effects accumulating to 18% growth in sales and 12% growth in productivity over the course of 15 years. More detailed analyses reveal, amongst others, that the performance effects become stronger the more often firms interact with Fraunhofer and that interactions aiming at generation of technology have a stronger effect than interactions aiming merely at the implementation of existing technologies. Finally, we provide evidence on the macroeconomic productivity effects of Fraunhofer interactions on the German economy. Our results indicate that doubling Fraunhofer revenues from industry (+€ 0.68 bn.) would increase overall productivity in the German economy by 0.55%.
    Keywords: innovation,R&D,diffusion,applied research,Fraunhofer
    JEL: O33 O38
    Date: 2019
  10. By: Barlow, Pepita; Reeves, Aaron; McKee, Martin; Stuckler, David
    Abstract: Sociologists have long acknowledged that being in a precarious labour market position, whether employed or unemployed, can harm peoples' health. However, scholars have yet to fully investigate the possible contextual, institutional determinants of this relationship. Two institutions that were overlooked in previous empirical studies are the regulations that set minimum compensation for dismissal, severance payments, and entitlements to a period of notice before dismissal, notice periods. These institutions may be important for workers' health as they influence the degree of insecurity that workers are exposed to. Here, we test this hypothesis by examining whether longer notice periods and greater severance payments protect the health of labour market participants, both employed and unemployed. We constructed two cohorts of panel data before and during the European recession using data from 22 countries in the European Union Statistics on Income and Living Conditions (person years = 338,000). We find more generous severance payments significantly reduce the probability that labour market participants, especially the unemployed, will experience declines in self-reported health, with a slightly weaker relationship for longer notice periods.
    Keywords: dismissal legislation; health; insecurity; institutions; job loss; precariousness
    JEL: R14 J01
    Date: 2019–02–14
  11. By: Marta Barazzetta; Andrew E. Clark; Conchita D'Ambrosio
    Abstract: We here consider the cognitive and non-cognitive consequences on young adults of growing up with a mother who reported experiencing major financial problems. We use UK data from the Avon Longitudinal Study of Parents and Children to show that early childhood financial problems are associated with worse adolescent cognitive and non-cognitive outcomes, controlling for both income and a set of standard variables, and in value-added models controlling for children's earlier age-5 outcomes. The estimated effect of financial problems is almost always larger in size than that of income. Around one-quarter to one-half of the effect of financial problems on the non-cognitive outcomes seems to transit through mother's mental health.
    Keywords: income, financial problems, child outcomes, subjective well-being, behaviour, education, ALSPAC
    JEL: I31 I32 D60
    Date: 2019–03
  12. By: Pierre Pora (CREST; INSEE.); Lionel Wilner (CREST; INSEE.)
    Abstract: Recent works have concluded to non-Gaussian features of labor earnings growth. We argue in this paper that it is mainly due to working hours'volatility. Using the non-parametric approach developed by Guvenen et al. (2016), we find on French data that labor earnings changes exhibit strong asymmetry as well as high peakedness. However, after decomposing labor earnings growth into wage and working time growth, the log-normality of hourly wages remains a quite plausible assumption since deviations from Gaussianity stem mainly from working time changes. The joint dynamics of hourly wages and working time help explain those deviations which relate most likely to labor supply decisions at the extensive margin.
    Keywords: Labor earnings growth; non-Gaussian distributions; skewness; kurtosis.
    JEL: E24 J22 J31
    Date: 2019–02–15
  13. By: Alan Piper
    Abstract: This empirical investigation into life satisfaction, using nationally representative German panel data, finds a substantial association with an individual’s thoughts about the future, whether they are optimistic or pessimistic about it. Furthermore, including individuals’ optimism and pessimism about the future substantially increases the explanatory power of standard life satisfaction models. The thoughts that individuals have about the future contribute substantially to their current life satisfaction. In particular, the reduction in life satisfaction experienced by individuals who report being pessimistic is greater than that for well-understood negative events like unemployment. These effects are attenuated but remain substantial after controlling for individual fixed effects, statistically matching on observable variables between optimistic and pessimistic individuals, and addressing the potential endogeneity of optimism and pessimism to life satisfaction. Moreover, these effects are robust to controlling for future life events that may be anticipated.
    Keywords: Life satisfaction, subjective well-being, mental health, entropy balancing, GMM, dynamics, endogeneity, SOEP
    JEL: C23 D84 I31
    Date: 2019
  14. By: Dan Anderberg (Royal Holloway, Institute for Fiscal Studies, and CESifo); Jesper Bagger (Royal Holloway and the Dale T. Mortensen Centre, Aarhus University); V. Bhaskar (University of Texas at Austin and CEPR); Tanya Wilson (University of Glasgow and IZA)
    Abstract: We study marital sorting on academic qualifications and latent ability in an equilibrium marriage market model using the 1972 UK Raising of the School-Leaving Age (RoSLA) legislation as a natural experiment that induced a sudden, large shift in the distribution of academic qualifications in affected cohorts, but plausibly had no impact on the distribution of ability. We show that a Choo and Siow (2006) model with sorting on cohort, qualifications, and latent ability is identified and estimable using the RoSLA-induced population shifts. We find that the RoSLA isolated low ability individuals in the marriage market, and affected marital outcomes of individuals whose qualification attainment were unaffected. We also decompose the difference in marriage probabilities between unqualified individuals and those with basic qualifications into causal effects stemming from ability and qualification differences. Differences in marriage probabilities are almost entirely driven by ability
    Keywords: Marriage, Qualifications, Assortative mating, Latent ability
    JEL: D10 D13 J12
    Date: 2019–03–18
  15. By: Marcel Bednarz; Tom Broekel
    Abstract: Knowledge diffusion is argued to be strongly influenced by knowledge networks and spatial structures. However, empirical studies primarily apply an indirect approach of measuring their impact. Moreover, little is known about how policy can influence the spatial diffusion of knowledge. This paper seeks to fill this gap by empirically testing the effects of policy induced knowledge networks on the propensity of inter-regional patent citations. We use patent citation data for 141 labor market regions in Germany between 2000 to 2009, which is merged with information on subsidized joint R&D projects. Based on the latter, we construct a network of subsidized R&D collaboration. Its impact on inter-regional patent citations is evaluated with binomial and negative binomial regression models. Our findings do not indicate that inter- regional network links created by public R&D subsidies facilitate patent citations and hence, inter-regional knowledge diffusion.
    Keywords: knowledge diffusion, subsidized R&D-networks, gravity model, negative binomial regression, proximity, spillover
    JEL: L14 O18 O33 O38 C31 D83 O18
    Date: 2019–03
  16. By: Dagmara Nikulin (Gdansk University of Technology, Gdansk, Poland; Gdansk University of Technology, Gdansk, Poland); Joanna Wolszczak-Derlacz (Gdansk University of Technology, Gdansk, Poland); Aleksandra Parteka
    Abstract: This paper investigates how involvement in Global Value Chains (GVCs) affects working conditions. We use linked employer-employee data from the Structure of Earnings Survey merged with industry-level statistics on GVCs based on the World Input-Output Database. The sample consists of almost 9 million workers in 24 European countries in 2014. Given the multidimensional nature of the dependent variable, we compare the estimates resulting from a Mincerian wage model with zero-inflated negative binomial regressions that analyse other aspects of working conditions (overtime work and bonus payments). As to the impact of production fragmentation on social upgrading, wages prove to be negatively related to sectoral GVC involvement. Workers in sectors more deeply involved in GVCs have lower and less stable earnings, meaning worse working conditions; on the other hand, they are also less likely to have to work overtime, which one may see as a sign of better labour standards.
    Keywords: working conditions, Global Value Chains, wellbeing of workers, social upgrading
    JEL: F16 J81
    Date: 2019–02
  17. By: Güell, Maia; Lafuente, Cristina
    Abstract: In a recent paper, Alvarez, Borovickova, and Shimer (2014) revisit the analysis of the determinants of unemployment duration by proposing a new method (the ABS method hereafter) that directly estimates the importance of each component and implementing it using precise information on unemployment spells from social security administrative data for Austria. In this paper, we apply the ABS method to social security administrative data for Spain with the objective of comparing these two very different labor markets as well as Spain along the business cycle. Administrative data have many advantages compared to Labor Force Survey data, but the incomplete nature of the data needs to be addressed in order to use the data for unemployment analysis (e.g., unemployed workers that runout of unemployment insurance have no labor market status in the data). The degree and nature of such incompleteness are country-specific and are particularly important in Spain. Following Lafuente (2018), we approach the matter of data incompleteness in a systematic way by using information from the Spanish LFS data as well as institutional information. We hope that our approach will provide a useful way to apply the ABS method in other countries. Our findings are as follows: (i) The aggregate component is clearly the most important one, followed by heterogeneity and duration dependence, which are roughly comparable. (ii) The relative importance of each component and, in particular, duration dependence is quite similar in Austria and Spain, especially when minimizing the effect of fixed-term contracts in Spain. Similarly, we do not find big differences in the relative contribution of the different components along the business cycle in Spain. (iii) These comparisons suggest that statistical discrimination due to dynamic sample selection does not seem to be the main driver of duration dependence.
    Keywords: administrative social security data; Duration Dependence; Unemployment Duration
    JEL: E24 J64
    Date: 2019–03
  18. By: Marianne Bertrand; Magne Mogstad; Jack Mountjoy
    Abstract: High school vocational education has a controversial history in the United States, largely due to a perceived tradeoff between teaching readily deployable occupational skills versus shunting mostly disadvantaged students away from the educational and career flexibility afforded by general academic courses. We study the effects of a nationwide high school reform in Norway that aimed to move beyond this tradeoff. Reform 94, implemented in one step in the fall of 1994, integrated more general education into the vocational track, offered vocational students a pathway to college through a supplementary semester of academic courses, and sought to improve the quality of the vocational track through greater access to apprenticeships. We identify the impacts of the reform through a difference-in-discontinuity research design, comparing students born just before and after the reform’s birthdate eligibility cutoff to students born around the same cutoff in placebo years. Linking multiple administrative registries covering the entire Norwegian population, we find that the reform substantially increased initial enrollment in the vocational track, but with different subsequent outcomes for different groups. More men complete the vocational track at the expense of academic diplomas, but this has no detectable impact on college-going and leads to reduced criminal activity and higher earnings in adulthood, especially among disadvantaged men. For disadvantaged women, the initial surge in vocational enrollment leads to fewer high school dropouts and more vocational degrees with the college-prep supplement, and hence an increase in the share of college-eligible women; however, this translates into only small and insignificant increases in college completion and adult earnings. We show that men overwhelmingly pursue vocational education in higher-paying skilled trade fields, while women almost exclusively pursue vocational education in lower-paying service-based fields, which helps in interpreting some of these results. Overall, the reform succeeded at improving social mobility, particularly among men, but it somewhat exacerbated the gender gap in adult earnings.
    JEL: I24 I28 J24 J62
    Date: 2019–03
  19. By: Cave, Martin; Genakos, Christos; Valletti, Tommaso
    Abstract: The European telecommunications sector has been radically transformed in the past 25 years: from a group of state monopolies to a set of increasingly competitive markets. In this paper we summarize how this process has unfolded—for both fixed and mobile telecommunications—by focusing on the evolution of the regulatory framework and by drawing some parallels with the evolution of the sector in the US. Given the major strategic importance of the sector, we highlight some of the challenges that lie ahead.
    Keywords: European Union; Fixed and mobile telecommunication networks; Institutional design; Telecommunications regulation
    JEL: L43 L50 L96 O52
    Date: 2019–02–26
  20. By: Escobar, Sebastian (University of Munich); Ohlsson, Henry (Uppsala University); Selin, Håkan (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: We study tax-driven intergenerational asset shifting using a salient tax discontinuity and rich data on both donors and recipients. When the Swedish inheritance tax was in place, heirs could lower their inheritance tax bills by passing on part of the inheritance to their children. We present evidence on strong and precise responses to this incentive. We quantify optimization frictions, and we show that they are small in this setting. Both intensive and extensive margin policy responses can be rationalized by a simple model in which agents face small frictions at the extensive margin. Descriptive evidence suggests that the policy response is associated with the abundant supply of cheap legal advice on tax planning.
    Keywords: tax avoidance; tax rate elasticity; inheritance taxation; inter vivos gifts
    JEL: H21 H24 H26
    Date: 2019–03–22
  21. By: Tommaso Colussi (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Ingo Isphording; Nico Pestel
    Abstract: We investigate how changes in the salience of a minority group affect the majority group’s voting behavior. Specifically, we focus on Muslim communities and their increased salience in daily life during Ramadan. To estimate a causal effect, we exploit exogenous variation in the distance of German federal and state elections to the month of Ramadan over the 1980–2013 period. Our findings reveal an increased polarization of the electorate: vote shares for both right- and left-wing extremist parties increase in municipalities where mosques are located when the election date is closer to Ramadan. We use individual-level survey data to provide evidence on potential mechanisms. During Ramadan respondents perceive the share of foreign-born people living in their country as larger and reveal more negative attitudes towards Muslims. We complement these findings with evidence on increased numbers of violent attacks against Muslim communities shortly after Ramadan.
    Keywords: Salience, Muslims, Behavioral Political Economy, Right-Wing Extremism.
    JEL: D72 D74 J15 D91
    Date: 2019–03
  22. By: Lars Højsgaard Andersen; Christian Dustmann (Department of Economics, University College London and CReAM); Rasmus Landersø (ROCKWOOL Foundation Research Unit)
    Abstract: Denmark's Start Aid welfare reform reduced benefits to refugee immigrants by around 50 percent for those granted residency after the reform date. The reform led to a sharp short run increase in labor earnings and employment, but it also induced a strong female labor force withdrawal, and a large and persistent drop in disposable income for most households. Furthermore, the reform caused a sharp increase in property crime among both females and males. Moreover, children's likelihood of being enrolled in childcare or preschool, their performance in language tests, and their years of education all decreased, while teenagers' crime rates increased.
    Keywords: Social assistance, welfare state, labor market outcomes, migration
    JEL: E64 I30 J60
    Date: 2019–03
  23. By: Jean-Baptiste Simon Combes; Alain Paraponaris; Yann Videau
    Date: 2019
  24. By: Massimo Motta; Martin Peitz
    Abstract: The proposal to relax EU merger control to allow for anti-competitive 􀇲European Champions􀇳 may lead policy makers to update current merger control. While we see little merit in this specific proposal, we recommend a revision that goes into a different direction and, in particular, addresses mergers of potential competitors and the burden of proof. Thus, our proposal aims at the EC addressing problems of under-enforcement and making better-informed decisions. However, we would find it sensible to introduce in the Merger Regulation a clause whereby in exceptional and well-defined cases a merger, which would otherwise pass muster on competition grounds, may be prohibited due to defence, strategic and security of supply considerations.
    Keywords: Merger policy, European Union, potential competitor, safe harbour, national champion
    JEL: K21 L41 L52
    Date: 2019–03

This nep-eur issue is ©2019 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.