nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2019‒04‒29
twenty-one papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Investing in Subsidized Childcare to Reduce Child Poverty: an Adequate Strategy? By Tine Hufkens; Francesco Figari; Dieter Vandelannoote; Gerlinde Verbist
  2. The Hypothetical Household Tool (HHoT) in EUROMOD: a new instrument for comparative research on tax-benefit policies in Europe By Tine Hufkens; Tim Goedeme; Katrin Gasior; Chrysa Leventi; Kostas Manios; Olga Rastrigina; Pasquale Recchia; Holly Sutherland; Natascha Van Mechelen; Gerlinde Verbist
  3. Firm heterogeneity, productivity, and the extensive margins of trade - differences between manufacturing firms in East and West Germany By Krenz, Astrid
  4. The Influence of Old-age Retirement on Health: Causal Evidence from the Finnish Register Data By Kuusi, Tero; Martikainen, Pekka; Valkonen, Tarmo
  5. Vaccination recommendations and timeliness - The German measles case By Andreas Kucher
  6. The Survival of Italian Individual Firms to Local Demand Shocks During the Great Recession By Giovanni Marin; Marco Modica
  7. The gender gap in international trade: Female-run firms and the exporter productivity premium By Krenz, Astrid
  8. The Causal Effects of the Minimum Wage Introduction in Germany - An Overview By Marco Caliendo; Carsten Schröder; Linda Wittbrodt
  9. Climate Change: Personal Responsibility and Energy Saving By David Boto-Garcìa; Alessandro Bucciol
  10. Discrimination in Hiring Based on Potential and Realized Fertility : Evidence from a Large-Scale Field Experiment By Sascha O. Becker, Sascha O.; Fernandes, Ana; Weichselbaumer, Doris
  11. Does facilitated access to the health system improve asylum-seekers' health outcomes? : Evidence from a quasi-experiment By Jaschke, Philipp; Kosyakova, Yuliya
  12. Cyclical labor costs within jobs By Daniel Schaefer; Carl Singleton
  13. Dynastic Human Capital, Inequality and Intergenerational Mobility By Adermon, Adrian; Lindahl, Mikael; Palme, Mårten
  14. Micro-founded tax policy effects in a heterogenenous-agent macro-model By Diego d'Andria; Jason DeBacker; Richard Evans; Jonathan Pycroft; Magdalena Zachlod-Jelec
  15. Has the Swedish Business Sector Become More Entrepreneurial than the US Business Sector? By Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars
  16. DyMH_LU: a simple tool for modelling and simulating the health status of the Luxembourgish elderly in the longer run By GENEVOIS Anne-Sophie; LIEGEOIS Philippe; PI ALPERIN Maria Noel
  17. Recent changes in British wage inequality: Evidence from firms and occupations By Daniel Schaefer; Carl Singleton
  18. Who works for whom and the UK gender pay gap By Sarah Louise Jewell; Giovanni Razzu; Carl Singleton
  19. Sectoral productivity Growth and Innovation Policies By Ivanova, Olga; Chatzouz, Moustafa
  20. Shadow Economy Index for Moldova and Romania By Talis Putnins; Arnis Sauka; Adriana Ana Maria Davidesc
  21. The Economic Impact of Long-term Care Services By Gerhard Streicher; Ulrike Famira-Mühlberger; Matthias Firgo

  1. By: Tine Hufkens (European Commission - JRC); Francesco Figari; Dieter Vandelannoote; Gerlinde Verbist
    Abstract: Expanding childcare is often considered as a suitable way to enhance employment opportunities of mothers with young children as well as to reduce child poverty. In this study the authors critically investigate this assertion by simulating a set of scenarios of increasing subsidized childcare slots and mothers’ employment. For a variety of European welfare states we estimate the impact on poverty and on the government budget using the European microsimulation model EUROMOD. The findings suggest that to achieve significant poverty reductions among young children, both additional childcare slots and increased mothers’ employment should be well targeted. The expenditures for additional childcare slots can to a large extent be recovered by the government receipts generated by the additional employment; however, there appears to be a trade-off between the extra revenue that can be generated and the extent of poverty reduction.
    Keywords: child care, maternal employment, poverty, microsimulation, family policy
    Date: 2019–04
  2. By: Tine Hufkens (European Commission - JRC); Tim Goedeme; Katrin Gasior; Chrysa Leventi; Kostas Manios; Olga Rastrigina; Pasquale Recchia; Holly Sutherland; Natascha Van Mechelen; Gerlinde Verbist
    Abstract: This paper introduces the Hypothetical Household Tool (HHoT), a new extension of EUROMOD, the tax-benefit microsimulation model for the European Union. With HHoT, users can easily create their own hypothetical data, which enables them to better understand how policies work for households with specific characteristics. The tool creates unique possibilities for an enhanced analysis of taxes and social benefits in Europe by integrating results from microsimulations and hypothetical household simulations in a single modelling framework. Furthermore, the flexibility of HHoT facilitates an advanced use of hypothetical household simulations to create new comparative policy indicators in the context of multi-country and longitudinal analyses. In this paper, we highlight the main features of HHoT, its strengths and limitations, and illustrate how it can be used for comparative policy purposes.
    Keywords: HHoT, microsimulation model, hypothetical household simulations, European Union
    Date: 2019–03
  3. By: Krenz, Astrid
    Abstract: I investigate the relationship between the extensive margins of imports and exports (the number of countries traded with and the number of goods traded) and firm productivity using a newly constructed and rich panel data set of German manufacturing firms for the years 2009-2014. I do for the first time construct a data set based on German trade data and firm data that accounts for the substantial change in the German register of firms statistics after 2012. The extensive margins are significantly and positively associated with firm-level productivity both for West and East German firms in cross-sectional estimations, which is in line with the previous literature. Productivity is higher in firms that import and export more goods and trade with more countries. However, results based on panel analyses reveal that especially for East German firms the relationship becomes insignificant when unobserved firm heterogeneity is controlled for. The results point to a high degree of firm heterogeneity, of factors that are relevant and differ within the firm only, for firms in East Germany.
    Keywords: Extensive margins of trade,Firm Productivity,Germany,Firm Heterogeneity
    JEL: F14 L25 L60
    Date: 2019
  4. By: Kuusi, Tero; Martikainen, Pekka; Valkonen, Tarmo
    Abstract: Abstract We quantify the impact of old-age retirement on health using longitudinal Finnish register data for the period 2000–2012, which allows for a strict isolation of the effects of transition from work to retirement for both mental and physical health indicators. We use the lowest statutory eligibility age for full old-age pensions, 63 years, as an instrument in FE-IV estimation to ensure causal inference. We find that (1) retirement moderately decreases the use of antidepressants, especially for women; (2) the beneficial effects of retirement on the cardiovascular and musculoskeletal conditions are smaller and more diffused; (3) there is no robust evidence that retirement effects vary systematically among socioeconomic groups, although more robust declines in musculoskeletal diseases were observed among manual-labour men; and (4) the beneficial effects in antidepressant use can be extended to apply to most Finns retiring at ages 62–64 based on our test of external validity.
    Keywords: Health, Health behaviour, Retirement, Retirement policies, Demographic economics
    JEL: I10 I12 J26 J18
    Date: 2019–04–18
  5. By: Andreas Kucher (University of Augsburg, Department of Economics)
    Abstract: High vaccination rates have a social protection function in addition to individual prevention of infections and diseases. To reach herd immunity thresholds and to protect risk groups, the timeliness of immunization is an important goal for vaccination policy. There is currently no causal evidence of age-appropriate immunization for childhood vaccinations. This research investigates how changing the recommended timeliness of vaccination in childhood affects vaccination status, leaving the number of doses during the primary vaccination unchanged. I analyze an adaption in 2001 that shifts the timeliness two and a half years earlier within the second year of life. Using representative German survey data based on vaccination cards, I investigate a timeliness adaption of the measles primary vaccination in 2001, which changed the scheduled age of the second dose among young children aged 2 to 7 years, and use variation of the implementation across states. For adjusted timeliness of the second measles vaccination, the data imply a significant shift into earlier ages after the policy for the treatment group. In the short run, a difference-in-difference strategy implies causal evidence of the up-to-date vaccination probability at the end of the 7th year of life. Additionally, the adaption induced a significant timeliness effect on the up-to-date level of the first measles dose at the end of the second year of life. This effect can be seen as evidence that individuals, in this case parents, respond to nonbinding vaccination recommendation policies and that timing of vaccination is an important factor for reaching vaccination policy aims.
    Keywords: Childhood immunization, Difference-in-differences, Measles vaccination, Timeliness
    JEL: H75 I12 I18
    Date: 2019–04
  6. By: Giovanni Marin (Department of Economics, Society & Politics, Universit? di Urbino Carlo Bo); Marco Modica (SGran Sasso Science Istitute GSSI, L'Aquila, Italy)
    Abstract: The Great Recessions a ected the Italian economy in a particularly severe way in terms of GDP collapse, increase in the unemployment rate and also in terms of number of rms that left the market. Moreover, because of its peculiar structural features, that is characterized by a business sector composed prevalently by a large number of micro and small firms, the Italian economy results to be particularly exposed to recession periods, especially so when these periods are prolonged and hit many sectors in the economy. The aim of this paper is to evaluate the impact of the Great Recession on the survival of firms for universe of Italian individual Firms. Our main contributions consist in the estimation of an indicator to capture the local demand shocks in order to infer about the link between local demand shock, rms' characteristics and hazard of exit. General results show that the conditional and unconditional hazard of exit is larger for female, old and foreign-born entrepreneurs. However, when considering the e ect of local demand shocks, this appears to be stronger for female, old, Italian entrepreneurs and for entrepreneurs located in highly- exposed labour market areas.
    Keywords: Resilience, Micro-Firms, Survival, Great Recession
    Date: 2019
  7. By: Krenz, Astrid
    Abstract: Female-run firms are less likely to be exporters although they exert positive influence in various aspects in an economy and society. With a new and comprehensive data set on manufacturing plants, I investigate the exporter productivity premium of female-run firms in Germany. The results show that female-run firms gain a higher exporter-productivity premium than male-run firms. I find evidence for selection into exporting but no impact for learning from exporting for female-run exporting firms. These results give hint to discrimination barriers that female-run firms face when they are exporting as compared to male-run firm exporters.
    Keywords: Gender Inequality,Exporter-Productivity Premium,Germany,Firm Heterogeneity
    JEL: F14 L25 L60 O12
    Date: 2019
  8. By: Marco Caliendo (University of Potsdam, IZA Bonn, DIW Berlin, IAB Nuremberg); Carsten Schröder (SOEP at DIW Berlin); Linda Wittbrodt (University of Potsdam)
    Abstract: In 2015, Germany introduced a statutory hourly minimum wage that was not only universally binding but also set at a relatively high level. We discuss the short-run effects of this new minimum wage on a wide set of socio-economic outcomes, such as employment and working hours, earnings and wage inequality, dependent and self-employment, as well as reservation wages and satisfaction. We also discuss difficulties in the implementation of the minimum wage and the measurement of its effects related to non-compliance and suitability of data sources. Two years after the minimum wage introduction, the following conclusions can be drawn: while hourly wages increased for low-wage earners, some small negative employment effects are also identifiable. The effects on aspired goals, such as poverty and inequality reduction, have not materialized in the short run. Instead, a tendency to reduce working hours is found, which alleviates the desired positive impact on monthly income. Additionally, the level of non-compliance was substantial in the short run, thus drawing attention to problems when implementing such a wide-reaching policy.
    Keywords: Minimum Wage, Evaluation, Earnings, Working Hours, Employment
    JEL: J22 J23 J31 J38
    Date: 2019–04
  9. By: David Boto-Garcìa (University of Oviedo); Alessandro Bucciol (Department of Economics (University of Verona))
    Abstract: We study at the individual level the connection between actions meant to reduce energy use and beliefs about personal responsibility on climate change mitigation. In addition, we also examine the role of human values and cross-country differences in shaping beliefs and behaviours. Using data from 23 (mostly) European countries, we find large heterogeneity in both beliefs and values, with richer countries being more likely to exhibit more concern about the environment. Personal responsibility and actual energy saving are positively correlated, but the correlation is not high. As regards human values, self-transcendence and openness are positively correlated with responsibility, while self-enhancement and conservation are negatively correlated. Values are instead not as correlated with energy saving, since we find only a positive correlation with conservation and a negative correlation with self-enhancement.
    Keywords: Climate change, Energy saving, Personal responsibility, Human values
    JEL: Q54 D91
    Date: 2019–04
  10. By: Sascha O. Becker, Sascha O. (Department of Economics, University of Warwick); Fernandes, Ana (Bern University of Applied Sciences); Weichselbaumer, Doris (Johannes Kepler University Linz)
    Abstract: Due to conventional gender norms, women are more likely to be in charge of childcare than men. From an employer’s perspective, in their fertile age they are also at “risk” of pregnancy. Both factors potentially affect hiring practices of firms. We conduct a largescale correspondence test in Germany, Switzerland, and Austria, sending out approx. 9,000 job applications, varying job candidate’s personal characteristics such as marital status and age of children. We find evidence that, for part-time jobs, married women with older kids, who likely finished their childbearing cycle and have more projectable childcare chores than women with very young kids, are at a significant advantage vis-àvis other groups of women. At the same time, married, but childless applicants, who have a higher likelihood to become pregnant, are at a disadvantage compared to single, but childless applicants to part-time jobs. Such effects are not present for full-time jobs, presumably, because by applying to these in contrast to part-time jobs, women signal that they have arranged for external childcare.
    Keywords: Fertility ; Discrimination ; Experimental economics
    JEL: C93 J16 J71
    Date: 2019
  11. By: Jaschke, Philipp (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Kosyakova, Yuliya (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "As long as their asylum application is not approved or their duration of stay does not exceed 15 months, asylum-seekers who require doctor visit have to claim it either by the local authority for foreigners or the responsible social assistance office in Germany. Since 2016 several Federal states and municipalities in Germany have launched the procedure to hand out electronic health cards (eHC) which allow immediate direct access to the health system for asylum-seekers. In this paper, we examine whether being eligible to the eHC as a result of the policy change has had an effect on the health outcomes of asylum-seekers in Germany. For empirical identification, we take advantage of the variation of the policy change across regions and over time. Relying on data from the IAB-BAMF-SOEP Survey of Refugees, we find that the introduction of the reforms allowing asylum-seekers' faster and more direct access to the healthcare system indeed reduced the risk of emotional disorder. We conclude by discussing the potential pros and contras of a comprehensive nationwide introduction of the eHC for asylum-seekers." (Author's abstract, IAB-Doku) ((en))
    Date: 2019–04–10
  12. By: Daniel Schaefer (School of Economics, University of Edinburgh); Carl Singleton (Department of Economics, University of Reading)
    Abstract: Using UK employer-employee panel data, we present novel facts on how wages and working hours respond to the business cycle within jobs. Firms reacted to the Great Recession with substantial real wage cuts and by recruiting more part-time workers. A one percentage point increase in the unemployment rate led to an average decline in real hourly wages of 2.8 percent for new hires and 2.6 percent for job stayers. Hiring hours worked were substantially procyclical, while job-stayer hours were acyclical. These results show that real wages are not rigid and that the labor costs of new hires are especially flexible.
    Keywords: Wage rigidity, Great Recession, Hours worked, Job-level analysis
    JEL: E24 E32 J30
    Date: 2019–04–07
  13. By: Adermon, Adrian (Institute for Evaluation of Labor Market and Education Policy (IFAU)); Lindahl, Mikael (Department of Economics, University of Gothenburg); Palme, Mårten (Dept. of Economics, Stockholm University)
    Abstract: We study the importance of the extended family – the dynasty – for the persistence in inequality across generations. We use data including the entire Swedish population, linking four generations. This data structure enables us to identify parents’ siblings and cousins, their spouses, and the spouses’ siblings. Using various human capital measures, we show that traditional parent-child estimates of intergenerational persistence miss almost one-third of the persistence found at the dynasty level. To assess the importance of genetic links, we use a sample of adoptees. We then find that the importance of the extended family relative to the parents increases.
    Keywords: Intergenerational mobility; extended family; dynasty; human capital;
    JEL: I24 J62
    Date: 2019–04–11
  14. By: Diego d'Andria (European Commission - JRC); Jason DeBacker (University of South Carolina – Darla Moore School of Business); Richard Evans (University of Chicago - Becker Friedman Institute); Jonathan Pycroft (European Commission - JRC); Magdalena Zachlod-Jelec (European Commission - JRC)
    Abstract: Microsimulation models are increasingly used to calibrate macro models for tax policy analysis. Yet, their potential remains underexploited, especially in order to represent the non-linearity of the tax and social benefit system and interactions between capital and labour incomes which play a key role to understand behavioural effects. Following DeBacker et al. (2018b) we use a microsimulation model to provide the output with which to estimate the parameters of bivariate non-linear tax functions in a macro model. In doing so we make marginal and average tax rates bivariate functions of capital income and labour income. We estimate the parameters of tax functions in order to capture the most important non-linearities of the actual tax schedule, together with interaction effects between labour and capital incomes. To illustrate the methodology, we simulate a reduction in marginal personal income tax rates in Italy with a microsimulation model, translating the microsimulation results into the shock for a dynamic overlapping generations model. Our results show that this policy change affects differently households distinguished by age and ability type.
    Keywords: computable models, general equilibrium, overlapping generations, taxation, microsimulation models
    JEL: H24 H31 D58
    Date: 2019–04
  15. By: Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars
    Abstract: Recent studies document a 30-year decline in various measures of entrepreneurship in the U.S. Using detailed Swedish employer-employee data over the period 1990 to 2013, we find young firms to be more prominent in the Swedish business sector than in the U.S. business sector. Young Swedish firms, aged five years or less, account for more than half of all firms during this period. We also observe an increase in Swedish entrepreneurial activity for start-ups. However, increasing job destruction rates for young firms has implied a declining employment share for younger firms from the mid-2000s. Moreover, most of the job creation by young firms occurs in the expanding service sector. We discuss different explanations for why Sweden appears not to have the same strong decline in entrepreneurial activity as the U.S. has had during the last two decades. We argue that one important explanation is economic reforms in Sweden in the 1990s that mitigated several hurdles to entrepreneurship.
    Keywords: entrepreneurship; industrial structure and structural change; job dynamics; Matched employer-employee data
    JEL: J23 K23 L26 L51
    Date: 2019–04
  16. By: GENEVOIS Anne-Sophie; LIEGEOIS Philippe; PI ALPERIN Maria Noel
    Abstract: We are facing one of the most important demographic events of the last decades in Europe: the population ageing process. This process will have significant economic effects particularly on health. As most diseases are age-related, this process might imply a proportionally higher share of individuals with declining health. Being able to forecast the health status of the population can help to deal with concerns about the financial and social sustainability of several public policies including health. In this paper, we present the DyMH_LU model, a dynamic microsimulation model focused exclusively on the health status of the Luxembourgish population. One of its major characteristics is that it simulates more than sixty different diseases and limitations in the activities of daily living. All this simulated information can be aggregated in order to compute, for each period, the overall health status of each individual, the marginal distribution of each disease among the total population and the global health status of the entire population. The starting point of the DyMH_LU model is the information collected in 2015 in the Wave 6 of the SHARE database that targets individuals aged 51 or older. The simulation period covers 2017 until 2045.
    Keywords: Dynamic microsimulation; Health; SHARE; Luxembourg
    JEL: C01 C02 I10
    Date: 2019–04
  17. By: Daniel Schaefer (School of Economics, University of Edinburgh); Carl Singleton (Department of Economics, University of Reading)
    Abstract: Using a linked employer-employee dataset covering large firms, we present new evidence on British wage inequality trends over the past two decades. Differences between firms in the average wages they paid did not drive these trends. Between 1996 and 2005, greater wage variance within firms accounted for eighty-six percent of the total increase in wage variance among employees. In the following decade, wage inequality between firms continued to increase, whereas overall wage dispersion decreased. Approximately all the contribution to inequality dynamics from estimated firm-specific factors, throughout the employee wage distribution, disappears after accounting for the changing occupational content of wages.
    Keywords: wage inequality, within-firm inequality, occupational wage premiums
    JEL: D22 E24 J31
    Date: 2019–04–03
  18. By: Sarah Louise Jewell; Giovanni Razzu (Department of Economics, University of Reading); Carl Singleton (Department of Economics, University of Reading)
    Abstract: This study reports novel facts about the UK gender pay gap. We use a representative, longitudinal and employer-employee linked dataset for the years 2002-16. Men’s average log hourly wage was 22 points higher than women’s in this period. We find that 16% of this raw pay gap is accounted for by estimated firm-specific wage effects. This is almost three times the amount explained by the occupation differences between men and women. When we decompose a preadjusted measure of the pay gap, we find that less than 1 percentage point is accounted for by the allocation of men and women across high and low wage firms. In other words, only a small share (6%) of what is traditionally referred to as the ‘unexplained’ part of the pay gap is in fact explained by the differences between men and women in whom they work for.
    Keywords: gender wage gap, firm-specific wages, occupation premiums
    JEL: J16 J31 J70
    Date: 2019–04–11
  19. By: Ivanova, Olga; Chatzouz, Moustafa
    Abstract: This papers studies the sectoral differences in the impacts of various innovation policies, human capital and R&D intensity on the productivity growth using econometric panel data techniques. We analyze the development of the sectoral productivity as depending on both knowledge creation and knowledge adoption, where both channels of productivity growth can be influenced by various types of R&D related public policy. We use the combination of the most recent EU-KLEMS database and OECD data for econometric analysis on six aggregated sectors of the economy. In contrast with other existing studies our econometric analysis covers the whole of the economy and includes various traditional, industrial and services sectors. The main contribution of the paper is in highlighting the differences between economic sectors and identifying potential for sector-specific innovation policies.
    Keywords: Endogenous growth, R&D, panel data, R&D policy, industrial sectors
    JEL: O47
    Date: 2019–04–23
  20. By: Talis Putnins (Finance Discipline Group, University of Technology Sydney); Arnis Sauka (Centre for Sustainable BusinessStockholm School of Economics in Riga); Adriana Ana Maria Davidesc (Department of Labour Market PoliciesNational Scientific Research Institute for Labour and Social Protection, Bucharest)
    Abstract: This report presents estimates of the size of the shadow economy in Moldova and Romania during the years 2015–2016. The estimates are based on surveys of entrepreneurs in both countries, following the method of Putninš and Sauka (Journal of Comparative Economics 43:471–490, 2015). The components of the shadow economy captured by this approach include misreported business income, unregistered or hidden employees, and ‘envelope’ wages. Our findings suggest that both Moldova and Romania exhibit high levels of bribery, which is influenced by the number of unregistered companies. The results of this chapter highlight the importance of focusing on different forms of entrepreneurship particularly in transition economies.
    Date: 2019–01–01
  21. By: Gerhard Streicher (WIFO); Ulrike Famira-Mühlberger (WIFO); Matthias Firgo (WIFO)
    Abstract: Projections show sharp increases in public spending on long-term care services across Europe. However, a purely cost based focus on long-term care services is economically misleading. Private and public expenditure on long-term care services directly and indirectly generate income in the form of salaries, taxes and social security contributions. The aim of this paper is to quantify the economic impact and multipliers of long-term care services for the first time. Based on an econometric regional input-output model for Austria, we estimate the direct, indirect and induced effects of public and private expenditures on value added, employment, taxes and social security contributions. According to our results, each Euro spent on long-term care services is associated with domestic value added of 1.7 € as well as 0,70 € in taxes and social security contributions. The economic multipliers of the long-term care services are comparatively high due to the high share of wages and salaries in direct expenditure and the associated high direct value added. Public expenditure on professional care services should therefore not be regarded merely as a cost factor in the public budget. Rather, this rapidly growing economic sector is also an increasingly important economic factor in a time of ageing societies.
    Keywords: Long-term care services, input-output model, returns to public expenditures
    Date: 2019–04–16

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