nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2019‒08‒19
nineteen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Expanding access to universal childcare: Effects on childcare arrangements and maternal employment By BOUSSELIN Audrey
  2. Working Time, Employment and Competitiveness By Kauhanen, Antti; Lehmus, Markku
  3. Immigration and Work-Related Injuries: Evidence from Italian Administrative Data By Alacevich, Caterina; Nicodemo, Catia
  4. Open Labor Markets and Firms’ Substitution between Training Apprentices and Hiring Workers By Aepli, Manuel; Kuhn, Andreas
  5. Explaining and measuring tolerant behavior By Caterina, Liberati; Riccarda, Longaretti; Alessandra, Michelangeli
  6. Is expansion of overeducation cohort-driven? Evidence from Poland By Jan Baran
  7. Innovation and Self-Employment By Tommaso Ciarli; Mattia Di Ubaldo; Maria Savona
  8. Long-run consequences of informal elderly care and implications of public long-term care insurance By Korfhage, T.;
  9. The Effect of Fiscal Incentives on Business R&D By Bucci, Valeria
  10. Three triggers? Negative equity, income shocks and institutions as determinants of mortgage default By Linn, Andrew; Lyons, Ronan
  11. Climbing up Ladders and Sliding down Snakes: An Empirical Assessment of the Effect of Social Mobility on Subjective Wellbeing By Dolan, Paul; Lordan, Grace
  12. Do Internships Pay Off? The Effects of Student Internships on Earnings By Margaryan, Shushanik; Saniter, Nils; Schumann, Mathias; Siedler, Thomas
  13. Doing Business Below the Line: Screening, Mafias and Public Funds By Gianmarco Daniele; Gemma Dipoppa
  14. Technological Learning and Innovation Gestation Lags at the Frontier of Science: from CERN Procurement to Patents By Andrea, Bastianin; Paolo, Castelnuovo; Massimo, Florio; Anna, Giunta
  15. We Were the Robots: Automation and Voting Behavior in Western Europe By Anelli, Massimo; Colantone, Italo; Stanig, Piero
  16. Multiple Births, Birth Quality and Maternal Labor Supply: Analysis of IVF Reform in Sweden By Bhalotra, Sonia R.; Clarke, Damian; Mühlrad, Hanna; Palme, Mårten
  17. Trade Exposure and the Decline in Collective Bargaining: Evidence from Germany By Daniel Baumgarten; Sybille Lehwald
  18. The Internal Spatial Organization of Firms: Evidence from Denmark By Acosta, Camilo; Lyngemark, Ditte Håkonsson
  19. The Standard Portfolio Choice Problem in Germany By Breunig, Christoph; Huck, Steffen; Schmidt, Tobias; Weizsäcker, Georg

  1. By: BOUSSELIN Audrey
    Abstract: In most OECD countries, subsidised childcare is a key instrument to support maternal employment. Using a large reform implemented in Luxembourg in 2009, I study the effect of expanding access to subsidised childcare on childcare and employment decisions of women in a context where childcare is universal and heavily subsidised, but bound by capacity constraints. The identification relies on temporal variation across child age groups. The results show that, in response to the reform, the employment rate of mothers increased by 4-7 percentage points and their hours of work by around 3 hours per week. Studying heterogeneous effects reveals a differential impact of the reform for more vulnerable mothers. Parents whose youngest child is under the age of 3 are found to use more daycare services, for longer hours, while the use of informal care remains unchanged. These results suggest that there is no crowding out effect of the new policy.
    Keywords: Childcare; family policy; maternal employment
    JEL: J13 J18 J22
    Date: 2019–08
  2. By: Kauhanen, Antti; Lehmus, Markku
    Abstract: Abstract This report studies working time and competitiveness. The first part of the report compares working time in Finland to other European countries using working time data from Eurostat and provides a review of the economics literature on working time and employment. The second part of the report studies the impact of the Competitiveness Pact on employment and Finnish competitiveness using Etla’s macro model. This analysis separates the impact of working time extension and social security contributions and taxation on employment. The results of the working time comparison show that the average hours worked are little less than an hour shorter in Finland compared to the EU average. The low incidence of part-time work increases the average hours worked in Finland, while the working hours of both full-time and part-time employees are among the shortest in Europe. Annual holidays, public holidays and absences decrease working time in Finland more than in most other European countries. The literature review shows that the impact of working time changes on employment depend crucially on how they affect labor costs. The Competitiveness Pact increased employment and improved Finnish competitiveness. Working time extensions account for about 40% of the employment impact, while the rest is accounted for by the reductions in social security contributions and taxation.
    Keywords: Employment, Working time, Competitiveness, Competitiveness pact
    JEL: E24 E27 E65 J23
    Date: 2019–08–12
  3. By: Alacevich, Caterina (Pompeu Fabra University); Nicodemo, Catia (University of Oxford)
    Abstract: There is growing evidence that foreign-born workers are over represented in physically demanding and dangerous jobs with relatively higher injury hazard rates. Given this pattern, do increasing inflows of foreign-born workers alleviate native workers' exposure to injuries? This paper provides evidence of the effects of immigration on the incidence and severity of workrelated accidents. We combine administrative data on work-place accidents in Italy with the Labour Force Survey from 2009 to 2017. Our approach exploits spatial and temporal variation in the distribution of foreign-born residents across provinces. Using province fixed-effects and an instrumental variable specification based on historical settlements of immigrants, we show that inflows of foreign-born residents drive reductions in the injury rate, paid sick leave, and severity of impairment for natives. Next, we investigate potential underlying mechanisms that could drive this effect, such as increased unemployment and selection of the workforce, and the sorting of native workers into less physically demanding jobs. Our results rule out that decreased injuries are driven by higher native unemployment. We find that employment rates are positively associated with immigration, in particular for workers with higher education. While not statistically significant at conventional levels, we also find that average occupational physical intensity for natives is lower in provinces that receive larger foreign-born inflows.
    Keywords: immigration, labour-market flexibility, work-related injuries, health
    JEL: J61 J28 I1
    Date: 2019–07
  4. By: Aepli, Manuel (Swiss Federal Institute for Vocational Education and Training); Kuhn, Andreas (Swiss Federal Institute for Vocational Education and Training)
    Abstract: In this paper, we study whether Swiss employers substitute between training apprentices and hiring cross-border workers. Because both training apprentices and hiring skilled workers are costly for firms, we hypothesize that (easier) access to cross-border workers will lead some employers to substitute away from training their own workers. We account for potential endogeneity issues by instrumenting a firm’s share of cross-border workers using a firm’s distance to the national border and therefore its possibility to fall back on cross-border workers to satisfy its labor demand. We find that both OLS and 2SLS estimates are negative across a wide range of alternative specifications, suggesting that firms substitute between training and hiring workers when the supply of skilled workers is higher. Our preferred 2SLS estimate implies that the increase in firms’ share of crossborder workers within our observation period, from 1995 to 2008, led to about 3,500 fewer apprenticeship positions (equal to about 2% of the total number of apprentice positions).
    Keywords: immigration, cross-border workers, firm behaviour, labor demand, substitution effects, apprenticeship training
    JEL: D22 J23 J61 M53
    Date: 2019–07
  5. By: Caterina, Liberati; Riccarda, Longaretti; Alessandra, Michelangeli
    Abstract: In recent studies, there has been a growing interest towards tolerance and its implications in the socio-economic system. This paper aims to contribute to this flourishing research area into two directions. First, we develop a theoretical framework to explain individual’s tolerant attitudes without necessarily resorting to altruistic preferences. Second, this paper addresses the issue of measuring tolerance when information about several dimensions of tolerance is available and data are of Likert’s scale type. To show how our new measure of tolerance works in practice, we carry out a case study using an Italian recent survey asking the opinion of university students about different subjects, such as interreligious dialogue, women/religion relationship, religion/death relationship, multicultural society, and homosexuality. We, finally, highlight the key policy implications arising from our study.
    Keywords: Economic behavior, social interactions, methodology.
    JEL: A13 C43
    Date: 2019–01
  6. By: Jan Baran (Faculty of Economic Sciences, University of Warsaw)
    Abstract: The study offers insight into dynamics of overeducation in Poland. The share of overeducated workers among tertiary educated workers grew substantially by about 8 p.p. between 2006 and 2016. In the paper, changing overeducation risk is disentangled into age, period and cohort effects. A strong upward trend in cohort effects is identified for individuals born after 1970, but not for older generations. It suggests that overeducation is a phenomenon which affects more profoundly individuals who entered the labour market after the collapse of the communism. Moreover, the study confirms that overeducation decreases with age, which has been already a well-documented finding in the literature.
    Keywords: overeducation, education mismatch, tertiary education, age–period–cohort
    JEL: I21 J21 J24
    Date: 2019
  7. By: Tommaso Ciarli (SPRU, Science Policy Research Unit, University of Sussex. UK); Mattia Di Ubaldo (Department of Economics, University of Sussex, UK); Maria Savona (SPRU, Science Policy Research Unit, University of Sussex, UK)
    Abstract: The paper adds to the literature on innovation and employment by looking at the relationship between R&D investments and the rise of alternative work arrangements, particularly selfemployment (SE). A literature review on the determinants of the emergence of non-standard work, alternative work arrangements and self-employment if offered first. The contributions that have looked at SE in relation to innovation strategies is surprisingly limited. General trends of SE in Europe are considered. The empirical contribution is focused on the analysis of local labour markets in the UK (Travel-To-Work-Areas, TTWAs), where their initial concentration of routinized and non-routinized jobs is considered. The probability that an individual shifts from paid employment to either unemployment or self-employment over the period 2001-13, as linked to changes in R&D investments in the TTWA is empirically accounted for. Results show that overall R&D has negligible effects on the probability of workers to become selfemployed. R&D increases the probability of moving from unemployment to paid employment, especially in routinized areas, and reduces the permeability between routinised and nonroutinised workers. Also, a non-negligible increase in the probability that a routinized worker becomes SE as a result of R&D increase is found in low routinised local labour markets, but not in highly routinised areas. The paper sheds new lights on the effect of R&D on employment and self-employment in areas with different degrees of routinization, and adds to the discussion on the more general raise of alternative work arrangements in Europe by disentangling the characteristics of self-employment as resulting from R&D investments.
    Keywords: R&D, employment, unemployment, self-employment, routinized local labour markets
    JEL: J6 O3 O32
    Date: 2019–08
  8. By: Korfhage, T.;
    Abstract: In this paper, I estimate a dynamic structural model of labor supply, retirement, and informal care supply, incorporating labor market frictions and the German tax and benefit system. I find that informal elderly care has adverse and persistent effects on labor market outcomes and therefore negatively affects lifetime earnings, future pension benefits, and individuals'well-being. These consequences of caregiving are heterogeneous and depend on age, previous earnings, and institutional regulations. Policy simulations suggest that, even though fiscally costly, public long-term care insurance can offset the personal costs of caregiving to a large extent - in particular for low-income individuals.
    Keywords: long-term care; informal care; long-term care insurance; labor supply; retirement; pension benefits; structural model;
    JEL: I18 I38 J14 J22 J26
    Date: 2019–08
  9. By: Bucci, Valeria
    Abstract: This paper analyses the determinants of business R&D choices. In particular, it provides new empirical evidence on the effectiveness of fiscal policies aimed at driving companies to invest in R&D activity. By computing two very accurate proxies for firm-specific tax savings achievable when investing in R&D, and by exploiting exogenous changes in fiscal legislation in Italy, this study investigates if fiscal considerations affect companies’ choice to invest in R&D and how much to spend in such activity. The empirical analysis is based on an unbalanced panel data set composed of 163 Italian companies, covering the years 2004-2010. A two-step approach has been implemented, by combining a probit and a tobit estimation model. The results deliver strong empirical evidence that fiscal incentives significantly affect business R&D choices, by one side, increasing companies’ likelihood to invest in R&D, and, by the other, fostering companies’ R&D expenditure.
    Keywords: Innovation, R&D, Fiscal Incentives, Marginal Tax Savings
    JEL: H25 H32 O32 O38
    Date: 2019–04–18
  10. By: Linn, Andrew (Bank of England); Lyons, Ronan (Trinity College Dublin)
    Abstract: In understanding the determinants of mortgage default, the consensus has moved from an ‘option theory’ model to the ‘double trigger’ hypothesis. Nonetheless, that consensus is based on within-country studies of default. This paper examines the determinants of mortgage default across five European countries, using a large dataset of over 2.3 million active mortgage loans originated between 1991 and 2013 across over 150 banks. The analysis finds support for both elements of the double trigger: while negative equity itself is a relatively small contributor to default, the effect of unemployment, and other variables such as the interest rate, is stronger for those in negative equity. The double trigger, however, varies by country: country-specific factors are found to have a large effect on default rates. For any given level of a loan’s Loan to Value (‘LTV’) ratio, and as LTV changes, borrowers were more sensitive to the interest rate and unemployment in Ireland and Portugal than in the UK or the Netherlands.
    Keywords: Mortgage default; negative equity; double trigger; European Union
    JEL: G21 R31
    Date: 2019–08–02
  11. By: Dolan, Paul (London School of Economics); Lordan, Grace (London School of Economics)
    Abstract: We examine how intergenerational mobility affects subjective wellbeing (SWB) using data from the British Cohort Study. Our SWB measures encapsulates both life satisfaction and mental health, and we consider both relative and absolute movements in income. We find that relative income mobility is a significant predictor of life satisfaction and mental health, whether people move upward or downward. For absolute income, mobility is only a consistent predictor of SWB and mental health outcomes if the person moves downwards, and in this case the impact is far larger than relative mobility. For both relative and income mobility downward movements affect SWB to a greater extent than upward movements, consistent with notions of loss aversion. Notably, we find that social class mobility does not affect SWB. We present evidence that the significant relative and absolute mobility effects we find operate partially through financial perceptions and consumption changes which can occur because of income mobility.
    Keywords: income mobility, relative income, social class mobility, loss aversion, intergenerational mobility, life satisfaction, SWB, subjective wellbeing, mental health
    JEL: D31 D63 I1 J60
    Date: 2019–07
  12. By: Margaryan, Shushanik (University of Hamburg); Saniter, Nils (Federal Ministry for Economic Affairs and Energy (BMWi)); Schumann, Mathias (University of Hamburg); Siedler, Thomas (University of Hamburg)
    Abstract: This paper studies the causal effect of student internship experience in firms on earnings later in life. We use mandatory firm internships at German universities as an instrument for doing a firm internship while attending university. Employing longitudinal data from graduate surveys, we find positive and significant earnings returns of about 6% in both OLS and IV regressions. The positive returns are particularly pronounced for individuals and areas of study that are characterized by a weak labor market orientation. The empirical findings show that graduates who completed a firm internship face a lower risk of unemployment during the first year of their careers, suggesting a smoother transition to the labor market.
    Keywords: internships, skill development, higher education, labor market returns, instrumental variable
    JEL: I23 J01 J31
    Date: 2019–07
  13. By: Gianmarco Daniele; Gemma Dipoppa
    Abstract: In 2013, the Italian government reinforced a screening mechanism to detect mafia-connected firms and ensure that their applications for subsidies over 150,000 euros are unsuccessful. We exploit this discontinuity to test whether (and how many) firms self-select below the threshold to avoid the screening after the law was strengthened. We find a large increase in subsidies just below the threshold and after the approval of the law, suggesting that about 3.8% of firms applying for subsidies reduced rent seeking to avoid police screening. In line with this interpretation, sorting is larger in mafia-affected cities and firms sorting at the 150,000 euros threshold display typical features of criminal firms. These findings shed light on (i) the extent to which mafia-connected firms misappropriate public funds; (ii) their strategic behavior in avoiding anti-corruption policies; (iii) the effectiveness of the new law at screening mafia-related firms out of the application process; (iv) the leverages policymakers can use to identify crime displacement.
    Date: 2018
  14. By: Andrea, Bastianin; Paolo, Castelnuovo; Massimo, Florio; Anna, Giunta
    Abstract: This paper contributes to the literature on the impact of Big Science Centres on technological innovation. We exploit a unique dataset with information on CERN’s procurement orders to study the collaborative innovation process between CERN and its industrial partners, mostly European firms. Since 19 out of the 23 Member Countries of CERN belong to the EU, public procurement for innovation through CERN can be seen as factor contributing to European innovation policies. After a qualitative discussion of case studies, survival and count data models are estimated; the impact of CERN procurement on suppliers’ innovation is captured by the number of patent applications. The fact that firms in our sample received their first order over a long time span (1995-2008) delivers a natural partition of industrial partners into “suppliers” and “not yet suppliers”. This allows estimating the impact of CERN on the hazard to file a patent for the first time and on the number of patent applications, as well as the time needed for these effects to show up. We find that a “CERN effect” does exist: being an industrial partner of CERN is associated with an increase in the hazard to file a patent for the first time and in the number of patent applications. These effects require a significant “gestation lag” in the range of five to eight years, pointing to a relatively slow process of absorption of new ideas.
    Keywords: Big Science; CERN; innovation; public procurement; patents; gestation lags.
    JEL: C21 C23 H57 L39 O31
    Date: 2019–04
  15. By: Anelli, Massimo (Bocconi University); Colantone, Italo (Bocconi University); Stanig, Piero (Bocconi University)
    Abstract: We investigate the impact of robot adoption on electoral outcomes in 14 Western European countries, between 1993 and 2016. We employ both official election results at the district level and individual-level voting data, combined with party ideology scores from the Manifesto Project. We measure exposure to automation both at the regional level, based on the ex-ante industry specialization of each region, and at the individual level, based on individual characteristics and pre-sample employment patterns in the region of residence. We instrument robot adoption in each country using the pace of robot adoption in other countries. Higher exposure to robot adoption is found to increase support for nationalist and radicalright parties. Unveiling some potential transmission channels, higher robot exposure at the individual level leads to poorer perceived economic conditions andwell-being, lower satisfaction with the government and democracy, and a reduction in perceived political self-efficacy.
    Keywords: automation, nationalism, radical right
    JEL: D72 J23 J24 O33
    Date: 2019–07
  16. By: Bhalotra, Sonia R. (University of Essex); Clarke, Damian (Universidad de Santiago de Chile); Mühlrad, Hanna (IFN - Research Institute of Industrial Economics); Palme, Mårten (Stockholm University)
    Abstract: In this study we examine the passage of a reform to in-vitro fertilization (IVF) procedures in Sweden in 2003. Following publication of medical evidence showing that pregnancy success rates could be maintained using single rather than multiple embryo transfers, the single embryo transfer (SET) was mandated as the default IVF procedure. Using linked registry data for the period 1998-2007, we find that the SET reform was associated with a precipitous drop in the share of multiple births of 63%. This narrowed differences in health between IVF and non- IVF births by 53%, and differences in the labor market outcomes of mothers three years after birth by 85%. For first time mothers it also narrowed the gap in maternal health between IVF and non-IVF births by 36%. Our findings imply that more widespread adoption of SET could lead to massive gains, reducing hospitalization costs and the foregone income of mothers and improving the long-run socioeconomic outcomes of children. This is important given that the share of IVF facilitated births exceeds 3% in several industrialized countries and is on the rise.
    Keywords: IVF, fertility, maternal health, neonatal health, career penalty, human capital formation
    JEL: J13 I11 I12 I38 J24
    Date: 2019–07
  17. By: Daniel Baumgarten; Sybille Lehwald
    Abstract: We analyze the effect of the increase in trade exposure induced by the rise of China and the transformation of Eastern Europe on collective bargaining coverage of German plants in the period 1996–2008. We exploit cross-industry variation in trade exposure and use trade flows of other high-income countries as instruments for German trade exposure. We find that increased import exposure has led to an increase in the probability of German plants leaving industry-wide bargaining agreements, accounting for about one fifth of the overall decline in the German manufacturing sector. The effect is most pronounced for small and medium-sized plants.
    Keywords: international trade, import competition, collective bargaining
    JEL: F16 J51
    Date: 2019
  18. By: Acosta, Camilo; Lyngemark, Ditte Håkonsson
    Abstract: While multi-establishment firms are an important part of the economy, little is known about their spatial organization. In this article, we study how the location and the occupational composition of establishments within firms has changed during the last 36 years. Using Danish administrative employer-employee data, we present a series of stylized facts regarding the spatial internal organization of firms. We show that the average number of establishments at the firm level increased by 36% during this period. Moreover, the average distance of the establishments and workers to their headquarters has increased by more than 200%. These changes are mainly driven by increases in the average distance of production workers and business service workers, and a higher use of the latter. Finally, we show that the ratio of managers to production and clerical workers within firms has increased, in particular in establishments located in the largest urban municipalities. After presenting the facts, we briefly discuss some of the mechanisms that could be behind these changes.
    Keywords: Spatial organization, agglomeration, multi-establishment firms, occupational composition
    JEL: J20 L22 L23 R00 R30
    Date: 2019–07–16
  19. By: Breunig, Christoph (HU Berlin); Huck, Steffen (WZB Berlin and UCL); Schmidt, Tobias (QuantCo); Weizsäcker, Georg (HU Berlin and DIW Berlin)
    Abstract: We study an investment experiment with a representative sample of German households. Respondents invest in a safe asset and a risky asset whose return is tied to the German stock market. Experimental investments correlate with beliefs about stock market returns and exhibit desirable external validity at least in one respect: they predict real-life stock market participation. But many households are unresponsive to an exogenous increase in the risky asset\'s return. The data analysis and a series of additional laboratory experiments suggest that task complexity decreases the responsiveness to incentives. Modifying the safe asset\'s return has a larger effect on behaviour than modifying the risky asset\'s return.
    Keywords: stock market expectations; stock market participation; portfolio choice; financial literacy; complexity;
    JEL: D01 D14 D84 G11
    Date: 2019–07–30

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