nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2019‒08‒26
twenty-one papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. What drives the location choice of new manufacturing plants in Germany? By Krenz, Astrid
  2. Export activity, innovation and institutions in Southern European nascent entrepreneurship By Marques, Helena
  3. The Norwegian Pension Reform in 2011: The Long Term Impact on Take-up of Pension and Labor Supply By Erik Hernæs; Steinar Strøm; Tao Zhang
  4. The retirement mortality puzzle: Evidence from a regression discontinuity design By Giesecke, Matthias
  5. Are they coming for us? Industrial robots and the mental health of workers By Abeliansky, Ana Lucia; Beulmann, Matthias
  6. Fertility effects of college education: Evidence from the German educational expansion By Kamhöfer, Daniel A.; Westphal, Matthias
  7. Income and wealth inequality in Malta: evidence from micro data By Ilias Georgakopoulos
  8. Skill Gap, Mismatch, and the Dynamics of Italian Companies’ Productivity By Fanti, Lucrezia; Guarascio, Dario; Tubiana, Matteo
  9. The effectiveness of restrictive immigration policies: the case of transitional arrangements By Ulceluse, Magdalena; Kahanec, Martin
  10. Can Perceived Returns Explain Enrollment Gaps in Postgraduate Education? By Teodora Boneva; Marta Golin; Christopher Rauh
  11. Diversifying in green technologies in European regions: does political support matter? By Artur Santoalha; Ron Boschma
  12. The media coverage of wealth and inheritance taxation in Germany By Hendrik Theine
  13. Are Business Start-Ups Liquidity Constrained? Evidence from a Quasi-Experimental Allocation of Housing Wealth in East Germany By Tobias Fuchs; Georg Gebhardt
  14. The length of stay of foreign workers in Malta By Ian Borg
  15. Adjusting to Globalization in Germany By Wolfgang Dauth; Sebastian Findeisen; Jens Suedekum
  16. Impact of Green Bond Policies on Insurers: Evidence from the European Equity Market By Petr Jakubik; Sibel Uguz
  17. Immigration and the Evolution of Local Cultural Norms By Schmitz, Sophia; Weinhardt, Felix
  18. Is There a Gender Wage Gap in Online Labor Markets? Evidence from Over 250,000 Projects and 2.5 Million Wage Bill Proposals By Estrella Gomez-Herrera; Frank Müller-Langer
  19. Does Tax-Benefit Linkage Matter for the Incidence of Social Security Contributions? By Bozio, Antoine; Breda, Thomas; Grenet, Julien
  20. Venture Capital Contracts By Michael Ewens; Alexander S. Gorbenko; Arthur Korteweg
  21. Tenure Choice, Portfolio Structure and Long-Term Care - Optimal Risk Management in Retirement By Hans Fehr; Maurice Hofmann

  1. By: Krenz, Astrid
    Abstract: About 30 years after German reunification a persistent gap in different firm performance measures exists between East and West Germany. In this paper I focus on the differences in new German manufacturing plants' location choices across the German district-free cities and districts and investigate its regional determinants. For that purpose, I construct a novel, rich regional- and firm-level dataset based on the Official Firm Statistics from the German Federal Statistical Office and the Offices of the Laender. The analysis provides first time evidence how in particular the location decision of firms in the German economy is influenced by regional road infrastructure as well as regional structural funding. The effects are economically important and significant. The results reveal that a 10 percent increase in firm agglomeration increases the odds of a new plant to locate in the region by 12 percent. A 10 percent decrease of travel time on roads increases the odds of a plant to locate by 4 percent in overall Germany, by 7.6 percent among East German regions and by 26.5 percent in particular for large plants in the East German regions. A 10 percent larger population increases the odds to locate by 8.7 percent. A 10 percent increase in regional structural funding for infrastructure purposes increases the odds to locate in a region in East Germany by 8.3 percent in particular for large plants. Policy implications emerge that address in particular the improvement of infrastructure and support to reap off benefits that arise from agglomeration externalities.
    Keywords: firm location choice,regional road infrastructure,Germany,agglomeration economies,regional structural funding,East-West gap,conditional logit,nested logit
    JEL: D22 L25 R11 R12
    Date: 2019
  2. By: Marques, Helena
    Abstract: This paper studies the role of personal characteristics, perceptual variables and country-level conditioning (financial environment, government quality and support, education quality and entrepreneurship know-how, innovation environment and support, business infrastructure, entrepreneurial culture and society, and gender roles) in explaining the export propensity and intensity of nascent entrepreneurs in four Southern European countries (Portugal, Spain, Italy and Greece), using Total Early-stage Entrepreneurial Activity (TEA) data from the Global Entrepreneurship Monitor (GEM) dataset in 2003-2010. Due to the nascent nature of the business, export activity is starting or about to start at the time of the survey and, for that reason, it cannot be studied using theoretical frameworks based on productivity heterogeneity, which has not yet been measured. In this sample of nascent businesses, there is no evidence of a selection effect into exporting and the individual-level factors influencing export propensity and intensity are identical. The most relevant individual-level variables facilitating export activity are new products, new technology, graduate education, and entrepreneurship networks. The most relevant country-level factors facilitating export activity are the availability of funding, the national government's macroeconomic support, and the support for new technology.
    Keywords: entrepreneurship,exporting,innovation,institutions,Southern Europe
    JEL: F14 J24 L26 O43
    Date: 2019
  3. By: Erik Hernæs; Steinar Strøm; Tao Zhang
    Abstract: We investigate the impact on pension take-up and labour supply of a broad Norwegian pension reform. Focussing on the long term impact, we use a structural discrete choice model estimated on data for first groups to become eligible for the new pension, accounting for the opportunity cost of retiring early. A majority of the individuals combine take-up of pension with working. This is particular the case for individuals with lower education. The estimated model explains observed behaviour rather precisely, in particular for those who retire entirely and for all choices made by individuals with higher education. The estimated model is applied in an out of sample prediction for the cohort born in 1950. Again, the model predicts rather accurately the fraction that retires entirely and the choices made by the higher educated. Two policy simulations, an increase in longevity and tax on pension income equal to tax on labour income, implies lower take up of pensions and more people working. The response to the longevity adjustment compensates less than half of the reduction of the annual pension level in the adjustment, which is designed to mimic the increase in the longevity over the next 20 years.
    Keywords: pension reform, labor supply
    JEL: D10 H55 J26
    Date: 2019
  4. By: Giesecke, Matthias
    Abstract: I estimate the effect of retirement on mortality, exploiting two discontinuities at age-based eligibility thresholds for pension claiming in Germany. The analysis is based on unique social security records that document the age at death for the universe of participants in the German public pension system. Using variation from bunching of retirements at age-based eligibility thresholds, I demonstrate that retirement can have both mortality-decreasing and mortality-increasing effects, depending on the group of retirees who comply to eligibility at each threshold. To reconcile heterogeneous effects with likewise mixed results from the literature I provide evidence that the retirement-mortality nexus is driven by the activity change at retirement.
    Keywords: retirement,mortality,age-based eligibility thresholds,regression discontinuity design
    JEL: H55 I12 J14 J26
    Date: 2019
  5. By: Abeliansky, Ana Lucia; Beulmann, Matthias
    Abstract: We investigate how an increase in the robot intensity (the ratio of industrial robots over employment) affects the self-reported mental health of workers in Germany. To do so, we combine individual mental health data from the German Socioeconomic Panel with the deliveries of robots to 21 German manufacturing sectors provided by the International Federation of Robotics for the period 2002-2014 (every two years). Controlling for a range of individual and sectoral characteristics, and employing individual-, time- and sectoral fixed effects, we find that an increase in robot intensity of 10% is associated with an average decrease of 0.59% of the average mental health standard deviation. This suggests that in a fast automating sector (i.e. rubber and plastics), where the robot intensity increased by approximately 2000%, mental health would have decreased by 118% of one standard deviation. This effect seems to be driven by job security fears of individuals working in noninteractive jobs and the fear of a decline in an individual's economic situation. Moreover, further sample divisions into low, middle and high occupational groups shows that the negative effects are affecting mostly the middle-level occupational group. Splitting the sample according to different age groups shows that the mental health of younger workers is the most vulnerable to an increase in automation. Results are also robust to instrumenting the stock of robots, and to different changes in the sample.
    Keywords: Mental Health,Industrial Robots,Germany,Job Loss Fear,Job Polarization
    JEL: I10 O30 I31 J6
    Date: 2019
  6. By: Kamhöfer, Daniel A.; Westphal, Matthias
    Abstract: Using arguably exogenous variation in college expansions we estimate the effects of college education on female fertility. While college education reduces the probability of becoming a mother, college-educated mothers have more children than mothers without a college education. Lower child-income penalties of college-educated mothers of two relative to mothers without college up to nine years after birth suggest a stronger polarization of college graduate jobs into family-friendly and career-oriented as a potential explanation. We conclude that policies aiming at increasing female educational participation should be counteracted by policies enabling especially college graduates to have both a career and a family.
    Keywords: family planning,college education,augmented quantity-quality model
    JEL: C36 I21 J13
    Date: 2019
  7. By: Ilias Georgakopoulos (Central Bank of Malta)
    Abstract: This paper studies the distribution of income and wealth in Malta over the period 2010-16, based on three waves of detailed micro-data from the Household Finance and Consumption Survey. This is the first paper that explores the evolution of income and wealth inequality jointly, and over time, using household-level data in Malta. In particular, the focus of the present paper is to examine how income and wealth are distributed over different socioeconomic characteristics, their joint distribution and its determinants, as well as factors that influence a household’s ability to obtain credit, using decomposition methods and binary response models. Our results suggest that households with tertiary education experienced strong increases in their incomes and wealth in the period examined. With reference to wealth, household main residence (HMR) is the most equalising factor of wealth inequality and self-employment wealth is the most disequalising factor. Regarding the determining factors of the position of a household in the wealth distribution, the financing structure of HMR is particularly important to explain the household’s position in the wealth distribution. Furthermore, the age and education level of the reference person of a household as well as increases in household’s income affect positively the probability of being in a higher wealth quintile. This finding also holds true for households who have received inheritance or gifts.
    JEL: D31 C35 D10 D63 D39
    Date: 2019
  8. By: Fanti, Lucrezia; Guarascio, Dario; Tubiana, Matteo
    Abstract: Relying on a unique integrated database, this work explores the relationship between labour productivity, on one side; intensity and characteristics of companies’ skills need and degree of skill mismatch, on the other. The analysis focuses on a representative sample of Italian limited liability companies observed during the years 2012, 2014 and 2017. First, companies acknowledging the need to update their knowledge base display a higher productivity vis-à-vis other firms. Second, when it comes to the skill need distinguished by competence/knowledge domains (management, STEM, social and soft skills, technical operatives and humanities) it emerges that companies looking for technical operative and social skills show lower labour productivity as compared to other firms. On the contrary, companies characterized by a need in managerial, STEM or humanities-related skills show higher productivity. Third, the ability to match the skill need via new hiring is always positively correlated with firms’ productivity. This result is confirmed across all the adopted specifications.
    Keywords: labour productivity,skill mismatch,firm-level heterogeneity,knowledgebase,organizational capabilities
    JEL: D22 D80 J24
    Date: 2019
  9. By: Ulceluse, Magdalena; Kahanec, Martin
    Abstract: The paper contributes to the on-going debates concerning the effectiveness of immigration policies, by investigating the case of the transitional arrangements implemented during the European Union enlargement rounds of 2004 and 2007. It has been argued that instead of deterring immigration, the arrangements rather altered the channels of entry. The hypothesis is that, as self-employed workers were not subjected to the transitional arrangements, these migrants used self-employment as a strategy to circumvent restrictions. Our results suggest that this might indeed have been the case post-2007, but not post-2004. We argue that in the latter case, migrants did not need to use self-employment as a strategy, because of alternative, restrictions-free destinations like Ireland and the UK. Our results point to the importance of immigration policies in shaping destination choices and have implications for future EU enlargement rounds.
    Date: 2019
  10. By: Teodora Boneva (Oxford University); Marta Golin (Oxford University); Christopher Rauh (University of Montreal)
    Abstract: Postgraduate-degree holders comprise a significant share of the workforce and have better labor-market outcomes than workers who only hold a first degree. To understand students' motives to obtain postgraduate qualifications and what drives socioeconomic gaps in this decision, we elicit intentions to pursue postgraduate education and beliefs about its returns in a sample of 1,002 enrolled university students. We document large gaps in perceptions about different immediate and later-life benefits of postgraduate education, both between first- and continuing-generation students and within the latter group. Differences in student beliefs about returns across socioeconomic groups can account for 70% of the gaps in intentions to pursue postgraduate studies. We also document large differences in students' current undergraduate experiences by socioeconomic background and find these to be predictive of perceived returns to postgraduate education.
    Keywords: higher education, beliefs, socioeconomic inequality, intergenerational mobility, postgraduate education
    JEL: I24 J13 J24 J62
    Date: 2019–07
  11. By: Artur Santoalha (University of Oslo, TIK); Ron Boschma (Utrecht University, Department of Human Geography and Planning, University of Stavanger, UiS Business School)
    Abstract: Regional diversification is a process characterized by past and place dependence: new activities tend to emerge and develop in a region in technological or industrial fields closely related to existing local activities. Recently, the relatedness concept has also been applied successfully to studies on green diversification of regions, providing new insights to the transition literature that is primarily focused on disruptive change. What has received little attention is a systematic approach that assesses the role of political support for the ability of regions to diversify into new green activities. This paper makes a first attempt to test the impact of regional capabilities and political support for environmental policy at the national and regional scale on the ability of 95 regions in 7 European countries to diversify into new green technologies during the period 2000-2012. We find evidence that related capabilities rather than political support in a region is associated with green diversification of regions in Europe. However, political support tends to moderate the role of regional capabilities.
    Date: 2019–08
  12. By: Hendrik Theine (Vienna University of Economics and Business)
    Abstract: Based on the political economy of the media perspective, this paper explores the media coverage of wealth and inheritance taxation over the early 21st century (2000 to 2018) based on a large-scale corpus of seven German daily and weekly newspapers. Germany is a useful case study, being one of the most unequal countries in the Eurozone area in terms of wealth inequality. Drawing on text mining methods and corpus linguistics, it shows that wealth and inheritance taxation is a relatively infrequent topic over the entire period, with the exception of a few intense months of increased reporting. On the occasions that the media do report on the topic of wealth and inheritance taxation, it is mainly covered in terms of a political debate. This debate centres on the politics of a possible reform process and the connected difficulties of finding compromise between different actors, rather than focussing on the potential economic impact. Furthermore, this paper explores the power of agents (both on the organisational and individual level) as the primary definers of social reality. It shows that market-liberal and conservative organisations and economists dominate the news over social-democratic and left-wing ones. Overall, the findings indicate a hostile news coverage concerning the introduction of wealth taxation and the increase of inheritance tax.
    Keywords: wealth taxation, economic inequality, media coverage of redistribution policies, critical discourse analysis, political economy of the media
    JEL: D63 E62 H29 L82
    Date: 2019–08
  13. By: Tobias Fuchs; Georg Gebhardt
    Abstract: Are entrepreneurs liquidity constraint? Using quasi-random housing wealth variation resulting from communist era decisions, we argue yes, as we find that wealthier East Germans are more likely to become self-employed after reunification. In the literature, no such strong relationship was found using regional house price changes the US and UK. In these economies, our results suggest, the effects of liquidity constraints are masked by anticipatory savings of the would be self-employed, which was impossible for the East Germans in our sample due to communism.
    Keywords: self-employment, financial constraints, wealthy households, starting capital
    JEL: J23 L26 G32
    Date: 2019
  14. By: Ian Borg
    Abstract: The length of stay of foreign workers in the Maltese labour market is short. Indeed, using longitudinal administrative data we find that around a quarter of foreigners engaged in the Maltese labour market exit within the first year of engagement, and around half exit between one and two years later. In general, we find that EU nationals, younger individuals, and lower-skilled foreign workers exhibit a relatively shorter length of stay. Moreover, we find significant sectoral heterogeneity. In particular, smaller firms and the public administration, health, and education sector, exhibit better retention rates. The increasing reliance on a transient labour force poses a number of economic challenges. The short length of stay may limit economic assimilation and labour productivity growth. In addition, low retention rates generate additional strain on training and hiring costs. There are also important implications on the demand for public transport, private education and the rental market.
    JEL: J21 J6 O4
  15. By: Wolfgang Dauth; Sebastian Findeisen; Jens Suedekum
    Abstract: We study the impact of trade exposure on the job biographies of 2.4 million manufacturing workers in Germany. Rising export opportunities lead to two equally important sources of earnings gains: on-the-job, and via employer switches within the same industry. Highly skilled workers benefit the most. Import shocks mostly hurt lowskilled workers, especially when they possess lots of industry-specific human capital. They also destroy workers’ rents when separating from high-wage plants, and they leave strongly scarring effects in the event of a mass layoff. We connect our results to the growing theoretical literature on the labor market effects of trade.
    Keywords: Trade Adjustments, Worker Mobility, Frictional Labor Markets
    JEL: F16 J31 R11
    Date: 2019–08
  16. By: Petr Jakubik; Sibel Uguz (EIOPA)
    Abstract: This article empirically investigates whether the introduction of green bond policies by insurance companies have a positive impact on their equity prices. To this aim, the sample of listed (re)insurers in Europe using monthly data for years 2012 – 2019 is employed. Announcements, press releases and semi-annual or annual reports are used to determine when the insurance companies committed to a green investment, issuance of green bonds or launching a green fund. Our results suggest that market investors positively price introducing such a policies for the issuance of green bonds or launching a green fund. However, the same results were not confirmed for initial investments in green bonds.
    Keywords: insurance, green bonds, equity prices
    JEL: G11 G12 G22
    Date: 2019–06
  17. By: Schmitz, Sophia (Federal Ministry of Finance); Weinhardt, Felix (DIW Berlin)
    Abstract: We study the local evolution of cultural norms in West Germany in reaction to the sudden presence of East Germans who migrated to the West after reunification. These migrants grew up with very high rates of maternal employment, whereas West German families followed the traditional breadwinner-housewife model. We find that West German women increase their labor supply and that this holds within household. We provide additional evidence on stated gender norms, West-East friendships, intermarriage, and childcare infrastructure. The dynamic evolution of the local effects on labor supply is best explained by local cultural learning and endogenous childcare infrastructure.
    Keywords: cultural norms, local learning, gender, immigration
    JEL: J16 J21 D1
    Date: 2019–07
  18. By: Estrella Gomez-Herrera; Frank Müller-Langer
    Abstract: We explore whether there is a gender wage gap in one of the largest EU online labor markets, PeoplePerHour. Our unique dataset consists of 257,111 digitally tradeable tasks of 55,824 hiring employers from 188 countries and 65,010 workers from 173 countries that made more than 2.5 million wage bill proposals in the competition for contracts. Our data allows us to track the complete hiring process from the employers' design of proposed contracts to the competition among workers and the final agreement between employers and successful candidates. Using Heckman and OLS estimation methods we provide empirical evidence for a statistically significant 4% gender wage gap among workers, at the project level. We also find that female workers propose lower wage bills and are more likely to win the competition for contracts. Once we include workers’ wage bill proposals in the regressions, the gender wage gap virtually disappears, i.e., it is statistically insignificant and very small in magnitude (0.3%). Our results also suggest that female workers’ higher winning probabilities associated with lower wage bill proposals lead to higher expected revenues overall. We provide empirical evidence for heterogeneity of the gender wage gap in some of the job categories, all job difficulty levels and some of the worker countries. Finally, for some subsamples we find a statistically significant but very small “reverse” gender wage gap.
    Keywords: gender wage gap, online labor markets, digitally performable projects
    JEL: D40 J40
    Date: 2019
  19. By: Bozio, Antoine (Paris School of Economics); Breda, Thomas (Paris School of Economics); Grenet, Julien (Paris School of Economics)
    Abstract: We study the earnings responses to three large increases in employer Social Security contributions (SSCs) in France. We find evidence of full pass-through to workers in the case of a strong and salient relationship between contributions and expected benefits. By contrast, we find limited pass-through of employer SSCs to wages for reforms that increased SSCs with no tax-benefit linkage. Together with a meta-analysis of the literature, we interpret these results as evidence that tax-benefit linkage and its salience matter for incidence, a claim long made by the literature but not backed by direct empirical evidence to date.
    Keywords: tax incidence, payroll tax, social security contributions, tax-benefit linkage
    JEL: H22 H55
    Date: 2019–07
  20. By: Michael Ewens; Alexander S. Gorbenko; Arthur Korteweg
    Abstract: We estimate the impact of venture capital (VC) contract terms on startup outcomes and the split of value between the entrepreneur and investor, accounting for endogenous selection via a novel dynamic search and matching model. The estimation uses a new, large data set of first financing rounds of startup companies. Consistent with efficient contracting theories, there is an optimal equity split between agents that maximizes the probability of success. However, VCs use their bargaining power to receive more investor-friendly terms compared to the contract that maximizes startup values. Better VCs still benefit the startup and the entrepreneur, due to their positive value creation. Counterfactual exercises show that eliminating certain contract terms benefits entrepreneurs and enables low-quality entrepreneurs to finance their startups more quickly, increasing the number of deals in the market. Lowering search frictions shifts the bargaining power to VCs and benefits them at the expense of entrepreneurs. The results show that selection of agents into deals is a first-order factor to take into account in studies of contracting.
    JEL: C78 D86 G24
    Date: 2019–07
  21. By: Hans Fehr; Maurice Hofmann
    Abstract: We study the interplay between tenure decisions, stock market investment and the public social security system. Housing equity not only serves a dual purpose as a consumption good and as an asset, but also provides insurance to buffer various risks in retirement. Our life cycle model captures these links in order to explain why homeownership in Germany is so low. Our simulation results indicate that the public long-term care as well as the pension system reduce the homeownership rate in Germany by 10-15 percentage points.
    Keywords: homeownership, stock market participation, life-cycle models, long-term care
    JEL: C61 G11 H55
    Date: 2019

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.