nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2020‒06‒15
thirty-one papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Do Generous Parental Leave Policies Help Top Female Earners? By Kunze, Astrid; Corekcioglu , Gozde; Francesconi , Marco
  2. Lift the Ban? Initial Employment Restrictions and Refugee Labour Market Outcomes By Fasani, Francesco; Frattini, Tommaso; Minale, Luigi
  3. Local governments’ efficiency and educational results: empirical evidence from Italian primary schools By Ferraro, Simona; Agasisti, Tommaso; Porcelli, Francesco; Soncin, Mara
  4. Wage Determination and the Bite of Collective Contracts in Italy and Spain: Evidence from the Metalworking Industry By Effrosyni Adamopoulou; Ernesto Villanueva
  5. The Carbon 'Carprint' of Suburbanization: New Evidence from French Cities * By Camille Blaudin de Thé; Benjamin Carantino; Miren Lafourcade
  6. The Effect of the Hartz Labor Market Reforms on Post-unemployment Wages, Sorting, and Matching By Woodcock, Simon D.
  7. Working After Covid-19: Cross-Country Evidence from Real-Time Survey Data By Martial Foucault; Vincenzo Galasso
  8. Moving towards fairer regional minimum income schemes in Spain By Adrian Hernandez; Fidel Picos; Sara Riscado
  9. The COVID-19 Shock and Equity Shortfall: Firm-level Evidence from Italy By Elena Carletti; Tommaso Oliviero; Marco Pagano; Loriana Pelizzon; Marti G. Subrahmanyam
  10. Age Effects in Primary Education: A Double Disadvantage for Second Generations By Antonio Abatemarco; Mariagrazia Cavallo; Immacolata Marino; Giuseppe Russo
  11. Ranking populations in terms of inequality of health opportunity: A flexible latent type approach By Paolo BRUNORI,; Caterina Francesca GUIDI; Alain Trannoy
  12. Environmental Policy and Heterogeneous Labor Market Effects: Evidence from Europe By Rutzer, Christian; Niggli, Matthias
  13. Agglomeration economies in Great Britain By Cem Özgüzel
  14. The spatial extent of network externalities in international migration By Roberto Basile; Francesca Licari
  15. Intergenerational joblessness across Europe: the role of labour markets, education and welfare generosity By Paul Gregg; Lindsey Macmillan
  16. Differentiating Retirement Age to Compensate for Health Differences By Vincent Vandenberghe
  17. Income, Aspirations and Subjective Well-being: International Evidence By Hovi Matti; Laamanen Jani-Petri
  18. Salience, Incentives, and Timely Compliance: Evidence from Speeding Tickets By Libor Dusek; Nicolas Pardo; Christian Traxler
  19. Climbing up ladders and sliding down snakes: an empirical assessment of the effect of social mobility on subjective wellbeing By Dolan, Paul; Lordan, Grace
  20. The Effects of Partial Employment Protection Reforms: Evidence from Italy By Diego Daruich; Sabrina Di Addario; Raffaele Saggio
  21. Priority to unemployed immigrants? A causal machine learning evaluation of training in Belgium By Bart Cockx; Michael Lechner; Joost Bollens
  22. The growing digital divide in Europe and the United States By Désirée Rückert; Reinhilde Veugelers; Christoph Weiss
  23. Germany’s ‘Lex Apple Pay’: Payment Service Regulation Overtakes Competition Enforcement By Jens-Uwe Franck; Dimitrios Linardatos
  24. ELMOD documentation: Modeling of flow-based market coupling and congestion management By Schönheit, David; Hladik, Dirk; Hobbie, Hannes; Möst, Dominik
  25. Changes in Assortative Matching and Inequality in Income: Evidence for the UK By Pierre-André Chiappori; Monica Costa Dias; Sam Crossman; Costas Meghir
  26. Minimum wages and firm employment: evidence from a minimum wage reduction in Greece By Georgiadis, Andreas; Kaplanis, Ioannis; Monastiriotis, Vassilis
  27. Tracking Owners’ Sentiments: Subjective Home Values, Expectations and House Price Dynamics By Anthony Lepinteur; Sofie R. Waltl
  28. Sexual Harassment and Gender Inequality in the Labor Market By Folke, Olle; Rickne, Johanna
  29. Capital Gains and UK Inequality By Advani, Arun; Summers, Andy
  30. Work, care and gender during the Covid-19 crisis By Hupkau, Claudia; Petrongolo, Barbara
  31. Cyclical income risk in Great Britain By Konstantinos Angelopoulos; Spyridon Lazarakis; James Malley

  1. By: Kunze, Astrid (Dept. of Economics, Norwegian School of Economics and Business Administration); Corekcioglu , Gozde (Kadir Has University); Francesconi , Marco (University of Essex)
    Abstract: Generous government-mandated parental leave is generally viewed as an effective policy to support women’s careers around childbirth. But does it help women to reach top positions in the upper pay echelon of their firms? Using longitudinal employer-employee matched data for the entire Norwegian population, we address this question exploiting a series of reforms that expanded paid leave from 30 weeks in 1989 to 52 weeks in 1993. The representation of women in top positions has only moderately increased over time, and career profiles of female top earners within firms are significantly different from those of their male counterparts. The reforms did not affect, and possibly decreased, the probability for women to be at the top over their life cycle. We discuss some implications of this result to put into perspective the design of new family-friendly policy interventions.
    Keywords: Top earners; parental leave; women; regression discontinuity
    JEL: J18 J21 J22 J24 M14
    Date: 2020–05–25
  2. By: Fasani, Francesco; Frattini, Tommaso; Minale, Luigi
    Abstract: This article investigates the medium to long-term effects on refugee labour market outcomes of the temporary employment bans being imposed in many countries on recently arrived asylum seekers. Using a newly collected dataset covering almost 30 years of employment restrictions together with individual data for refugees entering European countries between 1985 and 2012, our empirical strategy exploits the geographical and temporal variation in employment bans generated by staggered introduction and removal coupled with frequent changes at the intensive margin. We find that exposure to a ban at arrival reduces refugee employment probability in post-ban years by 15%, an impact driven primarily by lower labour market participation. These effects are not mechanical, since we exclude refugees who may still be subject to employment restrictions, are non-linear in ban length, confirming that the very first months following arrival play a key role in shaping integration prospects, and last up to 10 years post arrival. We further demonstrate that the detrimental effects of employment bans are concentrated among less educated refugees, translate into lower occupational quality, and seem not to be driven by selective migration. Our causal estimates are robust to several identification tests accounting for the potential endogeneity of employment ban policies, including placebo analysis of non-refugee migrants and an instrumental variable strategy. To illustrate the costs of these employment restrictions, we estimate a EUR 37.6 billion output loss from the bans imposed on asylum seekers who arrived in Europe during the so-called 2015 refugee crisis.
    Keywords: asylum policies; asylum seekers; economic assimilation
    JEL: F22 J61 K37
    Date: 2020–05
  3. By: Ferraro, Simona; Agasisti, Tommaso; Porcelli, Francesco; Soncin, Mara
    Abstract: In Italy, the provision of educational ancillary services (like meals and school transportation) is in charge of the municipalities. We investigate whether municipalities differ in their efficiency when providing these services and whether such heterogeneity explains some portion of the variability observed in pupils’ test scores. The paper is the first application of a nonparametric order-m model and a two-stage multilevel regression to a unique administrative dataset, made of the entire population of Italian pupils tested in reading and mathematics at grade 5 (academic years 2012/2013 and 2014/2015). Results demonstrate that local governments have different efficiency levels in providing services to schools. The test scores’ variability among pupils, however, is not explained by different efficiency levels of local government in producing ancillary services.
    Keywords: ancillary services, order-m, multilevel modelling, efficiency
    JEL: H52 I21
    Date: 2020–02–26
  4. By: Effrosyni Adamopoulou; Ernesto Villanueva
    Abstract: In several OECD countries employer federations and unions fix skill-specific wage floors for all workers in an industry. One view of those "explicit" contracts argues that the prevailing wage structure reflects the labor market conditions back at the time when those contracts were bargained, with little space for renegotiation. An alternative view stresses that only workers close to the minima are affected by wage floors and that the wage structure is shaped by current labor market conditions. We disentangle both models using a novel dataset that combines wage floors set in the metalworking industry with labor market histories of metalworkers drawn from Social Security records in Italy and Spain. An increase in the local unemployment rate of 1 p.p. diminished contemporaneous mean wages by about 0.45 p.p. between 2005 and 2013 in both countries. Instead, a 1 p.p. higher unemployment rate back at the time of contract renewal reduced wages by 0.07 p.p., an impact driven by wages close to the negotiated wage floors. Even though the evidence for earlier periods is mixed in Italy, the results do not support the view that the wage structure reflects labor market conditions at the time of bargaining. The response of wages to local unemployment was driven by reductions in complements and employee churning, although the elasticity falls short of the prediction of an off-the-shelf bargaining model.
    Keywords: minimum wages, collective contracts, Social Security data, spot market, explicit bargaining, wage cyclicality
    JEL: J31 J38 J52
    Date: 2020–05
  5. By: Camille Blaudin de Thé (PSE - Paris School of Economics); Benjamin Carantino (PSE - Paris School of Economics); Miren Lafourcade (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics, RITM - Réseaux Innovation Territoires et Mondialisation - UP11 - Université Paris-Sud - Paris 11)
    Abstract: This paper investigates the impact of urban form on household fuel consumption and car emissions in France. We in particular analyze three features of cities commonly referred to as the "3 D's" (Cervero & Kockelman 1997): Density, Design and Diversity. Individual data allow us to identify the effects of urban form and the spatial sorting of households on emissions. We also use instrumental variables to control for other endogeneity issues. Our results suggest that, by choosing to live at the fringe of a metropolitan area instead of the city center, a representative household would consume approximately six extra tanks of fuel per year. More generally, doubling residential Density would result in an annual saving of approximately two tanks per household. However, larger gains would result from better urban Design (job-housing central-ization, improved rail/bus routes to central business districts, reduced pressure for road construction and a less fragmented built environment in urban areas) while improved Diversity (the concentration of various local amenities such as shops and public facilities) can also help lower fuel consumption. Another important finding is that the relationship between the metropolitan population and car emissions in France is bell-shaped, contrary to that in the US, suggesting that small cities do compensate for their lack of Density/Diversity by environmentally-friendly Design.
    Keywords: Sprawl,car emissions,CO 2 footprint,driving,public transport,smart cities
    Date: 2020–05
  6. By: Woodcock, Simon D. (Simon Fraser University)
    Abstract: We use linked longitudinal data on employers and employees to estimate how the 2003-2005 Hartz reforms affected the wages of displaced German workers after they returned to work. We also present a simple new method to decompose the wage effects into components attributable to selection on unobservables, and to changes in the way that displaced workers are sorted across firms and worker-firm matches upon re-employment. We find that the Hartz reforms substantially reduced the wages of displaced workers after their return to work. Women experienced smaller wage losses than men. For both sexes, over 80 percent of the increased wage loss was because displaced workers found re-employment in lower-wage firms after the reforms. A disproportionate share of these low-wage firms offer temporary employment services to other firms, and we document a large increase in post-displacement employment in the temporary work sector after the reforms. Sorting into worse matches with employers explains a smaller 5-9 percent of the wage loss experienced by men, and 12.5-23 percent of the female wage loss. Collectively, the sorting and matching channels explain almost all of the Hartz reforms' effect on post-displacement wages.
    Keywords: Hartz reforms, displacement, unemployment insurance, reallocation, sorting, matching, selection, linked employer-employee data, fixed effects
    JEL: J65 J64 J62 J68 J63 J31 C23
    Date: 2020–05
  7. By: Martial Foucault (Centre de recherches politiques de Sciences Po); Vincenzo Galasso (Università Bocconi)
    Abstract: On March 9th, with the official count of COVID-positive individuals at 7,985 and of deaths from COVID at 463, Italy was the first European country to entered into a comprehensive, nation-wide lockdown. Containment measures were further tightened on March 22nd, when a Prime Minister’s Decree mandated the shut-down of any unessential productive activity, de facto bringing to a halt a large chunk of the Italian economy. Other European countries immediately followed: Austria on March 16th, France and Germany on March 17th, the UK on March 23rd.The aim of these lockdown measures was to confine the spread of the coronavirus, to limit pressure on the national health system and, of course, to contain the death counts. Different degrees of lockdown were implemented at different point in time and across different countries. These public policy measures included closing schools, closing non-essential businesses, economic activities and institutions, stopping public transportation, prohibiting meetings of two or more people, imposing quarantine on people entering the country, closing borders. Moreover, individuals were asked (or mandated) to follow health and social distancing measures, such as, washing hands, coughing in the elbow, stop hugging or greeting, keeping physical distance from the others, staying at home, avoiding crowed places, stop meeting friends. Early studies (Kraemer, 2020) show that these measures were effective in reducing COVID-19 spread in the province of Hubei in China. However, these restraining measures cause also economic and psychological harms for the restrained individuals (Brookset al., 2020) and have economic consequences (see Baldwin and di Mauro, 2020, for a review).
    Keywords: COVID-19; Cross-Country; Data Survey
    Date: 2020–05
  8. By: Adrian Hernandez (European Commission - JRC); Fidel Picos (European Commission - JRC); Sara Riscado (European Commission - JRC)
    Abstract: Minimum income schemes are set to provide citizens with a minimum living standard. In Spain, these schemes consist of a heterogeneous and complex collection of regional benefits designed and implemented by the Autonomous Communities. This generates important regional discrepancies among the poorest individuals, undermining equal access, adequate social assistance and ultimately the fairness of these last resort safety nets. Following the recent initiative by the central government to introduce a national minimum income scheme complementing the regional ones, a better understanding of the performance of the existing regional minimum income schemes, in terms of their coverage and adequacy, is of the essence. We assess the budgetary, distributional and poverty effects of the current Spanish regional minimum income schemes, as well as the impact of increasing both coverage rates and adequacy levels. Using the European microsimulation model EUROMOD together with microdata from the European Union Statistics on Income and Living Conditions, we simulate a sequence of theoretical scenarios with different combinations of coverage and adequacy levels using national and regional poverty lines as references. Our results suggest that increasing adequacy would have a higher impact on poverty rates than increasing coverage, but would be less effective to reduce poverty intensity. Importantly, all scenarios imply significant expenditure increases, the more so for larger decreases in poverty intensity, as would be expected. Noticeably, results greatly differ among regions, and are sensitive to measuring poverty under a national or a regional criterion, reflecting Spanish regional disparities in terms of poverty.
    Keywords: minimum income, coverage, adequacy, microsimulation, EUROMOD
    JEL: H53 H75 I38
    Date: 2020–05
  9. By: Elena Carletti (Università Bocconi and CEPR); Tommaso Oliviero (Università di Napoli Federico II and CSEF); Marco Pagano (Università di Napoli Federico II, CSEF and EEIF); Loriana Pelizzon (SAFE, Goethe University Frankfurt and Università di Venezia Ca' Foscari); Marti G. Subrahmanyam (Stern School of Business, New York University)
    Abstract: This paper estimates the drop in profits and the equity shortfall triggered by the COVID-19 shock and the subsequent lockdown, using a representative sample of 80,972 Italian firms. We find that a 3-month lockdown entails an aggregate yearly drop in profits of €170 billion, with an implied equity erosion of €117 billion for the whole sample, and €31 billion for firms that became distressed, i.e., ended up with negative book value after the shock. As a consequence of these losses, about 17% of the sample firms, whose employees account for 8.8% of total employment in the sample (about 800 thousand employees), become distressed. Small and medium-sized enterprises (SMEs) are affected disproportionately, with 18.1% of small firms, and 14.3% of medium-sized ones becoming distressed, against 6.4% of large firms. The equity shortfall and the extent of distress are concentrated in the Manufacturing and Wholesale Trading sectors and in the North of Italy. Since many firms predicted to become distressed due to the shock had fragile balance sheets even prior to the COVID-19 shock, restoring their equity to their pre-crisis levels may not suffice to ensure their long-term solvency.
    Keywords: COVID-19, pandemics, losses, distress, equity, recapitalization.
    JEL: G01 G32 G33
    Date: 2020–05–28
  10. By: Antonio Abatemarco (Università di Salerno); Mariagrazia Cavallo (University of Bristol); Immacolata Marino (Università di Napoli Federico II and CSEF); Giuseppe Russo (Università di Salerno, CSEF and GLO)
    Abstract: A double disadvantage occurs when the interaction of two disadvantages generates an additional disadvantage. We show that second-generation children in the Italian primary school experience a double disadvantage in Italian and Math scores. The double disadvantage stems from the interaction of the immigration background and age effects.
    Keywords: immigration, second generation, education, double disadvantage
    JEL: I21 J01 J13 Z13
    Date: 2020–06–04
  11. By: Paolo BRUNORI,; Caterina Francesca GUIDI; Alain Trannoy
    Abstract: We offer a flexible latent type approach to rank populations according to unequal health opportunities. Building upon the latent-class method proposed by Li Donni et al. (2015), our contribution is to let the number of types vary to obtain an opportunity-inequality curve for a population that gives how the between-type inequality varies with the number of types. A population A is said to have less inequality of opportunity than population B if its curve is statistically below that of population B. This version of the latent class approach allows for a robust ranking of 31 European countries regarding inequality of opportunity in health.
    Keywords: Inequality of opportunity, health inequality, latent class, opportunity-inequality curve, self-assessed health
    JEL: I14 D63
    Date: 2020
  12. By: Rutzer, Christian (University of Basel); Niggli, Matthias (University of Basel)
    Abstract: In this paper, we use a data-driven approach to predict the "green potential" of ISCO occupations based on their corresponding skills. With this information, we can investigate the relationship between environmental regulations and occupation-level employment in the manufacturing sector of 19 European countries for the period 1992-2010. Our empirical results highlight heterogeneous occupational employment changes in response to an increase in environmental policy stringency. More specically, we nd a decrease in labor demand for occupations with relatively low green potential and an increase for occupations with relatively high green potential. Thus, at least in the short term, greening the economy may create winners and losers across occupations and countries.
    Keywords: environmental regulation, green transition, labor market, supervised learning
    JEL: J23 J24 Q52
    Date: 2020–06–01
  13. By: Cem Özgüzel
    Abstract: This paper estimates agglomeration economies in Great Britain. The analysis employs a definition of urban areas as functional economic units developed by the OECD in collaboration with the European Union to investigate the size and sources of productivity disparities across urban areas. It uses data from the UK Annual Survey of Hours and Earnings and the UK Labour Force Survey between 2000 and 2018 and a two-step estimation procedure that accounts for bias in the extent of agglomeration economies arising from individual sorting. The results suggest that a 10% increase in employment density of a city in Great Britain, would, on average, increase city productivity by 0.9-1 percent. The analysis also shows the estimated elasticity for employment density remains the same before and after the 2007–08 global financial crisis, not showing any clear structural break between city size and productivity relationship.
    Keywords: Great Britain, local labour markets, spatial wage disparities
    JEL: R12 R23 J31
    Date: 2020–06–08
  14. By: Roberto Basile (Department of Industrial and Information Engineering and Economics. University of L'Aquila); Francesca Licari (Italian National Institute of Statistics (ISTAT))
    Abstract: In this paper, we assess the effect of community networks on the location choice of foreign immigrants in Italy. Our results confirm the existence of strong network externalities, but they also suggest that these effects spill over the borders of local labor markets areas (LLMAs). Significant positive spatial spillovers are indeed evident up to the second-order of contiguity, while a negative (spatial competition) effect emerges at the third-order. A possible channel for the generation of these spatial spillovers is the existence of common markets for unskilled and ethnic-specific jobs.
    Keywords: Community networks, Immigration, Gravity models, Spatial dependence
    JEL: F22 J61 R23 C14 C21
    Date: 2020–05
  15. By: Paul Gregg (Department of Social & Policy Sciences, University of Bath); Lindsey Macmillan (Centre for Education Policy and Equalising Opportunities, UCL Institute of Education, University College London)
    Abstract: Recent studies of intergenerational income mobility have used cross-area and cross-national variation in intergenerational elasticities to explore possible drivers of persistence in incomes across generations. We contribute to this literature, and the parallel literature on the effects of social exclusion, utilising a conceptual framework to explore the role of family factors (education and welfare generosity) and labour market conditions in accounting for intergenerational joblessness across Europe. Country-level differences suggest that lower expenditure on education and less generous welfare systems are associated with more intergenerational persistence in jobless spells across countries. We show that simple explanations, such as high unemployment and low education alone do not account for individual-level intergenerational joblessness. Instead, a combination of living in a jobless household in (late) childhood, low education and weak labour markets co-load to create penalties. Taken together, the individual- and country-level analysis point to multiple disadvantage creating persistence of deprivation across generations rather than individual risk factors. This suggests that a targeted and combined policy intervention is required to reduce such associations.
    Keywords: Joblessness; Poverty; Education; Labour markets; Welfare
    JEL: J62 J64 I24 I38
    Date: 2020–06
  16. By: Vincent Vandenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Population ageing in Europe calls for an overall rise of the age of retirement. However, most observers agree that the latter should be differentiated to account for individuals' heterogeneous health when they grow older. This paper explores the relevance of this idea using European SHARE panel data. It first quantifies the health gradient across European countries, and within each of them across sociodemographic groups (i.e. genderXeducation) at typical retirement age. It then estimates the degree of retirement age differentiation that would be needed to equalise expected health at the moment of retirement. Results point at the need of a very high degree of differentiation to equalise expected health, across and within European countries. But the paper also shows that systematic retirement age differentiation would fail to match a significant portion of the full distribution of health status. In a world synonymous with systematic health-based retirement age differentiation, there would still be a lot of what health economists call F-mistakes ([F]ailure of treatment ie. no retirement for people in poor health) and E-mistakes ([E]xcessive treatment ie. people in good health going for retirement).
    Keywords: Ageing, Health, Retirement Policy
    JEL: J14 I1 J26
    Date: 2020–04–14
  17. By: Hovi Matti; Laamanen Jani-Petri (Faculty of Management and Business, Tampere University)
    Abstract: Previous micro-level results from cross-sectional data from individual countries sug- gest that well-being improvements related to rising incomes are at least partly offset by associated rises in income aspirations. We conduct a more encompassing analysis on the topic, covering about 30 countries in different stage of economic development. We use micro-data on Europeans’ subjective well-being, income and aspirations as measured by minimum income needs from the year 2013 and panel data on income and aspirations. Earlier findings on the negative role of income aspirations when it comes to well-being are shown to hold internationally. Moreover, in line with the earlier results from individual countries, we find that aspirations matter systematically more, the higher the country’s average income. These results are robust to three different measures of well-being. Fur- ther, the panel analysis shows that aspirations increase with incomes. Taken together, our results suggest that aspirations play an important role in holding back income-induced well-being improvements, especially in high-income countries.
    Keywords: Income, Subjective well-being, Aspirations
    JEL: D60 D63 I31
    Date: 2020–05
  18. By: Libor Dusek (Charles University, Faculty of Law, and University of Economics, Prague); Nicolas Pardo (Hertie School, Berlin); Christian Traxler (Hertie School, Berlin; Max Planck Institute for Research on Collective Goods; CESifo)
    Abstract: This paper studies the enforcement of fines. We randomly assign 80,000 speeding tickets to treatments that increase the salience of the payment deadline, late penalties, or both. Stressing the penalties significantly and persistently increases payment rates. Emphasizing only the deadline is not effective. The findings from the RCT are consistent with a survey experiment which documents the treatments' impact on priors about parameters of the compliance problem. Exploiting discontinuous variation in fines, we then document a strong price responsiveness: a 1% increase in the payment obligation induces a 0.23 percentage point decrease in timely compliance. This semi-elasticity suggests that the impact of the salience nudges is equivalent to the effect of a 4-9% reduction in fines.
    Keywords: Enforcement, fines, timely compliance, salience, nudges, deadlines, perceptions, RCT, RDD
    JEL: K42 H26 D80
    Date: 2020–05
  19. By: Dolan, Paul; Lordan, Grace
    Abstract: We examine how intergenerational mobility impacts on subjective wellbeing (SWB) drawing on data from the British Cohort Study. Our SWB measures encapsulate 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 impact SWB to a greater extent than upward movements, consistent with exhibiting 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; life satisfaction; mental health; social class mobility; subjective wellbeing
    JEL: D31 D63 J60
    Date: 2020–05–14
  20. By: Diego Daruich (University of Southern California (Marshall)); Sabrina Di Addario (Bank of Italy); Raffaele Saggio (University of British Columbia)
    Abstract: We combine matched employer-employee data with firms’ financial records tostudy a 2001 Italian reform that lifted constraints on the employment of temporary contract workers while maintaining rigid employment protection regulationsfor employees hired under permanent employment contracts. Exploiting the stag-gered implementation of the reform across different sectoral collective bargainingagreements, we find that this policy change led to an increase in the incidence oftemporary contracts but failed to raise employment significantly. The reform hadboth winners and losers. Firms appear to be the main winners as the reform wassuccessful in decreasing labor costs, leading to higher profits. By contrast, youngworkers are the main losers since their earnings were substantially depressed follow-ing the policy change. Rent-sharing estimates show that workers on a temporarycontract receive only 68% of the rents shared by firms with workers hired under apermanent contract, helping explain the post-reform labor cost reductions.
    Date: 2020–04–27
  21. By: Bart Cockx (Department of Economics, Ghent University); Michael Lechner (Swiss Institute for Empirical Economic Research (SEW), University of St. Gallen); Joost Bollens (Vlaamse Dienst voor Arbeidsbemiddeling en Beroepsopleiding (VDAB))
    Abstract: Based on administrative data of unemployed in Belgium, we estimate the labour market effects of three training programmes at various aggregation levels using Modified Causal Forests, a causal machine learning estimator. While all programmes have positive effects after the lock-in period, we find substantial heterogeneity across programmes and unemployed. Simulations show that “black-box” rules that reassign unemployed to programmes that maximise estimated individual gains can considerably improve effectiveness: up to 20% more (less) time spent in (un)employment within a 30 months window. A shallow policy tree delivers a simple rule that realizes about 70% of this gain.
    Keywords: Policy evaluation, active labour market policy, causal machine learning, modified causal forest, conditional average treatment effects
    JEL: J68
    Date: 2020–05–04
  22. By: Désirée Rückert; Reinhilde Veugelers; Christoph Weiss
    Abstract: Using a new survey on digitalisation activities of firms in the EU and the US, we identify digitalisation profiles based on the current use of digital technologies and future investment plans in digitalisation. Our analysis confirms the trend toward digital polarisation and a growing digital divide in the corporate landscape with, on one side, many firms that are not digitally active, and on the other side, a substantial number of digitally active firms forging ahead. Old small firms, with less than 50 employees and more than 10 years old, are significantly more likely to be persistently digitally non-active. We show that these persistently non-digital firms are less likely to be innovative, increase employment or command higher mark-ups. These trends are likely to exacerbate the digital divide across firms in the EU and the US.
    Keywords: digital technology, investment, firm performance
    Date: 2020–05–18
  23. By: Jens-Uwe Franck; Dimitrios Linardatos
    Abstract: As of January 2020, Section 58a of the German Payment Services Supervisory Act (PSSA) provides a right for payment service providers and e-money issuers to access technical infrastructure that contributes to mobile and internet-based payment services. This right of access is intended to promote technological innovation and competition in the consumers’ interests in having a wide choice among payment services, including competing solutions for mobile and internet-based payments. The provision has been dubbed ‘Lex Apple Pay’ as it seems to have been saliently motivated by the objective to give payment service providers the right of direct access to the NFC interfaces of Apple’s mobile devices. In enacting Section 58a PSSA, the German legislature has rushed forwards, overtaking the EU Commission’s ongoing competition investigation into Apple Pay as well as the pending reform of the German Competition Act, which is aimed precisely at operators of technological platforms, which enjoy a gatekeeper position. This article explores the scope of application and the statutory requirements of this right of access as well as available defences and possible legal barriers. We point out that, to restore a level playing field in the internal market, the natural option would be to further harmonize EU payment services regulation, including the availability of a right of access to technical infrastructure for mobile and internet-based payment services and e-money issuers.
    Keywords: ‘Lex Apple Pay’; Technology platforms; Antitrust; Payment Services Regulation; Mobile Payment; Access to NFC interfaces; Wallet Apps; Internal Market Regulation
    JEL: K21 K22
    Date: 2020–05
  24. By: Schönheit, David; Hladik, Dirk; Hobbie, Hannes; Möst, Dominik
    Abstract: This paper documents ELMOD, a linear optimization model with a nodal pricing approach, covering the energy market and electricity grid of Europe. In the presented formulation, ELMOD is used for the computation of market coupling results without grid constraints and subsequent computation of congestion management, i.e. redispatch and curtailment. Furthermore, flow-based market coupling is implemented, as the EU-stipulated calculation method for cross-border trading capacities. A short case study presents exemplary results for market outcomes based on flow-based market coupling, i.e. n-1 secure trading domains, import-export balances, and zonal prices, as well as necessary congestion management measures.
    Keywords: energy system modeling,electricity grid models,linear optimization,congestion management,flow-based market coupling,n-1 security criterion
    Date: 2020
  25. By: Pierre-André Chiappori (Columbia University); Monica Costa Dias (Institute for Fiscal Studies, Centre for Economics and Finance); Sam Crossman (Institute for Fiscal Studies); Costas Meghir (Yale University)
    Abstract: The extent to which like-with like marry is important for inequality as well as for the outcomes of children that result from the union. In this paper we present evidence on changes in assortative mating and its implications for household inequality in the UK. Our approach contrasts with others in the literature in that it is consistent with an underlying model of the marriage market. We argue that a key advantage of this approach is that it creates a direct connection between changes in assortativeness in marriage and changes in the value of marriage for the various possible matches by education group. Our empirical results do not show a clear direction in the change in assortativeness in the UK, between the birth cohorts of 1945-54 and 1965-74. We find that changes in assortativeness pushed income inequality up slightly, but that the strong changes in education attainment across the two cohorts contributed to scale down inequality.
    Keywords: Marriage, mobility, UK
    JEL: J12 J13 D31
    Date: 2020–05
  26. By: Georgiadis, Andreas; Kaplanis, Ioannis; Monastiriotis, Vassilis
    Abstract: We investigate firm heterogeneity in responses to minimum wage changes leveraging on a policy reform in 2012 in Greece that introduced a youth sub-minimum through a sharp reduction in the minimum wage that was larger for youth. Using administrative linked employer-employee panel data and a difference-in-differences estimator, we find that, although wages decreased across all firms following the policy reform, adult wages decreased by more, whereas youth wages decreased by less in firms with a higher share of youth in employment. We also find that, in these firms, adult employment increased by more, while youth employment increased by less or even decreased and that these changes reflected mainly new hires rather than job separations. These heterogeneous responses to the change in the minimum across firms are not entirely consistent with the competitive model of the labour market.
    Keywords: minimum wage; wages; firm employment
    JEL: R14 J01
    Date: 2020–08–01
  27. By: Anthony Lepinteur (University of Luxembourg); Sofie R. Waltl (Department of Economics, Vienna University of Economics and Business & LISER)
    Abstract: Economic theory predicts that expectations on future house price growth are related to the current price of a house. We test this relationship for the supply side of the secondary housing market using micro data that links individual expectations to a subjective owner estimated value (OEV). We find a strong causal relationship that optimistic expectations indeed imply higher OEVs as compared to neutral or pessimistic expectations. We find qualitatively and quantitatively consistent results for Italy and the US as well as for booming and gloomy years. Our results survive ample robustness checks. Since we use subjective data on house prices, we first show that OEVs are indeed a valid source to study house price dynamics by performing three types of convergent validity tests. We find that price dynamics derived by either combining OEVs and dwelling characteristics, or making use of repeatedly provided OEVs by the same owner over time reproduce objectively measured market trends strikingly well – even over decades. In contrast, OEVs and objective data tend to differ in levels – potentially due to psychological bias. These results hold for a large set of countries. We hence conclude that the “wisdom of the home-owner crowd” is sufficient to study house price dynamics but OEVs are less suited for measuring the level of market prices.
    Keywords: Housing Markets, Expectations, Heterogeneous Beliefs, Subjective Data, Convergent Validity
    JEL: C43 D9 R31
    Date: 2020–05
  28. By: Folke, Olle; Rickne, Johanna
    Abstract: This paper offers a comprehensive empirical analysis of sexual harassment in the Swedish labor market. First, we use nationally representative survey data linked with employer-employee data to describe rates of self-reported sexual harassment across occupations and workplaces. The risk of sexual harassment is clearly imbalanced across the sex segregated labor market. In gender-mixed and male-dominated occupations and workplaces, women have a higher risk than men, and men have a higher risk than women in female-dominated contexts. We use a hypothetical job-choice experiment with vignettes for sexual harassment to measure the disutility of sexual harassment risks. Both men and women have an equally high willingness to pay for avoiding workplaces where sexual harassment has occurred. But the willingness to pay is conditional on the sex of the fictional harassment victim. People reject workplaces where the victim is the same sex as themselves, but not where the victim is of the opposite sex. We return to the administrative data to study employer compensation for the disutility of sexual harassment risks. Within workplaces, a high risk is associated with lower, not higher wages. People who self-report sexual harassment also have higher job dissatisfaction, more quit intentions, and more actual quits. Both these patterns indicate a lack of full compensation. We conclude that sexual harassment should be conceptualized as gender discrimination in workplace amenities, and that this discrimination reinforces sex segregation and pay-inequalities in the labor market.
    Keywords: Gender Inequality; occupational gender segregation; Sexual harassment; workplace amenities
    JEL: J16 J24 J81
    Date: 2020–05
  29. By: Advani, Arun (University of Warwick, CAGE, the Institute for Fiscal Studies (IFS), and the LSE International Inequalities Institute (III)); Summers, Andy (London School of Economics, International Inequalities Institute (III), and CAGE)
    Abstract: Aggregate taxable capital gains in UK have tripled in past decade. Using confidential administrative data on the universe of UK taxpayers, we show that including gains changes the picture of UK inequality over the past two decades. These taxable gains are largely repackaged income, so their exclusion biases the picture of inequality. Including them changes who is at the top of the distribution, adding more business owners and older people. The share of income plus gains (both pre- and post-tax) going to the top 1% is 3pp higher than for income only, and this gap has been steadily rising.
    Keywords: inequality ; capital gains ; income shifting ; top shares JEL codes: D31 ; E01 ; H2
    Date: 2020
  30. By: Hupkau, Claudia; Petrongolo, Barbara
    Abstract: The Covid-19 crisis has especially hit service sectors with frequent social interactions, in which women are over-represented. At the same time, if not directly subject to the lock-down, women are more likely to hold jobs that can be performed from home. Survey evidence for the UK shows that women are more likely to report job losses than men during Covid-19, suggesting that remote work opportunities only partially offset the differential exposure of men and women to the lockdown. Following the closure of nurseries and schools, women are also likely to take over a larger share of increased childcare needs. However, in about 20% of households, in which women work in critical sectors and men stay at home, one would expect a reversal of usual childcare gaps, with potential consequences on the evolution of gender roles and comparative advantages. Furthermore, valuable lessons may be learned from current remote working patterns, possibly feeding into more flexible working solutions for the long-run.
    Keywords: coronavirus; Covid-19
    JEL: R14 J01
    Date: 2020–05
  31. By: Konstantinos Angelopoulos; Spyridon Lazarakis; James Malley
    Abstract: This paper establishes new evidence on the cyclical behaviour of household income risk in Great Britain and assesses the role of social insurance policy in mitigating against this risk. We address these issues using the British Household Panel Survey (1991-2008) by decomposing stochastic idiosyncratic income into its transitory, persistent and fixed components. We then estimate how income risk, measured by the variance and the skewness of the probability distribution of shocks to the persistent component, varies between expansions and contractions of the aggregate economy. We first find that the volatility and left-skewness of these shocks is a-cyclical and counter-cyclical respectively. The latter implies a higher probability of receiving large negative income shocks in contractions. We also find that while social insurance (tax-benefits) policy reduces the levels of both measures of risk as well as the counter-cyclicality of the asymmetry measure, the mitigation effects work mainly via benefits.
    Keywords: household income risk, social insurance policy, aggregate áuctuations
    JEL: D31 E24 J31
    Date: 2019–03

This nep-eur issue is ©2020 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.