nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2020‒09‒28
23 papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Stung by Pension Reforms: The Impact of a Change in State Pension Age on Mental Health and Life Satisfaction of Affected Women By Della Giusta, Marina; Longhi, Simonetta
  2. Uncertainty and Firms' Labour Decisions. Evidence from European Countries By Martinez-Matute, Marta; Urtasun, Alberto
  3. Gender Smart Financing Investing In and With Women: Opportunities for Europe By Agnieszka Skonieczna; Letizia Castellano
  4. Pay Transparency Initiative and Gender Pay Gap: Evidence from Research-Intensive Universities in the UK By Gamage, Danula K.; Kavetsos, Georgios; Mallick, Sushanta; Sevilla, Almudena
  5. The Fall of the Aspirations Wall: Educational Aspirations, Achievement and Societal Change By Ghazala Azmat; Katja M. Kaufmann
  6. Incorporating quality in the efficiency assessment of hospitals using a generalized directional distance function approach By Guccio, C.; Lisi, D.; Martorana, M.F.; Pignataro, G.
  7. Now Unions Increase Job Satisfaction and Well-being By David G. Blanchflower; Alex Bryson
  8. Does Gender Matter for Promotion in Science? Evidence from Physicists in France By Jacques Mairesse; Michele Pezzoni; Fabiana Visentin
  9. Teacher Allocation and School Performance in Italy By Alex Bryson; Lorenzo Corsini; Irene Martelli
  10. The Impact of the Length of Schooling on the Timing of Family Formation By Josefine Koebe; Jan Marcus
  11. Now Unions Increase Job Satisfaction and Well-being By David G. Blanchflower; Alex Bryson
  12. Finance and Innovation in the Production Network By Brancati, Emanuele; Minetti , Raoul; Zhu, Susan Chun
  13. The Social Determinants of Choice Quality: Evidence from Health Insurance in the Netherlands By Benjamin R. Handel; Jonathan T. Kolstad; Thomas Minten; Johannes Spinnewijn
  14. Cash Thresholds, Cash Expenditure and Tax Evasion By Francesco Flaviano Russo
  15. True Covid-19 mortality rates from administrative data By Depalo, Domenico
  16. Winners and Losers of Immigration By Fiaschi, Davide; Tealdi, Cristina
  17. Where Do I Stand? Assessing Researchers' Beliefs about Their Relative Productivity By Bertoni, Marco; Brunello, Giorgio; Checchi, Daniele; Rocco, Lorenzo
  18. What Happens when Municipalities Run Corporations? Empirical Evidence from 290 Swedish Municipalities By Bergh, Andreas; Erlingsson, Gissur Ó; Wittberg, Emanuel
  19. Working Parents, Financial Insecurity, and Child-Care: Mental Health in the Time of COVID-19 By Tani, Massimiliano; Cheng, Zhiming; Mendolia, Silvia; Paloyo, Alfredo R.; Savage, David
  20. Increasing Hours Worked: Moonlighting Responses to a Large Tax Reform By Alisa Tazhitdinova
  22. Intergenerational Transfers by Size and Wealth Inequality in Rich Countries By Brian Nolan; Juan Palomino; Philippe Van Kerm; Salvatore Morelli
  23. Crisis Impact on the Diversity of Financial Portfolios - Evidence from European Citizens By Dorothea Schäfer; Michael Stöckel; Henriette Weser

  1. By: Della Giusta, Marina (University of Reading); Longhi, Simonetta (University of Reading)
    Abstract: Several reforms increased the state pension age (SPA) in the UK and equalised it to age 65 for both men and women. We use panel data and a difference-in-difference approach to comprehensively analyse the direct and indirect effects of these reforms, investigating mechanisms for indirect effects. We also analyse the heterogeneity of the effects of smaller versus larger increases in SPA, by partnership status, as well as spill-over effects to male partners. Consistent with previous research, we find a positive impact of the reform on employment and labour force participation, but also large negative impacts on various aspects of personal, financial, and mental wellbeing. The effect is larger for women who have to wait longer to reach their SPA, and smaller for women with a partner (compared to those without a partner). The effect of the reform partially spills over to affected women partner's labour market participation. Our results can be generalised to other countries that are seeking to implement similar reforms.
    Keywords: policy reform, retirement, labour supply, care supply, leisure, wellbeing
    JEL: I31 J22 J26
    Date: 2020–08
  2. By: Martinez-Matute, Marta (Universidad Autónoma de Madrid); Urtasun, Alberto (Banco de España)
    Abstract: Uncertainty affects employers' decisions on labour workforce, as it does on capital. We exploit differences on how firms adjust their labour work-force when uncertainty increases. Using data from the Wage Dynamic Network Survey for 25 European countries, we first construct, opposite to usual aggregate indicators, a set of uncertainty indicators exploiting firms' microeconomic environment. We combine variability from the country, sector and size of the firm. Secondly, we investigate the effect of uncertainty on firms' strategies to adjust labour through hirings and rings. Results reveal that firms reduce hiring decisions and recur to individual layos more frequently when uncertainty increases. An increase of one point in the uncertainty indicator increases the probability of having frozen hiring in between 21% to 39%. We also find more significant effects when firms are facing credit constraints and labour adjustment costs are higher.
    Keywords: uncertainty, labour adjustment, firms' labour decisions, freeze hirings, layoffs
    JEL: D22 D81 J21 J23
    Date: 2020–08
  3. By: Agnieszka Skonieczna; Letizia Castellano
    Abstract: Gender-diverse teams produce better results. However, women remain underrepresented when it comes to investment, both as beneficiaries of investment and as decision-makers. In 2018, over 90% of capital raised by tech companies backed by European venture capital (VC) went to teams that did not have a single female founder. This paper discusses the reasons behind the gender investment gap, with a focus on the lack of female investors. Women’s wealth is on the rise and women tend to invest in more long-term and impactful projects. Investing in and with women is thus an opportunity that Europe needs to seize for more sustainable and inclusive growth. InvestEU, the EU investment programme as of 2021, could act as a catalyst of these benefits by stimulating gender-smart financing, i.e. financing that funds, empowers and inspires female founders and investors.
    JEL: G20 G30 O16
    Date: 2020–07
  4. By: Gamage, Danula K. (Queen Mary, University of London); Kavetsos, Georgios (Queen Mary, University of London); Mallick, Sushanta (Queen Mary, University of London); Sevilla, Almudena (University College London)
    Abstract: Given the ongoing efforts to close the gender pay gap across different sectors in the UK, this paper investigates the impact of a pay transparency initiative on the gender pay gap in the university sector, focusing on the Russell Group of top-tier universities. The initiative, introduced in 2007, enabled public access to mean salaries of men and women in UK universities. Using a rich individual-level administrative dataset and a difference-in-differences approach comparing men and women, we document several key findings. First, following the pay transparency intervention, the log of salaries of female academics increased by around 0.62 percentage points compared to male counterparts, reducing the gender pay gap by 4.37%. The effect is more pronounced considering a balanced sample (1.27 percentage points increase in female wages or an 11.59% fall in the gender pay gap). This fall in the pay gap is mostly driven by senior female academics negotiating higher wages and female academics moving to universities with equal opportunity. We do not find any evidence of pre-existing wage gap or the gender composition associated with the fall in the gender pay gap.
    Keywords: gender pay gap, pay transparency, higher education sector, wage level
    JEL: I23 J16 J31 J44
    Date: 2020–08
  5. By: Ghazala Azmat; Katja M. Kaufmann
    Abstract: We use the German Reunification “experiment” to study how an exogenously changed environment (from state socialism to capitalist democracy) a ects aspirations and future outcomes. We analyze whether, and how quickly, individuals’ educational aspirations adapt, their long-term impact and the underlying mechanisms. Using di erences across cohorts induced by Reunification timing, we show that shortly after, educational aspirations among high school students in East Germany increase substantially and translate into sizable increases of completing university entrance certificate five years later. Perceived educational returns, economic preferences (“consumerism”), socio-political attitudes (“individualism”) and psychological well-being adapt quickly and are directly linked to changes in aspirations.
    Keywords: Aspirations; education; perceived returns; economic, social and political preferences; psychological well-being; German Reunification.
    JEL: I21 D72 D91
    Date: 2020–08
  6. By: Guccio, C.; Lisi, D.; Martorana, M.F.; Pignataro, G.
    Abstract: The increasing pressure to cost containment in the public sector and, specifically, in health care provision raises concern on the potential adverse effects on the hospital quality that would imply the existence of an efficiency-effectiveness trade-off. This hypothesis calls for taking into account explicitly the relationship between efficiency and quality when analyzing hospitals’ performance. This paper adopts a non-parametric approach to study the whole performance in the provision of hospital services in Italy. We employ a generalized directional distance function that allows incorporating both desirable outputs and undesirable outcomes (i.e. risk-adjusted mortality rates) in the estimation of efficiency, thus enabling for studying hospital performance thoroughly, and assess the impact of integrating quality in the efficiency assessment. We find that including quality does matter. In addition, considering that patients in the Italian National Health System do not directly pay for treatments and, thus, hospitals presumably compete on quality in a catchment area, we also study whether taking into account quality matters in studying spatial dependence in hospital performance.
    Keywords: hospital efficiency; directional distance function; undesirable outputs; trade-off effectiveness-efficiency; spatial dependence
    JEL: I12 I18 H75 D22
    Date: 2020–09
  7. By: David G. Blanchflower (University of Stirling, GLO, Bloomberg and NBER); Alex Bryson (University College London, NIESR and IZA)
    Abstract: Using data from the United States and Europe on nearly two million respondents we show the partial correlation between union membership and employee job satisfaction is positive and statistically significant. This runs counter to findings in the seminal work of Freeman (1978) and Borjas (1979) in the 1970s and most empirical studies since. With data for the United States we show the association between union membership and job satisfaction switched from negative to positive in the 2000s. Cohorts with positive union effects over time come to dominate those with negative effects. The negative association between membership and job satisfaction is apparent in cohorts born in the 1940s and 1950s but turns positive for those born between the 1960s and 1990s. Analyses for Europe since the 2000s confirm the positive association between union membership and worker wellbeing is apparent elsewhere. We also find evidence in the United Kingdom from panel estimation of a positive relation between union membership and job satisfaction. We find positive union associations with other aspects of worker wellbeing including life satisfaction and happiness, several macro variables and various measures of trust. Union members are also less likely to be stressed, worried, depressed, sad or lonely. The findings have important implications for our understanding of trade unionism.
    Keywords: : union membership; job satisfaction; worker wellbeing; trust; age; cohort effects; union density
    JEL: J28 J50 J51
    Date: 2020–08–01
  8. By: Jacques Mairesse; Michele Pezzoni; Fabiana Visentin
    Abstract: In this study, we investigate what are the factors of the promotion of female and male scientists at the French Institute of Physics (INP) at CNRS, one of the largest European public research organizations. We construct a long panel of INP physicists combining various data sources on their research activities and career. Using event history analysis, we find that female and male physicists have the same rate of promotion from junior to senior positions when controlling for research productivity and a variety of other promotion factors. Our results also suggest that promotion factors such as family characteristics, mentoring, professional network, research responsibilities have different impacts on female and male researchers.
    JEL: I23 J16
    Date: 2020–09
  9. By: Alex Bryson (University College London); Lorenzo Corsini (University of Pisa); Irene Martelli (Sant'Anna School of Advanced Studies)
    Abstract: Italy’s secondary school system has faced funding constraints for many years which limits availability of new permanent job slots for teachers. When permanent posts do arise they are allocated mostly on seniority while merit only plays a small role. Thus, the age distribution of teachers in schools reflects older teachers’ preferences which include the amenity of being close to urban centres. Using schools’ distance from main urban centres and population size in the school’s vicinity to instrument for non-random exposure of schools to older teachers, we show older teachers are detrimental to pupil attainment in secondary schools. The effect is large: a six-year increase in the average age of teachers (roughly similar to the increase that has occurred in the last 20 years) leads to a one standard deviation reduction in the mean graduation mark. The findings suggest there may be value in altering the way teachers are allocated to secondary schools in Italy.
    Keywords: pupil attainment; school performance; teacher allocation; teacher age; permanent contracts
    JEL: J41 J44 J45 J48 J62 M51 M55
    Date: 2020–09–01
  10. By: Josefine Koebe; Jan Marcus
    Abstract: Individuals typically traverse several life phases before forming a family. We analyse whether changing the duration of one of these phases, the education phase, affects the timing of marriage and childbearing. For this purpose, we exploit the introduction of short school years in Germany in 1966-67, which compressed the education phase without affecting the curriculum. Based on difference-in-differences regressions and German Micro Census data, we find that earlier graduation due to short school year exposure affects the timing of marriage for individuals in all secondary school tracks and shifts forward the birth of the first child mainly for academic-track graduates. This highlights that education policies might not only affect family formation through human capital accumulation, but also through changing the duration of earlier life phases. This is important as not only age at marriage and first birth increases in many countries, but also the duration of the education phase.
    Keywords: family formation, instruction time, fertility, marriage
    JEL: I26 J12 J13 J24
    Date: 2020
  11. By: David G. Blanchflower; Alex Bryson
    Abstract: Using data from the United States and Europe on nearly two million respondents we show the partial correlation between union membership and employee job satisfaction is positive and statistically significant. This runs counter to findings in the seminal work of Freeman (1978) and Borjas (1979) in the 1970s and most empirical studies since. With data for the United States we show the association between union membership and job satisfaction switched from negative to positive in the 2000s. Cohorts with positive union effects over time come to dominate those with negative effects. The negative association between membership and job satisfaction is apparent in cohorts born in the 1940s and 1950s but turns positive for those born between the 1960s and 1990s. Analyses for Europe since the 2000s confirm the positive association between union membership and worker wellbeing is apparent elsewhere. We also find evidence in the United Kingdom from panel estimation of a positive relation between union membership and job satisfaction. We find positive union associations with other aspects of worker wellbeing including life satisfaction and happiness, several macro variables and various measures of trust. Union members are also less likely to be stressed, worried, depressed, sad or lonely. The findings have important implications for our understanding of trade unionism.
    JEL: J28 J50 J51
    Date: 2020–08
  12. By: Brancati, Emanuele (University of Rome, La Sapienza); Minetti , Raoul (Michigan State University, Department of Economics); Zhu, Susan Chun (Michigan State University, Department of Economics)
    Abstract: Disruptions of the production network, such as that triggered by the 2020 global crisis, can spill over to firms’ financing and investment processes. This paper studies the role of the production network in the nexus between finance and investment in innovation. Using matched firm-bank data on 25,000 Italian businesses over the 2011-2017 period, we find that firms’ participation in supply chains significantly attenuates the negative effect of bank credit constraints on innovation. A disruption of 25% of the supply chain linkages is predicted to magnify the impact of credit constraints on innovation by about 17%. The support of supply chains to credit constrained innovators reflects not only liquidity pooling in supply chains but also the substitution of liquidity-intensive innovations with transfers of knowledge along R&D-oriented chains. The support fails however to materialize for radical innovations.
    Keywords: Banks; Financial Constraints; Innovation; Supply Chains
    JEL: G21 O30
    Date: 2020–09–08
  13. By: Benjamin R. Handel; Jonathan T. Kolstad; Thomas Minten; Johannes Spinnewijn
    Abstract: Market provision of impure public goods such as insurance retirement savings and education is common and growing as policy makers seek to offer more choice and gain efficiencies. This approach induces an important trade-off between improved surplus from matching individuals to products and misallocation due to well documented choice errors in these markets. We study this trade-off in the health insurance market in the Netherlands, with a specific focus on misallocation and inequality. We characterize choice quality as a function of predicted health risk and leverage rich administrative data to study how it depends on individual human capital, socioeconomic status and social and information networks. We find that choice quality is low on average, with many people foregoing options that deliver substantive value. We also find a strong choice quality gradient with respect to key socioeconomic variables. Individuals with higher education levels and more analytic degrees or professions make markedly better decisions. Social influence on choices further increases inequality in decision making. Using panel variation in exposure to peers we find strong within firm, location and family impacts on choice quality. Finally, we use our estimates to model the consumer surplus effects of different counterfactual scenarios. While smart default policies could improve welfare substantially, including the choice of a high-deductible option delivers little welfare gain, especially for low-income individuals who make lower quality choices and are in worse health.
    JEL: D91 H42 I13 I14
    Date: 2020–09
  14. By: Francesco Flaviano Russo (Università di Napoli Federico II and CSEF)
    Abstract: I investigate whether cash thresholds that forbid cash payments on big transactions are effective at reducing tax evasion. I find that the 1000 euros threshold implemented in Italy in 2011 induced a bigger cash expenditure reduction for the households with self employed members, and the more so in case they work in cash intensive sectors. With the help of a simple model, I show that this empirical evidence suggests a tax evasion reduction, and I compute the tax revenue increase implied by the empirical estimates. Calibrating the model, I also perform a counterfactual exercise to quantify the potential effects of lower thresholds.
    Keywords: Self-employed, Transactions, Payments
    JEL: H26 E42
    Date: 2020–09–18
  15. By: Depalo, Domenico
    Abstract: In this paper I use administrative data to estimate the number of deaths, the number of infections, and mortality rates from Covid-19 in Lombardia, the hot spot of the disease in Italy and Europe. The information is relevant for the policy maker, to make decisions, and for the public, to adopt appropriate behaviours. As the available data suffer from sample selection bias I use partial identification to derive these quantities. Partial identification combines as- sumptions with the data to deliver a set of admissible values, or bounds. Stronger assumptions yield stronger conclusions, but decrease the credibility of the inference. Therefore, I start with assumptions that are always satisfied, then I impose increasingly more restrictive assumptions. Using my preferred bounds, during March 2020 in Lombardia there were between 10,000 and 18,500 more deaths than before 2020. The narrowest bounds of mortality rates from Covid-19 are between 0.1% and 7.5%, much smaller than the 17.5% discussed for long time. This finding suggests that the case of Lombardia may not be as special as some argue.
    Keywords: Covid-19,Mortality,Bounds
    JEL: I18 C24 C81
    Date: 2020
  16. By: Fiaschi, Davide (University of Pisa); Tealdi, Cristina (Heriot-Watt University, Edinburgh)
    Abstract: We aim to identify winners and losers of a sudden inflow of low-skilled immigrants using a general equilibrium search and matching model in which employees, either native or nonnative, are heterogeneous with respect to their skill level and produce different types of goods. We estimate the short-term impact of this shock for Italy in the period 2008-2017 to be sizeable and highly asymmetric. In 2017, the real wages of low-skilled and high-skilled employees were 8% lower and 4% higher, respectively, compared to a counter-factual scenario with no non-natives. Similarly, employers working in the low-skilled market experienced a drop in profits of comparable magnitude, while the opposite happened to employers operating in the high-skilled market. Finally, the presence of non-natives led to a 10% increase in GDP and to an increment of approximately 70 billions € in Government revenues and 18 billions € in social security contributions. We argue that these results help rationalise the recent surge of anti-immigrant sentiments among the low-income segment of the Italian population.
    Keywords: immigration, welfare, search and matching
    JEL: J61 J64 J21 J31
    Date: 2020–08
  17. By: Bertoni, Marco (University of Padova); Brunello, Giorgio (University of Padova); Checchi, Daniele (University of Milan); Rocco, Lorenzo (University of Padova)
    Abstract: In 2017 the Italian government established the Fund to Finance Basic Research Activities – FFABR – with the purpose of assigning a 3,000 euros research grant to the most productive applicants among eligible assistant and associate professors. We show that, rather surprisingly, many low-productivity researchers applied to the program while many high-productivity ones did not. Our evidence from both a simple structural model of program participation estimated on registry data and a survey of the eligible population suggests that high-productivity researchers under-estimate their own position in the productivity distribution relative to the assignment threshold, while the opposite holds for low-productivity ones.
    Keywords: competitive research funds, overconfidence, Italy
    JEL: I28
    Date: 2020–08
  18. By: Bergh, Andreas (Department of Economics, Lund); Erlingsson, Gissur Ó (Centre for Local Government Studies, Linköping University); Wittberg, Emanuel (Centre for Local Government Studies and the Institute for Analytical Sociology, Linköping University)
    Abstract: Across the globe, local governments have increasingly begun to rely on municipally owned corporations (MOCs) to provide public services, mounting to what scholars describe as a burgeoning corporatization in local government. Some studies have described this development as a rational response to financial stress and contemporary austerity challenges, and emphasise the cost-efficiency of MOCs (the optimistic view). However, several scholars have identified problems associated MOCs relating to weak steering and supervision, lack of accountability, and heightened corruption risks (the sceptical view). Hitherto, no studies have tested these diametrically opposing expectations on the effects MOCs in the one and same analysis. This paper addresses the competing views by studying on Sweden, a country with a dramatic growth in the number of MOCs since the 1970s. We examine the association between the number of MOCs, citizen satisfaction with local government, local tax rates and a survey-based corruption measure for all 290 Swedish municipalities. Ultimately questioning the ‘optimistic view’, the results indicate that municipalities that rely heavily on MOCs in service delivery have higher taxes, not more satisfied citizens, and are associated with higher corruption levels.
    Keywords: Municipally owned corporations; Corruption; Arms-length principle; Hybridorganizations; Quasi-privatization; New public management
    JEL: D73 H79
    Date: 2020–09–03
  19. By: Tani, Massimiliano (University of New South Wales); Cheng, Zhiming (University of New South Wales); Mendolia, Silvia (University of Wollongong); Paloyo, Alfredo R. (University of Wollongong); Savage, David (University of Newcastle, Australia)
    Abstract: The COVID-19 pandemic and the policy measures to control its spread – lockdowns, physical distancing, and social isolation – has coincided with the deterioration of people's mental well-being. We use data from the UK Household Longitudinal Study (UKHLS) to document how this phenomenon is related to the situation of working parents who now have to manage competing time demands across the two life domains of work and home. We show that the worsening of mental health in the United Kingdom is worse for working parents, and that it is especially related to the increased financial insecurity and the time spent on childcare and home schooling. We find that this burden is not shared equally between men and women, and between richer and poorer households. In crafting public policy responses to the pandemic, better outcomes can be achieved if policymakers are cognizant of these inequalities.
    Keywords: COVID-19, working parents, United Kingdom, childcare, mental health, financial insecurity
    JEL: I14 J16
    Date: 2020–08
  20. By: Alisa Tazhitdinova
    Abstract: Moonlighting is increasingly popular in OECD countries, with 5 to 10% of workers holding two or more jobs. However, little is known about the responsiveness of moonlighting to financial incentives due to the lack of identifying variation. This paper studies a unique reform in Germany that allowed workers to hold small secondary jobs tax-free, decreasing the marginal tax rate by between 19.5 to 66pp. I show that the reform resulted in a dramatic increase in moonlighting that was not offset by reductions in primary earnings, and that hours constraints is the key determinant of moonlighting.
    JEL: H2 J01
    Date: 2020–08
  21. By: Seong Hee Kim; Byung-Yeon Kim
    Abstract: This study uses the German socio-economic panel data to investigate the effects of mass migration of East Germans on the generalized trust of West Germans who experienced the aftermath of the unification. Results suggest that West Germans¡¯ trust is negatively correlated with migration, but the persistent effect is only confined to participants in the labor markets at the time. The subsequent analysis finds that perceiving migrants as labor market competitors is a possible channel through which trust is negatively affected.
    Keywords: Trust; Migration; Germany; Unification;
    JEL: C10 C1 C15
    Date: 2020–09
  22. By: Brian Nolan (INET and University of Oxford); Juan Palomino (INET and University of Oxford); Philippe Van Kerm (University of Luxembourg and LISER); Salvatore Morelli (CSEF, University of Naples and Institute for Economic Modelling at the INET Oxford)
    Abstract: This paper uses household wealth surveys to compare patterns of intergenerational wealth transfers across six rich countries and assess the relationships between transfers, current levels of net wealth, and wealth inequality. The paper examines four Euro Area countries, France, Germany, Italy, and Spain and extends the systematic comparison to the US and the UK. It finds that many of those currently at the top of the wealth distribution did not benefit from intergenerational transfers, but those who did received particularly large amounts while those toward the bottom of the wealth distribution received very little. A substantial gap in net wealth is seen between those who received or did not receive some wealth transfer. Controlling for age, gender, education and household size reduces the size of that gap but it remains substantial, especially in the US. We further look at how a marginal increase in the proportion of recipients of transfers of differing sizes would contribute to the shape of the overall wealth distribution using influence function regressions. Crucially, we show that the impact depends not only on the locations in the wealth distributions of recipients versus non-recipients, but also on the size of the receipt, an aspect which has been overlooked to date. In most countries, increasing the proportion of recipients of large transfers generally increases overall wealth inequality. In contrast, having more recipients of small or medium-sized transfers would be expected to reduce wealth inequality modestly, as they are more concentrated around the middle of the wealth distribution than non-recipients.
    Keywords: Wealth, inheritance, inequality, intergenerational transmission
    JEL: D31
    Date: 2020–09–10
  23. By: Dorothea Schäfer; Michael Stöckel; Henriette Weser
    Abstract: Since the 2008 Lehman bankruptcy, it is clearly shown that global economic and financial crises present major challenges to private households, requiring from them, a high level of shock absorption capacity. According to the old adage, “Do not put all the eggs in one basket”, resilience depends, to a large extent on financial diversification. So far, especially for Europe, little is known about whether and how the Great Financial Crisis (GFC) affected the diversity of private households’ investment portfolios. We tackle this research gap and explore the impact of the GFC on portfolio diversity of European private households. Our European focus complements Sierminska and Silber (2019) who explore the diversification behaviour of US households after the Lehman insolvency. Our study reveals a significant decrease in the diversity of financial portfolios. This finding is robust across distinct model specifications. In response to the GFC, evidence suggests that European households adjusted the diversity of their financial portfolio in the opposite directions to that of US households.
    Keywords: Financial and economic crisis, household finance, portfolio diversification, Shannon entropy index, Gini-Simpson diversity index, background risk, risk aversion
    JEL: D14 G11 G01
    Date: 2020

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