nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2021‒11‒29
28 papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Does Grandparenting Pay off for the Next Generations? Intergenerational Effects of Grandparental Care By Barschkett, Mara; Spieß, C. Katharina; Ziege, Elena
  2. What Works for Whom? Youth Labour Market Policy in Poland By Madoń, Karol; Magda, Iga; Palczyńska, Marta; Smoter, Mateusz
  3. How Effective Are Hiring Subsidies to Reduce Long-Term Unemployment among Prime-Aged Jobseekers? Evidence from Belgium By Desiere, Sam; Cockx, Bart
  4. Redistributive effect and the progressivity of taxes and benefits: evidence for the UK, 1977–2018 By Hérault, Nicolas; Jenkins, Stephen P.
  5. Regional differences in productivity in Sweden: Insights from OECD regions By Christophe André; Mathilde Pak
  6. A Structural Analysis of Vacancy Referrals with Imperfect Monitoring and the Strategic Use of Sickness Absence By Gerard J. van den Berg; Hanno Foerster; Arne Uhlendorff
  7. Estimating Tax Noncompliance among the Self-Employed – Evidence from Pleasure Boat Registers By Per Engström; Johannes Hagen; Edvard Johansson
  8. The Intergenerational Transmission of Cognitive Skills: An Investigation of the Causal Impact of Families on Student Outcomes By Eric A. Hanushek; Babs Jacobs; Guido Schwerdt; Rolf van der Velden; Stan Vermeulen; Simon Wiederhold
  9. Graduate Earnings Premia in the UK : Decline and Fall? By Boero, Gianna; Nathwani, Tej; Naylor, Robin; Smith, Jeremy
  10. Profit taxation, R&D spending, and innovation By Lichter, Andreas; Löffler, Max; Isphording, Ingo Eduard; Nguyen, Thu-Van; Poege, Felix; Siegloch, Sebastian
  11. Financial Constraints for R&D and Innovation: New Evidence from a Survey Experiment By Dirk Czarnitzki; Marek Giebel
  12. Wage Effects of Educational Mismatch According to Workers’ Origin: The Role of Demographics and Firm Characteristics By Valentine Jacobs; François Rycx; Mélanie Volral
  13. Remote Working and Mental Health during the First Wave of COVID-19 Pandemic By Bertoni, Marco; Cavapozzi, Danilo; Pasini, Giacomo; Pavese, Caterina
  14. News from the frontier: Increased productivity dispersion across firms and factor reallocation By Paul Bouche; Gilbert Cette; Rémy Lecat
  15. The Origins of Gender Differences in Competitiveness and Earnings Expectations: Causal Evidence from a Mentoring Intervention By Boneva, Teodora; Buser, Thomas; Falk, Armin; Kosse, Fabian
  16. Elections and Government Efficiency By Florian Dorn
  17. Intolerance Predicts Climate Skepticism By Johansson, Alva; Berggren, Niclas; Nilsson, Therese
  18. Permanent versus transitory income shocks over the business cycle By Agnes Kovacs; Concetta Rondinelli; Serena Trucchi
  19. Zombie firms and the take-up of support measures during Covid-19. By Marco Pelosi; Giacomo Rodano; Enrico Sette
  20. Innovation pattern heterogeneity: A data-driven retrieval of the firms' approaches to innovation By Marco Capasso; Marina Rybalka
  21. Markups as a Hedge for Input Price Uncertainty: Evidence from Sweden By Agrawal, Sneha; Gaurav, Abhishek; Suveg, Melinda
  22. The COVID-19 Pandemic, Well-Being, and Transitions to Post-secondary Education By Sandner, Malte; Patzina, Alexander; Anger, Silke; Bernhard, Sarah; Dietrich, Hans
  23. Schools under mandatory testing can mitigate the spread of SARS-CoV-2 By Ingo E. Isphording; Marc Diederichs; Reyn van Ewijk; Nico Pestel
  24. Aggregate dynamics and microeconomic heterogeneity: the role of vintage technology. By Giuseppe Fiori; Filippo Scoccianti
  25. Split Personalities? Behavioral Effects of Temperature on Financial Decision-making By Despina Gavresi; Anastasia Litina; Christos A. Makridis
  26. Corruption under Austerity By Gianmarco Daniele; Tommaso Giommoni
  27. The Market for CEOs: Building Legacy and Feeling Empowered Matter By Dupuy, Arnaud; Kennes, John; Lyng, Ran Sun
  28. Girls Will Be Girls? The Gendered Effect of Economic Policy Uncertainty on Corporate Investment By Caroline PERRIN; Laurent WEILL

  1. By: Barschkett, Mara (DIW Berlin); Spieß, C. Katharina (Bundesinstitut für Bevölkerungsforschung (BiB)); Ziege, Elena (DIW Berlin)
    Abstract: Grandparents act as the third largest caregiver after parental care and daycare in Germany, as in many Western societies. Adopting a double-generation perspective, we investigate the causal impact of this care mode on children's health, socio-emotional behavior, and school outcomes, as well as parental well-being. Based on representative German panel data sets, and exploiting arguably exogenous variations in geographical distance to grandparents, we analyze age-specific effects, taking into account counterfactual care modes. Our results suggest null or negative effects on children's outcomes: If children three years and older are in full-time daycare or school and, in addition, cared for by grandparents, they have more health and socio-emotional problems, in particular conduct problems. In contrast, our results point to positive effects on parental satisfaction with the childcare situation and leisure. The effects for mothers correspond to an increase of 11 percent in satisfaction with the childcare situation and 14 percent in satisfaction with leisure, compared to the mean, although the results differ by child age. While the increase in paternal satisfaction with the childcare situation is, at 21 percent, even higher, we do not find an effect on paternal satisfaction with leisure.
    Keywords: grandparental childcare, socio-emotional outcomes, cognitive outcomes, parental well-being, instrumental variable
    JEL: D1 I21 I31 J13 J14
    Date: 2021–10
  2. By: Madoń, Karol (Institute for Structural Research (IBS)); Magda, Iga (Warsaw School of Economics); Palczyńska, Marta (Institute for Structural Research (IBS)); Smoter, Mateusz (Institute for Structural Research (IBS))
    Abstract: This paper compares the relative effectiveness of selected active labour market policies available to young unemployed people in Poland over the 2015-2016 period. We use rich administrative data and propensity score matching techniques to control for the non-random selection of unemployed individuals into alternative interventions. We find large negative employment effects of participating in public works programmes, particularly among disadvantaged individuals. The differences in effectiveness between other interventions are rather small, and most become insignificant over time. We also show that vouchers that allow unemployed individuals find on-the-job training providers themselves are more effective than on-the-job training schemes in which the unemployed individuals are directed to the training providers by the public employment services (PES).
    Keywords: youth unemployment, ALMP, Youth Guarantee, wage subsidies, public works, training vouchers
    JEL: J08 J64 J68
    Date: 2021–10
  3. By: Desiere, Sam (Ghent University); Cockx, Bart (Ghent University)
    Abstract: Hiring subsidies are widely used to create (stable) employment for the long-term unemployed. This paper exploits the abolition of a hiring subsidy targeted at long-term unemployed jobseekers over 45 years of age in Belgium to evaluate its effectiveness in the short and medium run. Based on a triple difference methodology the hiring subsidy is shown to increase the job finding rate by 13% without any evidence of spill-over effects. This effect is driven by a positive effect on individuals with at least a bachelor's degree. However, the hiring subsidy mainly created temporary short-lived employment: eligible jobseekers were not more likely to find employment that lasted at least twelve consecutive months than ineligible jobseekers.
    Keywords: hiring subsidies, long-term unemployment, prime-aged jobseekers, triple difference, temporary help agencies
    JEL: H22 J08 J18 J23 J38 J64 J65 J68
    Date: 2021–10
  4. By: Hérault, Nicolas; Jenkins, Stephen P.
    Abstract: We apply the Kakwani approach to decomposing redistributive effect into average rate, progressivity, and reranking components using yearly UK data covering 1977–2018. We examine cash and in-kind benefits, and direct and indirect taxes. In addition, we highlight an empirical implementation issue – the definition of the reference (‘pre-fisc’) distribution. Drawing on an innovative counterfactual approach, our empirical analysis shows that trends in the redistributive effect of cash benefits are largely associated with cyclical changes in average benefit rates. In contrast, trends in the redistributive effects of direct and indirect taxes are mostly associated with changes in progressivity. For in-kind benefits, changes in the average benefit rate and progressivity each played the major roles at different times.
    Keywords: Kakwani decomposition; inequality; redistributive effect; progressively reranking; benefits; taxes
    JEL: D31 H24 H50 I38
    Date: 2021–11
  5. By: Christophe André; Mathilde Pak
    Abstract: Regional inequality has increased in Sweden over the past decades, albeit from a low level. While redistribution and other public policies can narrow regional gaps in income, well-being and access to services, productivity growth is key to maintaining economic dynamism, creating job opportunities and attracting and retaining skilled workers. Against this background, this paper documents the performance of Swedish large regions (TL2) on the main productivity drivers identified by the literature. Panel regressions on a dataset covering up to 125 OECD regions in 17 countries identify the factors associated with high regional productivity, namely rail and road connectivity, knowledge-intensive employment and research and education. Investment in construction and finance is linked to somewhat weaker productivity. Even after taking these factors into account, the Stockholm region benefits from a sizeable productivity advantage, which likely reflects agglomeration effects.
    Keywords: Productivity, Regional development, Regional economic activity, Regional Studies, Sweden
    JEL: O47 P48 R11 R12 R58
    Date: 2021–11–19
  6. By: Gerard J. van den Berg (University of Groningen); Hanno Foerster (Boston College); Arne Uhlendorff (CNRS)
    Abstract: This paper provides a structural analysis of the role of job vacancy referrals (VRs) by Employment Agencies in the job search behavior of unemployed individuals, incorporating in- stitutional features of the monitoring of search behavior by the agencies. Notably, rejections of VRs may lead to sanctions (temporary benefits reductions) while workers may report sick to avoid those. We estimate models using German administrative data from social security records linked with caseworker recorded data on VRs, sick reporting and sanctions. The anal- ysis highlights the influence of aspects of the health care system on unemployment durations. We estimate that for around 25% of unemployed workers, removing the channel that enables strategic sick reporting reduces the mean unemployment duration by 8 days.
    Keywords: unemployment, wage, unemployment insurance, monitoring, moral hazard, struc- tural estimation, counterfactual policy evaluation, unemployment duration
    JEL: J64 J65 C51 C54
    Date: 2021–08–17
  7. By: Per Engström (Uppsala University); Johannes Hagen (Jönköping University); Edvard Johansson (Åbo Akademi University)
    Abstract: We improve upon the Pissarides-Weber method for estimating tax evasion among the self-employed by utilizing unique register-based consumption measures from the Swedish and Finnish mandatory registers for pleasure boats. The register data allows for more detailed and statistically powered analyses than survey-based applications. We evaluate i) the key assumption of equal preferences between self-employed and wage earner households, and ii) the functional form assumptions in the estimated Engel curves. Our results indicate overall levels of hidden incomes that are roughly in line with previous studies. However, the functional form analysis shows that the estimated sizes of income underreporting in absolute monetary amounts are almost constant over reported income levels, whereas previous studies have assumed that the underreporting is proportional to income. The results from the preference analysis – in which we compare households that will become self-employed in the near future with households that will remain wage earners – are mixed; the analysis shows that the two types of households have insignificant (Finland) or economically small (Sweden) preference differences. However, when we use engine power as a price proxy, the preference differences are substantially larger in both countries.
    Keywords: tax evasion, income underreporting, pleasure boats, Engel curves, permanent income, self-employment
    JEL: D12 H24 H25 H26
    Date: 2021–03
  8. By: Eric A. Hanushek; Babs Jacobs; Guido Schwerdt; Rolf van der Velden; Stan Vermeulen; Simon Wiederhold
    Abstract: The extensive literature on intergenerational mobility highlights the importance of family linkages but fails to provide credible evidence about the underlying family factors that drive the pervasive correlations. We employ a unique combination of Dutch survey and registry data that links math and language skills across generations. We identify a causal connection between cognitive skills of parents and their children by exploiting within-family between-subject variation in these skills. The data also permit novel IV estimation that isolates variation in parental cognitive skills due to school and peer quality. The between-subject and IV estimates of the key intergenerational persistence parameter are strikingly similar and close at about 0.1. Finally, we show the strong influence of family skill transmission on children’s choices of STEM fields.
    JEL: I24
    Date: 2021–11
  9. By: Boero, Gianna (Department of Economics, University of Warwick); Nathwani, Tej (Higher Education Statistics Agency); Naylor, Robin (Department of Economics, University of Warwick); Smith, Jeremy (Department of Economics, University of Warwick)
    Abstract: A long-standing puzzle in the economics of education concerns the observed constancy of the average earnings premium for a degree despite a prolonged period of substantial growth in the share of graduates in the working population in the UK. Focusing on birth cohorts between 1970 and 1990, we produce evidence of a recent decline in the earnings premium for graduates over non-graduates by age 26. For those born in 1990, we estimate an average graduate earnings premium of 10%, contrasting with an estimate of 17% for the 1970 birth cohort. We also find a substantial increase in dispersion around the average premium according to class of degree awarded. Combined with a falling average, this has left the earnings of 1990-born graduates awarded lower degree classes only 3% above that of non-graduates. Among the 1970-born cohort, the equivalent earnings premium was 14%. We suggest that this precipitous fall is consistent with a ‘double-scarring’ effect associated with the combination of increased higher education participation and a rise in the proportion of graduates awarded an upper honours degree over the span of the two cohorts.
    Date: 2021
  10. By: Lichter, Andreas; Löffler, Max; Isphording, Ingo Eduard; Nguyen, Thu-Van; Poege, Felix; Siegloch, Sebastian
    Abstract: We study how profit taxation affects plants' R&D spending and innovation activities. Relying on geocoded survey panel data which approximately covers the universe of R&D-active plants in Germany, we exploit around 7,300 changes in the municipal business tax rate over the period 1987-2013 for identification. Applying event study models, we find a negative and statistically significant effect of an increase in profit taxation on plants' R&D spending with an implied long-run elasticity of 􀀀1.25. Reductions in R&D are particularly strong among more credit-constrained plants. In contrast, homogeneity of effects across the plant size distribution questions policy makers common practice to link targeted R&D tax incentives to plant size. We further find lagged negative effects on the (citation-weighted) number of filed patents.
    Keywords: corporate taxation,firms,R&D,innovation,patents
    JEL: H25 H32 O31 O32
    Date: 2021
  11. By: Dirk Czarnitzki; Marek Giebel
    Abstract: We utilize a new survey experiment to evaluate the existence and degree of financial constraints for R&D in the economy. The experiment does not only allow to deduct the presence of financial constraints, but also to evaluate their economic significance. Using data on German companies, we find that financial constraints for R&D exist but that their relevance might have been overestimated in the literature. Most R&D projects that have not been implemented because of financial constraints turn out to have low expected marginal rates of return. While this findings stands in some contrast to other studies, we also find several results that are in line with the literature: young firms are most constrained and the constraints occur at the intensive margin, i.e. our results do not suggest that non-innovative companies are deterred from innovation. Instead, highly innovative companies are restricted by the capital market.
    Keywords: Innovation, Financial Constraints, Survey Experiment
    Date: 2021–11–18
  12. By: Valentine Jacobs; François Rycx; Mélanie Volral
    Abstract: This paper examines the influence of educational mismatch on wages according to workers’ region of birth, taking advantage of our access to rich matched employer-employee data for the Belgian private sector for the period 1999-2010. Using a fine-grained approach to measuring educational mismatch and controlling for a large set of covariates, we first find that workers born in developed countries benefit from positive wage returns to their years of attained-, required and over-education, and that these returns are significantly higher for them than for their peers born in developing countries. Second, our results show that the wage return to a year of over-education is positive but lower than that to a year of required education. This suggests that over-educated workers suffer a wage penalty compared to their well-matched former classmates (i.e. workers with the same level of education in jobs that match their education). However, the magnitude of this wage penalty is found to vary considerably depending on the origin of the workers. Indeed, all else being equal, our estimates show that it is much greater for workers from developing countries – especially for those born in Africa and the Middle and Near East – than for those from developed countries. Regardless of workers’ origin, our estimates further indicate that the wage penalty associated with over-education is higher for workers who: i) have attained tertiary education, ii) are male, iii) have more seniority in employment, iv) are employed in smaller firms, and v) are covered by a collective agreement at the firm level. Yet, whatever the moderating variable under consideration, the estimates also show that the wage penalty associated with over-education remains higher for workers born in developing countries.
    Keywords: Immigrants; educational mismatch; wage gap; linked employer-employee data
    JEL: I24 I26 J15 J24 J31
    Date: 2021–11–12
  13. By: Bertoni, Marco (University of Padova); Cavapozzi, Danilo (Università Ca’ Foscari di Venezia); Pasini, Giacomo (Ca' Foscari University of Venice); Pavese, Caterina (University of Padua)
    Abstract: We use longitudinal data from the SHARE survey to estimate the causal effect of remote working during the COVID-19 pandemic on mental health of senior Europeans. We face endogeneity concerns both for the probability of being employed during the pandemic and for the choice of different work arrangements conditional on employment. Our research design overcomes these issues by exploiting variation in the technical feasibility of remote working across occupations and in the legal restrictions to in-presence work across sectors. We estimate heterogeneous effects of remote working on mental health: we find negative effects for respondents with children at home and for those living in countries with low restrictions or low excess death rates due to the pandemic. On the other hand, the effect is positive for men and for respondents with no co-residing children.
    Keywords: mental health, remote working, COVID-19, SHARE
    JEL: I10 J22 J24 J81
    Date: 2021–10
  14. By: Paul Bouche; Gilbert Cette; Rémy Lecat
    Abstract: Analysing French firms over 1991-2016, we find first that since the beginning of the century, one or two downward significant productivity breaks have occurred in all industries, both at the frontier and for laggard firms, suggesting a decline in the contribution of technological progress to productivity growth. Second, the median labour share is always higher for the laggard firms than for the frontier firms, with a sharp decrease from the mid-1990s to 2008, and an increase from 2008 onwards. Third, factor reallocation decreased significantly in the 2000s, at the time when we observed an increase in productivity dispersion, with a growing productivity gap between frontier and laggard firms. It appears also that reallocation has been lower on average over the whole period for sectors with a high import share, which can be related to the impact of global value chains.
    Keywords: Productivity, Frontier Firms, Reallocation
    JEL: D24 E24 J23 L25
    Date: 2021
  15. By: Boneva, Teodora (University of Bonn); Buser, Thomas (University of Amsterdam); Falk, Armin (briq, University of Bonn); Kosse, Fabian (Ludwig-Maximilians-Universität München)
    Abstract: We present evidence on the role of the social environment for the development of gender differences in competitiveness and earnings expectations. First, we document that the gender gap in competitiveness and earnings expectations is more pronounced among adolescents with low socioeconomic status (SES). We further document that there is a positive association between the competitiveness of mothers and their daughters, but not between the competitiveness of mothers and their sons. Second, we show that a randomized mentoring intervention that exposes low-SES children to predominantly female role models causally affects girls' willingness to compete and narrows both the gender gap in competitiveness as well as the gender gap in earnings expectations. Together, the results highlight the importance of the social environment in shaping willingness to compete and earnings expectations at a young age.
    Keywords: competitiveness, gender, socioeconomic status, inequality, earnings expectations
    JEL: I24 J16
    Date: 2021–10
  16. By: Florian Dorn
    Abstract: Politicians are expected to influence policy outcomes in a way to gain electoral advantage. There is, however, a pending question whether efficiency in the provision of public goods and services is affected by strategic behavior. I examine how electoral cycles influence local government efficiency by using OLS fixed effects, event study, and instrumental variable estimations in a large balanced panel of around 2,000 municipalities in the German state of Bavaria. Cost efficiency is estimated by employing a fixed effects semi-parametric stochastic frontier analysis. The results show that electoral cycles increase government efficiency in election and pre-election years by around 0.75– 0.85 %. The effect is larger when executive and council electoral cycles coincide, and when incumbent mayors run for office again. My findings suggest an efficiencyenhancing effect of elections at given institutional conditions.
    Keywords: Electoral cycle, efficiency, local government, panel data, event study, stochastic frontier analysis (sfa), instrumental variables
    JEL: C14 C23 C26 D72 D73 H41 H70 H72 R15 R50
    Date: 2021
  17. By: Johansson, Alva (Department of Economics, Lund University); Berggren, Niclas (Research Institute of Industrial Economics (IFN)); Nilsson, Therese (Research Institute of Industrial Economics (IFN))
    Abstract: While there is almost unanimous consent among scientists that climate change is real and has detrimental consequences, there is a sizable number of people who are skeptical towards these propositions and who are not worried by climate change. In an attempt to understand the basis of climate skepticism, we look at the role of intolerance, a culturally transmitted attitude to the effect that people with certain characteristics are not to be respected. The theoretical link from intolerance to climate skepticism is driven by two elements: insufficient or biased knowledge formation and a value of not caring very much about the welfare of others. Our empirical analysis confirms that intolerance on the basis of race, ethnicity, immigration status, religion or sexual orientation predicts climate skepticism. By using the epidemiological method, relating the views on climate change of second-generation immigrants in Europe to cultural values in their countries of origin, we are able to rule out reverse causality – a novelty in the literature trying to explain climate skepticism. To get a feeling for the importance of intolerance, an increase in the share who are intolerant towards people of a different race in the individual’s country of origin by 10 percentage points implies a reduced probability of the individual considering the consequences of climate change extremely bad of 4.3 percentage points (21.5%). An important implication of our findings is that to influence climate skeptics, it may be necessary to go beyond argumentation about the facts as such and to find ways to affect more basic individual characteristics.
    Keywords: Climate skepticism; Culture; Intolerance; Causality; Values
    JEL: F64 Q01 Q54 Z10
    Date: 2021–11–15
  18. By: Agnes Kovacs (The University of Manchester); Concetta Rondinelli (Bank of Italy); Serena Trucchi (Cardiff University)
    Abstract: This paper investigates how income shocks shape consumption dynamics over the business cycle. First, we break new ground and create a unique panel dataset of transitory and permanent income shocks by combining household-level income expectations with the findings of the DNB Household Survey conducted in the Netherlands in the period 2006-2018. We then use the first and second moments of the identified income shocks in a structural life-cycle framework and show that the model matches the observed consumption patterns well. Finally, using counterfactual model simulations, we assess the importance of the nature of income shocks (permanent income hypothesis), future income uncertainties (precautionary saving motive), and cohort effects, and show how they individually shaped consumption dynamics over that period in the Netherlands.
    Keywords: subjective expectations, income shocks, consumption, business cycle
    JEL: C13 D12 D91 E21
    Date: 2021–11
  19. By: Marco Pelosi (Bank of Italy); Giacomo Rodano (Bank of Italy); Enrico Sette (Bank of Italy)
    Abstract: In this paper, we analyse the incidence of zombie firms, how they have been affected by the pandemic, and their take-up of economic support measures. While balance sheet data for 2020 are not available yet, we find that in 2019, they represented 3 to 5 per cent of all corporations. In 2020, they were more likely to experience liquidity deficits and spikes in their default probability, as well as to exit the market. Importantly, we also find that they were less likely to take up the economic support measures. Overall, as fewer firms exited the market in 2020 than in 2019, the pandemic is likely to have boosted the zombie share. However, compared with other firms, zombies have exited the market more and had a lower take-up of support measures. Thus, the Government’s policies are unlikely to have amplified such a trend.
    Keywords: zombie firms, Covid-19.
    JEL: L25 E61 G38 H32
    Date: 2021–11
  20. By: Marco Capasso; Marina Rybalka
    Abstract: Innovation is one of the usual suspects in defining differences in performance among firms, according to a strong and diverse theoretical framework. Understanding the diversity that exists within the population of innovative firms is essential to elaborate appropriate innovation policies. Our study explores the diversity of innovation patterns among Norwegian firms included in the 2018 Community innovation survey (CIS2018). By applying factor analysis on a wide array of survey variables and on a large sample of firms, we identify eleven typical approaches to innovation, which recurrently connect innovation inputs and outputs at firm level. A main outcome of our study is a renewed fine-grained view on innovation as a multifaceted concept.
    Keywords: Technological change; Innovation survey; Factor analysis; Business strategies; Intra-industry heterogeneity.
    Date: 2021–11–07
  21. By: Agrawal, Sneha (International Monetary Fund); Gaurav, Abhishek (Princeton University); Suveg, Melinda (Research Institute of Industrial Economics (IFN))
    Abstract: In this paper, we study a new channel to explain firms’ price-setting behavior. We propose that uncertainty about factor prices has a positive effect on markups. We show theoretically that firms with higher shares of inputs with volatile prices set higher markups. We use the Bartik shift-share approach to empirically test whether firms that use more oil relative to other inputs set higher markups when oil prices are more volatile. Our estimates imply that a one standard deviation increase in oil price volatility leads to a 0.38 percent increase in the markup of firms with average oil exposure.
    Keywords: Price setting; Markups; Input price volatility; Precautionary pricing
    JEL: D21 D22 D24 D42 D80 E31 E32 L11 L60
    Date: 2021–11–16
  22. By: Sandner, Malte (Institute for Employment Research (IAB), Nuremberg); Patzina, Alexander (Institute for Employment Research (IAB), Nuremberg); Anger, Silke (Institute for Employment Research (IAB), Nuremberg); Bernhard, Sarah (Institute for Employment Research (IAB), Nuremberg); Dietrich, Hans (Institute for Employment Research (IAB), Nuremberg)
    Abstract: This study examines the immediate and intermediate effects of the COVID-19 pandemic on the well-being of two high school graduation cohorts (2020 and 2021). We also investigate how changes in well-being at the transition to post-secondary education affect educational plans and outcomes. Our unique panel data contain prospective survey information on three dimensions of well- being: mental health problems, self-rated health, and life satisfaction for 3,697 students. Data is collected several months before (fall 2019), shortly before and soon after (spring 2020), and several months after (fall/winter 2020/21) the outbreak of the COVID-19 pandemic. Applying difference-in-differences designs, random effect growth curve models, and linear regression models, we find that school closures had a positive immediate effect on students' wellbeing. Over the course of the pandemic, however, well-being strongly declined, mainly concentrated among the 2021 graduation cohort. Finally, we show that a strong decline in mental health is associated with changes in educational and career plans and transition outcomes. As adverse life experiences in adolescence are likely to accumulate over the life course, this study is the first to exhibit potential long-lasting negative effects of the COVID-19 pandemic on education and careers of young individuals.
    Keywords: COVID-19, high school graduates, mental and physical well-being, life satisfaction, school-to-work transition
    JEL: I21 I18 J24
    Date: 2021–10
  23. By: Ingo E. Isphording (Institute of Labor Economics (IZA) / CESifo); Marc Diederichs (Johannes Gutenberg University Mainz); Reyn van Ewijk (Johannes Gutenberg University Mainz); Nico Pestel (Maastricht University / Institute of Labor Economics (IZA))
    Abstract: We use event-study models based on staggered summer vacations in Germany to estimate the effect of school re-openings after the summer of 2021 on the spread of SARS-CoV-2. Estimations are based on daily counts of confirmed coronavirus infections across all 401 German counties. Our results are consistent with mandatory testing contributing to containment of cases by uncovering otherwise undetected (asymptomatic) cases. Case numbers in school-aged children spike in the first week after the summer breaks but then turn not significantly di erent from zero. Case numbers in prime-aged age groups gradually decrease after school re-openings, arguably as a result of detected clusters through the school testing. The age group 60+ remains una ected by the school re-openings. We conclude that the combination of mandatory testing and compulsory school attendance can provide an unbiased and near-complete surveillance of the pandemic. Thus, under certain conditions open schools can play a role in containing the spread of the virus. The trade-o between reducing contacts and losing an important monitoring device has to be taken seriously when re-considering school closures as a nonpharmaceutical intervention under the current circumstances.
    Keywords: COVID-19, schooling, education, Germany
    Date: 2021–11–15
  24. By: Giuseppe Fiori (Board of Governors of the Federal Reserve System); Filippo Scoccianti (Bank of Italy)
    Abstract: We study how the timing of technology adoption through capital accumulation shapes firm-level productivity dynamics and quantify its aggregate implications in a model of heterogeneous firms. Using data on the census of incorporated Italian firms and exploiting the lumpiness of capital accumulation, we document that large investment episodes lead to productivity gains at the firm and sectoral level due to vintage effects. In a general equilibrium model of firm heterogeneity, we find that the presence of vintage technology constitutes a powerful microeconomic-based amplification mechanism of aggregate shocks relative to a benchmark real business cycle model.
    Keywords: business cycles, (S,s) policies, vintage effects, firm heterogeneity.
    JEL: D24 E22 E32
    Date: 2021–11
  25. By: Despina Gavresi (University of Ioannina); Anastasia Litina (Department of Economics, University of Macedonia); Christos A. Makridis (Arizona State University and Stanford University)
    Abstract: Do environmental factors affect financial decision-making and how might personality traits mediate these effects? Using plausibly exogenous variation in individuals' exposure to within-country fluctuations in temperature between 2004 and 2018 across 28 European countries and Israel, we estimate the causal effect of a marginal change in temperature on financial investments and its interaction with individual personality characteristics. We find that a 10% increase in temperature is associated with a 0.1 percentage point (pp) rise in the probability that an optimist invests in bonds and a 0.12 pp decline in the probability for stocks. However, among pessimists, we find null effects. We find similar results when we focus on the intensive margin of investment as well. We explain the mechanism behind these results with a stylized model where optimists are involved in more cognitively-demanding activities and sensitive to external stimuli. Our results are consistent with behavioral finance models where expectations moderate the transmission of shocks onto financial decision-making.
    Keywords: Behavioral Finance; Expectations; Optimism; Stocks; Temperature
    JEL: D87 D91 G11 G41 G51
    Date: 2021–11
  26. By: Gianmarco Daniele; Tommaso Giommoni
    Abstract: We study how policies limiting the spending capacity of local governments may reduce corruption. We exploit the extension of one such policy, the Domestic Stability Pact (DSP), to small Italian municipalities. The DSP led to a decrease in both recorded corruption rates and corruption charges per euro spent. This effect emerges only in areas in which the DSP put a binding cap on municipal capital expenditures. The reduction in corruption is linked to accountability incentives as it emerges mostly in pre-electoral years and for reeligible mayors. We then estimate the impact of the extension of the DSP on local public goods provision in the following years, finding a null effect in the short run. Overall, our findings suggest that budget constraints might induce local governments to curb expenditures in a way that dampens their exposure to corruption without depressing local public goods provision.
    Keywords: Corruption; Austerity; Fiscal rules; European funds; Local public finance; Public procurement
    JEL: D72 D73 H62 H72 K34
    Date: 2021–11–12
  27. By: Dupuy, Arnaud (University of Luxembourg); Kennes, John (Aarhus University); Lyng, Ran Sun (University of Toronto)
    Abstract: We develop a two-sided multidimensional matching model of the market for CEOs that allows for both pecuniary and non-pecuniary (amenity) compensation. The model is estimated by maximum likelihood estimation using matched CEO-firm data from Denmark. We show that CEOs have preferences for building legacy and gaining empowerment. The legacy mechanism explains why there is low mobility in the CEO market, even though firms demand general CEO skills. The empowerment mechanism explains why CEOs are willing to sacrifice significant pecuniary income to manage high equity firms. The overall conclusion is that job amenities matter in the market for CEOs.
    Keywords: multidimensional matching, observed transfers, structural estimation, value of job amenities, taxation, CEO compensation, CEO performance
    JEL: G30 M12 C78 C35 D22 D31 J3
    Date: 2021–10
  28. By: Caroline PERRIN (LaRGE Research Center, Université de Strasbourg); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: We examine the effect of CEO gender on the relation between economic policy uncertainty (EPU) and corporate investment. Using the newspaper-based EPU index developed by Baker, Bloom, and Davis (2016), we perform an empirical investigation on firm-level data of more than 38,000 firms from eight European countries for 2010-2019. We find evidence that higher EPU is associated with higher corporate investment. However, we show that this beneficial effect of economic policy uncertainty is lower when the firm CEO is a woman. We explain this finding by the higher risk aversion of women relative to men. Our main results are robust to a battery of sensitivity tests. Our work contributes to the debate on the impact of EPU on firm corporate decisions by bringing upfront the influence of CEO gender.
    Keywords: Economic policy uncertainty, firm investment, CEO gender.
    JEL: G30 G32 J16
    Date: 2021

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