nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2022‒03‒28
23 papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Immigrant labour market outcomes: new insights from a lack of language proficiency in Italy By Pieroni, Luca; d'Agostino, Giorgio; Lanari, Donatella; Scarlato, Margherita
  2. Home Ownership, Labour Market Transitions and Earnings By Carole Brunet; Thierry Kamionka; Guy Lacroix
  3. Cultural diversity and innovation-oriented entrepreneurship By Paula Prenzel; Niels Bosma; Veronique Schutjens; Erik Stam
  4. I would like to but I cannot. The determinants of involuntary part-time employment: Evidence from Italy By Gianluca Busilacchi; Giovanni Gallo; Matteo Luppi
  5. Parenthood and Political Engagement By Daryna Grechyna
  6. Nemo Propheta in Patria: Empirical Evidence from Italy By Emanuele Millemaci; Alessandra Patti
  7. Political and Non-Political Officials in Local Government By Resce, Giuliano
  8. Uncovered workers in plants covered by collective bargaining: Who are they and how do they fare? By Hirsch, Boris; Lentge, Philipp; Schnabel, Claus
  9. Regional recombinant novelty, related and unrelated technologies: a patent-level approach By Anne Plunket; Felipe Starosta de Waldemar
  10. Dual Returns to Experience By Laura Hospido; Jose Garcia-Louzao; Alessandro Ruggier
  11. The Effect of External Innovation on Firm Employment By Guillermo Arenas Díaz; Andrés Barge-Gil; Joost Heijs; Alberto Marzucchi
  12. Is inconsistent reporting of self-assessed health persistent and systematic? Evidence from the UKHLS By Davillas, A.;; de Oliveira, V.H.;; Jones, A.M.;
  13. Inefficient markets for energy efficiency - Empirical evidence from the German rental housing market By Lisa Taruttis
  14. The dynamics of COVID-19: An empirical analysis with a view to spatial health econometrics using macrodata. By Irene González Rodríguez; Marta Pascual Sáez; David Cantarero Prieto
  15. Foreign Doctorate Students in Europe By Laureti, Lucio; Costantiello, Alberto; Matarrese, Marco Maria; Leogrande, Angelo
  16. Human capital and the intertemporal substitution for leisure: empirical evidence for Spain By Antonio Cutanda; Juan A. Sanchis-Llopis
  17. On the Spatial Scope of Warehouse Activity: An Exploratory Study in France By David Guerrero; Jean Paul Hubert; Martin Koning; Nicolas Roelandt
  18. Public disclosure of tax information. Compliance tool or social network? By Daniel Reck; Joel Slemrod; Trine Vattø
  19. Patients’ experience of their GP practice in the COVID-19 pandemic By Paul Allanson; Paul Logan
  20. The Political Consequences of Green Policies: Evidence from Italy By Italo Colantone; Livio Di Lonardo; Yotam Margalit; Marco Percoco
  21. Business investment, the user cost of capital and firm heterogeneity By Alari Paulus
  22. Consumption effects of mortgage payment By Albuquerque, Bruno; Varadi, Alexandra
  23. Inequality and Redistribution in the Netherlands By Céline van Essen; Arjan Lejour; Jan Möhlmann; Simon Rabaté; Arjan Bruil; Wouter Leenders

  1. By: Pieroni, Luca; d'Agostino, Giorgio; Lanari, Donatella; Scarlato, Margherita
    Abstract: In this paper, we examine how immigrants' proficiency in the Italian language affects their labour market performance using hitherto unexploited immigration survey published by the Italian Institute of Statistics. With respect to immigrants with good proficiency in the Italian language, our empirical findings suggest that weak language proficiency reduces employment by about 25-30 percentage points. Language proficiency in Italian also significantly affects the hourly wages of immigrants. The point estimates suggest an hourly wage gap of more than 30% between immigrants with good proficiency in the Italian language compared to those with weak proficiency, irrespective of gender. Robustness checks confirmed our estimates.
    Keywords: Immigrants, Language skills, Employment, Hourly wages
    JEL: J15 J20 J31
    Date: 2022
  2. By: Carole Brunet (; Thierry Kamionka (; Guy Lacroix (
    Abstract: The paper investigates the links between home ownership, employment and earnings. The motivation stems from the lack of consensus in the literature linking these outcomes. Our analysis is cast within a dynamic setting and the endogeneity of each outcome is assessed through the estimation of a flexible panel multivariate model with random effects. The data we use are drawn from the French sample of the EU Survey on Income and Living Conditions for the years 2004–2013. Our results show that while homeowners have longer employment and unemployment spells, they must contend with lower earnings than tenants upon reemployment. Importantly, our results highlight the importance of distinguishing between outright and indebted home owners. Indeed, the latter are found to behave more or less like tenants on the labour market. At the aggregate level, thus, the positive relationship between home ownership and unemployment rate, known as Oswald’s conjecture, might thus depend on the share of leveraged homeowners in the population.
    Keywords: Home Ownership, Unemployment, Earnings, Heterogeneity, Simulation base destimation, Paneldata
    JEL: J21 J64 J31 C33 C35
    Date: 2022–03–14
  3. By: Paula Prenzel; Niels Bosma; Veronique Schutjens; Erik Stam
    Abstract: A growing empirical literature has established a positive relationship between cultural diversity and entrepreneurship rates, often attributing this effect to innovative benefits of diversity. However, not all entrepreneurship is inherently innovative, raising the question of whether cultural diversity may increase the relative prevalence of entrepreneurs pursuing innovative instead of more replicative strategies. This study investigates the relationship between regional cultural diversity and the innovation-orientation of early-stage entrepreneurs and considers moderating factors by decomposing shares of foreign-born population by origin within and outside of the EU and by education level. Combining survey data from the Global Entrepreneurship Monitor with various measures of cultural diversity, we carry out a multilevel analysis for 166 European regions. The results suggest that entrepreneurs in more culturally diverse regions are significantly more likely to exhibit innovation-orientation. We find some evidence that this effect is supported by cognitive proximity as the share of EU-born foreign population is driving this result. Moreover, our analysis suggests that the effect of cultural diversity on innovative entrepreneurship is not due to human capital availability or moderated by entrepreneurs' absorptive capacity but rather stems from the diversity in cultural background itself.
    Keywords: cultural diversity, entrepreneurship, innovation, European regions, multilevel analysis
    JEL: F22 L26 O30 R1
    Date: 2022–02
  4. By: Gianluca Busilacchi; Giovanni Gallo; Matteo Luppi
    Abstract: Over the last two decades, involuntary part-time (IPT) employment has become a more and more pressing issue in Europe, especially in the southern countries, where IPT today constitutes most part-time employment. The dualistic nature of voluntary and involuntary employment creates an opportunity to investigate this type of occupation by looking at the intersection between dualisation and gender. Using INAPP-PLUS data and Probit estimations, this paper aims to shed light on whether the determinants of IPT – at the individual, household and labour market levels – follow the trend of labour dualisation, compared to part-timers in voluntary arrangements. In particular, we aim to determine how dualisation related to these determinants varies according to gender and labour market structural changes. Our results confirm that individual and household characteristics count more than professional ones in determining IPT status, especially concerning the well-known gender differences. However, differentiating the analysis by workers' gender highlights interesting differences pointing at a growing polarisation for female workers driven not only by inequality in the work-family balance distribution but also by structural elements in the labour market.
    Keywords: Involuntary part-time; gender inequality; dualisation; job determinants; labour market
    JEL: J16 J40 Z13
    Date: 2022–02
  5. By: Daryna Grechyna (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: This paper analyzes the impact of parenthood on political engagement using the longitudinal British survey data and a repeated cross-sectional European Social survey. I construct a political engagement measure by applying confirmatory factor analysis to observable indicators of several different aspects of political engagement. Then, I estimate the impact of becoming a parent on political engagement based on an event study around the birth of an individual’s first child, using UK data. The results indicate that having children reduces the political engagement of female parents but does not significantly affect the political engagement of male parents. The impact on women is temporary and disappears several years after the birth of their first child. The analysis of the impact of additional children on political engagement suggests that women’s political engagement is reduced by the fact of becoming a mother rather than by the number of children. The results are confirmed using repeated cross-sectional data for European regions, controlling for fixed regional characteristics. The policy implications of these findings are discussed.
    Keywords: parenting; children; political interests; political disenfranchisement; voter turnout; survey data
    Date: 2022–03–08
  6. By: Emanuele Millemaci (University of Messina); Alessandra Patti (University of Messina)
    Abstract: In recent years, young brain drain within Italian provinces has increased at higher speed than ever. While is premature to assess whether this process is transitory or permanent, it should be analysed and monitored by researchers and policy makers for its many socio-economic consequences. Previous empirical studies have demonstrated that Italian net skilled migration is influenced by economic factors, such as income per capita and employment, and, with a less extent, by the search of places endowed with more amenities. In the crossroad between these factors, this paper investigates corruption as key element of the Italian skilled mobility. To this end, a comprehensive framework with Zero-Inflated Poisson and Pseudo-Poisson Maximum Likelihood with High Dimensional Fixed Effects models for bilateral data on the Italian students’ flows is used. Results suggest the dual role of push and pull mechanisms at play, as high corruption incentivizes Italian skilled mobility to destinations that, instead, exhibit lower corruption. Moreover, sensitivity of the prospective tertiary students to corruption varies according to their field of study of interest. Finally, empirical evidence on skilled flows from the lagging Mezzogiorno to the North of Italy, suggests that the push and pull effects of corruption stir up the endurance of the well-known socio-economic dualism between these two parts of the country.
    Keywords: Brain drain, Corruption, Panel data, Gravity, Zip, Ppmlhdfe
    JEL: D73 F12 R23
    Date: 2022–03
  7. By: Resce, Giuliano
    Abstract: This paper investigates the impact of non-political administrators on the financial management of local governments. The activity of prefectorial officials is compared with the activity of elected mayors exploiting data extracted from a panel of 7826 Italian municipalities from 2007 to 2018. To address the potential confounding effects and selection biases, we combine a Difference in Difference strategy with machine learning methods for counterfactual analysis. Results show that non-political administrators bring higher financial autonomy and higher collection capacity, raising more revenues at local level. This is consistent with the hypothesis that, since they do not respond to electoral incentives, non-political administrators have lower motivations to behave strategically, not taking their own interests about electoral successes into account when they have to choose the proportion of local versus external revenues for financing local expenditure.
    Keywords: Local Government, Electoral Incentives, Accountability
    JEL: D7 H2 H77
    Date: 2022–03–16
  8. By: Hirsch, Boris; Lentge, Philipp; Schnabel, Claus
    Abstract: In Germany, employers used to pay union members and non-members in a plant the same union wage in order to prevent workers from joining unions. Using recent administrative data, we investigate which workers in firms covered by collective bargaining agreements still individually benefit from these union agreements, which workers are not covered anymore, and what this means for their wages. We show that about 9 percent of workers in plants with collective agreements do not enjoy individual coverage (and thus the union wage) anymore. Econometric analyses with unconditional quantile regressions and firm-fixed-effects estimations demonstrate that not being individually covered by a collective agreement has serious wage implications for most workers. Low-wage non-union workers and those at low hierarchy levels particularly suffer since employers abstain from extending union wages to them in order to pay lower wages. This jeopardizes unions' goal of protecting all disadvantaged workers.
    Keywords: collective bargaining,union wage,uncovered workers,Germany
    JEL: J31 J53
    Date: 2022
  9. By: Anne Plunket (RITM - Réseaux Innovation Territoires et Mondialisation - UP11 - Université Paris-Sud - Paris 11); Felipe Starosta de Waldemar (RITM - Réseaux Innovation Territoires et Mondialisation - UP11 - Université Paris-Sud - Paris 11)
    Abstract: This paper investigates the impact of regional technological relatedness on the emergence of recombinant novelty (i.e. new combinations of subclasses occurring for the first time) in French regions using patent data over 1990-2010. We find that relatedness favors incremental innovations which reuse already applied combinations, whereas increasing levels of relatedness reduces the likelihood of novelty. However, the impact is less negative when combined technologies are new, unrelated or not locally specialized because it facilitates learning and technological recombination. We also find that universities and large incumbents are less dependent on relatedness than small and novel players to create novelty.
    Keywords: innovation,recombinant novelty,technological relatedness,Regional development
    Date: 2022–02–11
  10. By: Laura Hospido (Banco de Espana and IZA); Jose Garcia-Louzao (Bank of Lithuania and Vilnius University); Alessandro Ruggier (University of Nottingham)
    Abstract: In this paper we study how labor market duality affects human capital accumulation and wage trajectories of young workers. Using rich administrative data for Spain, we follow workers since their entry into the labor market to measure experience accumulated under different contractual arrangements and we estimate their wage returns. We document lower returns to experience accumulated in fixed-term contracts compared to permanent contracts and show that this difference is not due to unobserved firm heterogeneity or match quality. Instead, we provide evidence that the gap in returns is due to lower human capital accumulation while working under fixed-term contracts. This difference widens with worker ability, in line with skill-learning complementarity. Our results suggest that the widespread use of fixedterm work arrangements reduces skill acquisition of high-skilled workers, holding back life-cycle wage growth by up to 16 percentage points after 15 years since labor market entry.
    Keywords: labor market duality, human capital, earnings dynamics
    JEL: J30 J41 J63
    Date: 2022–02–15
  11. By: Guillermo Arenas Díaz (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore); Andrés Barge-Gil (Department of Economic Analysis, Complutense University of Madrid, ICAE and GRIPICO, Madrid, Spain); Joost Heijs (Department of Applied Economics, Structure and History, Complutense University of Madrid, Madrid, Spain); Alberto Marzucchi (Gran Sasso Science Institute, Social Sciences, L'Aquila, Italia)
    Abstract: This paper analyses the effects of product innovations introduced by firms in upstream and downstream sectors and firms in the same sector on firm employment. To this aim, we extend the Harrison et al. (2014) model to analyse the relationship between firm innovation and employment to account for innovation in the same and related sectors. We employ panel data for the innovation activities of Spanish firms together with input–output data. The results show that product innovation by firms in the same sector harms the firm's employment, which is consistent with a business-stealing mechanism. A negative effect on employment is found for the introduction of new products in upstream sectors, which results in the reduction of labour in the focal firm. The type of labour that is displaced by innovations introduced by both same-sector and upstream firms is predominantly low-skilled. No significant effects are found for innovations introduced in downstream industries.
    Keywords: same sector, downstream and upstream sectors, product innovation, employment growth
    JEL: J23 O31 O33 L6
    Date: 2022–02
  12. By: Davillas, A.;; de Oliveira, V.H.;; Jones, A.M.;
    Abstract: We capitalise on an opportunity in the UK Household Longitudinal Study, which asks respondents the same SAH question with identical wording two times. This is done once with a self-completion and once with an open interview mode within the same household interview over four waves. We estimate multivariate models to explore which individual and household-level characteristics are systematically relevant for the likelihood and frequency of inconsistent reporting across the two modes. We find evidence of some inconsistency in reporting; 11%-24% of those who reported a particular SAH category in the self-completion mode reported inconsistently in the open interview. The probability of inconsistency is systematic and influenced by an individual’s demographics, education, income, employment status, cognitive and non-cognitive skills. The same characteristics are also systematically associated with the frequency of inconsistent reporting across four UKHLS waves. Analysis of the implications of reporting inconsistencies shows no impact of SAH measurement on the magnitude of the association between income and health, estimated separately using the two SAH measures. A set of dimensions of people’s physiological and biological health, captured using biomarkers, is associated equally with both SAH measures, suggesting that reporting inconsistencies in SAH may be driven by mechanisms other than people’s underlying health
    Keywords: measurement error; reporting bias; self-assessed health; UKHLS;
    JEL: C10 C33 C83 I10
    Date: 2022–02
  13. By: Lisa Taruttis (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: Improving the energy efficiency of residential buildings is of paramount importance to reduce CO2 emissions and hence to achieve a climate-neutral building stock – the objective of the German government for 2045. Thereby, a focus on the existing building stock is needed, as regulations for new buildings are already quite tight in terms of energy efficiency, and a large proportion of the dwelling stock of 2045 already exists today. For the important segment of rental housing, split incentives are often invoked as an impediment for energy-related investments. Yet this implicitly takes the tenant-landlord relationship as given. On the market where prospective renters meet the dwelling offers, competitive forces and rational behavior on both sides would imply that the monthly net rent should reflect (with opposite sign) differences in expected monthly heating costs – other things being equal. We test this hypothesis by specifying a hedonic price model that reflects this gross-cost-of-renting perspective and applying it on a detailed dataset including dwelling and neighborhood characteristics. As a case study, we use data for the German state of North Rhine-Westphalia, which implies that variations in regulatory and meteorological conditions are small, while large socioeconomic differences across subregions exist (e.g., in terms of purchasing power or unemployment rates). Drawing on 844,229 observations from 2014 to 2020 on a small spatial scale, we find a premium for more efficient apartments; however, it is rather small. The expected energy cost savings exceed the premium by approximately a factor of six. Rather, we find large discounts if apartments use heating technologies that are known to be inefficient. The paper explores various explanations for these outcomes, considering both landlord and renter behavior as well as institutional settings.
    Keywords: Hedonic Analysis, Rental market, Housing market, Energy Efficiency, Residential Buildings
    JEL: C21 Q40 R21 R31
    Date: 2022–02
  14. By: Irene González Rodríguez; Marta Pascual Sáez; David Cantarero Prieto
    Abstract: The impact of the COVID-19 pandemic is not the same between regions. The aim of this study is to assess whether the infection rate depends on socioeconomic factors and whether there are spatial interactions between the Spanish regions. To this end, the Moran's test and spatial econometric models are used. The results suggest that the COVID-19 cases tends to form spatial clusters. In addition, the population density, the illiteracy rate and the unemployment rate are found to influence the spread of the coronavirus. Our analysis can be considered to apply policy intervention measures to reduce health population inequalities.
    Keywords: COVID-19, spatial econometrics, socioeconomic inequalities, Spain.
    JEL: I14
    Date: 2022–03
  15. By: Laureti, Lucio; Costantiello, Alberto; Matarrese, Marco Maria; Leogrande, Angelo
    Abstract: The determinants of the presence of “Foreign Doctorate Students” among 36 European Countries for the period 2010-2019 are analyzed in this article. Panel Data with Fixed Effects, Random Effects, WLS, Pooled OLS, and Dynamic Panel are used to investigate the data. We found that the presence of Foreign Doctorate Students is positively associated to “Attractive Research Systems”, “Finance and Support”, “Rule of Law”, “Sales Impacts”, “New Doctorate Graduates”, “Basic School Entrepreneurial Education and Training”, “Tertiary Education” and negatively associated to “Innovative Sales Share”, “Innovation Friendly Environment”, “Linkages”, “Trademark Applications”, “Government Procurement of Advanced Technology Products”, “R&D Expenditure Public Sectors”. A cluster analysis was then carried out through the application of the unsupervised k-Means algorithm optimized using the Silhouette coefficient with the identification of 5 clusters. Finally, eight different machine learning algorithms were used to predict the value of the "Foreign Doctorate Students" variable. The results show that the best predictor algorithm is the "Tree Ensemble Regression" with a predicted value growing at a rate of 114.03%.
    Keywords: Innovation, and Invention: Processes and Incentives; Management of Technological Innovation and R&D; Diffusion Processes; Open Innovation.
    JEL: O30 O31 O32 O33 O34
    Date: 2022–02–11
  16. By: Antonio Cutanda (Universidad de Valencia, Valencia, Spain ORCID number: 0000-0003-2066-4632); Juan A. Sanchis-Llopis (Universidad de Valencia and ERICES, Valencia, Spain ORCID number: 0000-0001-9664-4668)
    Abstract: Spain. Further, we will study whether human capital accumulation affects this key elasticity. For this purpose, we estimate the equation for the intertemporal substitution without accounting for human capital and introducing it. We build a pseudo-panel data set combining the Spanish Family Expenditure Survey and the Labour Survey over the period 1987-1997. From our results the estimate of the intertemporal elasticity of leisure is about 0.25, that is comparable to estimates found for other economies. Further, considering the effect of human capital significantly increases the estimated elasticity of intertemporal substitution for leisure, obtaining an estimate about 0.5, what confirms the existence of a bias if we do not consider human capital. Finally, this bias is larger for the younger cohorts than for the older ones.
    Keywords: Euler equation, Instrumental variables, Intertemporal Substitution for leisure, Panel data.
    JEL: C33 C36 E24 J22
    Date: 2022–02
  17. By: David Guerrero (AME-SPLOTT - Systèmes Productifs, Logistique, Organisation des Transports et Travail - Université Gustave Eiffel); Jean Paul Hubert (AME-DEST - Dynamiques Economiques et Sociales des Transports - Université Gustave Eiffel); Martin Koning (AME-SPLOTT - Systèmes Productifs, Logistique, Organisation des Transports et Travail - Université Gustave Eiffel); Nicolas Roelandt (AME - Département Aménagement, Mobilités et Environnement - Université Gustave Eiffel)
    Abstract: This article analyses the relationship between the location of warehouses, the spatial scope of their activities and some of their operational characteristics. It uses the results of a French national survey providing detailed characteristics for 1,974 warehouses of more than 5,000 square metres. A typology of four spatial categories is built based on a population potential with different values of friction (?). Applying logistic regression, the four categories are related to survey data describing the spatial scope of the activities of warehouses, controlling for variations in other characteristics such as seasonality and vehicle movements. The results show a significant relationship between the location of warehouses and their spatial scope. As expected, warehouses with local origins are more frequent outside the core (inner Paris) and metropolitan location categories (outer Paris and other large urban areas). The findings suggest there may be significant differences in the spatial scope of warehouse activity even within the same urban area.
    Date: 2022–01–01
  18. By: Daniel Reck; Joel Slemrod; Trine Vattø (Statistics Norway)
    Abstract: We conduct the first-ever study of actual searches done in a public tax disclosure system, analyzing about one million searches done in 2014 and 2015 in Norway. We characterize the social network these searches comprise, including its degree of homophily and reciprocation, and the demographics of targets and searchers. About one-fourth of searches occur within identifiable household and employment networks. Most searchers target people similar to themselves—homophily in network parlance—but young, low-income searchers also target older, successful people and celebrities. A causal research design based on the timing of searches relative to tax filing uncovers no evidence that, upon discovering they were targeted, targets subsequently increase their reported income. The evidence suggests that social comparisons motivate the bulk of searches rather than tax compliance. However, public disclosure may deter evasion even when compliance-motivated searches are rare in equilibrium.
    Keywords: Public disclosure; social network; tax compliance
    JEL: H26 D83 D85
    Date: 2022–03
  19. By: Paul Allanson; Paul Logan
    Abstract: This paper explores the impact of the COVID-19 pandemic on patients’ experiences of general practice in England using multicategory response data from the 2020 and 2021 GP Patient Surveys, where the former was conducted in the run up to the first UK national lockdown at the end of March 2020 and the latter a year later. It offers a novel analysis of changes in patients’ experience that is both sensitive to changes in the distribution of patients across the full set of response categories, not just in the proportion meeting some binary quality threshold, and provides a breakdown of changes in individual practice-level patient experience profiles into structural and exchange mobility components. Our results show a 4.47 percentage point higher chance that a randomly chosen patient from anywhere in England in 2021 would have reported a better rather than worse overall experience of their GP practice than one similarly chosen in 2020. Moreover, patients in 2021 were likely to rate their GP more highly if their last appointment was conducted face-to-face at their own practice rather than remotely over the phone or online. Practice-level changes exhibit reversion towards the median quality for England as a whole, likely reflecting the influence of transitory shocks to patient experience, with the average change in patients’ rating of their own practice found to be slightly higher than the nationwide improvement due to the pattern of idiosyncratic changes. We conclude that patients’ more positive rating of GP services in 2021 was not the result of the prescribed switch towards the greater use of remote consultations, thereby contributing to the current debate on whether this change should be reversed once the pandemic is over, but of a change in reporting behaviour stemming from a more supportive attitude towards the NHS.
    Keywords: Patient-reported experience measures; primary care services; mobility analysis; COVID-19; England
    JEL: D63 I14 I18
    Date: 2022–03
  20. By: Italo Colantone; Livio Di Lonardo; Yotam Margalit; Marco Percoco
    Abstract: For many governments enacting green policies is a priority, but these often entail substantial and uneven costs on citizens. How does the introduction of green policies affect voting? We study this question in the context of a major ban on polluting cars introduced in Milan. The policy was strongly opposed by the right-wing populist party Lega, portraying it as a “radical-chic-leftist†initiative penalizing common people. We show that owners of banned vehicles—who incurred a median loss of €3,750—were significantly more likely to vote for Lega in the subsequent elections. This electoral shift does not stem from increased environmental skepticism, but rather from the perceived unfairness of the policy and its pocketbook implications. In fact, recipients of compensation from the local government were not more likely to switch to Lega. The findings underscore that addressing the distributive consequences is key for advancing green policies that are politically sustainable.
    Keywords: environmental politics; green policies; distributional consequences; compensation mechanisms
    Date: 2022
  21. By: Alari Paulus
    Abstract: The sensitivity of business fixed investment to one of its key determinants, the user cost of capital, has been little investigated with firm-level data that captures firm heterogeneity to the full extent. I study the determinants of business fixed investment in Estonia, using the universe of business statements for non-financial firms in 1994-2020 from administrative records. The results with various panel data models provide strong support for a theoretical long-term relationship between the gross investment rate, and changes in production output and the user cost of capital. I find that the capital stock is modestly responsive to changes in output and the user cost of capital, with elasticities less than 0.5 in absolute size, and that different estimation strategies yield broadly similar results. Elasticities differ by firm size, but sectoral variation is relatively limited. User cost elasticities also exhibit notable variation over time, while output elasticities are much more stable. I also find that investments in machinery and equipment are more elastic than investments in buildings and structures.
    Keywords: business investment, user cost of capital, corporate taxation, firm panel data
    JEL: D22 E22 H32
    Date: 2022–03–24
  22. By: Albuquerque, Bruno (International Monetary Fund); Varadi, Alexandra (Bank of England)
    Abstract: We use UK transaction-level data during the Covid-19 pandemic to study whether mortgage payment holidays (PH) can act as a mechanism for smoothing household consumption following negative aggregate shocks. Our results suggest that mortgage PH were accessed by both households with pre-existing financial vulnerabilities and by those with stronger balance sheets, including buy-to-let investors. We also find that the temporary liquidity relief provided by PH allowed liquidity-constrained households to maintain higher annual consumption growth compared to those non-eligible for the policy. Finally, we find that mortgage PH led to higher saving rates for more financially-stable households.
    Keywords: Mortgage payment holidays; household behaviour; consumption; high-frequency data; difference-in-differences; panel data
    JEL: D14 E21 G51
    Date: 2022–02–25
  23. By: Céline van Essen (CPB Netherlands Bureau for Economic Policy Analysis); Arjan Lejour (CPB Netherlands Bureau for Economic Policy Analysis); Jan Möhlmann (CPB Netherlands Bureau for Economic Policy Analysis); Simon Rabaté (CPB Netherlands Bureau for Economic Policy Analysis); Arjan Bruil (CBS); Wouter Leenders (UC Berkeley)
    Abstract: How high is income inequality in the Netherlands? How progressive are taxes and how much income does government spending redistribute? This study presents the most exhaustive responses for the Netherlands to these questions to date. We combine detailed administrative records on the universe of the Dutch population with national accounts aggregates to provide a thorough description of income inequality before and after taxation and government spending. Overall, taxes and government spending reduce the top 10%'s income share from 31% to 26%. We decompose this difference between pre- and post- tax income and show two main results. First, the tax system is regressive due to high consumption taxes, flat social contributions and a low tax on capital income. Second, the entire reduction in inequality comes from government spending that is targeted at the bottom of the distribution. We finally provide a wide set of alternative scenarios to investigate the sensitivity of our results to different distributional assumptions. Our main conclusions are robust to this sensitivity analysis.
    JEL: D3 H2 H3 H5
    Date: 2022–03

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