nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2022‒05‒02
twenty-one papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. The “Robot Economy†and optimal tax-transfer reforms By Ugo Colombino; Nizamul Islam; Gian Luca Tedeschi
  2. Migration and wage inequality: A detailed analysis for German regions over time By Schmid, Ramona
  3. Becoming neighbors with refugees and voting for the far-right? The impact of refugee inflows at the small-scale level By Fremerey, Melinda; Hörnig, Lukas; Schaffner, Sandra
  4. Why Do Temporary Workers Have Higher Disability Insurance Risks Than Permanent Workers? By Koning, Pierre; Muller, Paul; Prudon, Roger
  5. Investment expectations by vulnerable European firms: A difference-in-difference approach By Coad, Alexander; Amaral-Garcia, Sofia; Bauer, Peter; Domnick, Clemens; Harasztosi, Péter; Pál, Rozália; Teruel, Mercedes
  6. Ratio Working Paper No. 354: Foreign Ownership and Transferring of Gender Norms By Halvarsson, Daniel; Lark, Ola; Gustavsson Tingvall, Patrik
  7. The role of employers in reducing the implementation gap in leave policies By Hipp, Lena; Schlüter, Charlotte; Molina, Stefania
  8. Search and Reallocation in the Covid-19 Pandemic: Evidence from the UK By Carlos Carrillo-Tudela; Camila Comunello; Alex Clymo; Annette Jäckle; Ludo Visschers; David Zentler-Munro
  9. The Importance of the First Generic Substitution: Evidence from Sweden By Janssen, Aljoscha; Granlund, David
  10. Neighborhoods, Perceived Inequality, and Preferences for Redistribution :Evidence from Barcelona By Gerard Domenech Arumi
  11. Sometimes It Works! The Effect of a Reform of the Short Vocational Track on School-to-Work Transition By Comi, Simona Lorena; Grasseni, Mara; Origo, Federica
  12. Pennies from Haven: Wages and Profit Shifting By Annette Alstadsæter; Julie Brun Bjørkheim; Ronald B. Davies; Johannes Scheuerer
  13. Getting Lucky: The Long-Term Consequences of Exam Luck By Fanny Landaud; Éric Maurin; Barton Willage; Alexander L.P. Willén
  14. The Impact of Mental Health Support for the Chronically Ill on Hospital Utilisation: Evidence from the UK By Gruber, Jonathan; Lordan, Grace; Pilling, Stephen; Propper, Carol; Saunders, Rob
  15. Marriage as insurance: job protection and job insecurity in France By Clark, Andrew E.; D'Ambrosio, Conchita; Lepinteur, Anthony
  16. Labor Demand on a Tight Leash By Mario Bossler; Martin Popp
  17. Do intensive guidance programs reduce social inequality in the transition to higher education in Germany? Experimental evidence from the ZuBAb study 0.5 years after high school graduation By Erdmann, Melinda; Pietrzyk, Irena Magdalena; Helbig, Marcel; Jacob, Marita; Stuth, Stefan
  18. The Determinants of Population Self-Control By Cobb-Clark, Deborah A.; Dahmann, Sarah C.; Kamhöfer, Daniel A.; Schildberg-Hörisch, Hannah
  19. Measuring Labor Market Transitions in Europe: Identification and Validation Analysis By Borowczyk-Martins, Daniel; Pacini, David
  20. Robot Adoption and Innovation Activities By Davide Antonioli; Alberto Marzucchi; Francesco Rentocchini; Simone Vannuccini
  21. Relative Price Changes of Ecosystem Services: Evidence from Germany By Jonas Heckenhahn; Moritz A. Drupp

  1. By: Ugo Colombino; Nizamul Islam; Gian Luca Tedeschi
    Abstract: Globalization and automation might imply deep changes on the labour market. An important policy issue is whether and how the tax-transfer rules should be reformed to cope with those changes. While the prevailing response has consisted of more sophisticated designs of mean-testing and targeting, we also witness an increasing interest in policies inspired by simplicity and universality. In this paper we take the latter route. Using a combination of behavioural microsimulation and numerical optimization, we look for a social welfare optimal tax-transfer rule within a flexible class where total household disposable income is a 4th polynomial in total household taxable income. We use a model of household labour supply that makes it possible to account for equilibrium constraints and to evaluate the effects of exogenous labour demand shocks. We consider two stylized scenarios: the Jobless Economy (the robots take over 10% of jobs at every skill-level) and the Polarized Economy (the robots take over 10% of the unskilled jobs while skilled jobs increase by 10%). We compare the social welfare performance of the polynomial optimal rules and of the current rules under the Current Economy scenario and under the alternative Jobless Economy and the Polarized Economy scenarios. We present results using the 2015 EU-SILC data sets for France, Germany, Italy and Luxembourg. The polynomial optimal rules feature a universal basic income and an almost flat marginal tax rate profile and are social welfare-superior under the Current Economy scenario in all the countries and also under the alternative scenarios in France, Germany and Italy.
    Keywords: Empirical Optimal Taxation, Microsimulation, Microeconometrics, Evaluation of Tax-Transfer rules, Equilibrium, Robot Economy.
    Date: 2022
  2. By: Schmid, Ramona
    Abstract: This study presents new evidence on immigrant-native wage differentials estimated in consideration of regional differences regarding the presence of Non-German population in metropolitan and non-metropolitan areas between 2000 and 2019 in Germany. Using linked employer-employee-data, unconditional quantile regression models are estimated in order to assess the degree of labor market integration of foreign workers. Applying an extended version of the Oaxaca-Blinder decomposition method, the results provide evidence on driving factors behind wage gaps along the entire wage distribution. There are not only changes in the relative importance of explanatory factors over time, but also possible sources of wage differentials shift between different points of the wage distribution. Differentiating between various areas in Germany, on average, larger wage gaps are revealed in metropolitan areas with at the same time a higher presence of the foreign population. Regarding the size of overall estimated wage gaps, after 2012 a reversal in trend and particular increasing tendencies around median wages are identified.
    Keywords: Immigrant-native wage gap,Oaxaca-Blinder decomposition,unconditional quantile regression,ethnic clustering,Germany
    JEL: J15 J31 J61 R23 R58
    Date: 2022
  3. By: Fremerey, Melinda; Hörnig, Lukas; Schaffner, Sandra
    Abstract: We investigate the effect of the refugee inflow between 2014 and 2017 on voting for the far-right party Alternative for Germany (AfD) in the national parliamentary election in 2017 in Germany. Drawing on unique small-scale data enables us to distinguish between the contact theory, captured by the inflow of refugees into the immediate neighborhood (1km x 1km), and county-level (NUTS 3) effects, which might pick-up other, broader factors such as media coverage or specific county-level policies. We alleviate concerns of an endogenous refugee allocation by a shift-share instrument. Our results indicate that the contact theory is valid in urban West Germany, i. e., higher refugee inflows in West German urban neighborhoods decrease the shares of far-right voting, while there is no robust evidence of a relationship between refugee inflow and far-right vote shares in East Germany and rural West Germany.
    Keywords: voting behavior,neighborhood characteristics,refugees,immigration
    JEL: D72 J15 R23
    Date: 2022
  4. By: Koning, Pierre (Vrije Universiteit Amsterdam); Muller, Paul (Vrije Universiteit Amsterdam); Prudon, Roger (Free University Amsterdam)
    Abstract: Workers with fixed-term contracts typically have worse health than workers with permanent contracts. We show that these differences in health translate into a substantially higher (30%) risk of applying for disability insurance (DI) in the Netherlands. Using unique administrative data on health and labor market outcomes of all employees in the Netherlands, we decompose this differential into: (i) selection of workers types into fixed-term contracts; (ii) the causal impact of temporary work conditions on worker health; (iii) the impact of differential employer incentives to reintegrate ill workers; and (iv) the differential impact of labor market prospects on the decision to apply for DI benefits. We find that selection actually masks part of the DI risk premium, whereas the causal impact of temporary work conditions on worker health is limited. At the same time, the differences in employer commitment during illness and differences in labor market prospects between fixed-term and permanent workers jointly explain more than 80% of the higher DI risk.
    Keywords: disability insurance, temporary work, employer incentives, worker health
    JEL: J08 I1 J22 H53
    Date: 2022–03
  5. By: Coad, Alexander; Amaral-Garcia, Sofia; Bauer, Peter; Domnick, Clemens; Harasztosi, Péter; Pál, Rozália; Teruel, Mercedes
    Abstract: The effect of the COVID shock on European economies has been severe and also unequal, with some firms being affected much more strongly than others. To improve the effectiveness of policy interventions, policymakers need to understand which types of vulnerable firms have been suddenly pushed into dire circumstances. We seek to fill this important gap in our knowledge by providing evidence from the EIBIS (European Investment Bank Investment Survey, 2016-2020) on how the COVID shock has affected the investment activity and investment-related framework conditions of vulnerable firms. While data on actual investment activity post-COVID is not yet available to us, we focus on investment expectations. We exploit the fact that the same questions relating to investment expectations have been asked in several previous survey waves, which enables a difference-indifferences approach to investigate how investment expectations might have suddenly changed, for vulnerable groups of firms, immediately after the onset of the COVID crisis. We focus on 4 groups of vulnerable firms: High-Growth Enterprises (HGEs), young and small firms, R&D investors and nonsubsidiary firms. R&D investors are more likely to be pessimistic about investment plans as a consequence of the COVID shock, and (similarly) HGEs are less likely to be optimistic about investment plans. R&D investors are less likely to be optimistic about the availability of internal finance, while HGEs and R&D investors are more likely to be pessimistic about the availability of external finance. Subsidiary firms, interestingly, are more likely to report a decrease in expected investment, although this could be part of a conservative group-level strategy and coordinated group-level reduction in investment, however that is not caused by any detectable lack of access to (internal or external) finance. Event study graphs generally confirm our regression results.
    Date: 2022
  6. By: Halvarsson, Daniel (The Ratio Institute); Lark, Ola (Lund University); Gustavsson Tingvall, Patrik (Stockholm School of Economics)
    Abstract: In this paper, we study foreign ownership as a vehicle for transferring gender norms across international borders. Specifically, we analyze how the wage differential between men and women in Swedish firms is affected by the degree of gender inequality in the home country of foreign investors. The results suggest that gender norms of the home country matter—the gender wage gap in foreign-owned subsidiaries appears to increase with the degree of gender inequality prevailing in the investors’ home market. This finding is identified from within job-spell variation in wages and proves robust across a series of specifications.
    Keywords: Foreign ownership; Gender inequality; Gender wage gap; Internationalization; Gender norms
    JEL: F66 J16 J31
    Date: 2022–04–19
  7. By: Hipp, Lena; Schlüter, Charlotte; Molina, Stefania
    Abstract: Although parents in almost all rich democracies are entitled to some form of paid parenting leave, fathers in particular often do not take all the leave available to them. As employers play an important role in the implementation of parenting leave policies, this article investigates what workplace characteristics influence mothers' and fathers' uptake of their statutory leave entitlements. In Part 1, we combine data from the OECD and the European Labor Force Survey to estimate the size of the "implementation gap" between statutory leave entitlements and leave uptake for mothers and fathers, and compare the size of this gap across countries. In Parts 2 and 3, we review the literature on structural and cultural workplace factors that promote or hinder parenting leave uptake. We conclude the article with suggestions for further research and stress the need for reliable data on the uptake of parenting leave entitlements and research on non-European countries.
    Keywords: parenting/parental leave,policy implementation,workplace culture,gender equality,Elternzeit,Politikumsetzung,Arbeitsplatzkultur,Geschlechtergleichstellung
    Date: 2022
  8. By: Carlos Carrillo-Tudela; Camila Comunello; Alex Clymo; Annette Jäckle; Ludo Visschers; David Zentler-Munro
    Abstract: The impact of the Covid-19 pandemic on the UK labour market has been extremely heterogeneous across occupation and industrial sectors. Using novel data on job search, we document how individuals adjust their job search behaviour in response to changing employment patterns across occupations and industries in the UK. We observe that workers changed their search direction in favour of expanding occupations and industries as the pandemic developed. This suggests job searchers do respond to occupation-wide and industry-wide conditions in addition to idiosyncratic career concerns. However, non-employed workers and those with low education levels are more attached to their previous occupations and more likely to target declining ones. We also see workers from declining occupations making fewer transitions to expanding occupations than those who start in such occupations, despite targeting these jobs relatively frequently. This suggests those at the margins of the labour market may be least able to escape occupations that declined during the pandemic.
    Keywords: job search, occupation mobility, industry mobility, Covid-19 pandemic
    JEL: E24 J23 J63
    Date: 2022
  9. By: Janssen, Aljoscha (Singapore Management University); Granlund, David (Umea University)
    Abstract: We analyze changes in the willingness to substitute from prescribed pharmaceuticals to more affordable generic equivalents in response to the first experience with a substitution. Using Swedish individual-level data of prescribed and dispensed pharmaceuticals, we employ a dynamic event study and an instrumental variable approach to show that an initial substitution reduces the probability of opposing subsequent substitutions by 39 percentage points. The impact of a first substitution is especially large among elderly patients. We recommend that policy-makers target patients with a history of opposed substitution and offer additional discounts to promote substitution as long-term savings outweigh one-time costs.
    Keywords: Generic Substitution; Pharmaceuticals; Health Care Costs
    JEL: D12 I11 I12
    Date: 2022–04–11
  10. By: Gerard Domenech Arumi
    Abstract: study the effects of neighborhoods on perceived inequality and preferences for redistribution. Using administrative data on the universe of dwellings and real estate transactions in Barcelona (Spain), I construct a novel measure of local inequality — the Local Neighborhood Gini (LNG). The LNG is based on the spatial distribution of housing within a city, independent of administrative boundaries, and building-specific. I elicit inequality perceptions and preferences for redistribution from an original large-scale survey conducted in Barcelona. I link those to respondents’ specific local environments using exact addresses. I find that a one standard deviation increase inLNGis associated with 4% higher perceived inequality, but with (if anything) lower demand for redistribution. Residential sorting explains the counter-intuitive pattern. To causally identify the effects of local environments, I exploit within-neighborhood variation from the rise of new apartment buildings as a quasi-experiment. Exposure to new buildingsincreases perceived inequality by 7% and demand for redistribution by 1%. Effects come from higher perceived income at the top. Local environments shape inequality perceptions and (to a lesser extent) demand for redistribution.
    Keywords: Inequality, Gini, Redistribution, Housing
    Date: 2022–04
  11. By: Comi, Simona Lorena (University of Milan Bicocca); Grasseni, Mara (University of Bergamo); Origo, Federica (University of Bergamo)
    Abstract: This paper studies the impact on the length of school-to-work transition of a reform that extended from two to three years the short vocational track in Italy in the early 2000s. In the empirical analysis we use the Two Way Fixed Effect methodology to estimate the impact of the reform, exploiting its staggered implementation across regions. The analysis is restricted to graduates from the short vocational track before and after the reform. The results show that the reform had a positive impact and reduced school-to-work transition by around 5 months (a 24% reduction). Moreover, the new short vocational track proved to be extremely effective for migrants and females, whose school-to-work transition was reduced by 1.4 years and 0.9 years, respectively. In implementing the new short vocational track, some regions adopted a quasi-market organization in which private training institutions competed with public schools. This model proved to be more effective in shortening school-to-work transitions, in particular for migrants. This study makes an important contribution to the literature on the labor-market effect of vocational education by showing that lengthening the short vocational track, and changing the overall content of curricula, can speed up school-to-work transition.
    Keywords: school-to-work transition, vocational education, policy evaluation
    JEL: I26 I28 J24
    Date: 2022–03
  12. By: Annette Alstadsæter; Julie Brun Bjørkheim; Ronald B. Davies; Johannes Scheuerer
    Abstract: Increasing attention has been given to the fact that some multinational enterprises shift income to tax haven countries, an activity that generates inequality in corporate taxation. Here, we examine how profit shifting relates to wage inequality. Using rich matched employer-employee data from Norway, we find that profit-shifting firms pay higher wages, particularly among service firms where the wage premium is approximately 2%. Furthermore, this average effect masks significant within-firm heterogeneity with high-skill occupations – and managers in particular – earning higher shifting wage premiums. CEOs particularly gain, with their wages rising nearly 10%. These results thus suggest that profit shifting by multinationals meaningfully contributes to wage inequality, both between and within firms. Finally, our back-of-the-envelope calculations suggest these higher wages would generate additional income tax revenues which would offset around 3% of the fall in Norway’s corporate tax revenues due to profit shifting.
    Keywords: profit shifting, tax haven, tax avoidance, multinational firms, wage distribution, inequality
    JEL: F23 H26 J31 J32 M12
    Date: 2022
  13. By: Fanny Landaud; Éric Maurin; Barton Willage; Alexander L.P. Willén
    Abstract: This paper studies the impact of exam luck on individuals’ education and labor market success. We leverage unique features of the Norwegian education system that produce random variation in the content of the exams taken by students at the end of high school. Lucky students take exams in subjects they are better at, and we show that this generates significant improvements in both their high school GPA and diploma probability. Subsequently, exam luck generates substantial and persistent wage differentials across otherwise identical individuals. These luck-induced wage effects are of a similar magnitude as those generated by well-known education inputs, such as parental education and teacher quality.
    Keywords: luck, fairness, wage differentials, returns to education, high-stakes exams
    JEL: D63 H52 I21 I23 I24 I26 J24 J31
    Date: 2022
  14. By: Gruber, Jonathan (MIT); Lordan, Grace (London School of Economics); Pilling, Stephen (University College London); Propper, Carol (Imperial College London); Saunders, Rob (University College London)
    Abstract: Individuals with common mental disorders (CMDs) such as depression and anxiety frequently have co-occurring long-term physical health conditions (LTCs) and this co-occurrence is associated with higher hospital utilisation. Psychological treatment for CMDs may reduce healthcare utilisation through better management of the LTC, but there is little previous research. We examined the impact of psychological treatment delivered under the nationwide Improving Access to Psychological Therapies (IAPT) programme in England on hospital utilisation 12-months after the end of IAPT treatment. We examined three types of hospital utilisation: Inpatient treatment, Outpatient treatment and Emergency room attendance. We examined individuals with Chronic Obstructive Pulmonary Disease (COPD) (n=816), Diabetes (n=2813) or Cardiovascular Disease (CVD) (n=4115) who received psychological treatment between April 2014 and March 2016. IAPT episode data was linked to hospital utilisation data which went up March 2017. Changes in the probability of hospital utilisation were compared to a matched control sample for each LTC. Individuals in the control sample received IAPT treatment between April 2017 and March 2018. Compared to the control sample, the treated sample had significant reductions in the probability of all three types of hospital utilisation, for all three LTCs 12-months after the end of IAPT treatment. Reductions in utilisation of Emergency Room, Outpatient and non-elective Inpatient treatment were also observed immediately following the end of psychological treatment, and 6-months after, for individuals with diabetes and CVD, compared to the matched sample. These findings suggest that psychological interventions for CMDs delivered to individuals with co-occurring long-term chronic conditions may reduce the probability of utilisation of hospital services. Our results support the roll-out of psychological treatment aimed at individuals who have co-occurring common mental disorders and long-term chronic conditions.
    Keywords: depression, anxiety, hospital utilisation, psychological interventions, chronic conditions
    JEL: I10
    Date: 2022–03
  15. By: Clark, Andrew E.; D'Ambrosio, Conchita; Lepinteur, Anthony
    Abstract: Job insecurity is one of the risks that workers face on the labour market. As with any risk, individuals can choose to insure against it. We here consider marriage as a way of insuring against labour-market risk. The 1999 rise in the French Delalande tax, paid by large private firms when they laid off workers aged 50 or over, led to an exogenous rise in job insecurity for the uncovered (younger workers) in the affected firms. A difference-in-differences analysis using French panel data reveals that this greater job insecurity for the under-50s led to a significant rise in their probability of marriage, and especially when the partner had greater job security, consistent with marriage providing insurance against labour-market risk.
    Keywords: marriage; insurance; employment protection; perceived job security; difference-in-differences
    JEL: I38 J13 J18
    Date: 2021–06–30
  16. By: Mario Bossler; Martin Popp
    Abstract: Although theory highlights search frictions in tight labor markets, standard models of labor demand do not account for labor market tightness. Given the universe of administrative employment data on Germany, we study the effect of labor market tightness on firms' labor demand using novel Bartik instruments that rely on predetermined firm shares and national shifts at the occupation level. In line with theory, the IV results suggest that a 10 percent increase in labor market tightness reduces firms' employment by 0.5 percent. When accounting for search externalities, we find that the individual-firm wage elasticity of labor demand reduces from -0.7 to -0.5 at the aggregate level. For the 2015 minimum wage introduction, the elasticities imply only modest disemployment effects mirroring empirical ex-post evaluations. Moreover, the doubling of tightness between 2012 and 2019 led to a significant slowdown in employment growth by 1.1 million jobs.
    Date: 2022–03
  17. By: Erdmann, Melinda; Pietrzyk, Irena Magdalena; Helbig, Marcel; Jacob, Marita; Stuth, Stefan
    Abstract: This paper examines the effect of an intensive counseling program to promote university access among students who are eligible for university. Using data from the experimental panel study ZuBAb, we examine the average effect on university enrollment directly after high school graduation and the effect heterogeneity by educational background. No positive effect of participation is found. We discuss these results in relation to the potential of reducing inequalities through individual counseling in Germany.
    Keywords: university access,educational intervention,experiment,social origin,Studienaufnahme,Bildungsintervention,Experiment,soziale Herkunft
    Date: 2022
  18. By: Cobb-Clark, Deborah A. (University of Sydney); Dahmann, Sarah C. (University of Melbourne); Kamhöfer, Daniel A. (Düsseldorf Institute for Competition Economics (DICE)); Schildberg-Hörisch, Hannah (Heinrich Heine University Düsseldorf)
    Abstract: This paper demonstrates that structural factors can shape people's self-control. We study the determinants of adult self-control using population-representative data and exploiting two sources of quasi-experimental variationْ¢â‚¬â€œGermany's division and compulsory schooling reforms. We find that former East Germans have substantially higher levels of self-control than West Germans and provide evidence for suppression as a possible underlying mechanism. An increase in compulsory schooling had no causal effect on self-control. Moreover, we find that self-control increases linearly with age. In contrast to previous findings for children, there is no gender gap in adult self-control and family background does not predict self-control.
    Keywords: compulsory schooling reforms, quasi-experiments, German division, determinants of self-control, Brief Self-Control Scale, population-representative evidence
    JEL: D90 C26
    Date: 2022–03
  19. By: Borowczyk-Martins, Daniel (Department of Economics, Copenhagen Business School); Pacini, David (University of Bristol)
    Abstract: We consider the problem of measuring transition probabilities across employment, unemployment and nonparticipation when longitudinal data is not available and/or the available retrospective data is measured with error. We establish nonparametric point-identification conditions from time series of cross sections, focusing on the European Union Labor Force Survey (EULFS) microdata released by Eurostat, and assess their validity using auxiliary panel data for Portugal and the United Kingdom. We find that the variables in the EULFS do not satisfy the identification conditions. Consequently, we propose alternative data-releasing solutions allowing users to measure transitions from EULFS data while satisfying the existing legal requirements.
    Keywords: Retrospective data; Measurement error; Labor force surveys
    JEL: C26 C52 E24 J21
    Date: 2022–01–31
  20. By: Davide Antonioli (University of Ferrara); Alberto Marzucchi (Gran Sasso Science Institute); Francesco Rentocchini (European Commission, Joint Research Centre (JRC), Seville, Spain; Department of Economics Management and Quantitative Methods (DEMM), University of Milan); Simone Vannuccini (Science Policy Research Unit, University of Sussex)
    Abstract: We exploit firm-level data on robot adoption and use an event-study approach to study the unexplored relationship between robotisation and innovation. Instead of an enabling effect, we find a negative association between robot adoption and the probability to introduce product innovations, as well as their number; the results emerge using different proxy of product innovation. However, large-scale investments in mechanisation cancel-out the negative effect and show a positive association with R&D expenditure. We rationalise and interpret the findings suggesting that a piecewise substitutive relationship exists between process and product innovation. Large investments relax the product-process trade-off, as substantial R&D investments to accrue absorptive capacity are mobilised; as a result, they make less binding the allocation dilemma between implementing robot technology and designing and trialling new products. Finally, we discuss whether industrial robots studied here and in the literature feature enabling capabilities at all. The study has important implications for our understanding of the role of robots for firms operations and strategies, as well as for policy design.
    Keywords: robots, automation, product innovation, absorptive capacity, Spain
    JEL: O31 O33
    Date: 2022–04
  21. By: Jonas Heckenhahn; Moritz A. Drupp
    Abstract: Discounting future costs and benefits is a crucial yet contentious practice in the appraisal of long-term public projects with environmental consequences. The standard approach typically neglects that ecosystem services are not easily substitutable with manufactured goods and often exhibit considerably lower growth rates. Theory has shown that we should either apply differentiated discount rates, such as a lower environmental discount rate, or account for increases in relative scarcity by uplifting environmental values. Some governments already integrate this into their guidance, but empirical evidence is scarce. We provide first comprehensive country-specific evidence, taking Germany as a case study. We estimate growth rates of 15 ecosystem services and the degree of limited substitutability based on a meta-analysis of 36 willingness to pay studies in Germany. We find that the relative price of ecosystem services has increased by more than four percent per year in recent decades. Heterogeneity analysis suggests that relative price changes are most substantial for regulating ecosystem services. Our findings underscore the importance of considering relative price adjustments in governmental project appraisal and environmental-economic accounting.
    Keywords: willingness to pay, discounting, relative prices, ecosystem services, substitutability, growth, cost-benefit analysis
    JEL: D61 H43 Q51 Q54 Q58
    Date: 2022

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