nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2022‒05‒30
twelve papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. The Role of Employment Protection Legislation Regimes in Shaping the Impact of Job Disruption on Older Workers' Mental Health in Times of COVID-19 By Di Novi, Cinzia; Paruolo, Paolo; Verzillo, Stefano
  2. Accounting for firms in ethnicity wage gaps throughout the earnings distribution By Van Phan; Carl Singleton; Alex Bryson; John Forth; Felix Ritchie; Lucy Stokes; Damian Whittard
  3. Financial concerns and the marginal propensity to consume in Covid times: evidence from UK survey data By Albuquerque, Bruno; Green, Georgina
  4. Analysing Gender Equality at the Firm Level By Dania Eugenidis; Jan Kinne; David Lenz
  5. Value of information, search, and competition in the UK mortgage market By Myśliwski, Mateusz; Rostom, May
  6. Supporting policies addressing the digital skills gap – Identifying priority groups in the context of employment By Clara Centeno; Zbigniew Karpinski; Cesira Urzi Brancati
  7. Can skill differences explain the gap in the track recommendation by socio-economic status? By Maria Zumbuehl; Nihal Chehber; Rik Dillingh
  8. “And Breathe Normally†: The Low Emission Zone impacts on health and well-being in England. By Beshir, H.A.;; Fichera, E.;
  9. How is the Minimum Wage Shaping the Wage Disitribution: Bite, Spillovers, and Wage Inequality By Carlos Oliveira
  10. Wealth Taxation and Charitable Giving By Marius A. K. Ring; Thor Olav Thoresen
  11. Do Management Practices Matter in Further Education? By Sandra McNally; Luis Schmidt; Anna Valero
  12. Growing Like Germany: Local Public Debt, Local Bank, Low Private Investment By Mathias Hoffmann; Iryna Stewen; Michael Stiefel

  1. By: Di Novi, Cinzia (European Commission); Paruolo, Paolo (European Commission); Verzillo, Stefano (European Commission)
    Abstract: This study exploits individual data from the 8th wave of the Survey of Health, Ageing and Retirement in Europe (SHARE) and the SHARE Corona Survey to investigate the mental health consequences of COVID-19 job disruption across different European countries. It focuses on older workers (aged 50 and over) who were exposed to a higher risk of infection from COVID-19 and were also more vulnerable to the risk of long-term unemployment and permanent labour market exits during economic downturns. The relationship between job disruption in times of COVID-19 and older workers' mental health is investigated using differences in country-level employment legislation regimes in the EU. European countries are clustered into three macro-regions with high, intermediate and low employment regulatory protection regulations, using the Employment Protection Legislation (EPL) aggregate score proposed by the OECD. Results reveal a clear EPL gradient: job disruption has a positive and significant impact on older workers' psychological distress especially in those countries where EPL is more binding. The present findings suggest possible mitigating measures for older unemployed in the EU countries with higher Employment Protection legislation.
    Keywords: European Countries; COVID-19 pandemic; job disruption; mental health; older workers; EPL
    JEL: I14 I18 J08
    Date: 2022–04
  2. By: Van Phan; Carl Singleton; Alex Bryson; John Forth; Felix Ritchie; Lucy Stokes; Damian Whittard
    Abstract: Ethnicity wage gaps in Great Britain are large and have persisted over time. Previous studies of these gaps have been almost exclusively confined to analyses of household data, so they could not account for the role played by individual employers, despite growing evidence of their wage-setting power. We study ethnicity wage gaps using high quality employer-employee payroll data on jobs, hours, and earnings, linked with the personal and family characteristics of workers from the national census for England and Wales. We show that firm-specific wage effects account for sizeable parts of the estimated differences between the wages of white and ethnic minority workers at the mean and other points in the wage distribution, which would otherwise mostly have been attributed to differences in individual worker attributes, such as education levels, occupations, and locations. Nevertheless, there are substantial gaps between the wage structures of white and ethnic minority employees which cannot be accounted for by who people work for or other attributes, especially among higher earners.
    Keywords: Employer-Employee Data, Unconditional Quantile Regression, Decomposition Methods, UK Labour Market
    JEL: J31 J7 J71
    Date: 2022–05–01
  3. By: Albuquerque, Bruno (International Monetary Fund and University of Coimbra, CeBER, Faculty of Economics); Green, Georgina (Bank of England)
    Abstract: We study how household concerns about their future financial situation may affect the marginal propensity to consume (MPC) during the Covid-19 pandemic. We use a representative survey of UK households to compute the MPC from a hypothetical transfer of £500. We find that household expectations play a key role in determining differences in MPCs across households: households concerned about not being able to make ends meet have a 20% higher MPC than other households. This novel result holds when controlling for a range of important household-specific characteristics, including liquidity constraints. Our findings suggest that policies targeted to vulnerable and financially distressed households may prove more effective in stimulating demand than providing stimulus payments to all households.
    Keywords: Covid-19; marginal propensity to consume; survey data; household behaviour; expectations; financial concerns; fiscal polic
    JEL: D12 E21 E62 G51 H31
    Date: 2022–03–04
  4. By: Dania Eugenidis (University of Giessen); Jan Kinne (ZEW); David Lenz (University of Giessen)
    Abstract: The role of gender in the labour force and potential inequalities between men and women have been widely discussed. Despite efforts to align gender roles in recent decades, high levels of inequality are not an exception but rather the standard. These inequalities can lead to the respective minorities’ general dissatisfaction, which affects the working atmosphere and ultimately a firm’s economic success (Hoogendoorn et al. 2013). Recent quantitative studies confirm this dissatisfaction exists. However, analyses only take place at a country or regional level. Therefore, conclusions can be drawn on an aggregated level, whereas underlying structural differences between individual firms remain undetected. Alternative ways to measure inequalities include qualitative studies for individual companies. However, no generalized inference can be made. Our proposed framework, the Gender Equality Firm Index (GEFI), allows for quantitative gender equality analysis at the company level. GEFIaims to explore the latent and the concrete implementation of gender equality in firms. Specifically, we derive firm-level measurements from large-scale data extraction of firm websites and combine them with official data. We consequently derive a gender equality score for each company, making it possible to draw conclusions at any given level of granularity. We demonstrate the applicability of our framework in a case study including nearly 1 million firms throughout Germany. Thereby, we find that mainly urban and western German firms in sectors such as health and social services comparably enforce gender equality the most, which is in line with the existing literature.
    Keywords: Gender Equality Index; Firm level studies; Web Minig; Germany; Gender
    Date: 2022
  5. By: Myśliwski, Mateusz (Norwegian School of Economics); Rostom, May (Bank of England)
    Abstract: We formulate a structural model of search with lender and borrower heterogeneity to estimate the value of information provided to UK households by mortgage brokers. Using administrative data on loans originating in 2016 and 2017, we document the existence of a substantial degree of unexplained price dispersion, and observe that while mortgages obtained from brokers are cheaper, borrowers who use intermediaries pay more once commissions are factored in. Assuming that borrowers with high search costs are more likely to use brokers, we nonparametrically estimate the distributions of search, and the banks’ costs of providing these loans. Our results show that search costs vary by demographic groups, and that broker presence exerts negative pressure on lenders’ market power. Compared to a world where broker advice is unavailable, we estimate their presence reduces average monthly mortgage costs by 21%, and welfare losses arising from search frictions by 70% – although the results differ by borrower and loan charateristics. We also find that regulation in support of market centralization halves lenders’ markups and lowers monthly costs of an average mortgage by 4.4%.
    Keywords: Mortgage markets; consumer search; intermediation; auction estimation
    JEL: C57 D83 G21 L85
    Date: 2022–03–25
  6. By: Clara Centeno (European Commission - JRC); Zbigniew Karpinski (European Commission - JRC); Cesira Urzi Brancati (European Commission - JRC)
    Abstract: In a context of deficiency of digital skills in Europe to respond to the needs of the labour market, this report analyses the most recent data from Eurostat, OECD and CEDEFOP that refer to the digital skills gap in contexts of employment. In doing so it makes an attempt to clarify the differences between the existing data sets (relative to different methodological approaches) and concludes upon which would be the highest priority groups to take into account in those policies that seek to increase digital skills, providing a set of policy design recommendations. With this research we aim to bring some light to the two questions – 1. which type of gaps exist and 2. which would be the priority target groups for policy action – and through these, support several of the latest Digital Decade targets on digital skills also mentioned in the European Social Pillar Action Plan; the European Skills Agenda actions, including Action 2: Strengthening skills intelligence; Action 3: EU support for strategic national upskilling action; and Action 6: The Commission support to digital skills for all; and the Digital Education Action Plan, Priority 2, Enhancing digital skills and competences for the digital transformation.
    Keywords: digital skills gap, skilling policies, digital divide
    Date: 2022–04
  7. By: Maria Zumbuehl (CPB Netherlands Bureau for Economic Policy Analysis); Nihal Chehber (CPB Netherlands Bureau for Economic Policy Analysis); Rik Dillingh (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: Tracking early in the school career can influence a student's further educational path significantly. We study the track advice at the end of primary school in the Netherlands, where teachers give a track advice based on a student's previous performance and their impression of the student's ability. If the student outperforms the initial advice in the subsequent nationwide test, the school reevaluates the student and can – but does not have to – update the final advice. We use cognitive and non-cognitive skills measurements that are collected three years before the tracking decision is made, linked with the teachers initial and revised advice, as well as background information from register data. We find that with equal skills, students from lower socio-economic backgrounds receive on average lower advice, while students with a migration background receive on average higher advice. A decomposition of the total difference in initial advice between students from high versus low educated parents shows that around 55% of the difference in advice can be explained by differences in cognitive and non-cognitive skills. Adding additional information about the family, school and place of residence, we can explain about 71% of the difference between students with low and high educated parents. We do not find a significant change in the gap in advice between children from different socio-economic backgrounds after the nationwide test and reevaluation procedure.
    JEL: I21 I24 J24
    Date: 2022–05
  8. By: Beshir, H.A.;; Fichera, E.;
    Abstract: Air pollution is a global concern for its negative externalities on the climate, but also on the healthcare sector and human capital accumulation. Yet, there is scant evidence on the effectiveness of clean air transport policies. In this study we investigate the effects of London’s Low Emission Zone (LEZ) and Ultra-Low Emission Zone (ULEZ) on health and well-being. We exploit the temporal and spatial variation of these policies, implemented in Greater London (LEZ) and Central London (ULEZ) in 2008 and 2019, respectively. Using a difference-in-differences approach and linked survey and administrative data, we find LEZ has significantly reduced PM10 by 12% of the baseline mean and ULEZ has reduced both NO2 by 12.4% and PM10 by 27%. We also show improvements in health with LEZ reducing limiting health problems by 7%, COPD by 14.5% and sick leave by 17%; and ULEZ reducing number of health conditions by 22.5%, anxiety by 6.5%, and sick leave by 18%. A back of the envelope cost-benefit analysis indicates savings for £963.7M for the overall population.
    Keywords: air pollution; well-being; low emission zones;
    JEL: I25 J1 O12
    Date: 2022–05
  9. By: Carlos Oliveira (Nova School of Business and Economics)
    Abstract: Over the last three decades, wage inequality and the importance of the minimum wage presented an interesting negative correlation in Portugal. Using a semiparametric approach, counterfactual decomposition methods, and an extremely rich matched employer-employee dataset of all employees in the country, this paper presents significant visual and quantitative evidence of how the minimum wage structurally reshaped the wage distribution. The remarkable rise in the real minimum wage of 2006-2019 fully explained the sharp decline in wage inequality, and 40% of average wage growth - for women, who benefited the most, that was 60%. Spillover effects reached up to 40% above the minimum, being at times more important than the bite itself. The minimum wage reduced within and between wage in- equality in several fronts, cutting the gender wage gap by a quarter, potentially decreasing the returns to education, and raising wages of workers at less productive firms. While the minimum wage bite was felt in workers’ base wages, spillovers predominantly manifested in total wages.
    Keywords: minimum wage, spillover effects, wage inequality, counterfactual decomposition
    JEL: C14 D31 J31 J38
    Date: 2022–04
  10. By: Marius A. K. Ring; Thor Olav Thoresen
    Abstract: We provide novel evidence on the linkages between capital taxation and charitable giving on three fronts. First, we use quasi-experimental variation in the annual Norwegian wealth tax to study the effect on how much households give. Inconsistent with the notion that households give more in order to reduce future wealth taxes, we find a small negative effect. This is effect is entirely driven by households paying more in wealth taxes. The extensive-margin variation has no effect, which suggests an absence of intertemporal substitution effects in giving. Second, we study bunching at an income-tax exemption threshold for giving and estimate a modest own-price elasticity that is decreasing in income, age, and wealth. Third, we show that these nominally unrelated tax incentives interact: wealth taxation increases the after-tax own-price elasticity of giving. Overall, our evidence is consistent with modest effects of capital taxation on charitable giving that are primarily driven by income effects.
    Keywords: charitable giving, wealth taxation, tax incentives
    JEL: H24 H31 H41 D64
    Date: 2022
  11. By: Sandra McNally; Luis Schmidt; Anna Valero
    Abstract: Further Education colleges are a key way in which 16-19 year olds acquire skills in the UK (much like US Community Colleges), especially those from low income backgrounds. Yet, little is known about what could improve performance in these institutions. We design and conduct the world’s first management practices survey in these colleges (based on the World Management Survey) and match this to administrative longitudinal data on over 40,000 students. Value added regressions with rich controls suggest that structured management matters for educational outcomes (e.g. upper secondary qualifications), especially for students from low-income backgrounds. In a hypothetical scenario where a learner is moved from a college at the 10th percentile of management practices to the 90th, this would be associated with 8% higher probability of achieving a good high school qualification, which is nearly half of the educational gap between those from poor and non-poor backgrounds. Hence, improving management practices may be an important channel for reducing inequalities.
    Keywords: management practices, further education
    JEL: I20 J24
    Date: 2022
  12. By: Mathias Hoffmann; Iryna Stewen; Michael Stiefel
    Abstract: Using a firm-bank panel of more than 1m German firms over 2010-2016, we document that local public bank lending to municipalities crowds out private investment. Our results show how crowding out can happen in a developed economy characterized by low interest rates and fiscal austerity. Our mechanism relies on two structural features of Germany’s banking landscape: First, the geographical segmentation of credit markets for small and medium firms (SME) which are dominated by local banks. Second, a special statutory mandate requiring local public banks to lend to municipalities. With yields on local government debt declining to all-time lows, local public banks tried to alleviate stress on their balance sheets by using their local market power to charge higher rates on their SME customers. This crowded out firm investment. Perversely, fiscal consolidation at the state and federal levels contributed to this effect by putting pressure on the budgets of municipal governments which increasingly borrowed from local public banks. Crowding out lowered aggregate private investment by around 30-40 bio euros per year (or 1 percent of GDP). Thus, we identify a novel channel through which low interest rates can adversely affect bank lending and firm performance. Our results also illustrate how segmented credit markets can amplify negative multiplier effects from fiscal austerity.
    Keywords: local public finance, firm-level investment, crowding-out, fiscal austerity, global and intra-European imbalances
    JEL: E22 E40 E62 G21 G28 F21 F32 H32
    Date: 2021

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