nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2022‒06‒20
33 papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Heterogeneous Paths to Stability By di Porto, Edoardo; Tealdi, Cristina
  2. Does income inequality change the relationship between environmental attitudes and subjective well-being? Evidence for 27 European countries By Ary Júnior
  3. The unequal consequences of job loss across countries By Acabbi, Edoardo; Barcelo, Cristina; Bertheau, Antoine; Gulyas, Andreas; Lombardi, Stefano; Saggio, Raffaele
  4. Offshoring, domestic employment and production: Evidence from the German International Sourcing Survey By Kaus, Wolfhard; Zimmermann, Markus
  5. Unburdening regulation: the impact of regulatory simplification on photovoltaic adoption in Italy By Federica Daniele; Stefano Clò; Enza Maltese; Alessandra Pasquini
  6. Are women breaking the glass ceiling? A gendered analysis of the duration of sick leave in Spain By Martín-Román, Ángel L.; Moral, Alfonso; Pinillos-Franco, Sara
  7. This time is not so different: income dynamics during the Covid-19 recession By Brian Bell; Nicholas Bloom; Jack Blundell
  8. Socioeconomic inequalities in survival to retirement age or shortly afterwards: a register-based analysis By Strozza, Cosmo; Vigezzi, Serena; Callaway, Julia; Kashnitsky, Ilya; Aleksandrovs, Aleksandrs; Vaupel, James W
  9. Older Mothers' Employment and Marriage Stability When the Nest Is Empty By D'Albis, Hippolyte; Doorley, Karina; Stancanelli, Elena G. F.
  10. Exchanging money for love? A regional analysis of EU cohesion policy on euroscepticism By Bayerlein, Michael; Diermeier, Matthias
  11. Pandemic Depression: COVID-19 and the Mental Health of the Self-Employed By Caliendo, Marco; Graeber, Daniel; Kritikos, Alexander S.; Seebauer, Johannes
  12. Does unemployment worsen babies’ health? A tale of siblings, maternal behaviour, and selection By De Cao, Elisabetta; McCormick, Barry; Nicodemo, Catia
  13. Replacing student grants with loans. Evidence from a Swedish policy reform. By Brandén, Gunnar
  14. Pension reform, incentives to retire and retirement behavior: empirical evidence from Swedish micro-data. By Laun, Lisa; Palme, Mårten
  15. Intergenerational Spillovers of Integration Policies: Evidence from Finland’s Integration Plans By Pesola, Hanna; Sarvimäki, Matti
  16. Filling in the blanks. How does information about the Swedish EITC affect labour supply? By Nyman, Pär; Aggeborn, Linuz; Ahlskog, Rafael
  17. Linking the health of older people in places with labour market outcomes for all: does it matter how we measure health? By Murray, Emily T; Head, Jenny; Shelton, Nicola; Beach, Brian; Norman, Paul
  18. Fertility and Family Labor Supply By Katrine Marie Jakobsen; Thomas H. Jørgensen; Hamish Low; Katrine Marie Jakobsen
  19. Monetary compensation schemes during the COVID-19 pandemic: Implications for household incomes, liquidity constraints and consumption across the EU By Silvia De Poli; Michael Christl; Francesco Figari; Tine Hufkens; Chrysa Leventi; Andrea Papini; Alberto Tumino
  20. Permanent and transitory earnings dynamics and lifetime income inequality in Sweden By Gustafsson, Johan; Holmberg, Johan
  21. Short-time work policies during the COVID-19 pandemic By Julien Albertini; Xavier Fairise; Arthur Poirier; Anthony Terriau
  22. Working from Home during a Pandemic – A Discrete Choice Experiment in Poland By Lewandowski, Piotr; Lipowska, Katarzyna; Smoter, Mateusz
  23. Alternative financing and investment in intangibles: evidence from Italian firms By Gabriele Beccari; Francesco Marchionne; Beniamino Pisicoli
  24. The Impact of Austerity Policies on Local Income: Evidence from Italian Municipalities By Andrea Cerrato; Francesco Filippucci
  25. Alcohol Price Floors and Externalities: The Case of Fatal Road Crashes By Francesconi, Marco; James, Jonathan
  26. You can’t be what you can’t see: The role of gender in the intergenerational transmission of entrepreneurship By Noemi Oggero; Francesco Devicienti; Mariacristina Rossi; Davide Vannoni
  27. Health shocks and spousal labor supply: An international perspective By Jolly, Nicholas A.; Theodoropoulos, Nikolaos
  28. Regional Structural Change and the Effects of Job Loss By Arntz, Melanie; Ivanov, Boris; Pohlan, Laura
  29. Effect of Secondary Education on Cognitive and Non-cognitive Skills By Ollikainen, Jani-Petteri; Pekkarinen, Tuomas; Uusitalo, Roope; Virtanen, Hanna
  30. Inflation Illiteracy – A Micro-Data Analysis By Andersson, Fredrik N G; Hjalmarsson, Erik; Österholm, Pär
  31. The Short-Term Effect of the COVID-19 Crisis on Employment Probabilities of Labour-Market Entrants in the Netherlands By Bussink, Henri; Vervliet, Tobias; ter Weel, Bas
  32. Earnings responses to even higher taxes By Miao, Dingquan; Selin, Håkan; Söderström, Martin
  33. A few Euro more: benefit generosity and the optimal path of unemployment benefits By Anna D'Ambrosio; Vincenzo Scrutinio

  1. By: di Porto, Edoardo (University of Naples Federico II); Tealdi, Cristina (Heriot-Watt University, Edinburgh)
    Abstract: We investigate how the flexibility of temporary contracts affects the probability of young workers to be upgraded into permanent employment. Theoretically, we explore the workers' career development in response to the change in flexibility within a search and matching model; empirically, we exploit an Italian labour market reform which increased flexibility in a difference in differences framework. We find that new entrants in the labour market who have been affected by the reform experienced a decrease in the conversion rate of approximately 12.5 percentage points in the first months after the reform, and of 5.1 percentage points over a year, compared to unaffected peers. This effect is particularly strong among women and low-educated workers employed in low productive firms in the Center/South of Italy. Worryingly, the lower conversion rate leads to a 25% wage penalty even two years down the workers' career paths.
    Keywords: institutional reforms, flexibility, young workers, temporary contracts, employment protection legislation
    JEL: J41 J63 J64
    Date: 2022–04
  2. By: Ary Júnior
    Abstract: This paper explores the effects of income inequality on the relationship between environmental attitudes and life satisfaction across 27 European countries. Furthermore, it assesses the influence of the European Union on their citizens’ behavior regarding the link between environmental attitudes and happiness. Using data from European Values Study, it applies an ordered probit model. The findings suggest that subjective and objective income inequality do not change the relationship between environmental attitudes and welfare, providing evidence of the “commitment effect”. The results also show similar performance of the relationship between environmental attitudes and well-being between EU-members and non-EU members.
    Date: 2022–05
  3. By: Acabbi, Edoardo (Universidad Carlos III de Madrid,); Barcelo, Cristina (Banco de España); Bertheau, Antoine (University of Copenhagen.); Gulyas, Andreas (University of Mannheim); Lombardi, Stefano (Institute for economic research, VATT); Saggio, Raffaele (University of British Columbia)
    Abstract: We document the consequences of losing a job across countries using a harmonized research design applied to seven matched employer-employee datasets. Workers in Denmark and Sweden experience the lowest earnings declines following job displacement, while workers in Italy, Spain, and Portugal experience losses three times as high. French and Austrian workers face earnings losses somewhere in between. Key to these differences is that Southern European workers are less likely to find employment following displacement. Loss of employer specific wage premiums explains a substantial portion of wage losses in all countries.
    Keywords: Job loss Effects; Wage dynamics; Labor turnover; Mass Layoffs
    JEL: J30 J63 J64
    Date: 2022–05–18
  4. By: Kaus, Wolfhard; Zimmermann, Markus
    Abstract: This paper analyses the effect of offshoring (i.e., the relocation of activities previously performed in-house to foreign countries) on various firm outcomes (domestic employment, production, and productivity). It uses data from the International Sourcing Survey (ISS) 2017 for Germany, linked to other firm level data such as business register and ITGS data. First, we find that offshoring is a rare event: In the sample of firms with 50 or more persons employed, only about 3% of manufacturing firms and 1% of business service firms have performed offshoring in the period 2014-2016. Second, difference-in-differences propensity score matching estimates reveal a negative effect of offshoring on domestic employment and production. Most of this negative effect is not because the offshoring firms shrink, but rather because they don't grow as fast as the non-offshoring firms. We further decompose the underlying employment dynamics by using direct survey evidence on how many jobs the firms destroyed/created due to offshoring. Moreover, we do not find an effect on labour productivity, since the negative effect on domestic employment and production are more or less of the same size. Third, the German data confirm previous findings for Denmark that offshoring is associated with an increase in the share of 'produced goods imports', i.e. offshoring firms increase their imports for the same goods they continue to produce domestically. In contrast, it is not the case that offshoring firms increase the share of intermediate goods imports (a commonly used proxy for offshoring), as defined by the BEC Rev. 5 classification.
    Keywords: international sourcing,offshoring,productivity
    JEL: D24 L60 O30
    Date: 2022
  5. By: Federica Daniele; Stefano Clò; Enza Maltese; Alessandra Pasquini
    Abstract: This paper measures the impact of a series of reforms enacted by a subset of Italian regions during 2009-2013 that dramatically simplified the authorisation procedure for investment into mid-sized to large sized photovoltaic plants, i.e. plants with capacity installed between 20 and 200 kW. We rely on georeferenced administrative data on nearly the universe of photovoltaic plants built in Italy, and employ a stacked border diff-in-diff around the time of the regional reforms and municipalities located close to the border of regions that implemented them. We find that simplification reforms increased by 29 percentage points the capacity installed in medium-to-large plants, which resulted into 12 extra MW installed per quarter, about 10% of average quarterly installations for the same category of plants during 2009-2013.
    Keywords: Photovoltaic investment, regulatory simplification, regions
    JEL: K32 Q42 H23 L51
    Date: 2022
  6. By: Martín-Román, Ángel L.; Moral, Alfonso; Pinillos-Franco, Sara
    Abstract: We study the gender gap in the duration of sick leave in Spain by splitting this duration into two types of days - those which are related to biological characteristics and those derived from behavioral reasons. Using the Statistics of Accidents at Work for 2011-2019, we found that women presented longer standard durations (i.e., purely attached to physiological reasons) compared to men. However, when estimating individuals' efficiency as the ratio between actual and standard durations, we found that women were more inefficient at lower levels of income, whereas in case of men, this occurred at higher levels of income. These results were reinforced when considering that men and women do not recover from the same injury at the same rate. Women were more efficient than men across all the compensation distribution, especially at higher income levels.
    Keywords: Moral hazard,Glass ceiling,Workplace injuries,Gender,Stochastic frontiers
    JEL: I12 I13 I18 J28
    Date: 2022
  7. By: Brian Bell; Nicholas Bloom; Jack Blundell
    Abstract: We use a UK employer-employee administrative earnings dataset to investigate the response of earnings and hours to business cycles. Exploiting our long panel of data from 1975 to 2020 we find wide heterogeneity in the exposure of different types of workers to aggregate shocks. Employees who are younger, male, lower-skilled, non-union, and working in smaller private sector firms show the largest earnings response to recessions. The qualitative patterns of earnings changes across workers observed in the COVID-19 recession are broadly as predicted using the previously estimated exposures and size of the GDP shock. This suggests the COVID-19 recession in terms of its impact responses was relatively similar to those that have gone before, but the GDP shock was far larger in absolute size. Compared to aggregate shocks, we find a relatively small role of firm-specific shocks, suggesting macro shocks play an outsized role in individual earnings dynamics.
    Keywords: Covid-19, recession, firm-specific shocks, earnings
    Date: 2021–09–02
  8. By: Strozza, Cosmo (University of Southern Denmark); Vigezzi, Serena; Callaway, Julia (University of Southern Denmark); Kashnitsky, Ilya (University of Southern Denmark); Aleksandrovs, Aleksandrs; Vaupel, James W
    Abstract: Larger numbers of people are living to retirement and old age, posing a threat to the financing of the welfare state. In Denmark, statutory retirement age is increasing gradually to account for changes in life expectancy. However, the chances of reaching retirement age are not equal across the population, and raising the retirement age could disproportionally affect those from lower socioeconomic backgrounds. In this paper, we investigate socioeconomic inequalities in mortality before retirement age or shortly thereafter in Denmark. We use Danish registry data over a 30-year period, focusing on individuals aged 50 to 70. We perform sex-specific survival analyses across socioeconomic groups using three measures of socioeconomic status: education, income, and occupation. We observe an increase in survival inequalities over time between the lowest and highest socioeconomic groups for each measure. The reason for the widening gap lies in minimal mortality improvements in the lowest socioeconomic group. These results are complemented by lifespan inequality measures, which have the same mortality trends. We show that individual level variability in socioeconomic characteristics play a crucial role in defining the survival chances just before and shortly after retirement and thus should be accounted for in designing retirement policies.
    Date: 2022–04–29
  9. By: D'Albis, Hippolyte (University of Toulouse I); Doorley, Karina (Economic and Social Research Institute, Dublin); Stancanelli, Elena G. F. (Paris School of Economics)
    Abstract: A significant literature in the social sciences addresses the impact of child-bearing and rearing on marital stability and on mothers' labour market outcomes. Much less is known about older mothers' employment and marriage patterns when the adult children leave the parental nest. This study aims to shed light on these issues using longitudinal labour force data for France. Exploiting retirement laws for identification purposes, and taking a regression discontinuity approach, we find that older women's retirement probability is positively associated with an empty nest. We also conclude that an empty nest is negatively associated with older mothers' marriage probability. There is scope for better targeting of both family and retirement policies for older mothers during those critical years when adult children leave the parental nest.
    Keywords: ageing, retirement, divorce
    JEL: J12 J14 J22
    Date: 2022–05
  10. By: Bayerlein, Michael; Diermeier, Matthias
    Abstract: In the past, the European Union seems to have been able to tame Euroscepticism through regional 'convergence' funding. After the Eastern enlargement of the Union, however, this relationship needs to be put to the test. Not only have the new member states become the main recipients of EU funding, Eastern Europe has also changed from once being the most integration-friendly region to displaying the most integration-hostile attitudes in the EU. Motivated by this empirical puzzle, we revisit the relationship between structural 'convergence' funding and Euroscepticism and ask where - if at all - is the EU's convergence spending still able to tame Euroscepticism. Most surprisingly, correlation analyses reveal that between 2006 and 2018 larger regional subsidies go along with increasing opposition to EU integration. We can rebut this counterintuitive finding by a Diff-in-Diff approach that reveals an increasing Euroscepticism in Eastern European regions between 2006 and 2014. Nevertheless, also these more advanced models fail to establish a positive relationship between regional funding eligibility and pro-integrationist attitudes. Finally, fuzzy RDD models exploit the funding assignment rule and corroborate that the EU is no longer able to pacify integration-critical regions by their simply increasing 'convergence' funding. Nevertheless, the EU has won support in Eastern Europe where EU investments are perceived (positively). In designing a strategy to win back support for EU integration, Brussels does not need more fiscal capacity but rather has to design 'convergence' funding that is visible as well as clearly attributable to its donor.
    Keywords: Euroscepticism,cohesion policy,EU transfers,methodology,regional analysis
    JEL: D72 F14 H11 I38
    Date: 2022
  11. By: Caliendo, Marco (University of Potsdam); Graeber, Daniel (University of Potsdam); Kritikos, Alexander S. (DIW Berlin); Seebauer, Johannes (DIW Berlin)
    Abstract: We investigate the effect of the COVID-19 pandemic on self-employed people’s mental health. Using representative longitudinal survey data from Germany, we reveal differential effects by gender: whereas self-employed women experienced a substantial deterioration in their mental health, self-employed men displayed no significant changes up to early 2021. Financial losses are important in explaining these differences. In addition, we find larger mental health responses among self-employed women who were directly affected by government-imposed restrictions and bore an increased childcare burden due to school and daycare closures. We also find that self-employed individuals who are more resilient coped better with the crisis.
    Keywords: representative longitudinal survey data, gender, mental health, COVID-19, self-employment, PHQ-4 score, resilience
    JEL: L26 D31 I14 I18 J16
    Date: 2022–04
  12. By: De Cao, Elisabetta; McCormick, Barry; Nicodemo, Catia
    Abstract: We study in-utero exposure to economic fluctuations on birth outcomes by exploiting geographical variation in the unemployment rate across local areas in England, and by comparing siblings born to the same mother. Using rich individual data from hospital administrative records for 2003–2012, babies’ health is found to be strongly pro-cyclical. This overall result masks marked differences between babies born in the most affluent areas whose health at birth improves in a recession, and babies born in the average-to-lowest income deprived areas whose health deteriorates. Maternal alcohol consumption, smoking, and delay in the first antenatal care assessment - combined with parental income loss, are found to drive the results. While differences in maternal risky behaviours can explain the heterogenous effects.
    Keywords: unemployment rate; birth outcomes; birthweight; fertility; England; ES/T008415/1; NIHR Applied Research Collaboration Oxford and Thames Valley at Oxford Health NHS Foundation Trust
    JEL: E24 I10 I12 J13
    Date: 2022–05–01
  13. By: Brandén, Gunnar (Karolinska Institutet, and Center for Epidemiology and Social medicine (CES))
    Abstract: The Recruitment grant was a student aid policy that replaced the loans in the student aid system with grants for unemployed adults with low education. In this paper, I estimate the causal effects of repealing this policy on the educational attainment and subsequent labor market outcomes for the target population in a difference-in-differences framework. I find that the repeal reduced enrollment in adult education by 10 percent relative to the pre-repeal enrollment rate, and that the number of passed credits decreased by 29 percent. I also find that repeal increased unemployment by an average of 76 days over the eight-year follow-up, and decreased earnings by about 12,000 SEK ($1,300). Although there are substantial differences in these outcomes across subgroups, the repeal had significant adverse effects for the target population as a whole.
    Keywords: Student aid; Adult education; Difference-in-differences; Propensity scores
    JEL: D31 I24 J62 R00
    Date: 2022–04–20
  14. By: Laun, Lisa (IFAU - Institute for Evaluation of Labour Market and Education Policy); Palme, Mårten (Department of Economics, Stockholm University)
    Abstract: This paper investigates to what extent the 1998 reform of Sweden’s public old-age pension system contributed to the increase in extensive margin labor supply among older workers seen in the country in recent decades. We use a large data set containing all males and females born in Sweden between 1927 and 1950 and observe their retirement behavior during 1991–2012. The data show that the reform changed the incentives to remain in the labor force ambiguously: although it induced an income effect towards later retirement through lower replacement levels,it also implied a lower price on leaving the labor market under some assumptions. We use an econometric model in which the economic incentives to stay in the labor market are measured by Social Security Wealth, defined at each hypothetical retirement age, and a variable measuring the implicit tax, imposed by the income security system, on staying in the labor force. The point estimates from our econometric model, which should be interpreted with caution, suggest that at most a small part of the increase in labor force participation of the elderly can be attributed to the pension reform.
    Keywords: retirement; pension; reform; incentives to retire
    JEL: H30 J10 J20
    Date: 2022–04–28
  15. By: Pesola, Hanna (VATT, Helsinki); Sarvimäki, Matti (Aalto University)
    Abstract: This paper shows that an integration policy aimed at unemployed adult immigrants generated positive spillovers for their children. Our research design builds on a discontinuity in the phase-in-rule of Finland’s 1999 reform that introduced integration plans—a new approach for allocating unemployed immigrants to active labor market policies. We find that parents’ integration plans substantially improved their children’s grades and educational attainment and reduced their time out of employment, education, or training. Our examination of potential mechanisms suggests that integration plans increased parents’ earnings, employment and exposure to native colleagues and pushed their children to better schools.
    Keywords: immigrants, integration policy, intergenerational effects
    JEL: J61 J68 J13 H53
    Date: 2022–05
  16. By: Nyman, Pär (Statsvetenskapliga institutionen, Uppsala universitet.); Aggeborn, Linuz (Statsvetenskapliga institutionen, Uppsala universitet); Ahlskog, Rafael (Statsvetenskapliga institutionen, Uppsala universitet)
    Abstract: Information plays a key role in economics. According to the benchmark neoclassical model, agents require information in order to optimize their choices. Information, however, is sometimes incomplete or asymmetric in the real world. In this paper, we investigate the role of information for the labour–leisure choice. We conduct an information experiment wherein we distribute a leaflet about the Swedish Earned Income Tax Credit (EITC), and then study the effects with registry data. More specifically, we focus on the household decision to allocate between labour income and parental leave payments. The EITC, it bears noting, applies to the former but not to the latter. The construction of the Swedish EITC generates a strong economic incentive to have some labour income during a calendar year, because it is tailored to benefit low labour income earners more in relative terms. Yet, despite the substantial economic incentives involved, and despite the flexibility with which a person may earn labour income, we find that providing information about the features of the EITC has zero impact on labour supply.
    Keywords: Labour Supply; Information; Experiment; Earned Income Tax Credit; Sweden
    JEL: I21 I26 J18
    Date: 2022–05–12
  17. By: Murray, Emily T; Head, Jenny; Shelton, Nicola; Beach, Brian; Norman, Paul
    Abstract: Background Inequalities between different areas in the UK according to health and employment outcomes are well-documented. Yet it is unclear which health indicator is most closely linked to labour market outcomes, and whether associations are restricted to the older population. Methods We used the ONS Longitudinal Study (LS) to analyse which measures of health-in-a-place were cross-sectionally associated with three employment outcomes in 2011: not being in paid work, working hours (part-time, full-time), and economic inactivity (unemployed, retired, sick/disabled, other). Nine health indicators from local-authority census and vital records data were chosen to represent the older working age population (50-74y) and linked with LS data. Interactions by gender and age category (16-49y vs 50-74y) were tested. Findings For all health-in-a-place measures, LS members aged 16-74 who resided in the tertile of local authorities with the ‘unhealthiest’ older population, had higher odds of not being in paid work, including all four types of economic inactivity. The strongest associations were seen for the health-in-a-place measures that were self-reported, long-term illness and self-rated health (SRH) (OR 1·60 [95% CI 1·52–1·67/8]). Within each measure, associations were slightly stronger for men than women and for the 16-49y versus 50-74y LS sample. In models adjusted for individual SRH and gender and age category interactions, health-in-a-place gradients were apparent across all economic inactivity’s. However, these same gradients were only apparent for women in part-time work and men in full-time work. Interpretation Improving health of older populations may lead to wider economic benefits for all. Funding Health Foundation
    Date: 2022–04–21
  18. By: Katrine Marie Jakobsen; Thomas H. Jørgensen; Hamish Low; Katrine Marie Jakobsen
    Abstract: We study the role of fertility adjustments for the labor market responsiveness of men and women. First, we use longitudinal Danish register data and tax reforms from 2009 to provide new empirical evidence on asymmetric fertility adjustments to tax changes of men and women. Second, we quantify the importance of these fertility adjustments for understanding the labor supply responsiveness of couples through a life-cycle model of family labor supply and fertility. Allowing fertility adjustments increases the labor supply responsiveness of women by 28%. These adjustments affect human capital accumulation and has permanent implications for the gender wage gap within couples.
    Keywords: fertility, labor supply, human capital accumulation, gender inequality, tax reform, life-cycle
    JEL: J22 J13 D15 H24
    Date: 2022
  19. By: Silvia De Poli (Joint Research Centre); Michael Christl (Joint Research Centre); Francesco Figari (University of Insubria); Tine Hufkens (Joint Research Centre); Chrysa Leventi (Athens University of Economics and Business); Andrea Papini (Joint Research Centre); Alberto Tumino (Joint Research Centre)
    Abstract: This paper analyses the effect of the COVID-19 pandemic on household disposable income and household demand in the European Union (EU) during 2020, making use of the EU microsimulation model EUROMOD and nowcasting techniques. We show evidence of heterogeneity in the impact of the COVID-19 pandemic on the labour markets in EU Member States, with some countries hit substantially harder than others. Most EU Member States experience a large drop in market incomes, with poorer households hit the hardest. Tax-benefit systems cushioned significantly the transmission of the shock to the disposable income and the household demand, with monetary compensation schemes playing a major role. Additionally, we show that monetary compensation schemes prevent a significant share of households from becoming liquidity constrained during the pandemic.
    Keywords: COVID-19, inequality, microsimulation, EUROMOD, compensation schemes, liquidity constraints, consumption, income stabilizers
    JEL: D13 E24 H24
    Date: 2022–06
  20. By: Gustafsson, Johan (Department of Economics, Umeå University); Holmberg, Johan (Department of Economics, Umeå University)
    Abstract: This paper studies the role of permanent- and transitory earnings variability for lifetime income inequality in Sweden. We fit a permanent–transitory error component model to the autocovariance structure of earnings using administrative data for 2002–2015 and minimum distance estimation. We find that permanent earnings inequality increased during the first decade and that the financial crisis of 2008 temporarily heightened earnings volatility. Using this model, we simulate pensions and study lifetime income inequality. We find that permanent earnings differences generally contributes the most to lifetime income inequality. We conclude that the Swedish pension system provides some insurance against earnings risk, but accentuates the role of permanent earnings differences in explaining lifetime inequality.
    Keywords: Permanent-transitory; Income pension entitlements; earning dynamics; life-cycle inequality
    JEL: H55 I24 J31 J62
    Date: 2022–05–24
  21. By: Julien Albertini (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France); Xavier Fairise (GAINS, University of Le Mans); Arthur Poirier (LED, Paris 8 University Vincennes-Saint-Denis); Anthony Terriau (GAINS, University of Le Mans)
    Abstract: In this paper, we analyze the impact of short-time work programs on the French labor market during the COVID-19 pandemic. We develop a dynamic model with incomplete markets, search frictions, human capital, and aggregate and idiosyncratic productivity shocks. We calibrate our model and simulate what the labor market response to a lockdown shock would have been under various STW programs. We show that STW succeeded in stabilizing employment and consumption but generated substantial windfall effects characterized by an excessive reduction in hours worked.
    Keywords: COVID-19, matching frictions, short-time work policies, incomplete markets.
    JEL: E21 E24 J24 J38 J63 J65
    Date: 2022
  22. By: Lewandowski, Piotr (Institute for Structural Research (IBS)); Lipowska, Katarzyna (Institute for Structural Research (IBS)); Smoter, Mateusz (Institute for Structural Research (IBS))
    Abstract: The COVID-19 pandemic has transformed working from home from a rarity to a widely adopted job amenity. We study workers' willingness to pay for working from home, and how it may be affected by subjective and objective assessments of COVID-19-related risks. We conducted a discrete choice experiment with more than 10,000 workers in Poland. We randomised wage differences between otherwise identical home- and office-based jobs. We also randomised an information provision treatment in which we informed 50% of workers about the level of exposure to contagion in their occupation, and how it may be reduced by working from home. We found that the demand for working from home was substantial – the majority of participants would prefer to work from home if they were offered the same wage for a home-based job as they would earn in an office-based job. On average, workers would sacrifice 5.1% of their earnings for the option to work from home, especially for 2-3 days a week (7.3%) rather than 5 days a week (2.8%). We also found that the perception of COVID-19 mattered, as workers who perceived it as a threat were willing to give up a much higher share of their earnings than those who did not. However, the willingness to pay did not differ significantly between individuals depending on whether their occupation had a high or a low level of exposure, or between individuals treated in the information experiment and those in the control group.
    Keywords: working from home, discrete choice, information provision experiment, occupational exposures, COVID-19
    JEL: J21 J44
    Date: 2022–04
  23. By: Gabriele Beccari (University of Rome Tor Vergata. Dipartimento di Economia e Finanza); Francesco Marchionne (Indiana University, Kelley School of Business); Beniamino Pisicoli (University of Rome Tor Vergata. Dipartimento di Economia e Finanza)
    Abstract: This paper uses the Italian 2012 reform that introduced minibonds, a financial instrument specifically designed for SMEs, to check whether more accessible market-based finance promotes investment in intangibles. We apply a propensity score matching to address selection bias, run diff-in-diff estimates over 1,454 different samples to test our hypotheses, and use a meta-analysis to summarize the results. We find that minibond-issuing firms increase investments in intangible assets, a component difficult to finance via bank credit, more than other firms and investments in tangibles. Two mechanisms are at work: minibond issuances increase financial resources available to the firm (financial effect) and, above all, signal an improvement in business practices (reputational effect). These effects are more intense for smaller, more opaque, and bank-dependent firms. Our results are not affected by model dependence or endogeneity issues and are robust to different specifications.
    Keywords: intangibles; corporate bonds; bank dependence; minibonds; market-based finance; SMEs; investment
    JEL: G10 G23 G32 O30
    Date: 2022–05
  24. By: Andrea Cerrato (University of California [Berkeley] - University of California); Francesco Filippucci (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: Fiscal consolidation is often a necessity for local governments, but the cost of austerity for local economic activity is an open empirical question. Quasi-experimental estimates of local fiscal multipliers range between 1.5 and 1.8, but most of them are obtained from expansionary shocks. We study the extension of tighter budget rules in 2013 to Italian municipalities below 5,000 inhabitants, which generates a persistent increase of about 100 Euros per capita (0.5% of local income) in municipal net budget surplus, mostly driven by a cut in capital expenditures. We find no decrease in local income over a eight-year horizon. The estimated multiplier is always not significantly different from zero, and we can exclude it is above 1.5 with 95% confidence within 4 years from the shock. We find no evidence of spillovers to neighboring municipalities. These results suggest that the cost of fiscal consolidation can be lower than what currently prevailing estimates of local multipliers imply.
    Keywords: Local economy multiplier,Budget deficit,Fiscal policy,Fiscal consolidation
    Date: 2022–05
  25. By: Francesconi, Marco (University of Essex); James, Jonathan (University of Bath)
    Abstract: In May 2018, Scotland introduced a minimum unit price on alcohol. We examine the impact of this policy on traffic fatalities and drunk driving accidents. Using administrative data on the universe of vehicle collisions in Britain and a range of quasi-experimental modeling approaches, we do not find that the policy had an effect on road crash deaths and drunk driving collisions. The results are robust to several sensitivity exercises. There is no evidence of effect heterogeneity by income and other predictors of alcohol consumption or cross-border effects. A brief discussion of the policy implications of our findings is provided.
    Keywords: motor vehicle collisions, minimum unit pricing, alcohol, externality, driving under the influence
    JEL: D12 D62 H23 K42 R41
    Date: 2022–05
  26. By: Noemi Oggero; Francesco Devicienti; Mariacristina Rossi; Davide Vannoni
    Abstract: In this paper, we investigate how the intergenerational transmission of entrepreneurship varies between sons and daughters, and whether such a process depends on living in a country characterized by a high gender gap. Using the SHARE dataset, we find that the effect on daughters’ entrepreneurial choices of having an entrepreneur as father is lower than the one on sons only in countries with a high gender gap. Moreover, it is just in countries with high gender inequality that the effect of having an entrepreneurial mother is different between sons and daughters, with the impact being positive for daughters only. We also develop an individual-level indicator of gender gap within countries that corroborates our findings, which we interpret as evidence of the presence of a role modeling mechanism. However, we find evidence of convergence across time of the intergenerational transmission process to the gender-independent transfer typical of more gender equal countries.
    Keywords: Entrepreneurship, Gender, Parents, Intergenerational transmission
    Date: 2022
  27. By: Jolly, Nicholas A.; Theodoropoulos, Nikolaos
    Abstract: This paper uses data from the Survey of Health, Ageing and Retirement in Europe to analyze the effect of spousal health shocks on own labor supply decisions. Results from the analysis suggest minimal changes to the probability of work and the intensity of work for both husbands and wives of disabled spouses. Wives, however, do experience an increase in the probability of retirement after their husbands experience a work-limiting health shock. Results suggest that this increased probability is due to the desire to consume joint leisure. Finally, the analysis finds substantial cross-regional heterogeneity in the effect spousal health shocks have on the various labor market outcomes examined here, which suggests an important role for country-specific factors in the estimates provided in the earlier literature.
    Keywords: health shocks,marriage,labor supply
    JEL: I10 J12 J22
    Date: 2022
  28. By: Arntz, Melanie (ZEW Mannheim); Ivanov, Boris (ZEW); Pohlan, Laura (Institute for Employment Research (IAB), Nuremberg)
    Abstract: Routine-intensive occupations have been declining in many countries, but how does this affect individual workers’ careers if this decline is particularly severe in their local labor market? This paper uses administrative data from Germany and a matched difference-in-differences approach to show that the individual costs of job loss strongly depend on the task-bias of regional structural change. Workers displaced from routine manual occupations have substantially higher and more persistent employment and wage losses in regions where such occupations decline the most. Regional and occupational mobility partly serve as an adjustment mechanism, but come at high cost as these switches also involve losses in firm wage premia. Non-displaced workers, by contrast, remain largely unaffected by structural change.
    Keywords: routine-biased structural change, local labor markets, displacement, mass-layoffs, plant closures, matching, difference-in-differences, event study
    JEL: J24 J63 J64 J65 O33 R11
    Date: 2022–05
  29. By: Ollikainen, Jani-Petteri (LABORE Labour Institute for Economic Research); Pekkarinen, Tuomas (VATT, Helsinki); Uusitalo, Roope (University of Jyväskylä); Virtanen, Hanna (ETLA - The Research Institute of the Finnish Economy)
    Abstract: We exploit admission cutoffs to secondary schools to study the effects of general academically oriented, versus vocational secondary schooling on cognitive and non-cognitive skills using a regression discontinuity design. We measure these skills using the Finnish Defence Forces Basic Skills Test that due to compulsory military service covers the vast majority of Finnish men and is a strong predictor of later labor market success. We find that large differences in average skills across students that differ in their schooling when entering military service are due to selection rather than causal effects of secondary schooling on either cognitive or non-cognitive skills.
    Keywords: non-cognitive skills, regression discontinuity, secondary schooling
    JEL: J24 I21
    Date: 2022–05
  30. By: Andersson, Fredrik N G (Lund University); Hjalmarsson, Erik (University of Gothenburg); Österholm, Pär (Örebro University School of Business)
    Abstract: Survey data indicate that a relatively large share of households is ill-informed about the rate of inflation in the economy, with perceived and expected rates of inflation deviating sub-stantially from official measures. Using Swedish micro-level data, we find that such inflation illiteracy is related to respondent characteristics, including income, education and sex.
    Keywords: Perceived inflation; Inflation expectations; Survey data; Economic literacy
    JEL: E31
    Date: 2022–05–20
  31. By: Bussink, Henri (SEO Amsterdam); Vervliet, Tobias (SEO Amsterdam); ter Weel, Bas (SEO Amsterdam)
    Abstract: This research documents employment opportunities of labour-market entrants during the COVID-19 crisis in the Netherlands. Two recent cohorts of graduates are studied and compared to two pre-COVID-19 cohorts: the 2019 cohort was unexpectedly hit by the COVID-19 crisis about six months after entering the labour market and the 2020 cohort graduated and entered the labour market in the midst of a lockdown. Our estimation results suggest short-term effects of lockdowns on employment probabilities, specifically for relatively lower educated labour-market entrants. The effects appear to be relatively small in size and seem to fade when the lockdown measures are eased. Men seem to have suffered more than women and some sectors are hit harder than others, which could result in short-run mismatches. Overall the effects appear to be less severe than during an economic recession, which is most likely due to the tight labour market and the strong measures taken by the government to mitigate the labour-market impact of the COVID-19 crisis.
    Keywords: COVID-19, employment, young workers
    JEL: J10 J23 I24
    Date: 2022–04
  32. By: Miao, Dingquan (Linnaeus University); Selin, Håkan (IFAU - Institute for Evaluation of Labour Market and Education Policy); Söderström, Martin (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: We exploit a recent Swedish tax reform, implying higher marginal tax rates for the top 5% of the earnings distribution, to learn about earnings responses in an economy where taxes already are high. Using a simple and graphical cross sectional method, we estimate earnings elasticities in the range 0.13-0.16. We interpret the response using a simulation model in which people face uncertain marginal tax rates due to earnings dynamics. The tax response is surprisingly sharp given the earnings variability at the top of the earnings distribution.
    Keywords: Earnings supply; Income taxation
    JEL: H24 J22
    Date: 2022–05–30
  33. By: Anna D'Ambrosio; Vincenzo Scrutinio
    Abstract: In this paper, we exploit the provision of higher UB at different points of the unemployment spell to shed light on the relative cost of insurance at different horizons after the job loss. First, we exploit a double cap system in an RDD setting to study the effect of higher benefit levels in the early part of unemployment spell on time on benefits and non-employment. We find that higher benefits increase the time spent on benefits and in non-employment, with no impact on new job quality. Second, we exploit an age-based discontinuity in benefit duration, which determines higher benefits later in the spell, to compare the behavioural and mechanical costs of these two variations in benefits. We find that the moral hazard costs are greater for higher benefit levels early in the spell. In addition, we provide evidence of a slight negative selection in long term unemployment and argue that the long-term unemployed face higher uncertainty in their employment prospects. These findings suggest that higher benefits later in the unemployment spell generate lower costs and would provide higher insurance. Our results question the optimality of strongly declining schedules for unemployment benefit levels.
    Keywords: unemployment insurance, benefit level, benefit duration, regression discontinuity design, optimal pattern
    Date: 2022–12

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