nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2022‒07‒25
eighteen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Firm-Level Effects of Reductions in Working Hours By Marta C.Lopes; Alessandro Tondini
  2. Job Location Decisions and the Effect of Children on the Employment Gender Gap By Andrea Albanese; Adrián Nieto; Konstantinos Tatsiramos
  3. Toxic pollution and labour markets: uncovering Europe's left-behind places By Charlotte Bez; Maria Enrica Virgillito
  4. Does Your Doctor Matter? Doctor Quality and Patient Outcomes By Rita Ginja; Julie Riise; Barton Willage; Alexander L.P. Willén
  5. Caring for Carers? The Effect of Public Subsidies on the Wellbeing of Unpaid Carers By Joan Costa-i-Font; Francesco D'Amico; Cristina Vilaplana-Prieto
  6. Lessons from an Aborted Second-Generation Rent Control in Catalonia By Konstantin A. Kholodilin; Fernando A. López; David Rey Blanco; Pelayo González Arbués
  7. The Subjective Cost of Young Children: A European Comparison By Angela Greulich; Sonja Spitzer; Bernhard Hammer
  8. Household and individual economic responses to different health shocks: The role of medical innovations By Volha Lazuka
  9. Heterogeneous Effects of After-School Care on Child Development By Laura Schmitz
  10. The 'Welcomed Lockdown' Hypothesis: When Do Mobility Restrictions Influence Mental Wellbeing? By Joan Costa-i-Font; Martin Knapp; Cristina Vilaplana-Prieto
  11. Fighting Populism on Its Own Turf: Experimental Evidence By Vincenzo Galasso; Massimo Morelli; Tommaso Nannicini; Piero Stanig
  12. The Early Roots of the Digital Divide: Socioeconomic Inequality in Children’s ICT Literacy from Primary to Secondary Schooling By Giampiero Passaretta; Carlos J. Gil-Hernández
  13. Downward Revision of Investment Decisions after Corporate Tax Hikes By Sebastian Link; Manuel Menkhoff; Andreas Peichl; Paul Schüle; Lukas Menkhoff
  14. Fiscal and Economic Effects of Local Austerity By Melinda Fremerey; Andreas Lichter; Max Löffler
  15. Business creation during Covid-19 By Bahaj, Saleem; Piton, Sophie; Savagar, Anthony
  16. Neighborhood CEOs By Amore, Mario Daniele; Bennedsen, Morten; Larsen, Birthe
  17. Mapping general practitioners' motivation: It is not all about the money By Yordanov, Dimitar; Oxholm, Anne Sophie; Gyrd-Hansen, Dorte; Bjørnskov Pedersen, Line
  18. Tracking and Taxing the Super-Rich: Insights from Swiss Rich Lists By Enea Baselgia; Isabel Z. Martínez

  1. By: Marta C.Lopes; Alessandro Tondini
    Abstract: How do legislative reductions in hours impact firms? In this paper, we use matched employer-employee data to evaluate a policy reform in Portugal that unexpectedly reduced the usual weekly working hours from 44 to 40 hours. Using a difference-in-differences approach that exploits initial heterogeneity across collective agreements covering workers, we show that the reform led to a significant drop in working hours in treated firms, while salaries did not adjust, resulting in higher wages per hour. We observe only a small and insignificant negative effect on employment, as treated firms are able to maintain or even increase sales despite the fall in labor input (total hours worked within a firm). We show that this partly reflects higher prices rather than higher (or constant) volumes, whereby firms are able to shift the higher labor costs onto consumers.
    Keywords: working time, hours, wages, labor demand, labor cost
    JEL: J22 J23 J31
    Date: 2022–07
  2. By: Andrea Albanese; Adrián Nieto; Konstantinos Tatsiramos
    Abstract: We study the effect of childbirth on local and non-local employment dynamics for both men and women using Belgian social security and geo-location data. Applying an event-study design that accounts for treatment effect heterogeneity, we show that 75 percent of the effect of the birth of a first child on the overall gender gap in employment is accounted for by gender disparities in non-local employment, with mothers being more likely to give up non-local employment compared to fathers. This gender specialisation is mostly driven by opposing job location responses of men and women to individual, household and regional factors. On the one hand, men do not give up non-local employment after childbirth when they are employed in a high-paid job, have a partner who is not participating in the labour market or experience adverse local labour market conditions, suggesting that fathers trade off better employment opportunities with longer commutes. On the other hand, women give up non-local jobs regardless of their earnings level, their partner’s labour market status and local economic conditions, which is consistent with mothers specialising in childcare provision compared to fathers.
    Keywords: gender gap, childbirth, job location, cross-border employment, specialisation
    JEL: J13 J16 J61 C21 C23 J22 R23
    Date: 2022
  3. By: Charlotte Bez; Maria Enrica Virgillito
    Abstract: This paper looks at the nexus between toxic industrial pollution and the spillovers from the plant's production activities, leading to regional lock-ins. Geolocalised facility-level data from the European Pollutant Release and Transfer Register (E-PRTR) are used to calculate annual chemical-specific pollution, weighted by its toxicity. We combine the latter with regional data on employment, wages and demographics sourced from Cambridge Econometrics, covering more than 1.200 NUTS-3 regions in 15 countries, over the period 2007-2018. We employ quantile regressions to detect the heterogeneity across regions and understand the specificities of the 10th and 25th percentiles, the so-called left-behind places. Our first contribution consists in giving a novel and comprehensive account of the geography of toxic pollution in Europe, both at facility and regional level, disaggregated by sectors. Second, we regress toxic pollution (intensity effect) and pollutant concentration (composition effect) on labour market dimensions of left-behind places. Our results point to the existence of economic dependence on noxious industrialization in left-behind places. In addition, whenever environmental efficiency-enhancing production technologies are adopted this leads to labour-saving effects in industrial employment, but positive spatial spillovers at the regional level. Through the lens of evolutionary economic geography our results call for a new political economy of left-behind places.
    Keywords: Environmental inequality; Left-behind places; Toxic pollution; Labour markets.
    Date: 2022–07–02
  4. By: Rita Ginja; Julie Riise; Barton Willage; Alexander L.P. Willén
    Abstract: We estimate doctor value-added and provide evidence on the distribution of physician quality in an entire country, combining rich population-wide register data with random assignment of patients to general practitioners (GPs). We show that there is substantial variation in the quality of physicians, as measured by patients’ post-assignment mortality, in the primary care sector. Specifically, a one standard deviation increase in doctor quality is associated with a 12.2-percentage point decline in a patient’s two-year mortality risk. While we find evidence of observable doctor characteristics and practice styles influencing a GP’s value-added, a standard decomposition exercise reveals that most of the quality variation is driven by unobserved differences across doctors. Finally, we show that patients are unable to identify who the high-quality doctors are, and that patient-generated GP ratings are uncorrelated with GP value-added. Using a lower bound of the predicted value of an additional life year in Norway ($35,000), our results demonstrate that replacing the worst performing GPs (bottom 5 percent of the VA distribution) with GPs of average quality generates a social benefit of $27,417 per patient, $9.05 million per GP, or $934 million in total. At the same time, our results show that higher-quality GPs are associated with a lower per-patient cost.
    Keywords: value-added, health behaviors, mortality rate
    JEL: H75 I11 I14 J18
    Date: 2022
  5. By: Joan Costa-i-Font; Francesco D'Amico; Cristina Vilaplana-Prieto
    Abstract: We study the effect of long-term care (LTC) subsidies and supports on the wellbeing of unpaid caregivers. We draw on evidence from a policy intervention, that universalized previously means-tested caregiving supports in Scotland, known as free personal care (FPC). We document causal evidence of an increase in the well-being (happiness) of unpaid carers after the introduction of FPC. Our estimates suggest economically relevant improvements in the happiness (12pp increase in subjective wellbeing) among caregivers exposed to FPC and that provide at least 35 hours of care per week. Consistently, these results are larger among women and non-actively employed caregivers (17pp increase in happiness). Estimates are not driven by selection into caregiving (we find similar wellbeing effects among caregivers at baseline and caregivers throughout the sample), and are driven by income effects of FPC among caregivers.
    Keywords: caregiving, long-term care subsidies, subjective wellbeing, caregiver’s wellbeing, Scotland
    JEL: I18 J22
    Date: 2022
  6. By: Konstantin A. Kholodilin; Fernando A. López; David Rey Blanco; Pelayo González Arbués
    Abstract: This study investigates the effects of short-lived rent control regulations introduced in Catalonia in September 2020 and revoked in March 2022. Using the microdata of the largest Spanish housing advertisement portal idealista between January 2017 and May 2022, we analyze the dynamics of prices and supply for dwellings offered for rent and for sale. We also examine separately the rental and sales markets. We find that the introduction of rent control led to a reduction in rents in both controlled and uncontrolled Catalan municipalities, while quantities virtually did not react to it. The selling prices of dwellings remained unchanged, whereas their supply increased substantially. The revocation of rent control caused a strong increase in the rental and selling prices in all municipalities, no increase in the supply, with the exception of the supply of regulated dwellings for sale. In addition, using the macrodata on housing construction we find that during the rent-control period the average number of monthly dwelling starts in Catalonia declined by 6% compared to January 2019 – September 2020, while nationwide it increased by almost 12%. Thus, the effects are broadly consistent with the predictions of the economic literature on rent controls.
    Keywords: Rent control, Catalonia, asking rents, asking selling prices
    JEL: C43 O18 R38
    Date: 2022
  7. By: Angela Greulich (OSC - Observatoire sociologique du changement (Sciences Po, CNRS) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IUF - Institut Universitaire de France - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche); Sonja Spitzer (University of Vienna [Vienna], Wittgenstein Centre for Demography and Global Human Capital - Vienna Institute of Demography/Austrian Academy of Sciences); Bernhard Hammer (Technical University of Vienna, VID - Vienna Institute of Demography - OeAW - Austrian Academy of Sciences)
    Abstract: Abstract Understanding child-related costs is crucial given their impact on fertility and labour supply decisions. We explore the subjective cost of young children in Europe by analysing the effect of child births on parents' self-reported ability to make ends meet, and link it to changes in objective economic well-being such as income, benefits, and employment. The study is based on EU-SILC longitudinal data for 30 European countries from 2004 to 2019, enabling comparisons between country groups of different welfare regimes. Results show that newborns decrease subjective economic well-being in all regions, yet with economies of scale for the number of children. Mediation analyses reveal that the substantial labour income losses of mothers (indirect costs) explain only a small part of subjective child costs. In the first year after birth, these losses are mostly compensated for via public transfers or increased labour income of fathers, except in regions where women take extensive parental leave. This suggests that the initial drop in subjective economic well-being after childbirth is caused by increased expenses due to the birth of a child (direct costs) and other drivers such as stress that are reflected in the self-reported indicator.
    Date: 2022–04–15
  8. By: Volha Lazuka
    Abstract: This study provides new evidence regarding the extent to which medical care mitigates the economic consequences of various health shocks. To obtain causal effects, I focus on the role of medical scientific discoveries and leverage the longitudinal dimension of unique administrative data on adults in Sweden, their partners, and their working-age children. The results indicate that medical innovations strongly mitigate the negative economic consequences of a health shock, including subsequent losses for the individual and close relatives, and income inequalities within these groups. Such mitigating effects are highly heterogeneous across diseases that cause health shocks. These results support the view that the economic repercussions of health shocks have been overlooked, and there is a lack of focus on the efficiency of medical care for specific health conditions.
    Date: 2022–06
  9. By: Laura Schmitz
    Abstract: It is often argued that institutionalized after-school care (ASC) can benefit children lacking adequate homework support at home and, hence, foster equality of opportunity. However, despite considerable policy interest, it is unclear whether these afternoon programs are beneficial for child development and if selection into them is efficient, i.e., whether students benefiting most from the programs choose to attend. In this paper, I examine the effects of ASC on elementary school children’s schooling outcomes and non-cognitive skill development. Using a marginal treatment effect framework and regional and temporal variation caused by an extensive reform in Germany, I instrument after-school care attendance with the change in the distance to the next school offering ASC within one district. My findings suggest that children from lower socioeconomic backgrounds, who more often select into treatment, have higher ASC premiums. Concerning schooling outcomes, I find minor positive local average treatment effects but no effect heterogeneity concerning unobserved characteristics. ASC effects on the treated’s non-cognitive skills are more sizable than those on the untreated, suggesting that selection into ASC is positive and efficient. Overall, a universal voluntary offer of ASC will likely help reduce educational inequalities.
    Keywords: After-school care, marginal treatment effects, inequality
    JEL: I21 I24 I26 J08
    Date: 2022
  10. By: Joan Costa-i-Font; Martin Knapp; Cristina Vilaplana-Prieto
    Abstract: The COVID-19 pandemic and its mobility restrictions have been an external shock, influencing wellbeing. However, does risk exposure affect the welfare effect of lockdowns? This paper examines the ‘welcomed lockdown’ hypothesis, namely the extent to which there is a level of risk where mobility restrictions are not a hindrance to wellbeing. We exploit the differential timing of the effect of the pandemic across European countries, and the different stringency of lockdown to examine the effects on two mental health conditions, namely anxiety and depression. We examine whether differences in symptoms of anxiety and depression are explained by mortality and stringency of lockdown measures using ad event study that draws on Coarsened Exact Matching (CEM), Difference-in-Difference (DiD) and Regression Discontinuity Design (RDD). Our estimates suggest an average increase in depression (3.95%) and anxiety (10%) symptoms relative to the mean level on the day that the lockdown took effect. However, such effects are wiped out when a country exhibits high mortality (‘pandemic category 5’). Hence, we conclude that in an environment of high mortality, lockdowns no longer give rise to a reduction in well-being consistent with the ‘welcome lockdown’ hypothesis.
    Keywords: anxiety, depression, Covid-19, pandemic, lockdown
    JEL: I18
    Date: 2022
  11. By: Vincenzo Galasso; Massimo Morelli; Tommaso Nannicini; Piero Stanig
    Abstract: We evaluate how traditional parties may respond to populist parties on issues that are particularly fitting for populist messages. The testing ground is the 2020 Italian referendum on the reduction of members of Parliament. We implement a large-scale field experiment, with almost one million impressions of programmatic advertising, and a survey experiment. Our treatments are an informative video on the likely costs of cutting MPs, aimed at deconstructing the populist narrative, and a reducing trust video aimed at attacking the credibility of populist politicians. Our field experiment shows that the latter video is more effective at capturing the viewers’ attention. It decreases the turnout rate and, albeit less, the “Yes” votes (in favor of cutting MPs). We present a theoretical framework based on trust in traditional parties and information acquisition to account for our findings and provide additional predictions. In the survey experiment, both (unskippable) videos reduce the “Yes” votes and increase the share of undecided. Confirming the theory, for voters of traditional parties the effects are concentrated among people with low information, while for voters of populist parties previous information plays no role. Our findings show that campaign messages should target not only demographic characteristics but also trust attitudes.
    Keywords: field experiment, programmatic advertisement, electoral campaign
    JEL: D72 C93
    Date: 2022
  12. By: Giampiero Passaretta (Stockholm University Demography Unit (SUDA)); Carlos J. Gil-Hernández (European Commission - JRC)
    Abstract: Information and communications technology (ICT) skills are crucial for labour market success and full participation in society. Socioeconomic status (SES) inequality in the development of ICT skills would prevent disadvantaged children from reaping the benefits of the digital age. Besides, the digital divide in ICT literacy might add to the already well-documented large and persistent SES inequality in ‘hard’ skills—like math, reading, and science. This article studies the roots, evolution, and drivers of SES inequality in ICT literacy from age 8 to 15 in Germany. Drawing from the German National Educational Panel Study (NEPS), we highlight five main findings: (1) SES gaps in ICT literacy exist as early as age 8 (grade 3) and are similar in size compared to SES gaps in hard skills; (2) like hard skills, SES gaps in ICT literacy remain stable over primary and tracked lower secondary schooling; (3) ICT access and use at home and school do not substantially explain SES gaps in ICT literacy at any age; (4) selection into school tracks seems a critical pathway, although not necessarily a causal one, leading to SES inequality in secondary school; (5) SES gaps in ICT literacy are not observed among children with similar levels of hard skills. We discuss the implications of these findings for the interdisciplinary literature on social stratification, skill formation, and the digital divide.
    Keywords: digital skills, ICT literacy, socioeconomic status inequality, educational inequality, digital divide, Germany
    Date: 2022–06
  13. By: Sebastian Link; Manuel Menkhoff; Andreas Peichl; Paul Schüle; Lukas Menkhoff
    Abstract: This paper estimates the causal effect of corporate tax hikes on firm investment based on more than 1,400 local tax changes. By observing planned and realized investment volumes in a representative sample of German manufacturing firms, we can study how tax hikes induce firms to revise their investment decisions. On average, the share of firms that invest less than previously planned increases by three percentage points after a tax hike. This effect is twice as large during recessions.
    Keywords: investment, corporate taxation, state dependence, business cycle
    JEL: G11 H25 H32 H71 O16
    Date: 2022
  14. By: Melinda Fremerey; Andreas Lichter; Max Löffler
    Abstract: We study the consequences of a large-scale austerity program targeting financially-constrained municipalities in Germany. For identification, we exploit the quasi-random assignment of treatment among equally-distressed municipalities using a difference-in-differences design. The policy helped targeted municipalities to consolidate budgets. Whereas the amount of fiscal consolidation was homogeneous among treated municipalities, strategies of consolidation differed between smaller and larger municipalities. The former primarily cut spending on local public services, whereas the latter predominantly relied on tax increases. We detect no adverse economic effects but sizable negative effects on population levels and house prices in municipalities reducing local amenities.
    Keywords: austerity, fiscal consolidation, local amenities, taxes, spatial equilibrium
    JEL: H74 H73 H11 H30
    Date: 2022
  15. By: Bahaj, Saleem (Bank of England); Piton, Sophie (Bank of England); Savagar, Anthony (University of Kent and Centre for Macroeconomics)
    Abstract: We use data on business registrations in the UK to study the response of firm entry to the Covid-19 pandemic. We find that firm entry increased during the pandemic, unlike typical recessions where firm entry declines. The rise in firm creation is driven by individual entrepreneurs creating companies for the first time, and particularly creating companies in online retail. We link the rise in firm creation to declines in brick-and-mortar retail footfall via Google mobility data, and show that it takes 10 weeks for a firm to be registered after a shock to footfall. To study the impacts of the newly created firms, we merge entry data with online job postings from Indeed and show that the rise in firm creation drives increased vacancy postings. However, we also show there is a higher probability of pandemic startups dissolving relative to pre-pandemic cohorts. Therefore, we conclude that booming firm creation aided the rapid recovery of the UK economy in the short run, but the long-run implications are more uncertain.
    Keywords: Firm dynamics; Covid-19; business dynamism; firm entry.
    JEL: E32 L25 L26
    Date: 2022–05–20
  16. By: Amore, Mario Daniele (Bocconi University); Bennedsen, Morten (University of Copenhagen); Larsen, Birthe (Department of Economics, Copenhagen Business School)
    Abstract: The working environment is a key driver of firms’ success. Using unique survey and register data from Denmark, we show that firms led by neighborhood CEOs –defined by physical distance and personal values - exhibit better workplace condi-tions as perceived both by a regulatory authority and firms’ own employees. The e˙ect is stronger when the CEO’s and employees’ children attend the same school, pointing to social interactions as a channel for the result. Finally, we show that CEOs who emphasize neighborhood engagement adopt a management style tilted toward employees’ welfare.
    Keywords: CEO; geographic proximity; neighborhood values; working environment; management styles;
    JEL: G34
    Date: 2022–05–30
  17. By: Yordanov, Dimitar (University of Southern Denmark, DaCHE - Danish Centre for Health Economics); Oxholm, Anne Sophie (University of Southern Denmark, DaCHE - Danish Centre for Health Economics); Gyrd-Hansen, Dorte (University of Southern Denmark, DaCHE - Danish Centre for Health Economics); Bjørnskov Pedersen, Line (Line Bjørnskov Pedersen, Danish Centre for Health Economics - DaCHE & Research Unit of General Practice, University of Southern Denmark)
    Abstract: Studies find substantial variation in healthcare providers’ treatment behaviour and responses to policies. One potential explanation may be differences in their motivation. However, healthcare providers’ motivation remains an understudied area. This study maps general practitioners’ (GPs’) motivation. Using data from a survey sent to all Danish GPs in 2019, we measure four types of motivation: extrinsic motivation, intrinsic motivation, user orientation, and public service motivation. We combine these measures with high-quality register data on GP, practice, and area characteristics. Our analyses reveal substantial heterogeneity and limited interdependence in GPs’ different motivations. Using latent profile analyses, we identify five classes of GPs: Class 1 (class probability: 53.2%): “It is about everything but the money”, Class 2 (26.5%): “It is about everything”, Class 3 (8.6%): “It is about helping others”, Class 4 (8.2%): “It is about the work”, and Class 5 (3.5%): “It is about the money and the patient”. Linear regression analyses show that motivation only to a limited extent is associated with GP, practice, and area characteristics. Our finding that “it is not all about the money” for all GPs could explain their heterogenous treatments and responses to policies. Therefore, we conclude that it may be important to consider GPs’ different motivations when predicting GPs’ treatment behaviour and designing policies.
    Keywords: General practice; Extrinsic motivation; Intrinsic motivation; User orientation; Public service motivation; Prosocial motivation; Self-centred motivation; Denmark
    JEL: I10 I12
    Date: 2022–06–23
  18. By: Enea Baselgia; Isabel Z. Martínez
    Abstract: We collect, digitize, and supplement the Swiss rich list for the years 1989–2020 published in the “BILANZ” business magazine to gain new insights on the structure and dynamics of top wealth in Switzerland. Using this data allows us study the super-rich in Switzerland in ways that were not possible in previous research based largely on tax data. In addition to presenting this valuable data source, and also discussing its limitations, we make three distinctive contributions to the literature. First, we present a number of new facts on the wealth elite in Switzerland. We show that about 60% of the super-rich are heirs—a much larger fraction than in the United States where many of the super-rich are self-made—and that five in ten super-rich residing in Switzerland are foreign-born. Second, we estimate the sensitivity of the location-decision of super-rich foreigners to a preferential tax scheme that offers wealthy foreigners to be taxed on their expenses rather than on their true income and wealth. We are the first to evaluate this policy—similar to “non-dom” taxation that exists in other countries like the UK or Italy—and show that when some of the Swiss cantons abolished this practice, they lost about 30% of their stock of super-rich taxpayers. Third, we use the wealth series compiled in our BILANZ dataset to estimate the wealth shares of the top 0.01% in Switzerland and show how they compare to earlier estimates by Föllmi and Martínez (2017) based on wealth tax data. We find that top wealth concentration is higher than previously assumed, an conclude that top wealth shares based on tax data constitute a lower bound, while the estimates based on our BILANZ data are upper bounds.
    Keywords: super-rich, wealth inequality, wealth distribution, wealth mobility, top wealth shares
    JEL: D31 H24 C81
    Date: 2022

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