nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2023‒02‒13
seventeen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Is There a Union Wage Premium in Germany and Which Workers Benefit Most? By Bonaccolto-Töpfer, Marina; Schnabel, Claus
  2. Company wage policy in a low-wage labor market By Giupponi, Giulia; Machin, Stephen
  3. Do Elections Affect Immigration? Evidence From French Municipalities By Schmutz, Benoît; Verdugo, Gregory
  4. The effects of schooling on cognitive skills: evidence from education expansions. By Lorenzo Cappellari; Daniele Checchi; Marco Ovidi
  5. Knocking It Down and Mixing It Up: The Impact of Public Housing Regenerations By Blanco, Hector; Neri, Lorenzo
  6. Energy Tax Exemptions and Industrial Production By Andreas Gerster; Stefan Lamp
  7. A Widening Authority–Legitimacy Gap in EU Regulatory Governance? An Experimental Study of the European Medicines Agency’s Legitimacy in Health Security Regulation By Rimkute, Dovile; Mazepus, Honorata
  8. Are more automatable jobs less satisfying? By Arthur Jacobs; Elsy Verhofstadt; Luc Van Ootegem
  9. How Effective were Job-Retention Schemes during the COVID-19 Pandemic? A Microsimulation Approach for European Countries By Alexandra Solovyeva; W. Raphael Lam
  10. The Gendered Effects of COVID-19 on Well-being: A Household Perspective By Patzina, Alex; Collischon, Matthias; Kroh, Jacqueline
  11. When are wages cut? The roles of incomplete contracts and employee involvement By Marco Fongoni; Daniel Schaefer; Carl Singleton
  12. Managerial input and firm performance. Evidence from a policy experiment By Manaresi, Francesco; Palma, Alessandro; Salvatici, Luca; Scrutinio, Vincenzo
  13. Retrieving the Returns to Experience, Tenure, and Job Mobility from Work Histories By Pedro Portugal; John T. Addison; Pedro Raposo
  14. Firm Expectations and News: Micro v Macro By Benjamin Born; Zeno Enders; Manuel Menkhoff; Gernot J. Müller; Knut Niemann; Gernot Müller
  15. Some issues on poverty measurement: a critical approach to the Eurostat at-risk-of-poverty measure By José António Pereirinha; Elvira Pereira
  16. Prescription Behavior of Physicians in the Public and Private Sector By Elina Jussila; Kaisa Kotakorpi; Jouko Verho
  17. The well-being cost of inflation inequalities By Prati, Alberto

  1. By: Bonaccolto-Töpfer, Marina (University of Genova); Schnabel, Claus (University of Erlangen-Nuremberg)
    Abstract: Using representative data from the German Socio-Economic Panel (SOEP), this paper finds a statistically significant union wage premium in Germany of almost three percent which is not simply a collective bargaining premium. Given that the union membership fee is typically about one percent of workers' gross wages, this finding suggests that it pays off to be a union member. Our results show that the wage premium differs substantially between various occupations and educational groups, but not between men and women. We do not find that union wage premia are higher for those occupations and workers which constitute the core of union membership. Rather, unions seem to care about disadvantaged workers and pursue a wider social agenda.
    Keywords: union membership, collective bargaining, union wage premium, Germany
    JEL: J31 J53
    Date: 2023–01
  2. By: Giupponi, Giulia; Machin, Stephen
    Abstract: The question of how firms set wages for their employees has been of longstanding interest. In this paper, we investigate what models of wage determination are at play in a low-wage labor market. We exploit a sizable and salient age-specific minimum wage change in the United Kingdom - the National Living Wage (NLW) introduction. Starting in April 2016, the NLW raised the minimum wage rate applying to workers aged 25 and over, leaving unchanged the minimum wage rates for younger workers. Using matched employer-employee data on the English residential care home sector, we document positive wage spillovers on workers aged under 25. Younger workers' wages are shown to have risen in tandem with those of older workers, with no differential employment effects by age at both the market level and the firm level. We probe the inter- vs intra-firm nature of wage spillovers and show that they arise within rather than between firms. Based on empirical tests and qualitative evidence from a survey of care homes in the sample, pay-equity concerns offer the most plausible explanation for the emergence of wage spillovers. The wage spillover effects that we document are shown to emerge in other low-paying sectors of the UK labor market.
    Keywords: wage determination; minimum wage; fairness
    JEL: J31 J38 J42 D63
    Date: 2022–09–13
  3. By: Schmutz, Benoît (CREST); Verdugo, Gregory (University of Evry)
    Abstract: Using thirty years of municipal elections in France, we show that election results affect the share of immigrants across municipalities. In municipalities where a left- instead of right-wing mayor has been elected, the share of immigrants in the population grows faster by 1.5 p.p. within six years after the elections, and by 3 p.p. within twelve years. To a large extent, these effects are driven by partisan differences in public housing constructions and changes in the composition of the population within existing public housing units. They also are associated with greater incumbency advantage, in line with a model of strategic partisan behavior.
    Keywords: immigration, public housing, local elections
    JEL: D72 H4 H7 R38
    Date: 2023–01
  4. By: Lorenzo Cappellari (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Daniele Checchi; Marco Ovidi (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)
    Abstract: We quantify the causal effect of schooling on cognitive skills across 21 countries and the full distribution of working-age individuals. We exploit exogenous variation in educational attainment induced by a broad set of institutional reforms affecting different cohorts of individuals in different countries. We find a positive effect of an additional year of schooling on internationally-comparable numeracy and literacy scores. We show that the effect is substantially homogeneous by gender and socio-economic background and that it is larger for individuals completing a formal qualification rather than dropping out. Results suggest that early and late school years are the most decisive for cognitive skill development. Exploiting unique survey data on the use of skills, we find suggestive evidence that our result is mediated by access to high-skill jobs.
    Keywords: Cognitive skills, Educational Policies, Returns to schooling.
    JEL: H52 I21 I28
    Date: 2022–12
  5. By: Blanco, Hector (New York University); Neri, Lorenzo (University of St. Andrews)
    Abstract: Due to their negative effects on surrounding neighborhoods, some countries have gradually been replacing distressed public housing developments with mixed-income housing. This paper studies the effects of such policies on local housing markets in London (UK), where local authorities demolished and rebuilt several public housing developments while adding market-rate units on-site. We show that these 'regeneration' programs lead to large increases in nearby house prices and rents over a six-year period, although house prices decrease farther away. The results are consistent with strong demand effects from observed amenity improvements near the buildings and downward price pressures from increased supply dominating in the broader area. We provide suggestive evidence that regenerations involving larger socioeconomic composition changes are associated with higher price increases.
    Keywords: public housing, mixed-income housing, house prices, amenities
    JEL: I38 H75 R23 R31
    Date: 2023–01
  6. By: Andreas Gerster; Stefan Lamp
    Abstract: Environmental policies are often accompanied by exemptions for energy-intensive and trade-exposed industrial firms to avoid leakage from regulated to unregulated jurisdictions. This paper investigates the impact of a large electricity tax exemption on production levels, employment, and input choices in the German manufacturing industry. For two different policy designs, we show that exempted plants significantly increase their electricity use. This effect is considerably larger under a notched exemption policy, where passing an eligibility threshold yields infra-marginal benefits, compared to a revised policy where these benefits have been largely removed. We detect no significant impact of the exemptions on production levels, export shares, and employment. Using counterfactual simulations, we document substantial distortive effects of notched exemption policies when financial stakes are high and compliance cost for firms are low.
    Keywords: Environmental Policy, Leakage, Energy Taxes, Manufacturing Industry
    JEL: D22 H23 L60 Q41
    Date: 2023–01
  7. By: Rimkute, Dovile; Mazepus, Honorata
    Abstract: Agencification in the EU stretches the confines of the European regulatory state to the maximum by extending to policy domains that were formerly the exclusive terrain of national institutions. Although the challenge to legitimize EU-level agencies is widely acknowledged, scant empirical research has been done on the conditions under which EU-level epistemic authority prevails or fails. To fill this gap, we examine whether EU agencies are perceived as more legitimate when the scientific nature of their regulatory outputs is made explicit and whether they start facing grave legitimacy challenges when national-level stakeholders signal disapproval with their scientific recommendations. We draw on a survey experiment with Dutch local politicians to study their legitimacy perceptions about the European Medicines Agency (EMA) and its mandate to authorize vaccines in view of cross-border health security risks. Our data suggest that the EMA is regarded as a highly legitimate agency and that disapproval by national-level politicians and citizens does not undermine its epistemic authority in the eyes of local decision-makers. This study contributes to the scholarship on non-majoritarian institutions’ legitimation imperatives by introducing novel research avenues and analytical tools to continue rigorous empirical testing of the well-established theoretical and normative claims.
    Date: 2023–01–11
  8. By: Arthur Jacobs; Elsy Verhofstadt; Luc Van Ootegem (-)
    Abstract: We investigate whether the characteristics which render a job more likely to disappear due to automation also make that job less satisfying. The literature on automation offers convincing reasons infavour of this hypothesis, but it has not been empirically tested before. We use a widely-established, occupation-level measure of automatability and find that more automatable jobs are indeed significantly less satisfying using data from the European Working Conditions Survey. The effect is sizeableand robust to controlling for a wide range of individual-level variables and job-context variables. Our finding suggests that more automatable occupations are less satisfying because of their inherent nature (i.e. the nature of the tasks required for the performance of that occupation). We conduct a mediation analysis and find that the smaller creative intelligence requirement related to automatable occupations is the most important reason for their lower job satisfaction. We discuss to what extent these economy-wide findings translate to the level of the individual worker, in the context of a labor market segmented by education level.
    Keywords: Automation, Job Satisfaction, Occupational Task Content, European Working Conditions Survey
    Date: 2023–01
  9. By: Alexandra Solovyeva; W. Raphael Lam
    Abstract: The COVID-19 pandemic had posed a dramatic impact on labor markets across Europe. Forceful fiscal responses have prevented an otherwise sharper contraction. Many countries introduced or expanded job-retention schemes to preserve jobs and support households. This paper uses a microsimulation approach (EUROMOD) and household data to assess the effectiveness of those schemes in stabilizing household income during the pandemic across European countries. Empirical evidence shows that job-retention schemes were effective in stabilizing income and, along with other measures, absorbed nearly 80 percent of market income shocks—almost doubling the extent of the automatic stabilization of the pre-pandemic tax and benefit systems. The large effects are related to the widespread use and scaling up of those schemes and a deep but short-lived disruption to labor markets during the pandemic. Along with other fiscal support measures, job-retention schemes helped mitigate the rise in the unemployment rate, by about 3 percentage points, and income inequality during the pandemic. Our results show that job-retention schemes were largely targeted, in which households more vulnerable to income losses, such as lower-income families, youth, and low-skilled workers, are able to stabilize their income.
    Keywords: Job-retention schemes; COVID-19 pandemic; short-time work; inequality; income stabilization; Okun’s Law
    Date: 2023–01–13
  10. By: Patzina, Alex; Collischon, Matthias; Kroh, Jacqueline
    Abstract: We investigate the causal effect of COVID-19 incidence rates on changes in subjective well-being. Specifically, we employ a household-level perspective and expect that household composition (i.e., single and multi-person households and caregiving duties for children or older adults) and affluence (i.e., housing quality and financial resources) moderate the effect of COVID-19 incidence rates, with a special focus on gender differences. Employing longitudinal household data from the Panel Labour Market and Social Security (PASS) and a difference-in-difference (DiD) approach, we find an overall negative effect. This effect is stronger for individuals with caregiving responsibilities. In contrast to our theoretical expectations, our results indicate stronger negative effects on individuals from households with high living standards and high financial resources. Strikingly, our findings indicate that the relevant negative subjective well-being changes are concentrated among women with caregiving obligations. Overall, our study underscores the need for further sociological research based on strong methodological designs.
    Date: 2023–01–20
  11. By: Marco Fongoni (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.); Daniel Schaefer (Department of Economics, Johannes Kepler University Linz, Austria); Carl Singleton (Department of Economics, University of Reading, Whiteknights, UK)
    Abstract: We develop a model of incomplete employment contracts such that employees have some discretion over effort, which depends on their work morale. Nominal wage cuts have a strong negative effect on morale, while employee involvement in workplace decision-making tends to increase morale. We derive predictions on how these two mechanisms affect the decisions of firms to cut nominal wages. Using matched employer-employee and manager survey data from Great Britain, we find support for our model: nominal wage cuts are only half as likely when managers think that employees have some discretion over how they perform their work, but this reduced likelihood recovers partially when employees are involved in the decision-making process at their workplace.
    Keywords: wage rigidity; reciprocity; workplace relations; employer-employee data
    JEL: E24 E70 J31 J41
    Date: 2023–01
  12. By: Manaresi, Francesco; Palma, Alessandro; Salvatici, Luca; Scrutinio, Vincenzo
    Abstract: We study the effects of a subsidy program designed to boost small and medium enterprises' export capabilities through a Temporary Export Manager (TEM), hired for at least 6 months to provide consulting on how to reach foreign markets. Firms applied online for the subsidy and vouchers to hire TEMs were allocated on a first-come, first-served basis. We use a difference-in-differences design to compare the performances of firms that nearly got the subsidy with those that barely did not. Eligible firms experienced a large increase in revenues, return on equity, profits and value added per employee, accompanied by a significant growth in export in extra-EU markets four years after receiving the subsidy. The gains were larger for the least productive and smaller firms and effects were heterogeneous across TEM providers. TEMs were also effective in stimulating 'good' labor demand: besides intensifying exports, firms increased their workforce by nearly 13%, mainly in full-time and permanent employees. Results of a survey conducted on TEM providers confirm our econometric results and revealed that the benefits of voucher extended beyond the initial subsidized service.
    Keywords: SMEs; export subsidy; labor demand; natural experiment; click-day
    JEL: L20 O40 F14 H20 F20
    Date: 2022–10–05
  13. By: Pedro Portugal; John T. Addison; Pedro Raposo
    Abstract: Using a unique linked employer-employee dataset Portuguese dataset, the Quadros de Pessoal, 1986-2020, this paper offers an extension of the standard Mincerian model of wage determination by allowing for different returns to experience and tenure in the sequence of jobs that constitute a career of up to ten jobs. In addition to such heterogeneity, we also allow for the possibility of a distinct wage hike each time workers change jobs. We report that workers achieve the highest returns to experience on the second job. For its part, the returns to tenure are sizable, most notably on the first job. The sequence of wage uplifts attendant upon job changes reflects the returns to job search investments over the life cycle. They shape the curvature of the earnings profile, with the returns to job mobility tending to decline over the sequence of jobs. Further, the ability to distinguish the order of the jobs held by the worker enabled us to disentangle the returns to experience from those to tenure in a model with a job match fixed effects in a more satisfactory manner than the conventional routes followed in the literature. In a final application, we investigate how worker, firm, and job match heterogeneity influence the returns to mobility, experience, and tenure. The returns to job mobility were found to partially reflect sorting into better job matches and into firms offering more generous wage policies. Also, the estimated returns to experience are upwardly biased because more productive worker tend to be more experienced. However, none of the three components of the job match fixed effect had a clear impact on the returns to tenure.
    JEL: C23 J31 J63
    Date: 2022
  14. By: Benjamin Born; Zeno Enders; Manuel Menkhoff; Gernot J. Müller; Knut Niemann; Gernot Müller
    Abstract: In this study, we investigate how firm expectations about their own developments respond to different types of news. We classify news as either micro or macro, with micro news being information about firm-specific developments and macro news being information about the aggregate economy. Our analysis of firm surveys from Germany and Italy shows that both types of news consistently predict forecast errors, contradicting the idea of full-information rational expectations. Yet while firm expectations overreact to micro news, they underreact to macro news. We propose a model in which firms suffer from “island illusion” to explain these patterns in the data.
    Keywords: firm expectations, survey, overreaction, underreaction, micro news, macro news, island illusion, business cycle
    JEL: D84 C53 E71
    Date: 2022
  15. By: José António Pereirinha; Elvira Pereira
    Abstract: The official measurement of monetary poverty in the EU countries is made using the relative at-risk-of-poverty (AROP) measure, which currently accounts for different monetary income levels among EU countries but faces limitations in some relevant dimensions of poverty measurement. This paper is addressed to some of such limitations as a relative poverty measure: the scope of economic resources used by the households to face human needs (monetary vs total disposable income), the equivalence scale used to weight differently the household members to obtain the household economic size (OECD modified equivalence scale vs a MIS equivalence scale, supported in a consensual evaluation of the adequate household income), and the nature of the immediate material needs that should account to measure and to monitor poverty (total expenses vs total minus housing costs, as a contracted and inescapable need, with great regional variability). Additionally, the comparison of household economic resources with household needs can be made using, instead, an absolute approach, trough the elaboration of reference budgets and the estimation of household MIS (minimum income standard) (60% median equivalized income vs household MIS). The estimation of poverty incidence for Portugal using these alternative approaches with EU-SILC data (*) for the income reference period 2013-2019, elucidate about the “core” poor, that is, those that always account as poor whatever the approach used in measurement. A hybrid approach, combining absolute and relative approaches, will be considered, and a discussion of policy implications.
    Keywords: relative poverty, absolute poverty, AROP, equivalence scales, minimum income standard. JEL classification: I32
    Date: 2022
  16. By: Elina Jussila; Kaisa Kotakorpi; Jouko Verho
    Abstract: We analyze prescription behavior of physicians in the public and private sector. We study two major diseases for which an effective, widely accepted low-cost treatment and alternative, more expensive treatments are available. We find that private sector physicians are more likely to prescribe the expensive medication. The result holds after controlling for individual-level factors including health indicators based on detailed administrative data, and patient fixed effects. In one of our cases, we further find that the same physicians prescribe different medication when working in different sectors. These results are consistent with higher 2nd degree moral hazard in the private sector.
    Keywords: healthcare, prescription behaviour, public sector, private sector, moral hazard
    JEL: I11 H42 I18
    Date: 2022
  17. By: Prati, Alberto
    Abstract: In terms of well-being, how costly is inflation? To answer this question, empirical evaluations have typically studied average inflation rates at the national level, thus disregarding the role of inflation inequalities within a country. In this paper, we relax the assumptions that heterogeneous consumers face homogeneous inflation rates, and study the correlation between price changes and self-reported satisfaction with living standards. We use newly available data from France, and adopt two approaches. First, we focus on individually perceived inflation and use the internationally harmonized Opinion Price Index as a proxy for experienced inflation. Variations in perceived inflation help predict wellbeing differences among consumers, even when controlling for relevant socio-demographic factors, personality traits and common method variance. We estimate their marginal impact to be higher than equivalent variations in nominal income. Second, we compare groups of consumers over time, and find that changes in the price of a good disproportionately affect the relative well-being of those who consume it. The study shows that the well-being cost of the inflation crisis would be underestimated if looking at aggregate figures only.
    Keywords: inflation; inequality; heterogeneous inflation; subjective well-being; standard of living; perceived inflation; opinion price index
    JEL: E31 I31 D63
    Date: 2022–09–13

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