nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2023‒03‒20
seventeen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Can Tax Incentives Bring Brains Back? Returnees Tax Schemes and High-Skilled Migration in Italy By Jacopo Bassetto; Giuseppe Ippedico
  2. Crossing Borders: Labor Market Effects of European Integration By Illing, Hannah
  3. The Employment Effects of the Disability Education Gap in Europe By Albinowski, Maciej; Magda, Iga; Rozszczypała, Agata
  4. Does Education Improve Cognitive Performance Four Decades After School Completion? A Replication Study of Nicole Schneeweis, Vegard Skirbekk and Rudolf Winter-Ebmer (Demography, 2014) By Beatrice Baaba Tawiah; Valentin Schiele
  5. The effect of pension wealth on employment By Sebastian Becker; Hermann Buslei; Johannes Geyer; Peter Haan
  6. Allocative efficiency, plant dynamics and regional productivity: Evidence from Germany By Bruhn, Simon; Grebel, Thomas
  7. Tax and Occupancy of Business Properties: Theory and Evidence from UK Business Rates By Ben Lockwood; Martin Simmler; Eddy H.F. Tam; Benjamin Lockwood
  8. The Effect of Children on Health By Beatrice Baaba Tawiah
  9. Gender Wage Gap among Young Adults: A Comparison across British Cohorts By Foliano, Francesca; Bryson, Alex; Joshi, Heather; Wielgoszewska, Bożena; Wilkinson, David
  10. Does Paid Parental Leave Affect Children's Schooling Outcomes? Replicating Danzer and Lavy (2018) By Troccoli, Claudia
  11. Spatial Agglomeration, Innovation and Firm Survival for Italian Manufacturing Firms By Arnab Bhattacharjee; Ornella Maietta; Fernanda Mazzotta
  12. Mamma Mia! Revealing hidden heterogeneity by PCA-biplot: MPC puzzle for Italy's elderly poor By Radermacher, Jan W.
  13. Marital Sorting and Inequality: How Educational Categorization Matters By Frederik Almar; Benjamin Friedrich; Ana Reynoso; Bastian Schulz; Rune Vejlin
  14. A Leveraged Gender Gap: The Combined Effect of Longevity Risk (Mis)-Perception and Financial Risk-Taking By Giovanna Apicella; Enrico G. De Giorgi
  15. Work from Home and Commercial Real Estate – Evidence from Stock Markets By Stanimira Milcheva; Lingshan Xie
  16. Indirect Savings from Public Procurement Centralization By Clarissa Lotti; Arieda Muço; Giancarlo Spagnolo; Tommaso Valletti; Tommaso M. Valletti
  17. The sorting effect in healthcare access: Those left behind By Carine Milcent

  1. By: Jacopo Bassetto; Giuseppe Ippedico
    Abstract: Brain drain is a growing concern for many countries experiencing large emigration rates of their highly educated citizens. While several European countries have designed preferential tax schemes to attract high-skilled individuals, there is limited empirical evidence on the effectiveness of fiscal incentives in a context of brain drain, and on migration responses beyond top earners. In this paper we investigate the effects of the Italian 2010 tax scheme “Controesodo”, which granted a generous income tax exemption to young high-skilled expatriates who relocate to Italy. Eligibility requires a college degree as well as being born in 1969 or later, which creates suitable quasi-experimental conditions to identify the effect of tax incentives. Using a Triple Difference design and administrative data on return migration, we find that eligible individuals are 27% more likely to move back to Italy post-reform. Additionally, using social security data from the main origin country of Italian returnees (Germany), we uncover significant effects throughout the wage distribution, suggesting that mobility in response to tax incentives is a broad phenomenon not limited to top earners. A cost-benefit analysis reveals that the direct fiscal impact of the reform – a lower bound of the total effect in the presence of human capital externalities – is marginally positive, by virtue of the tax scheme targeting young high-skilled individuals.
    JEL: J60 H20 F22
    Date: 2023
  2. By: Illing, Hannah (University of Bonn)
    Abstract: This paper studies the labor market effects of out- and in-migration in the context of cross-border commuting. It investigates an EU policy reform that granted Czech citizens full access to the German labor market, resulting in a Czech commuter outflow across the border to Germany. Exploiting the fact that the reform specifically impacted the Czech and German border regions, I use a matched difference-in-differences design to estimate its effects on local labor markets in both countries. Using a novel dataset on Czech regions, I show that municipalities in the Czech border region experienced a decrease in unemployment rates due to the worker outflow, and a corresponding increase in vacancies. For German border municipalities, I find evidence for slower employment growth (long-term) and slower wage growth (short-term), but no displacement effects for incumbent native workers.
    Keywords: out-migration, in-migration, local labor markets
    JEL: J61 J15 R23
    Date: 2023–02
  3. By: Albinowski, Maciej (Institute for Structural Research (IBS)); Magda, Iga (Warsaw School of Economics); Rozszczypała, Agata (Institute for Structural Research (IBS))
    Abstract: We investigate the role of education in creating employment opportunities for persons with disabilities across the European Union. We use the European Union Statistics on Income and Living Conditions (EU-SILC) for 2011-2019. We find that educational attainment is a major factor determining the probability of employment among persons with disabilities. In particular, the employment effects of tertiary education are much larger among persons with disabilities than among non-disabled people: that is, having a disability is a greater disadvantage for less educated than for better educated people. We provide evidence that the endogeneity of educational attainment does not drive these findings. We also uncover substantial heterogeneity in the role of education between countries. In more developed countries, the employment status of persons with disabilities is generally less dependent on their educational attainment. Overall, we estimate that 20% of the disability employment gap in the 25-34 age group can be attributed to the gap in education between individuals with and without disabilities.
    Keywords: disability, employment, educational attainment, European Union
    JEL: I26 I14 C21
    Date: 2023–02
  4. By: Beatrice Baaba Tawiah (Paderborn University); Valentin Schiele (University of Paderborn)
    Abstract: This paper replicates the analysis of Schneeweis et al. (2014) using their sample as well as an extended sample. Schneeweis et al. (2014) use the Survey of Health, Ageing and Retirement in Europe (SHARE) dataset and exploit compulsory schooling reforms implemented in six European countries to analyse the impact of education on cognitive functioning decades after leaving school. They find a positive effect of education on memory scores and some evidence of a protective effect of education on the decline in verbal fluency. Our results support their findings when we use the same waves as they do, but also when we extend the sample by including more countries and interview waves and use different variables for years of education.
    Keywords: Replication; Education; Cognitive abilities;Compulsory schooling
    JEL: I21 D91 J14
    Date: 2023–03
  5. By: Sebastian Becker; Hermann Buslei; Johannes Geyer; Peter Haan
    Abstract: This study provides novel evidence about the pension wealth elasticity of employment. For the identification we exploit reform-induced variation of pension wealth that is related to the number of children but which does not affect the implicit tax rate of employment. We use a difference-in-differences estimator based on administrative data from the German pension insurance and find that, on average, the negative employment effect of pension wealth is significant and economically important. Heterogeneity analyses document a strong age pattern showing that the employment effects are driven by behavioral responses of women close to retirement. The age pattern is partly explained by the positive effect of pension wealth on disability pensions after the age of 60.
    Keywords: pension reform, pension wealth elasticity, female labour supply, retirement, differences in differences
    JEL: H55 J13 J21 J26
    Date: 2023–01–03
  6. By: Bruhn, Simon; Grebel, Thomas
    Abstract: This paper argues that regional variation in the efficiency of labor allocation among German manufacturing plants plays a critical role in explaining regional disparities in productivity. In fact, we show that over 50% of the East-West productivity gap is associated with a less efficient labor allocation in former East Germany. Yet, we also demonstrate that the mere focus on East-West comparisons hides partially large differences between the German federal states. These results suggest that regional productivity differences could be substantially narrowed by a more efficient labor allocation among plants. With respect to the underlying causes, we find evidence that the regional differences in allocative efficiency are significantly correlated with differences in export intensity, market concentration and plant size.
    Keywords: Regional productivity gap, productivity decomposition, allocative efficiency, labor allocation
    JEL: E24 J24 L11 L25 O47
    Date: 2023
  7. By: Ben Lockwood; Martin Simmler; Eddy H.F. Tam; Benjamin Lockwood
    Abstract: We study the impact of commercial property taxation on vacancy rates and rents in the UK, using a new data-set, and exploiting exogenous variations in property tax rates from reliefs in the UK system: small business rate relief (SBRR), retail relief and empty property relief. We estimate that the retail relief reduces vacancies by 85%, and SBRR relief by up to 49%, while empty property exemption increases them by up to 89%. The effect of retail relief on clusters of urban properties (the “High St”) is no different to its overall effect. SBRR increases (decreases) the likelihood that a property is occupied by a small (large) business. We also use data on asking prices for rental properties to study the effect of reliefs on rental rates. Rental rates move in the opposite direction to vacancy rates, except in the case of empty property relief. All these findings are consistent with a novel model of directed search in the commercial property market, also presented in the paper.
    Keywords: commercial property, vacancy, occupancy, property taxation
    JEL: H25 H32 R30 R38
    Date: 2023
  8. By: Beatrice Baaba Tawiah (Paderborn University)
    Abstract: This paper analyses the causal effect of having children on parents' health. I consider men and women from ages 50 to 90 with at least two children in the German Socio-Economic Panel data. Twin birth at second birth and same sex of first two children are used as instruments to exogenously determine the number of children. I find negative effects on the BMI of women, and negative effects on the mental and physical health of men. Looking at the effects over the life-cycle, I find that the BMI of women increases until age 64. Mental health starts to decline from age 75. The effect on physical health fluctuates over the life-cycle. The results show that children negatively affect parental health and the effects are not constant over the life-cycle.
    Keywords: Childbirth; Health; Instrumental variables
    JEL: I10 J13 C21 C36
    Date: 2023–03
  9. By: Foliano, Francesca (UCL Institute of Education); Bryson, Alex (University College London); Joshi, Heather (University College London); Wielgoszewska, Bożena (University College London); Wilkinson, David (University College London)
    Abstract: We study the evolution of the gender wage gap among young adults in Britain between 1972 and 2015 using data from four British cohorts born in 1946, 1958, 1970 and 1989/90 on early life factors, human capital, family formation and job characteristics. We account for non-random selection of men and women into the labour market and compare the gender wage gap among graduates and non-graduates. The raw and covariate adjusted gender wage gaps at the mean decline over the period among nongraduates, but they rise among young graduates. The gender wage gap across the wage distribution narrows over time for lower wages. Adjusting for positive selection into employment increases the size of the gender wage gap in earlier cohorts, but selection is not apparent in the two most recent cohorts. Thus the rate of convergence in the wages of young men and women is understated when estimates do not adjust for positive selection in earlier cohorts. Differences in traditional human capital variables explain only a very small component of the gender wage gaps among young people in all four cohorts, but occupational gender segregation plays an important role in the later cohorts.
    Keywords: gender wage gap, birth cohorts, employment selection, graduates, occupational segregation
    JEL: J16 J2 J3
    Date: 2023–02
  10. By: Troccoli, Claudia
    Abstract: Danzer and Lavy (2018) study how the duration of paid parental leave affects children's educational performance using data from PISA. An extension of the maximum duration from 12 to 24 months in Austria had no statistically significant effect on average, but the authors highlight the existence of large and statistically significant heterogenous effects that vary in sign depending on the education of mothers and children's gender. The policy increased the scores obtained by sons of highly educated mothers by 33% of a standard deviation (SD) in Reading and 40% SD in Science. On the contrary, sons of low educated mothers experienced a decrease of 27% SD in Reading and 23% SD in Science. In this article, I replicate their study following the recommended estimation procedure taking into account both the survey's stratified two-stage sample design and the fact that PISA relies on imputation to derive student scores. I show that the estimates of the effects of the parental leave extension become substantially smaller in absolute magnitude and non-significant.
    Date: 2023
  11. By: Arnab Bhattacharjee; Ornella Maietta; Fernanda Mazzotta
    Abstract: Innovativeness of a firm improves not only its own survival chances but can also generate externalities on its neighboring firms. We empirically examine the role of agglomeration economies in how innovativeness affects firm survival in Southern Italy, using spatial weights to model spillovers. Spatial Durbin probit model estimates confirm that innovation is a determinant of firm survival not only for firms that are themselves innovative but also ones located close to other innovative firms. Definition of spatial scale and weight plays an important role. Spillover benefits are enhanced by agglomeration economies, but only at a very local scale.
    Keywords: Firm survival, Spatial models, Innovation, Spillovers, Southern Italian SMEs
    JEL: L20 O3 D22 C21 C41
    Date: 2023–02
  12. By: Radermacher, Jan W.
    Abstract: I investigate consumption patterns in Italy and use a PCA-biplot to discover a consumption puzzle for the elderly poor. Data from the third wave (2017) of the Eurosystem's Household Finance and Consumption Survey (HFCS) indicate that Italian poor old-aged households boast lower levels of the marginal propensity to consume (MPC) than suggested by the dominant consumption models. A customized regression analysis exhibits group differences with richer peers to be only half as large as prescribed by a traditional linear regression model. This analysis has benefited from a visualization technique for high-dimensional matrices related to the unsupervised machine learning literature. I demonstrate that PCA-biplots are a useful tool to reveal hidden relations and to help researchers to formulate simple research questions. The method is presented in detail and suggestions on incorporating it in the econometric modeling pipeline are given.
    Date: 2023
  13. By: Frederik Almar; Benjamin Friedrich; Ana Reynoso; Bastian Schulz; Rune Vejlin
    Abstract: This paper revisits the link between education-based marriage market sorting and income inequality. Leveraging Danish administrative data, we develop a novel categorization of marriage market types based on the starting wages and wage growth trajectories associated with educational programs: ambition types. We find a substantial increase in sorting by educational ambition over time, which explains more than 40% of increasing inequality since 1980. In contrast, sorting trends are flat with the commonly used level of education. Hence, the mapping between education and marriage-market types matters crucially for conclusions about the role of marital sorting in rising income inequality.
    Date: 2023
  14. By: Giovanna Apicella (University of Udine); Enrico G. De Giorgi (University of St. Gallen - SEPS: Economics and Political Sciences; Swiss Finance Institute)
    Abstract: Financial risk and longevity risk are the main risks affecting pension income. This paper analyses gender differences related to how financial risk taking and survival expectations are correlated. We analyse data from the “Survey of Health, Ageing and Retirement in Europe” (SHARE) database and find a significant gender gap in self-assessed risk tolerance, consistently with previous literature. Moreover, we show that individuals with realistic survival expectations (i.e., survival expectations that are close to their actuarial counterparts) tend to take more financial risk. Because women show a significantly higher underestimation of their survival compared to men (-17% vs. -6% on average), the co-existence of no risk taking and longevity risk mis-perception is much stronger among women than men, what we call the leveraged gender gap, with important economic implications in relation to post-retirement income.
    Keywords: gender pension gap, financial risk tolerance, longevity risk, demographic literacy
    JEL: D15 H31
    Date: 2023–02
  15. By: Stanimira Milcheva; Lingshan Xie
    Abstract: We explore investor expectations about the effects of work from home (WFH) for the commercial real estate sector. We assess how differences in WFH exposure of listed real estate investment trusts (REITs) in the largest European economies – Germany, France and the UK – during the early stages of the Covid-19 pandemic affect their abnormal returns. We measure WFH exposure as REIT’s exposure to the office sector, central business districts (CBDs) and WFH tenants. To capture tenant’s strong commitment to working from home in the future, we construct a variable for tenant WFH intensity using tenant WFH announcements between March and June 2020. We show that REITs with higher WFH exposure have significantly negative abnormal returns independently of their domicile, sector specialization or CBD exposure. Equity investors look at REIT portfolio composition and WFH announcements by tenants to assess the likelihood of WFH in the long term and the associated drop in office demand.
    Keywords: commercial real estate; Real Estate Investment Trusts; Stock returns; Work from Home
    JEL: R3
    Date: 2022–01–01
  16. By: Clarissa Lotti; Arieda Muço; Giancarlo Spagnolo; Tommaso Valletti; Tommaso M. Valletti
    Abstract: Centralization of public procurement can lower prices for the government’s direct purchase of goods and services. This paper focuses on indirect savings. Public administrations that do not procure directly through a central procurement agency might benefit from the availability of centrally-procured goods. We exploit the introduction of a central purchasing agency in Italy and find that prices came down by 22% among administrations that bought autonomously. These indirect effects appear to be driven by informational externalities, especially for less competent public buyers purchasing technologically more complex goods. Accounting for indirect savings increases the estimate of direct ones.
    Keywords: centralization, informational externalities, procurement, public contracts
    JEL: D44 H11 H57 H83 L38 L88
    Date: 2023
  17. By: Carine Milcent (PSE - Paris School of Economics - 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: Many governments have sought to enhance patient choice in hospital by intensifying competitive pressure on hospital administrations that results in an improvement in efficiency, quality, and innovation. However, there is mixed evidence on whether patients travel past their local hospitals to seek better quality care and whether higherincome patients are those most sensitive to respond to competitive pressures. Using detailed data from 17 million inpatient stays admitted in France during 2019, this paper explores the attributes of hospital ownership as determinants of patients' choice for healthcare. We found that, in general, patients travel for their care, with just one-quarter of them going to the nearest hospital. In fact, the most vulnerable patients (i.e., those socioeconomically deprived, and very aged) are mostly treated in local public hospitals with the lowest quality service level, and with large variability in quality as well, while those with less socioeconomic deprivation seek care at higher-quality for-profit hospitals. Our counterfactual simulations show that admission to university hospitals attenuates existing inequalities. However, whether it delays the healthcare access sought by this population remains an open question.
    Keywords: Deprivation, Ageing, Inequality, Patient choice, Demand for healthcare, Rural areas, Quality, Distance
    Date: 2023–01–27

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