nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2023‒03‒27
twenty-one papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. How Does Immigration Affect Housing Costs in Switzerland? By Helfer, Fabienne; Grossmann, Volker; Osikominu, Aderonke
  2. The More You Breath, The Less You Are Safe. The Effect of Air Pollution on Work Accidents By Domenico Depalo; Alessandro Palma
  3. Rational cuts? The local impact of closing undersized schools By Marco Di Cataldo; Giulia Romani
  4. Gender differences in job mobility and pay progression in the UK By Harkness, Susan; Popova, Daria; Avram, Silvia
  5. Intergenerational Mobility Trends and the Changing Role of Female Labor By Ulrika Ahrsj\"o; Ren\'e Karadakic; Joachim Kahr Rasmussen
  6. The Micro and Macro Effects of Changes in the Potential Benefit Duration By Jessen, Jonas; Jessen, Robin; Galecka-Burdziak, Ewa; Góra, Marek; Kluve, Jochen
  7. The Nature of Long-Term Unemployment: Predictability, Heterogeneity and Selection By Andreas I. Mueller; Johannes Spinnewijn
  8. Parental Education and Invention: The Finnish Enigma By Philippe Aghion; Ufuk Akcigit; Ari Hyytinen; Otto Toivanen
  9. Digitalisation and productivity: gamechanger or sideshow? By Anderton, Robert; Botelho, Vasco; Reimers, Paul
  10. Does Twitter data mirror the European North-South family ties divide? A comparative analysis of tweets about family. By Gil-Clavel, Sofia; Mulder, Clara H.
  11. The transition of brown regions: A matter of timing? By Stefano Basilico; Nils Grashof
  12. Retrieving the Returns to Experience, Tenure, and Job Mobility from Work Histories By Addison, John T.; Portugal, Pedro; Raposo, Pedro
  13. Partisan Abortions By Libertad González; Luis Guirola; Blanca Zapater
  14. Works Councils as Gatekeepers: Codetermination, Monitoring Practices, and Job Satisfaction By Grund, Christian; Sliwka, Dirk; Titz, Krystina
  15. Labour market expectations and occupational choice: evidence from teaching By Fullard, Joshua
  16. Teenage parenthood, circumstances and educational mobility of children By Giovanni Bernardo; Giuseppe Cinquegrana; Giovanni Fosco
  17. Rather First in a Village than Second in Rome? The Effect of Students' Class Rank in Primary School on Subsequent Academic Achievements By Francois-Xavier Ladant; Paolo Sestito; Falco J. Bargagli-Stoffi
  18. Teaching, technology and test scores. The impact of personal computers on student performance in primary school By Hall, Caroline; Lundin, Martin
  19. Paying Moms to Stay Home: Short and Long Run Effects on Parents and Children By Jonathan Gruber; Tuomas Kosonen; Kristiina Huttunen
  20. On the relationship between information and individuals’ perception in affecting income tax evasion By Ludovica Spinola
  21. Does offshoring shape labor market imperfections? A comparative analysis of Belgian and Dutch firms By Sabien Dobbelaere; Catherine Fuss; Mark Vancauteren

  1. By: Helfer, Fabienne (University of Fribourg); Grossmann, Volker (University of Fribourg); Osikominu, Aderonke (University of Hohenheim)
    Abstract: This paper examines the short-run immigration effects on prices for owner-occupied housing and rents in Switzerland, exploiting regional variation at the level of 106 local labour markets ("Mobilité Spatiale" regions) and 26 cantons, respectively. We propose two empirical strategies that exploit the Agreement on the Free Movement of Persons (AFMP) with the European Union (EU), enacted in 2002, as an exogenous shock to immigration. The first approach uses the AFMP reform within an instrumental variable approach, instrumenting current regional inflows of immigrants based on the historical distribution of immigrants across regions. The second conducts an event study of housing price changes before and after the reform, distinguishing between regions with historically high, medium, and low immigration from EU-15 countries. The analysis based on data at the level of local labour markets for the years 1985-2016 suggests that immigration triggered off by the AFMP reform substantially raises prices of single-family homes and of owner-occupied apartments. Estimates based on cantonal data for the years 1998-2016, suggest that immigration raises rental prices even more than prices of owner-occupied housing.
    Keywords: agreement on the free movement of persons, immigration, shift-share instrument, event study, house prices, rental rates
    JEL: F22 O18 R31
    Date: 2023–02
  2. By: Domenico Depalo (Bank of Italy, Labor Market Department); Alessandro Palma (Gran Sasso Science Institute (GSSI) & CEIS, Università di Roma ‘Tor Vergata’)
    Abstract: We estimate the effect of air pollution on work-related accidents using administrative data from Italy in a setting characterized by strict air pollution and work safety regulations. To address the potential endogeneity due to unobserved productivity shifts and firm-specific pollution sources, we use winter heating rules in highly urbanized areas as a exogenous sources of variation in pollution exposure. We find that a one unit increase in PM10 causes 0.014 additional accidents and 0.0013 additional disabilities. We also explore the theoretical implications of these findings in a setting where firms are risk carriers and fully bear the compensation costs of less severe accidents. We empirically confirm that firms have an incentive to deploy defensive investments also when the risk of accidents derives from external factors, as in the case of air quality. Our back-of-the-enveloped calculation shows that each additional unit in PM10 concentration would increase the total cost of an accident by about 1.7%.
    Keywords: air pollution, workplace safety, work accidents, IV, winter heating
    JEL: I18 J28 J81 Q51 Q53
    Date: 2023–02–25
  3. By: Marco Di Cataldo (Department of Economics, University Of Venice CÃ Foscari; Department of Geography and Environment, London School of Economics); Giulia Romani (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: The availability of public education services can influence residential choices. Hence, policies aiming to ‘rationalise’ service provision by cutting on under- sized nodes of the public school network can induce population decline. This paper exploits an Italian education reform inducing a significant contraction of the school network to investigate the demographic and income effects of primary school closures. We assess whether school closures have an impact on households’ residential choices, on top and beyond preexisting negative population trends which motivate school closures. We address endogeneity by combining a Two-Way-Fixed-Effects model with an instrumental variable approach, constructing the IVs on the basis of institutional thresholds for school sizing adopted by some Italian regions. Our findings suggest that municipalities affected by school closures experience significant reduction in population and income. The effect is driven by peripheral municipalities located far away from economic centres, and distant from the next available primary school. This evidence indicates that school ‘rationalisation policies’, by fostering depopulation of peripheral areas, have an influence on the spatial distribution of households and income, thus affecting territorial disparities.
    Keywords: school closures, residential choices, education policy, core-periphery patterns, Italy
    JEL: H40 H52 R23
    Date: 2023
  4. By: Harkness, Susan; Popova, Daria; Avram, Silvia
    Abstract: Understanding disparities in the rates at which men and women’s wages grow over the life course is critical to explaining the gender pay gap. Using panel data from 2009 to 2019 for the United Kingdom, we examine how differences in the rates and types of job mobility of men and women – with and without children - influence the evolution of wages. We contrast the rates and wage returns associated with different types of job moves, including moving employer for family reason, moving for wage or career-related reasons, and changing jobs but remaining with the same employer. Despite overall levels of mobility being similar for men and women, we find important differences in the types of mobility they experience, with mothers most likely to switch employers for family related reasons and least likely to move for wage or career reasons, or to change jobs with the same employer. We find that, while job changes with the same employer and career related employer changes have large positive wage returns, changing employers for family related reasons is associated with significant wage losses. Our findings show that differences in the types of mobility experienced by mothers compared to other workers provide an important part of the explanation for their lower wage growth and play a crucial role in explaining the emergence of the motherhood wage gap in the years after birth.
    Date: 2023–03–07
  5. By: Ulrika Ahrsj\"o; Ren\'e Karadakic; Joachim Kahr Rasmussen
    Abstract: Using harmonized administrative data from Scandinavia, we find that intergenerational rank associations in income have increased uniformly across Sweden, Denmark, and Norway for cohorts born between 1951 and 1979. Splitting these trends by gender, we find that father-son mobility has been stable, while family correlations for mothers and daughters trend upwards. Similar patterns appear in US survey data, albeit with slightly different timing. Finally, based on evidence from records on occupations and educational attainments, we argue that the observed decline in intergenerational mobility is consistent with female skills becoming increasingly valued in the labor market.
    Date: 2023–02
  6. By: Jessen, Jonas (European University Viadrina, Frankfurt / Oder); Jessen, Robin (RWI); Galecka-Burdziak, Ewa (Warsaw School of Economics); Góra, Marek (Warsaw School of Economics); Kluve, Jochen (KfW Development Bank)
    Abstract: We quantify micro and macro effects of changes in the potential benefit duration (PBD) in unemployment insurance. In Poland, the PBD is 12 months for newly unemployed if the previous year's county unemployment rate is more than 150% of the national average, and 6 months otherwise. We exploit this discontinuity using RD estimates on registry data containing the universe of unemployed from 2004 to 2020. For workers whose PBD is directly affected by the policy rule (benefit recipients younger than 50), a PBD increase from 6 to 12 months leads to 13 percent higher unemployment. The aggregate effect on unemployment is entirely explained by this increase. Thus, the micro effect equals the macro effect. We find no evidence of spill-overs on two distinct groups of unemployed whose PBD is unchanged and no effect on measures of labour market tightness. A decomposition analysis reveals that 12 months after an increase in the PBD, changes in exits from and entries into unemployment each contribute to about one half of the overall increase in unemployment.
    Keywords: unemployment benefits, extended benefits, spell duration, separation rate, regression discontinuity
    JEL: H55 J20 J65
    Date: 2023–02
  7. By: Andreas I. Mueller; Johannes Spinnewijn
    Abstract: This paper studies the predictability of long-term unemployment (LTU) and analyzes its main determinants using rich administrative data in Sweden. Compared to using standard socio-demographic variables, the predictive power more than doubles when leveraging the rich data environment. The largest gains come from adding job seekers' employment history prior to becoming unemployed. Applying our prediction algorithm over the unemployment spell, we show that dynamic selection into LTU explains at least half of the observed decline in job finding. While the within-individual declines are small on average, we find substantial heterogeneity in the individual-level declines and thus reject the commonly used proportional hazard assumption. Applying our prediction algorithm over the business cycle, we find that the cyclicality in average LTU risk is not driven by composition but rather by within-individual cyclicality and that individual rankings are relatively persistent across years. Finally, we evaluate the implications of our findings for the value of targeting unemployment policies and how these change over the unemployment spell and the business cycle.
    JEL: E24 J64 J68
    Date: 2023–02
  8. By: Philippe Aghion; Ufuk Akcigit; Ari Hyytinen; Otto Toivanen
    Abstract: Why is invention strongly positively correlated with parental income not only in the US but also in Finland which displays low income inequality and high social mobility? Using data on 1.45M Finnish individuals and their parents, we find that: (i) the positive association between parental income and off-spring probability of inventing is greatly reduced when controlling for parental education; (ii) instrumenting for the parents having a MSc-degree using distance to nearest university reveals a large causal effect of parental education on offspring probability of inventing; and (iii) the causal effect of parental education has been markedly weakened by the introduction in the early 1970s of a comprehensive schooling reform.
    JEL: J24 O3
    Date: 2023–02
  9. By: Anderton, Robert; Botelho, Vasco; Reimers, Paul
    Abstract: Is digitalisation a massive gamechanger which will deliver huge gains in productivity, or is it more of a sideshow with only limited impacts? We use a large balance sheet panel dataset comprising more than 19 million European firm-level observations to empirically investigate the impact of digitalisation on productivity growth via various previously unexplored chan-nels and mechanisms. Our results suggest that for two otherwise identical firms, the firm that exhibits on average a higher share of investment in digital technologies will exhibit a faster rate of TFP growth, but not all firms and sectors experience significant productivity gains from digitalisation. Digitalisation does not seem to have relatively stronger impacts on the productivity of frontier firms compared to laggards, nor does it help to turn laggards into frontier firms. Overall, firms should not regard digital investment as a ‘one-size-fits-all’ strategy to improve their productivity. Digital technologies are a gamechanger for some firms. But they seem more like a sideshow for most firms, who attempt to be increasingly digital but are not able to adequately reap its productivity gains. JEL Classification: D22, D24, D25, O33
    Keywords: digital technology/transition, productivity growth, technology adoption/diffusion
    Date: 2023–03
  10. By: Gil-Clavel, Sofia (Max Planck Institute for Demographic Research); Mulder, Clara H.
    Abstract: Previous research on the relationship between geographical distance and the frequency of contact between family members has shown that the strength of family ties differs between Northern and Southern Europe. However, little is known about how family ties are reflected in peoples’ conversations on social media, despite research showing the relevance of social media data for understanding users’ daily expressions of emotions and thoughts based on their immediate experiences. This work investigates the question of whether Twitter use patterns in Europe mirror the North-South divide in the strength of family ties by analyzing potential differences in family-related tweets between users in Northern and Southern European countries. This study relies on a longitudinal database derived from Twitter collected between January 2012 and December 2016. We perform a comparative analysis of Southern and Northern European users’ tweets using Bayesian generalized multilevel models together with the Linguistic Inquiry and Word Count software. We analyze the association between regional differences in the strength of family ties and patterns of tweeting about family. Results show that the North-South divide is reflected in the frequency of tweets that are about family; that refer to family in the past versus in the present tense; and that are about close versus extended family.
    Date: 2023–02–06
  11. By: Stefano Basilico (University of Bremen, Faculty of Business Studies and Economics, and Gran Sasso Science Institute, Social Sciences); Nils Grashof (Friedrich Schiller University Jena, Faculty of Economics and Business Administration)
    Abstract: Green innovations aim to improve and reduce the environmental impact of economic activities. Thus far, research focus on the positive trajectories of green transition. Recent studies focus also on the speed of transition and on its effects on economic outcomes. Continuing in this direction we focus on brown regions (i.e. specialized in fossil-fuel technologies) and the challenges that they face to become sustainable. Taking as example German Labour Market Regions we identify brown regions and measure their transition using an innovative approach based on Social Network Analysis and Knowledge Spaces. We find that the earlier a region transitioned to green technologies, the better it is for both its social and economic outcomes. Our findings imply that the transition of brown regions has effects on socio-economic outcomes not yet accounted for in the sustainability transition literature.
    Keywords: green transition, green technologies, knowledge spaces, network embeddedness, socio-economic development
    JEL: O32 O33 R11
    Date: 2023–03–09
  12. By: Addison, John T. (Durham University Business School); Portugal, Pedro (Banco de Portugal); Raposo, Pedro (Universidade Catolica Portuguesa, Lisbon)
    Abstract: Using a unique Portuguese linked employer-employee dataset, this paper offers an extension of the standard Mincerian model of wage determination by allowing for different returns to experience and tenure over the sequence of jobs that constitute a career. We also consider the possibility of distinct wage hikes each time workers change jobs, where such uplifts reflect the returns to job search investments over the life cycle and shape the curvature of the earnings profile. We further investigate how worker, firm, and job match heterogeneity influence the returns to mobility, experience, and tenure. The returns to job mobility are found to reflect sorting into better job matches. Moreover, the estimated returns to experience are upwardly biased because more productive workers tend to be more experienced.
    Keywords: returns to tenure, returns to experience, job mobility, high-dimensional fixed effects, job match fixed effect, job match quality effect
    JEL: J31 J63
    Date: 2023–02
  13. By: Libertad González; Luis Guirola; Blanca Zapater
    Abstract: We study the effect of unexpected changes in the party in government on fertility outcomes, using administrative data on births and abortions for Spain. Following a difference-in-differences strategy, we find that, after an unanticipated loss by the party in power in 2004, municipalities with strong support for this party experienced a sharp increase in abortions (of about 0.10 pregnancy interruptions per 1, 000 women in the month following the election), as well as a decrease in pregnancies leading to live birth (of about 0.28 conceptions per 1, 000 women, for an average monthly birth rate of 3.9). We show that the surprise election results also had an immediate effect on citizens’ economic expectations along partisan lines, a plausible channel for the impact on fertility decisions.
    Keywords: fertility, economic expectations, abortion, partisanship
    JEL: J13 D72
    Date: 2023–03
  14. By: Grund, Christian (RWTH Aachen University); Sliwka, Dirk (University of Cologne); Titz, Krystina (RWTH Aachen University)
    Abstract: This paper analyzes the role of works councils as gatekeepers safeguarding employee's interests in the adoption of monitoring practices. We first introduce a formal model predicting that (i) the introduction of monitoring practices leads to a stronger increase (or weaker decrease) in job satisfaction when a works council is in place, (ii) that this effect should be larger the lower the prior level of employee participation and (iii) that works councils increase the likelihood of the implementation of monitoring practices at the level of individual employees. We provide evidence in line with these hypotheses using linked-employer-employee panel data from Germany. We indeed find that the adoption of formal performance appraisals and feedback interviews is associated with a significantly larger increase in job satisfaction when there is a works council. This pattern is driven by establishments without collective bargaining agreements. The evidence also suggests that works councils indeed facilitate the implementation of monitoring practices, as codetermined firms have a higher likelihood that a practice implemented on the firm level is actually applied by middle management.
    Keywords: works councils, codetermination, performance appraisal, feedback interview, job satisfaction, linked employer-employee data
    JEL: M5 J83 J28
    Date: 2023–02
  15. By: Fullard, Joshua
    Abstract: Using new data on teachers’ intentions to leave the profession, subjective expectations about labour market outcomes and a modified discrete-choice experiment we find that i) teachers are systematically misinformed about population earnings, and misinformation is correlated with attrition intentions; ii) non-pecuniary factors are the most cost-effective method of reducing teacher attrition; and iii) attrition intentions are more affected by reductions in workplace amenities than symmetric improvements, suggesting preventing cuts is more important that rolling out more generous benefits. Linking our survey data to teachers’ administrative records we provide the first evidence that teachers attrition intentions are strong predictors of actual behaviour.
    Date: 2023–03–03
  16. By: Giovanni Bernardo; Giuseppe Cinquegrana; Giovanni Fosco
    Abstract: This paper focuses on teenage childbearing, a phenomenon that is often linked to poverty, restricted education, and cultural and social norms. Teenage parenthood can hinder educational goals, resulting in low income and social exclusion. Through an examination of Italian census data, this paper analyzes the effects of unequal opportunities caused by teenage childbearing of parents on intergenerational educational mobility, finding that increasing parents' age at the conception of the first child is associated with higher upward educational mobility among their children. As a consequence, children whose parents had experienced early pregnancies between the ages of 12 and 18 have low upward mobility with respect to their peers and are unable to overcome their parents' educational attainment.
    Keywords: Intergenerational mobility, Educational attainment, Rank-Rank coefficient, Teenage childbearing
    JEL: C43 I24 J62 O15
    Date: 2023–03–01
  17. By: Francois-Xavier Ladant; Paolo Sestito; Falco J. Bargagli-Stoffi
    Abstract: Is it better to be first in a village than second in Rome, as Caesar claimed? Peer groups can impact later outcomes through two distinct yet related channels: the group's intrinsic quality and one's relative position within this group. The Italian public school setting is an advantageous quasi-laboratory to investigate this question. Using panel data on Italian students over 2013-2019, we compare the effect of a student's relative position in their peer group (class rank) to the effect of class quality in primary school on later academic outcomes. We design a new strategy to identify the rank effect by leveraging two sets of scores: grades on a national standardized test and grades on class exams. Standardized test grades are used to control for ability, alongside student fixed effects. Class grades are used to construct the class rank. We exploit the variation in rank coming from differences in teachers' grading pattern and offer evidence that our measure of rank is as good as random, once we control for our proxies for ability. We find that ranking at the top of the class compared to the bottom in primary school is associated with a gain of 8.1 percentiles in the national standardized grade distribution in middle school and 7.6 in high school. We further show that Caesar was misguided: the effect of a one standard deviation increase in rank amounts to 20% of the effect of a similar increase in class quality, conditional on the rank. Finally, using an extensive student survey, we establish that the rank effect is mediated through student sorting into better high schools and higher interest in academic subjects, self-esteem, peer recognition, and career prospects.
    Date: 2023–02
  18. By: Hall, Caroline (IFAU - Institute for Evaluation of Labour Market and Education Policy); Lundin, Martin (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: The closing of schools and shift to remote teaching during the COVID-19 pandemic has accelerated the use of digital technology in education. Many schools today provide personal computers not only to older students, but also in primary school. There is little credible evidence on how one-to-one (1:1) computer programs affect learning outcomes among younger pupils. We investigate how 1:1 computer technology impacts student performance in primary school in Sweden, using data from an expansion of 1:1 programs that took place before the pandemic. Using a staggered difference-in-differences design, we examine impacts on student performance on standardized tests in language and math in 6th grade. We find no important effects on these learning outcomes on average, but a positive effect on test scores in Swedish and English among students with highly educated parents. Moreover, the results indicate a positive effect in Swedish in schools that received additional financial support for implementing 1:1 technology. Nevertheless, all positive impacts in subgroups appear to be rather small, amounting to 0.01–0.03 SD per semester of 1:1 exposure.
    Keywords: Technology; computers; one-to-one programs; student performance;
    JEL: I21 I24
    Date: 2023–02–15
  19. By: Jonathan Gruber; Tuomas Kosonen; Kristiina Huttunen
    Abstract: We study the impacts of a policy designed to reward mothers who stay at home rather than join the labor force when their children are under age three. We use regional and over time variation to show that the Finnish Home Care Allowance (HCA) decreases maternal employment in both the short and long term. The effects are large enough for the existence of home care benefit system to explain the higher short-term child penalty in Finland than comparable nations. Home care benefits also negatively affect the early childhood cognitive test results of children, decrease the likelihood of choosing academic high school, and increase youth crimes. We confirm that the mechanism of action is changing work/home care arrangements by studying a day care fee reform that had the opposite effect of raising incentives to work – with corresponding opposite effects on mothers and children compared to HCA. Our findings suggest that shifting child care from the home to the market increases labor force participation and improves child outcomes.
    JEL: H31 J13
    Date: 2023–02
  20. By: Ludovica Spinola (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: We experimentally test how information about the number of caught tax evaders, by interacting with individuals’ prior beliefs, affect the decision to underreport taxes. Specifically, our results indicate that when individuals receive the information about the number of people caught evading taxes and perceive this as higher than prior beliefs, they evade less. When, instead, individuals consider the number of caught evaders as low with respect to their beliefs, they evade more. These findings suggest that when subjects are informed on how many people have been found evading taxes they infer the audit probability, rather than the tax evasion rate. Finally, we observe no salience bias effect when considering individuals to whom we highlighted information about others’ norm violation nor when looking at those to whom we emphasised the probability of being audited.
    Keywords: tax evasion, social information, audit probability, salience bias, laboratory experiment
    JEL: D83 D9 H2 H26
    Date: 2023
  21. By: Sabien Dobbelaere (Vrije Universiteit Amsterdam); Catherine Fuss (National Bank of Belgium); Mark Vancauteren (Universiteit Hasselt)
    Abstract: We study the relationship between offshoring and the prevalence and intensity of labor market imperfections at the firm level in Belgium and the Netherlands. Wage markup pricing stemming from workers’ monopoly power is more prevalent than wage markdown pricing originating from firms’ monopsony power in both countries. Offshoring benefits firms in that imports of final as well as intermediate goods are associated with a higher prevalence and intensity of wage markdowns. The widening effect of offshoring on wage markdowns arises from an increase in productivity that is only imperfectly passed through into an increase in wages. Offshoring is negatively related to the prevalence of wage markups. This also holds for the intensity of wage markups measured by workers’ bargaining power in Belgium.
    Keywords: Wage markdowns, wage markups, firm-level offshoring
    JEL: F14 F16 J42 J50
    Date: 2023–02–17

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