nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2023‒05‒22
eighteen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Do reduced labor costs increase employment among minimum wage workers? Evidence from a Swedish payroll tax cut By Daunfeldt, Sven-Olov; Gidehag, Anton; Seerar Westerberg, Hans
  2. Pension Reforms and Couples' Labour Supply Decisions By Moghadam, Hamed Markazi; Puhani, Patrick; Tyrowicz, Joanna
  3. Longer careers: A barrier to hiring and coworker advancement? By Irene Ferrari; Jan Kabátek; Todd Morris
  4. Municipal Waste Policies and Spillover Effects By Alessandro Bucciol; Roberta Muri; Francesca Rossi
  5. The Effects of the Legal Minimum Working Time on Workers, Firms and the Labor Market By Pauline Carry
  6. Imported carbon emissions: evidence from French manufacturing companies By Dussaux, Damien; Vona, Francesco; Dechezleprêtre, Antoine
  7. "The influence of independent local parties on spending: Evidence from Dutch municipalities". By Marianna Sebo; Raymond Gradus; Tjerk Budding
  8. Impact techniques of modelling next-gen infrastructure investment projects to redress regional disparities using multi-regional input-output model By Darlington Agbonifi
  9. Do Renewables Create Local Jobs? By Natalia Fabra; Eduardo Gutiérrez; Aitor Lacuesta; Roberto Ramos
  10. Refugee Benefit Cuts By Dustmann, Christian; Landerso, Rasmus; Andersen, Lars Højsgaard
  11. The Different Returns to Cognitive Ability in the Labor and Capital Markets By Bastani, Spencer; Karlsson, Kristina; Waldenström, Daniel
  12. Beyond financial knowledge and IQ: The effect of temporal values on pension planning, homeownership and financial wealth of natives and immigrants in the Netherlands By Zheng, Yeqiu; Gu, Yan; van Soest, Arthur
  13. The value of host-country language: The effect of Dutch language proficiency on immigrants’ income, savings and financial wealth in the Netherlands By Zheng, Yeqiu; Gu, Yan; Backus, Albert; van Soest, Arthur
  14. Non-take-up of minimum social benefits: quantification in Europe By Céline Marc; Mickaël Portela; Cyrine Hannafi; Rémi Le Gall; Antoine Rode; Stéphanie Laguérodie
  15. Land-use regulation and housing supply elasticity: evidence from France By Guillaume Chapelle; J.B. Eyméoud; C. Wolf
  16. Monetary Rewards, Hierarchy Level and Working Hours as Drivers of Employees' Self-Evaluations By Grund, Christian; Soboll, Alexandra
  17. Right time or the right person? Investigating the hires of high-growth new ventures By Daunfeldt, Sven-Olov; McKelvie, Alexander; Seerar Westerberg, Hans
  18. Trust and accountability in times of pandemics By Monica Martinez-Bravo; Carlos Sanz

  1. By: Daunfeldt, Sven-Olov (Confederation of Swedish Enterprise); Gidehag, Anton (Swedish Agency for Growth Policy Analysis); Seerar Westerberg, Hans (Institute of Retail Economics (Handelns Forskningsinstitut))
    Abstract: We use a youth payroll tax cut in Sweden to investigate whether retail firms that were exposed to substantial labor cost savings increased employment of minimum wage workers more than firms that received smaller labor cost savings. Our dataset includes information on both contracted wages and working hours for most employees in the Swedish retail trade industry. The fact that a large portion of retail employees had contracted wages near the negotiated minimum wage levels at the time of the reform suggests that the minimum wage levels were binding to a great extent. We also find that retail firms with large labor cost savings due to the youth payroll tax cut significantly increased both the number of minimum wage hourly employees and their working hours. We observe no such effects for employees with long-term contracts or wages well above the negotiated minimum wages. This suggests that the relatively high minimum wage levels of the Swedish retail industry prevent the employment of workers who are perceived to have low productivity.
    Keywords: Retail trade industry; minimum wages; payroll tax reform; natural experiments; collective bargaining
    JEL: D24 L25 L26
    Date: 2023–01–26
  2. By: Moghadam, Hamed Markazi; Puhani, Patrick; Tyrowicz, Joanna
    Abstract: To determine how wives' and husbands' retirement options affect their spouses' (and their own) labour supply decisions, we exploit (early) retirement cutoffs by way of a regression discontinuity design. Several German pension reforms since the early 1990s have gradually raised women's retirement age from 60 to 65, but also increased ages for several early retirement pathways affecting both sexes. We use German Socio-Economic Panel data for a sample of couples aged 50 to 69 whose retirement eligibility occurred (i) prior to the reforms, (ii) during the transition years, and (iii) after the major set of reforms. We find that, prior to the reforms, when several retirement options were available to both husbands and wives, both react almost symmetrically to their spouse reaching an early retirement age, that is both husband and wife decrease their labour supply by about 5 percentage points when the spouse reaches age 60. This speaks in favour of leisure complementarities. However, after the set of reforms, when retiring early was much more difficult, we find no more significant labour supply reaction to the spouse reaching a retirement age, whereas reaching one's own retirement age still triggers a significant reaction in labour supply. Our results may explain some of the diverse findings in the literature on asymmetric reactions between husbands and wives to their spouse reaching a retirement age: such reactions may in large parts depend on how flexibly workers are able to retire.
    Keywords: Retirement Coordination, Labour Market Participation, Household Decisions, Regression Discontinuity Design
    JEL: J22 J26
    Date: 2023–04
  3. By: Irene Ferrari; Jan Kabátek; Todd Morris
    Abstract: Government policies are encouraging older workers to delay retirement, which may curb younger workers’ career advancement. We study a Dutch reform that raised the retirement age by 13 months and nearly tripled employment at age 66. Using monthly linked employer-employee data, we show that affected firms delay and decrease replacement hiring, and coworkers’ earnings fall via reductions in hours worked, wages, and promotions. Combined, the hiring and coworker spillovers offset most of the additional hours worked by older workers, disproportionately affect career advancement for younger workers and women, and considerably increase the policy’s ratio of welfare costs to fiscal savings.
    Keywords: retirement reform; labor demand; internal labor markets; firms; coworker spillovers
    JEL: H55 J23 J26 J63
    Date: 2023
  4. By: Alessandro Bucciol (Department of Economics (University of Verona)); Roberta Muri (University of Bologna); Francesca Rossi (Department of Economics (University of Verona))
    Abstract: Using a unique dataset combining administrative data from the municipalities of the Veneto region of Italy for the years 2010-2019, we develop a spatial econometric model to study the effect of two policies (Door-to-Door collection and Pay-As-You-Throw tariff) on waste sorting and waste accumulation. We are especially interested in the spatial spillover effect of the policies. Both policies are successful and with similar impact on the outcome variables. Interestingly, we also find evidence of a spatial spillover effect. The effect is mostly negative and limits the effectiveness of the policies (especially PAYT). Our results highlight the importance of coordinating decisions on the implementation of waste management policies.
    Keywords: Waste, Door-to-Door, Pay-As-You-Throw, Spatial effects
    JEL: Q53 C23
    Date: 2023–04
  5. By: Pauline Carry (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper provides new evidence on how firms and workers adjust to a restriction on lowhour jobs. I exploit a unique reform introducing a minimum workweek of 24 hours in France in 2014, affecting 15% of jobs. Drawing on linked employer-employee data and an event study design, I find a firm-level reduction in the number of jobs and an increase in average hours per worker. Overall, total hours worked in the firm decreased significantly, showing imperfect substitutability between workers and hours. The effects differ by gender: part-time female workers were replaced by full-time male workers. Importantly, reduced-form evidence indicates the reallocation of workers from firms highly exposed to the policy to firms less exposed. To quantify the aggregate impact taking into account these effects, I build and estimate a search and matching model with heterogeneous workers and firms. I find that the minimum workweek destroyed 1% of jobs but had no effect on total hours, due to positive general equilibrium effects. Finally, the gender gap in welfare increased by 3% because women were more affected by the direct negative employment effects and benefited less from reallocation effects.
    Keywords: Working time regulation, Hours of work, Reallocation effects, Gender inequality
    Date: 2022–12–29
  6. By: Dussaux, Damien; Vona, Francesco; Dechezleprêtre, Antoine
    Abstract: This paper analyzes imported carbon emission at the firm level. To do so, we combine information on emissions, imports, imported emissions and energy prices for French manufacturing firms between 1997 and 2014. We document a significant increase of the carbon emissions embedded in imports of French manufacturing companies over the period 1997 to 2014 that is attributable mainly to a shift towards more carbon-intensive products and countries. We then estimate the impact of imported emissions on domestic emissions and emission intensity using a shift-share instrumental variable strategy based on third countries supply shocks. We do not find compelling evidence of an impact of carbon imports on total emissions, but emission efficiency improves significantly in companies offshoring emissions abroad. A 10% increase in carbon offshoring causes a 4% decline in emission intensity. In addition, we find that the elasticity of domestic emission intensity to imported emissions is stronger in energy-intensive sectors, on high-productivity companies and among exporters. Reassuringly, the relationship between imported emissions and emission intensity does not seem to be driven by a pollution haven motive.
    Keywords: Horizon 2020 Framework Programme; project INNOPATHS (grant number 730403
    JEL: F18 F14 Q56
    Date: 2023–07–14
  7. By: Marianna Sebo (Department of Econometrics, Statistics and Applied Economics. John Keynes 1-11. 08034 Barcelona, Spain.); Raymond Gradus (School of Economics and Business and Tinbergen Institute, Vrije Universiteit Amsterdam.); Tjerk Budding (School of Economics and Business and Tinbergen Institute, Vrije Universiteit Amsterdam.)
    Abstract: Do independent local parties make different decisions on municipal finances compared to their national counterparts? In this paper, we empirically analyze whether independent local parties affect public finances in Dutch municipalities. Using a matching strategy, we compare municipalities that are similar in their observable characteristics except for the presence of an independent local party majority in the municipal council. We provide evidence that shows that municipalities with independent local majorities indeed differ in terms of local spending, specifically they spend more on categories of Local Public Administration, Public Health and Environment and Culture and Recreation which are arguably more local-oriented. We extend our analysis by looking at the local effects of local independent majorities. Using a regression kink design, we find consistent results if we look at the changes that take place once the majority share of the seats in the municipal council has been reached by independent local parties.
    Keywords: Local government, Spending categories, Local parties, Empirical research, Matching methods, Regression kink design. JEL classification: D72, H41, H72, H83.
    Date: 2023–05
  8. By: Darlington Agbonifi (Department of Economics (University of Verona))
    Abstract: This paper estimates the socio-economic impact of infrastructure recovery investments and resilience plan related to the Institutional Development Contract (CIS) for the city of Taranto on different categories of households, labor markets (skilled and unskilled), and private enterprises in Italy. It does so by implementing a multi-regional input-output (MRIO) model with inter-regional trade at the level of Apulia region, to estimate the intra-regional impact, and, at the national level, to estimate the inter-regional and inter-sectoral supply chain linkages and spillover effects through trade. The intra-regional effects are almost two times the inter-regional effects. Almost 51% of the inter-regional impact on value-added accrues to northern regions, 22% at the centre, while about 27% is captured by the regions in southern Italy. This evidence clearly shows a good degree of connection of the Apulia local economy with the macro region of northern Italy, while it is quite weak with the macro south in Italy. The considerable share of inter-regional spillover effects in terms of value-added, which is transferred outside the southern macro-region, over 73% reflects the persisting regional disparities in Italy, where the productive northern-regions mostly benefit from the national development policies made in the most marginal areas in southern Italy.
    Keywords: multiregional input-output (MRIO) model, local-NGEU investment projects, interregional trade flows, regional disparities, Taranto, Apulia, Italy
    JEL: C67 D57 F14 Q58 R13
    Date: 2023–04
  9. By: Natalia Fabra (UNIVERSIDAD CARLOS III); Eduardo Gutiérrez (Banco de España); Aitor Lacuesta (Banco de España); Roberto Ramos (Banco de España)
    Abstract: We investigate whether investments in renewable energy – solar and wind plants – create jobs in the municipality where they are located. Using 13 years of monthly data, we exploit the variation in the timing and size of investment projects across more than 3, 200 municipalities in Spain, a country with substantial investments in this area. We use a new estimator for staggered differences-in-differences analysis that extends the local projections approach with clean controls (Dube et al., 2022). We find strong heterogeneity in the magnitude and pattern of the impacts of solar and wind investments. On average, solar investments increase employment by local firms, but the effects on the unemployment of local residents are weak. The effects of wind investments on local employment and unemployment are mostly non-significant. These findings have important implications for public policy.
    Keywords: renewable energy, employment, unemployment, NIMBY, spatial effects
    JEL: L94 C33 O25 R23
    Date: 2023–01
  10. By: Dustmann, Christian (University College London); Landerso, Rasmus (Rockwool Foundation Research Unit); Andersen, Lars Højsgaard (Rockwool Foundation Research Unit)
    Abstract: This paper analyzes the effects of Denmark's Start Aid welfare reform that targets refugees. Implemented in 2002, it enables us to study not only the reform's immediate effects, but also its longerterm consequences, and its repeal a decade later. The reform-induced large transfer cuts led to an increase in employment rates, but only in the short run. Overall, the reform increased poverty rates and led to a rise in subsistence crime. Moreover, local demand conditions generate substantial heterogeneity in the reform's effects on immediate and longer-term employment.
    Keywords: labor market outcomes, welfare state, social assistance, labor demand, migration
    JEL: E64 I30 J60
    Date: 2023–04
  11. By: Bastani, Spencer (Institute for Evaluation of Labour Market and Education Policy (IFAU)); Karlsson, Kristina (Department of Economics, Uppsala University); Waldenström, Daniel (Research Institute of Industrial Economics (IFN))
    Abstract: We investigate the returns to cognitive ability in the labor and capital markets. Using population-wide Swedish military enlistment data and administrative tax records, we find that cognitive ability is much better at predicting capital income than labor earnings. The difference is almost a factor of three and remains substantial even after controlling for education, occupation, savings, inheritance, and parental background. Moreover, ability is significantly positively correlated with wealth returns. Our results provide new insights into why inequality in capital income is greater than in labor income and shed light on the drivers of economic mobility.
    Keywords: Ability; Skills; Education; Capital income; Wealth
    JEL: D31 H20 J24
    Date: 2023–04–28
  12. By: Zheng, Yeqiu; Gu, Yan; van Soest, Arthur
    Abstract: We study pension planning and financial wealth of natives and immigrants (N=1177) in the Netherlands, in relation to their temporal values (past/future-focused), financial knowledge, IQ, and other individual characteristics. We find that, compared to natives, immigrants are less financially literate and rely more on the government for their retirement income, but are more future-focused and think more about their retirement. Second, controlling for financial knowledge, IQ, saving intention, health, self-control and demographic factors, temporal values help to predict many aspects of pension planning: how much people think about retirement, their desired retirement age, whether they develop a plan to save for retirement, perceived saving adequacy, and home ownership. Furthermore, temporal values predict savings and financial wealth in 2016 and 2020, even after controlling for the financial situation in 2016. In conclusion, habitually attending to the past leads people to give less priority to the future compared to the past, which has consequences for people’s planning and behaviour such as retirement planning and financial well-being. Our results have strong implications for policies related to pension communication and contribute to the theory on relationships between economic decisions, time and cognition.
    Date: 2023–04–13
  13. By: Zheng, Yeqiu; Gu, Yan; Backus, Albert; van Soest, Arthur
    Abstract: We study the effect of Dutch proficiency on immigrants’ labour market performance, savings and financial wealth in the Netherlands. Different from past research, we had participants (N=659) take a language proficiency test apart from self-reported assessments, and measured participants’ IQ, patience, saving intention, risk aversion, self-control, temporal focus, etc. to better control for individual characteristics. Immigrants’ labour market performance and financial wealth were initially surveyed in 2016, and then again in 2020-2021. We find that Dutch proficiency affects immigrants’ earnings (employment probabilities; income; hourly wages) in 2016 and predicts participants’ earnings in 2021 even after controlling for the baseline in 2016, individual characteristics and demographic information. Furthermore, the results for the first time reveal that language proficiency can also predict immigrants’ current and future savings and financial wealth. Importantly, using an instrumental variables approach we show that language proficiency has a causal effect. Our findings have theoretical and policy implications.
    Date: 2023–04–13
  14. By: Céline Marc (DREES - Direction de la recherche, des études, de l’évaluation et des statistiques [Paris] - Ministère des Solidarités et de la Santé [Paris, France]); Mickaël Portela (DREES - Direction de la recherche, des études, de l’évaluation et des statistiques [Paris] - Ministère des Solidarités et de la Santé [Paris, France]); Cyrine Hannafi (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel); Rémi Le Gall (2L2S - Laboratoire Lorrain de Sciences Sociales - UL - Université de Lorraine, TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique); Antoine Rode (Odenore - PACTE - Pacte, Laboratoire de sciences sociales - UPMF - Université Pierre Mendès France - Grenoble 2 - UJF - Université Joseph Fourier - Grenoble 1 - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique, PACTE - Pacte, Laboratoire de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - UGA - Université Grenoble Alpes); Stéphanie Laguérodie (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: "Non-take-up", which describes the situation of "anyone who – for whatever reason – does not benefit from a public offer of rights or services to which they may be entitled" (Warin, 2016a), is the subject of growing, shared interest in countries with widely varying social security systems. There is a tendency for social support systems to grow in complexity in order to adapt to the diverse range of situations they are designed to serve; situations which are becoming increasingly characterised by their instability. When people do not receive benefits to which they are entitled, the risk of poverty and exclusion increases, espe-cially when the benefits in question are intended for the poorest individuals. Although our understanding of this phenomenon and its causes has advanced thanks to the now abundant literature on the subject, measuring the extent to which it exists remains a major challenge: any such means of measurement must satisfy the social demand for statistics on the subject whilst also helping to refine our understanding of the mechanisms by which we can combat non-take-up. This DREES Report, written in collaboration with the Observatoire des non-recours aux droits et services (Odenore), aims to report on the efforts to quantify non-take-up of guaranteed minimum income in five European countries with different national social security systems, but also a shared, long-term interest in the issue of non-take-up. The study covers Germany, Belgium, Finland, the United Kingdom and the Netherlands. More specifically, this report aims to present the main non-take-up rates for minimum income in the countries studied as well as the methods and data sources used to evaluate these. It briefly describes the different social security systems, followed by the origins and context of the steps taken to quantify non-take-up in these countries. Finally, it attempts to identify the main actors and areas of data production. This stocktaking allows us to analyse whether certain types of data production have helped to put this phenomenon "on the agenda" and, if so, whether they have also helped to qualify it and define it as an issue. The study is based on material comprising a literature review and discussions and interviews with actors who produce data and/or possess expertise on the subject. Given the number of works quantifying non-take-up, the period covered by the study primarily covers those produced within the past ten years.
    Keywords: Non-take-up of rights and services
    Date: 2022–04
  15. By: Guillaume Chapelle; J.B. Eyméoud; C. Wolf (Université de Cergy-Pontoise, THEMA)
    Abstract: This study gathered original data on French metropolitan statistical areas to estimate and decompose their inverse housing supply elasticity, describing how housing prices react to demand shocks. Our findings confirm that French cities are highly inelastic, with an estimated average supply elasticity of 0.5. Furthermore, leveraging a nationwide regulation protecting historical monuments as an instrument, we found that land-use regulations controlled by local authorities appear to be mainly responsible for this low supply elasticity.
    Keywords: housing supply, land use regulation, real estate, urban growth.
    JEL: R31 R52 R21
    Date: 2023
  16. By: Grund, Christian (RWTH Aachen University); Soboll, Alexandra (RWTH Aachen University)
    Abstract: In this study, we explore the relation between job characteristics and employees' self-evaluations of performance in comparison to their colleagues' performance. Making use of unique individual panel data of ten large firms in Germany's chemical industry, we focus on monetary rewards (bonus payments and wage increases), level of hierarchy and weekly working hours as well as interactions with gender and tenure as possible drivers of self-evaluations. Our results hint for particular relevance of working hours, and some extent of hierarchy levels and monetary rewards. We find less evidence for our hypotheses regarding interaction effects of gender and tenure.
    Keywords: self-evaluations, bonus payments, wage increases, level of hierarchy, working hours
    JEL: J3 M5
    Date: 2023–03
  17. By: Daunfeldt, Sven-Olov (Confederation of Swedish Enterprise); McKelvie, Alexander (Syracuse University, New York, United States.); Seerar Westerberg, Hans (Institute of Retail Economics (Handelns Forskningsinstitut))
    Abstract: Hiring new employees is an important part of a new venture’s growth. However, we still have limited understanding of the human capital needs of high-growth new ventures, and how their pace of growth relates to whom they hire. We contribute to the literature by investigating 64, 404 hires among growing new ventures in Sweden from 2008 to 2015, finding that individuals with higher educational attainment and previous management experience are more likely to be hired by high-growth new ventures. In contrast, we find no indications that unemployed individuals or people that are outside the labor force are more likely to be hired by the fastest growing new ventures. High-growth new ventures are thus more selective in their hiring decisions than new ventures with lower sales growth rates, suggesting that ‘the right person’ is more important than ‘the right time’. These differences in hiring practices are most prevalent during new ventures’ first three years of operation and become more negligible as the ventures age.
    Keywords: Hiring; High-growth new ventures; Firm growth; Human capital
    JEL: D21 D22 J63 L25
    Date: 2023–01–10
  18. By: Monica Martinez-Bravo (CEMFI); Carlos Sanz (Banco de España)
    Abstract: The COVID-19 pandemic took place against the backdrop of growing political polarization and distrust in political institutions in many countries. Did deficiencies in government performance further erode trust in public institutions? Did citizens’ ideology interfere with the way they processed information on government performance? To investigate these two questions, we conducted a pre-registered online experiment in Spain in November 2020. Respondents in the treatment group were provided information on the number of contact tracers in their region, a key policy variable under the control of regional governments. We find that individuals greatly over-estimate the number of contact tracers in their region. When we provide the actual number of contact tracers, we find a decline in trust in governments, a reduction in willingness to fund public institutions and a decrease in COVID-19 vaccine acceptance. We also find that individuals endogenously change their attribution of responsibilities when receiving the treatment. In regions where the regional and central governments are controlled by different parties, sympathizers of the regional incumbent react to the negative news on performance by attributing greater responsibility for it to the central government. We call this the blame shifting effect. In those regions, the negative information does not translate into lower voting intentions for the regional incumbent government. These results suggest that the exercise of political accountability may be particularly difficult in settings with high political polarization and areas of responsibility that are not clearly delineated.
    Keywords: trust, accountability, polarization, COVID-19
    JEL: P00 D72 H1 H7
    Date: 2023–01

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