nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2023‒08‒28
eighteen papers chosen by
Giuseppe Marotta, Università degli Studi di Modena e Reggio Emilia

  1. Intergenerational educational mobility and the COVID-19 pandemic By Anna Adamecz-Volgyi; Yuyan Jiang; Nikki Shure; Gill Wyness
  2. Taxing the Gender Gap: Labor Market Effects of A Payroll Tax Cut for Women in Italy By Enrico Rubolino
  3. The Wage Effect of Workplace Sexual Harassment: Evidence for Women in Europe By Giulia Zacchia; Izaskun Zuazu
  4. Why wages don't fall in jobs with incomplete contracts By Marco Fongoni; Daniel Schaefer; Carl Singleton
  5. Changing Gender Norms across Generations: Evidence from a Paternity Leave Reform By Farré, Lídia; Felfe, Christina; Gonzalez, Libertad; Schneider, Patrick
  6. Displacement Effects in Manufacturing and Structural Change By Helm, Ines; Kügler, Alice; Schönberg, Uta
  7. Job Displacement and Migrant Labor Market Assimilation By Balgova, Maria; Illing, Hannah
  8. Does homeownership reduce crime? A radical housing reform from the UK By Disney, Richard; Gathergood, John; Machin, Stephen; Sandi, Matteo
  9. Taxes and Gender Equality: The Incidence of the ‘Tampon Tax’ By Thiess Büttner; Frank Hechtner; Boryana Madzharova
  10. Are Managers More Machiavellian Than Other Employees? By Baktash, Mehrzad B.; Jirjahn, Uwe
  11. Couples’ ideological pairings, relative income and housework sharing By Natalie Nitsche; Daniela Grunow; Ansgar Hudde
  12. Is Self-Employment for Migrants? Evidence from Italy By Marianna Brunetti; Anzelika Zaiceva
  13. Minimum Tax Rates and Tax Competition: Evidence from Property Tax Limits in Finland By Teemu Lyytikäinen
  14. When Excellence is not Excellent: The Impact of the Excellence Initiative on the Relative Productivity of German Universities By Cantner, Uwe; Grashof, Nils; Grebel, Thomas; Zhang, Xijie
  15. Permanent Residency and Refugee Immigrants’ Skill Investment By Jacob Nielsen Arendt; Christian Dustmann; Hyejin Ku
  16. Debt Relief for the Financially Vulnerable: Impact on Employment, Welfare Receipt, and Mental Health By de Bruijn, Ernst-Jan; Vethaak, Heike; Koning, Pierre; Knoef, Marike
  17. Outside Options and Worker Motivation By Alexander Ahammer; Matthias Fahn; Flora Stiftinger
  18. Household Savings in Selected Southern European Countries Evidence from Cross-Country Micro-Level Data By Mr. Kamil Dybczak; Shiqing Hua; Mariusz Jarmuzek; Ruifeng Zhang; Yipei Zhang

  1. By: Anna Adamecz-Volgyi (UCL Social Research Institute, University College London); Yuyan Jiang (UCL Social Research Institute, University College London); Nikki Shure (UCL Social Research Institute, University College London); Gill Wyness (UCL Centre for Education Policy and Equalising Opportunities, University College London)
    Abstract: We examine the differential impact of the COVID-19 pandemic on the labour market outcomes of graduate workers by their family background. Specifically, we compare first in family (FiF) graduates, young people who obtained a university degree even though their parents did not, with their graduate peers whose parents have university degrees. We compare their labour market outcomes using multiple waves of data collected during the pandemic, which are linked to an existing longitudinal study and administrative data. We find that FiF graduates, both men and women, were just as likely to keep working during the pandemic as the graduate children of graduate parents. Our results, however, reveal substantial differences in the outcomes of graduates who stopped working, and these differences are heterogenous by gender. Female FiF graduates were more likely to stop working altogether or to be put on an unpaid leave and less likely to be put on furlough or paid leave than non-FiF female graduates. However, we find no such differences between FiF and non-FiF male graduates. Our results highlight how the COVID-19 recession has exacerbated the disadvantage arising from the intersectionality of socioeconomic background and gender and the prolonged impact of parental human capital for women.
    Keywords: socioeconomic gaps, intergenerational educational mobility, higher education, first generation, first in family, COVID-19
    JEL: I24 J24
    Date: 2023–08
  2. By: Enrico Rubolino (University of Lausanne, Department of Business and Economics)
    Abstract: This paper studies the labor market effects of a large payroll tax cut for female hires in Italy. Starting in January 2013, the payroll tax rate paid by the employer for female hires was reduced by 50 percent for a period of 12 months for temporary jobs and 18 months for permanent jobs. Eligibility for the tax cut depends on the time elapsed in nonemployment status and varies discontinuously by the worker’s municipality of residence, age, and occupation. Combining social security data on the universe of Italian private-sector workers with several empirical approaches, I find that the tax cut increases female employment and spurs business performance, especially where gender biases are more severe. By contrast, the tax cut does not raise workers’ net wages. A cost-benefit analysis implies that the net cost of the policy is around one-fourth of the budgetary cost. These findings provide the first empirical evidence that differentiating payroll taxes by gender helps to reduce the gender employment gap, but not the gender pay gap.
    Keywords: Local gender gaps; female employment; payroll tax; tax incidence
    JEL: H22 J21 J31
    Date: 2023–07
  3. By: Giulia Zacchia (Sapienza University of Rome); Izaskun Zuazu (Duisburg-Essen University)
    Abstract: This article contributes to the literature on wage discrimination by examining the consequences of sexual harassment in the workplace on wages for women in Europe. We model the empirical relationship between sexual harassment risk and wages for European women employees using individual-level data provided by the European Working Conditions Survey (EWCS, Eurostat). We find that sexual harassment risk has a negative and statistically significant effect on wages of -0.03% on average for women in Europe. However, our empirical analysis uncovers the importance of considering the dynamics of workplace power relations: analyzing individual-level data, we find evidence of a higher negative impact of sexual harassment risk on wages for women working in counter-stereotypical occupations. We conclude that the wage effect of hostile working conditions, mainly in terms of sexual harassment risk in the workplace, should be considered and monitored as a first critical step in making women be less vulnerable at work and increasing their bargaining power, thereby reducing inequalities in working conditions and pay in Europe.
    Keywords: Sexual harassment, wages, working conditions, Europe.
    JEL: J71 J31 J16 M52
    Date: 2023–05–08
  4. By: Marco Fongoni (École d'Économie d'Aix-Marseille, Aix-Marseille Université); Daniel Schaefer (Institut für Volkswirtschaftslehre, Johannes-Kepler-Universität Linz); Carl Singleton (Department of Economics, University of Reading)
    Abstract: We investigate how the incompleteness of an employment contract - discretionary and non-contractible effort - can affect an employer's decision about cutting nominal wages. Using matched employer-employee payroll data from Great Britain, linked to a survey of managers, we find support for the main predictions of a stylised theoretical framework of wage determination: nominal cuts are at most half as likely when managers believe their employees have significant discretion over how they do their work, though involvement of employees in workplace decision-making reduces this correlation. We also describe how contract incompleteness and wage cuts tend to vary across different jobs. These findings provide the first quantitative evidence of the notion that managerial beliefs about contractual incompleteness can account for their hesitancy over nominal wage cuts. This has long been conjectured by economists, based on anecdotes, qualitative surveys, and lab experiments.
    Keywords: Wage rigidity, Employment contract, Workplace relations, Employer-employee data
    JEL: E24 E70 J31 J41
    Date: 2023–08–02
  5. By: Farré, Lídia (University of Barcelona); Felfe, Christina (University of Würzburg); Gonzalez, Libertad (Universitat Pompeu Fabra); Schneider, Patrick (University of Würzburg)
    Abstract: Social norms are an important barrier to gender convergence. We show that public policy designed to promote gender equality at home can pave the way towards gender convergence by shaping gender norms in the next generation. We combine the introduction of paternity leave in Spain with a large-scale lab-in-the field experiment in secondary schools. Following a local difference-in-differences approach, we show that children born after the policy change exhibit more gender egalitarian attitudes and perceive less stereotypical social norms. They are also more likely to engage in counter-stereotypical day-to-day behaviors and to deviate from the male-breadwinner model in the future.
    Keywords: gender equality, gender norms, paternity leave permits
    JEL: J08 J13 J16 J18
    Date: 2023–07
  6. By: Helm, Ines (Ludwig-Maximilians-Universität München); Kügler, Alice (CEU); Schönberg, Uta (University College London)
    Abstract: We investigate the consequences of structural change for workers displaced from the manufacturing sector. Manufacturing establishments traditionally employed low- and high-wage workers in similar proportions and paid substantial wage premiums to both types of workers. Structural change has led to the disappearance of these jobs, particularly for low-wage workers. Decomposing displacement wage losses, we show that low-wage workers suffer considerable losses in establishment premiums following displacement, whereas high-wage workers tend to fall down the match quality ladder. With ongoing structural change, losses in wages and establishment premiums have increased over time, especially for low-wage workers, in part because they are increasingly forced to switch to low-knowledge service jobs where establishment premiums are low. Our findings further highlight that structural change and layoffs in manufacturing have significantly contributed to job polarization and the rise in assortative matching of workers to firms.
    Keywords: structural change, manufacturing decline, displaced workers, cost of job loss, human capital, firm rents
    JEL: J22 J24 J31 J63
    Date: 2023–07
  7. By: Balgova, Maria (IZA); Illing, Hannah (University of Bonn)
    Abstract: This paper sheds new light on the barriers to migrants' labor market assimilation. Using administrative data for Germany from 1997-2016, we estimate dynamic difference-in-differences regressions to investigate the relative trajectory of earnings, wages, and employment following mass layoff separately for migrants and natives. We show that job displacement affects the two groups differently even when we systematically control for pre-layoff differences in their characteristics: migrants have on average higher earnings losses, and they find it much more difficult to find employment. However, those who do find a new job experience faster wage growth compared to displaced natives. We examine several potential mechanisms and find that these gaps are driven by labor market conditions, such as local migrant networks and labor market tightness, rather than migrants' behavior.
    Keywords: immigration, job displacement, job search
    JEL: J62 J63 J64
    Date: 2023–07
  8. By: Disney, Richard; Gathergood, John; Machin, Stephen; Sandi, Matteo
    Abstract: “Right to Buy” (RTB), a large-scale natural experiment whereby incumbent tenants in public housing could buy properties at heavily-subsidised prices, increased the UK homeownership rate by over 10 percentage points between its 1980 introduction and the 1990s. This paper studies the impact of this reform on crime by leveraging exogenous variation in eligibility for the policy. Results show that RTB generated significant property crime reductions. Behavioural changes of incumbent tenants and renovation of public properties were the main drivers of this crime reduction. This is evidence of a novel means by which subsidised homeownership and housing policy can reduce criminality.
    Keywords: crime; ownership; pubic housing; OUP deal
    JEL: H44 K14 R31
    Date: 2023–06–05
  9. By: Thiess Büttner; Frank Hechtner; Boryana Madzharova
    Abstract: Many countries are currently debating whether to reduce or eliminate taxes on feminine hygiene products as a measure to address “period poverty” and promote gender equality. Legislators often reject proposals involving reforms of “tampon taxes” as the pass-through of sales taxes into consumer prices cannot be guaranteed. This paper uses a permanent reduction of the tax on tampons & pads in Germany in 2020 as a natural experiment to study the price and unit-sales effects of the tax. Exploiting an extensive data set on the unit sales and scanner prices of feminine hygiene products in Germany and Italy, our results indicate that the incidence of tampon taxes is fully on consumers, while demand for these products is price-inelastic. We do not find cross-price effects for a closely related product group, which remained taxed at the standard tax rate. Both the pass-through and demand effects are found to be homogenous along the pre-reform market-share and price distributions.
    Keywords: tax incidence, pass-through, gender equality, feminine hygiene products, period poverty
    JEL: H22 H23 I38 J16
    Date: 2023
  10. By: Baktash, Mehrzad B.; Jirjahn, Uwe
    Abstract: Concerns about corporate scandals and abusive leadership suggest that individuals with an opportunistic and manipulative personality take advantage of incomplete incentive and control systems to get their way into managerial positions. Against this background, we examine whether there is an association between Machiavellianism and occupying a managerial position. We suggest how to incorporate the psychological concept of Machiavellianism into agency theory and hypothesize that individuals scoring high on Machiavellianism are more likely to attain and keep a managerial position. Using a large and representative panel dataset from Germany, our empirical analysis confirms a strong and positive relationship between Machiavellianism and occupying a managerial position. This result holds in various robustness checks and in instrumental variable estimations accounting for possible endogeneity. Furthermore, our analysis provides evidence that the relationship is monotone; i.e., those with the highest scores of Machiavellianism are most likely to be managers. It also suggests that the direction of influence runs from Machiavellianism to occupational status and not vice versa.
    Keywords: Machiavellianism, Dark Triad, Managers, Agency Theory, Occupational Sorting
    JEL: D23 D90 J24 M12 M51
    Date: 2023
  11. By: Natalie Nitsche (Max Planck Institute for Demographic Research, Rostock, Germany); Daniela Grunow; Ansgar Hudde
    Abstract: Our study offers and empirically tests a new conceptual framework of couples’ housework sharing. We suggest that the partners’ joint gender ideology, or their ‘ideological pairings’ will determine their housework sharing. Further, we argue the link between couples’ relative socio-economic resources and their housework sharing likely depends on these ‘ideological pairings’. Our results, based on data from the German Panel Study of Family and Income Dynamics (pairfam) and mixed- and fixed-effects panel regressions, offer support for this conceptualization. First, we find egalitarian attitudinal duos to share housework the most equally, traditional attitudinal duos to share housework the most unequally, and mismatched attitudinal couples to lie in between. Second, our results indicate that only egalitarian duos further equalize housework sharing when she becomes the family’s main earner. Traditional duos don’t adjust their housework divisions even if she outearns him. Findings for mismatched couples are mixed, but don’t lend support for successful within-couple re-negotiations of housework divisions as her income share rises. Our study advances prior literature by conceptualizing the relevance of the partners’ joint attitudes for gendered domestic work divisions and by making complex interactions between sociological and economic aspects visible. Further, it underscores the importance of investigating couples as an essential meso-level institution in the reproduction of gender inequalities.
    Keywords: Germany
    JEL: J1 Z0
    Date: 2023
  12. By: Marianna Brunetti (CEIS & DEF, University of Rome "Tor Vergata"); Anzelika Zaiceva (University of Modena and Reggio Emilia)
    Abstract: Using a unique Italian dataset covering the period 2004-2020, we assess the immigrant-native gap in entrepreneurship and investigate channels behind it. The data allows us to account for many observable characteristics as well as for risk aversion, which is usually not observed, yet crucial for the self-employment decision. Unlike most of the existing empirical literature, we find that immigrants in Italy are less likely to be self-employed. The negative gap is confirmed when propensity score matching methodology is used. Heterogeneity analysis suggests that the negative gap is larger for men, for economic migrants and those coming from Sub-Saharan Africa, while it is not significant for mixed immigrant-native couples, for highly skilled, and for migrants from Asia and Oceania. The largest gap is found for those working in the agricultural sector. Regarding additional channels, we explore the role of access to credit, including the informal one, and whether migrants are credit constrained, as well as the importance of migrant networks, easiness of doing business, and expenditures on services for migrants. Despite finding significant correlations between self-employment and some of these factors, none of them seem to decrease the magnitude of the negative gap.
    Keywords: Immigrants, self-employment, gender, intermarriage, propensity score matching
    JEL: F22 J21 O15 J15
    Date: 2023–07–31
  13. By: Teemu Lyytikäinen
    Abstract: This paper analyzes how minimum local property tax rates affect local tax policy choice. In Finland, central government has raised the limits on property tax rates several times in the past 30 years. I construct a measure of forced tax rate increases caused by these reforms and examine how municipalities respond to forced increases in nearby municipalities. Results for the property tax on business properties indicate that neighbors' forced tax rate increases lead to higher tax rates, after a reform of the tax base equalization system which increased incentives to compete for the tax base. Before the equalization reform, the tax rates on business properties were unaffected by neighbors' forced tax rate increases. I find some indications that forced increases in the residential property tax rate lead to lower tax rates in neighboring municipalities four years later. Analysis of government bills shows that the introduction of minimum tax rates was partly motivated by concerns regarding horizontal and vertical tax competition. Forced property tax rate increases have a clear and lasting effect on tax revenue in affected municipalities, implying that the tax capacity of central government as regards other tax bases likely increased.
    JEL: H70 H71 H77
    Date: 2023–07
  14. By: Cantner, Uwe; Grashof, Nils; Grebel, Thomas; Zhang, Xijie
    Abstract: Since the Bologna Process, universities have experienced a tremendous increase in competitive pressure. The Excellence Initiative is a path-breaking initiative to the historically-based egalitarian higher education system in Germany to boost universities' competitiveness and the competition among universities. Despite this systematic change, it remains rather unclear to what extent the Excellence Initiative influences the performance. In this paper, we investigate the effect of the Excellence Initiative on universities relative productivity in teaching and research and hence on the divergence or convergence of universities in these performance dimensions. Based on a unique dataset that combines publication and detailed university-level data, we apply a two-step approach by calculating relative productivity with a non-parametric procedure in the first step and using a difference-in-difference approach for estimating treatment effects of the Excellence Initiative in the second step. Overall, we note only a few moments when universities funded by the Excellence Initiative seem to excel and make progress compared to non-funded universities. In research, only some of the Excellence-funded universities, particularly the winners of the Graduate Schools and Clusters of Excellence funding line, manage to improve significantly, even if only for a few years. In teaching, we found no significant average treatment effect of the Excellence Initiative, but a slightly significant time-specific decline in relative teaching productivity two years after funding.
    Keywords: Excellence Initiative, Universities, Relative Productivity, DEA, Difference-in-difference, Funding
    JEL: C22 I20 I23 I25 I28
    Date: 2023–07–29
  15. By: Jacob Nielsen Arendt; Christian Dustmann; Hyejin Ku
    Abstract: We analyze an immigration reform in Denmark that tightened refugee immigrants’ eligibility criteria for permanent residency to incentivize their labor market attachment and acquisition of local language skills. Contrary to what the reform intended, the overall employment of those affected decreased while their average language proficiency remained largely unchanged. This was caused by a disincentive effect, where individuals with low pre-reform labor market performance reduced their labor supply. Our findings suggest that stricter permanent residency rules, rather than incentivizing refugees’ skill investment, may decrease the efforts of those who believe they cannot meet the new requirements.
    Keywords: immigrant assimilation, refugee integration, labor supply, language proficiency, human capital
    JEL: J22 J24 J61
    Date: 2023
  16. By: de Bruijn, Ernst-Jan (Leiden University); Vethaak, Heike (University of Leiden); Koning, Pierre (Vrije Universiteit Amsterdam); Knoef, Marike (Tilburg University)
    Abstract: We study the labor market and mental health impacts of debt relief among financially vulnerable individuals. We exploit a cutoff rule used by a Dutch welfare office to determine eligibility to debt relief of welfare debts. We use this cutoff as an instrument in both a fuzzy regression discontinuity and instrumented difference-in-difference design. With administrative data, we estimate economically small and insignificant effects of debt relief on employment, earnings, welfare receipt, and medication use for mental health problems. Subgroup analyses suggest that debt relief increases employment among debtors with larger welfare debts. The larger amount of debt relief for this group has probably a stronger potential to improve their overall debt position.
    Keywords: debt relief, welfare debts, welfare recipients, fuzzy regression discontinuity design, instrumented difference-in-difference
    JEL: G51 I38 J22 J64 J68
    Date: 2023–07
  17. By: Alexander Ahammer; Matthias Fahn; Flora Stiftinger
    Abstract: We study the relationship between outside options and workers’ motivation to exert effort. We evaluate changes in outside options arising from age and experience cutoffs in the Austrian unemployment insurance (UI) system, and use absenteeism as a proxy for worker effort. Results indicate that a one-percent increase in the potential UI benefit duration increases absenteeism at the intensive margin by 0.28 percent. These results are consistent with a relational contracting model where effort is constrained by the future value of an employment relationship. This model further predicts that effort reductions are more pronounced if benefits assume a larger role in a worker’s outside option and if the perceived relationship value is small. Indeed, we find that our effects are stronger for workers with higher potential cost of unemployment, for older workers, in declining rather than in growing firms, in low-wage firms, and for women as well as workers with children.
    Keywords: outside options, effort incentives, relational contracts
    JEL: D21 D22 J22 J53 M52
    Date: 2023
  18. By: Mr. Kamil Dybczak; Shiqing Hua; Mariusz Jarmuzek; Ruifeng Zhang; Yipei Zhang
    Abstract: The paper looks into the puzzle of low household savings in three Southern European (SE3) countries – Cyprus, Greece, and Portugal. Building on the household saving drivers literature, we employ cross-country micro-level data and investigate the key saving patterns, examining their heterogeneity across households in SE3 countries relative to the EA average. The results confirm the prominent role of income, along with interest rate, inflation, fiscal balance, and debt in shaping household savings in SE3 countries. Quantile regressions employed to analyze saving behavior across the distribution of households suggest that households with lower savings tend to see their savings dip (or dissavings rise) more-than-proportionately with shocks to income, interest rate, inflation, and government balance. Our policy simulations across the distribution of households suggest that targeted rather than universal policy intervention could improve household savings, especially of the most vulnerable ones.
    Keywords: Household savings; distributional analysis; policy simulations
    Date: 2023–07–21

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