nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2023‒09‒18
sixteen papers chosen by
Giuseppe Marotta, Università degli Studi di Modena e Reggio Emilia

  1. How institutions shape the economic returns of public investment in European regions By Inmaculada C. Alvarez; Javier Barbero; Luis Orea; Andrés Rodríguez-Pose
  2. Does gender equality bargaining reduce child penalty? Evidence from France By Pierre-Jean Messe; Jérémy Tanguy
  3. The Short and Medium Term Effects of Full-Day Schooling on Learning and Maternal Labor Supply By Bovini, Giulia; Cattadori, Niccolò; De Philippis, Marta; Sestito, Paolo
  4. Ancestral diversity and performance: Evidence from football data By Silvia Peracchi; Skerdilajda Zanaj; Michel Beine
  5. Business Improvement Districts and Housing Markets: Evidence from Neighborhoods in London By Stefano Cellini; Francisco Nobre
  6. Change, stagnation, and polarisation in UK job quality, 2012-2021: evidence from a new Quality of Work index By Stephens, Thomas C.
  7. Gendered effects of minimum wage By Di Nola, Alessandro; Haywood, Luke; Wang, Haomin
  8. Vacancy Duration and Wages By Bassier, Ihsaan; Manning, Alan; Petrongolo, Barbara
  9. Non-monetary Interventions, Workforce Retention and Hospital Quality: Evidence from the English NHS By Moscelli, Giuseppe; Sayli, Melisa; Blanden, Jo; Mello, Marco; Castro-Pires, Henrique; Bojke, Chris
  10. What do women want in a job? Gender-biased preferences and the reservation wage gap By Kenza Elass
  11. Trends in Social Security Incentives in Belgium By Anne-Lore Fraikin; Alain Jousten; Mathieu Lefebvre
  12. The Effects of Social Insurance Benefits on Leaving Employment at Older Ages in the Netherlands By Adriaan Kalwij; Arie Kapteyn
  13. From bricklayers to waiters: Reallocation in a deep recession By Henry Redondo
  14. Personality and physician performance pay: Evidence from a behavioral experiment in health By Groß, Mona; Hennig-Schmidt, Heike; Wiesen, Daniel
  15. Were COVID and the Great Recession Well-Being Reducing? By Blanchflower, David G.; Bryson, Alex
  16. Costs and Benefits of Congestion in Two-Sided Markets: Evidence from the Dating Market By Tobias Lehmann; Camille Terrier; Rafael Lalive

  1. By: Inmaculada C. Alvarez (Universidad Autonoma de Madrid); Javier Barbero (Universidad Autonoma de Madrid); Luis Orea (Universidad de Oviedo); Andrés Rodríguez-Pose (London School of Economics)
    Abstract: In this paper, we examine the impact of institutional quality on the returns on key drivers of economic growth in 230 European Union (EU) NUTS-2 regions from 2009 to 2017. To estimate region-specific elasticities, we employ a latent class modelling approach, considering the quality of government and the degree of authority in each region as mediators. Our findings reveal significant variation in the returns to education, physical capital investment, and innovation across regions. Moreover, we observe that changes in government quality and regional authority influence the ability of EU regions to leverage different types of investment effectively. These results emphasize the importance of considering the government quality in regions where investments are made in order to maximize the returns on European Cohesion investment.
    Keywords: Institutional quality, European funds, public investment, regional development
    JEL: O43 E61 H54 R11
    Date: 2023–08
  2. By: Pierre-Jean Messe (Nantes Université); Jérémy Tanguy (Université Savoie Mont Blanc)
    Abstract: This presentation investigates the effects of firm-level gender equality bargaining on the motherhood penalty using French administrative data. To tackle the endogeneity issue, we exploit the 2010 reform that introduced financial penalties for firms with 50 employees or more not complying with their obligation of negotiating on gender equality. This change led to a strong acceleration of gender equality bargaining after 2010 but only for firms with 50 employees or more. Thus, women who had their first child in concerned firms after 2010 are more likely to be employed in firms covered by a text related to gender equality. Controlling for firms' size effect and time trends as well as a set of other individuals' and firms' characteristics, we identify the causal effect of gender equality bargaining on earnings impact of motherhood. Our estimates show that forcing firms to promote measures related to gender equality has reinforced the motherhood penalty. While the causal effect of this reform is close to zero just after the first child's birth, it turns out to be significantly negative five years after. Our results suggest that some measures mentioned in texts related to gender equality, especially those favoring work–life balance, may act as an indirect discrimination towards mothers.
    Date: 2023–08–11
  3. By: Bovini, Giulia (Bank of Italy); Cattadori, Niccolò (University of Zurich); De Philippis, Marta (Bank of Italy); Sestito, Paolo (Bank of Italy)
    Abstract: This paper considers the case of Italy to analyze the short- and medium-term effect of a longer school day in primary school on both students' learning and mothers' labor supply. we rely on unique application-to-primary-school data: first, we control for parental preferences, proxied by individual applications; second, we exploit variation in the probability of attending the full-time (FT) scheme that only stems from nonlinearities in the mix of FT and part-time (PT) applications received by the school and from class size limits set by the law. We show that attending the FT scheme increases Math test scores in grades 2 and 5 and Italian scores in grade 2 by around 4.5% of a standard deviation, but the effects fade away by grade 8. Conversely, there is a positive impact on maternal labor force participation and employment, which is long-lasting (approximately 2 p.p.). No effect is found on fathers' employment. Finally, we find some evidence of negative selection on gains, as the groups of students and mothers for whom the effect seems to be larger are not those more likely to apply to the FT scheme or to attend it conditional on applying.
    Keywords: time at school, female labor supply, selection into treatment, students' learning
    JEL: H40 I21 I24 J13 J21
    Date: 2023–08
  4. By: Silvia Peracchi (Université du Luxembourg); Skerdilajda Zanaj (Université du Luxembourg); Michel Beine (Université du Luxembourg)
    Abstract: The theoretical impact of diversity is ambiguous because it leads to costs and benefits at the collective level. In this presentation, we empirically assess the connection between ancestral diversity and the performance of sport teams. Focusing on football (soccer), we built a novel dataset of national teams of European countries having participated in the European and the World Championships since 1970. Ancestral diversity of national teams is based on augmenting the diversity index with genetic distance information on every player's origins in the team. Origins for each player are recovered using a matching algorithm based on family names. Performance is measured at the match level. Identification of the causal link relies on an instrumental-variable strategy based on past immigration at the country level about one generation before. Our findings indicate a positive causal link between ancestral diversity and teams' performance. We find that a one-standard increase in diversity can lead to ranking changes of two to three positions after each stage of a championship.
    Date: 2023–08–11
  5. By: Stefano Cellini (University of Surrey); Francisco Nobre (University of Surrey)
    Abstract: Business Improvement Districts (BIDs) represent an important place-management tool across the UK, investing more than 100 million pounds each year into street safety and other public goods provision for their local neighborhoods. This paper studies the effects of the opening of a BID on local housing markets in London, where the first BIDs started operating in 2004 and more than 20% of the active BIDs in the country are located. We show that BID openings lead to an increase in house prices by around 3%, using property transaction data and BID-level information. We record also an increase the share of new-building sales after the BID opening. We argue that these results are driven by demand effects from neighborhood improvements, since they seem to be driven by BIDs spending more on crime and environment. We rule out housing supply responses to BID openings using administrative records on housing planning applications. In the longer run, blocks exposed to BIDs activity present gentrification trajectories as they lower their share of social renters, BAME and unemployed residents to a greater extent compared to non-affected blocks.
    JEL: H70 R28 R30
    Date: 2023–04
  6. By: Stephens, Thomas C.
    Abstract: This paper presents results from a new synthetic index of multidimensional Quality of Work (QoW) for the UK, using data from five waves of Understanding Society (Waves 4, 6, 8, 10 and 12) covering the years 2012-2013 to 2020-2021. The index operationalises a conceptual framework for measuring QoW using the Capability Approach (Stephens, 2023), with an emphasis on the objective rather than subjective aspects of work (Felstead et al., 2019). It comprises 6 Dimensions – Earnings, Insurance, Security, Autonomy and Voice, Work-Life Balance, and Prospects – and 11 Indicators. In line with a number of recent international studies, it adopts an indicator cut-off, weighting, and aggregation approach informed by the Alkire-Foster method (García-Pérez et al., 2017; González et al., 2021; Hovhannishan et al., 2022; Sehnbruch et al., 2020). QoW indicator scores are therefore assigned using cut-offs, with a mix of binary (2-level) and categorical (3-level) cut-offs depending on the indicator. These cut-offs then determine dimensional and, ultimately, index scores. The index suggests there has been a mixed picture for UK job quality over the past decade, with marked changes for some groups and dimensions but stagnation in others. There has been an improvement in mean QoW index scores for employees, led particularly by (a) a sharp rise in workplace pension enrolment as a result of the Pensions Act 2008 and, to a lesser extent, (b) an improvement in wages at the bottom 20% of the distribution. This provides new evidence to support trends already discussed in the literature. However, this masks significant underlying inequalities in job quality. There has been a decline in QoW amongst the self-employed, leading to increased labour market polarisation between employees and more insecure workers. Further, despite improvements in wages, the index also suggests there has been little-to-no corresponding improvement in the proportion of workers able to achieve sufficient earnings to meet the Minimum Income Standards – partly accounted for by a fall in working hours amongst the self-employed. The index also highlights marked sub-group differences in job quality by age, sex, geography, and ethnicity.
    Keywords: Alkire-Foster method; capability approach; employment; job quality; polarisation; self-employment; work
    JEL: I31 I38 I39 J21 J28 J31 J32 J80
    Date: 2023–08–22
  7. By: Di Nola, Alessandro; Haywood, Luke; Wang, Haomin
    Abstract: Women are more likely to work in jobs with low hours than men. Low-hour jobs are associated with lower hourly wages and are more likely impacted by minimum wages that set a floor on hourly wages. We document that the first German minimum wage significantly increased women's transition towards jobs with higher weekly hours. We construct and estimate an equilibrium search model with demographic and firm productivity heterogeneity. The model replicates observed gender gaps in employment, hours and wage and the positive relationship between hours and hourly wages. We implement the minimum wage in our model with a penalty to address non-compliance. Based on our model, the minimum wage primarily reduces the gender income gap through the gender wage gap. At its 2022 level, the German minimum wage reduces the gender employment and hours gap due to an upward reallocation effect, resulting in women's increased participation in higher-hour jobs with lower separation rates. The upward reallocation effect is the strongest for women with children and varies by marital state and spousal income. While the minimum wage only modestly discourages firms from posting jobs, it shifts job offers toward full-time positions.
    Keywords: Minimum wage, gender gaps, equilibrium job posting, hour requirement
    JEL: J08 J31 J16 E24 E64
    Date: 2023
  8. By: Bassier, Ihsaan (London School of Economics); Manning, Alan (London School of Economics); Petrongolo, Barbara (University of Oxford)
    Abstract: We estimate the elasticity of vacancy duration with respect to posted wages, using data from the near-universe of online job adverts in the United Kingdom. Our research design identifies duration elasticities by leveraging firm-level wage policies that are plausibly exogenous to hiring difficulties on specific job vacancies, and control for job and market-level fixed-effects. Wage policies are defined based on external information on pay settlements, or on sharp, internally-defined, firm-level changes. In our preferred specifications, we estimate duration elasticities in the range −3 to −5, which are substantially larger than the few existing estimates.
    Keywords: vacancy duration, monopsony, wages
    JEL: J42 J63 J64
    Date: 2023–08
  9. By: Moscelli, Giuseppe (University of Surrey); Sayli, Melisa (University of Surrey); Blanden, Jo (University of Surrey); Mello, Marco (University of Aberdeen); Castro-Pires, Henrique (University of Surrey); Bojke, Chris (University of Leeds)
    Abstract: Excessive turnover can signicantly impair an organization's performance. Using high-quality administrative data and staggered dierence-in-dierences strategies, we evaluate the impact of a programme that encouraged public hospitals to increase staff retention by providing data and guidelines on how to improve the non-pecuniary aspects of nursing jobs. We find that the programme has decreased the nurse turnover rate by 4.49%, decreased exits from the public hospital sector by 5.38%, and reduced mortality within 30 days from hospital admission by 3.45%, preventing 11, 400 deaths. Our results are consistent with a theoretical model in which information is provided to managers of multi-unit organizations, who trade off coordinating decisions across units and adapting them to local conditions.
    Keywords: labor supply, workforce retention, non-monetary incentives, hospital care, staggered difference-in-differences
    JEL: J32 J38 J45 J63 I11 C22
    Date: 2023–08
  10. By: Kenza Elass (Aix Marseille Université Économiques and Ecole d'Économie de Paris)
    Abstract: Recent explanations of the gender wage gap emphasize the role of gender differences in psychological traits. Nevertheless, there have been only a limited number of studies confirming the relevance of these factors for labor market outcomes. This presentation assesses the role of gender-specific preferences in the reservation wage gap during the job search. I use French administrative data from the unemployment insurance agency providing information on job search behavior and previous outcomes to assess which kind of occupations men and women apply for and the gap in their reservation wages. Employing text analysis, I build a novel dataset classifying occupations with respect to a number of characteristics and examine to which extent men and women differ in the occupation they are looking for. I document widespread gender differences in the occupation characteristics targeted by job seekers. Quantile decomposition methods allow me to document an unequal gap in reservation wage, intensifying along the distribution. After I adjust for occupation characteristics reflecting gender-biased preferences and household constraints, the unexplained part of the reservation wage gap is decreased by half. Investigating unemployment history and outcomes from previous interviews with firms, I do not find evidence of a female risk aversion to previous unemployment shocks or male overconfidence.
    Date: 2023–08–11
  11. By: Anne-Lore Fraikin; Alain Jousten; Mathieu Lefebvre
    Abstract: In Belgium, a series of social security reforms have been implemented over the years with the overarching goal of increasing the labor force participation through better work incentives. Using individual-level administrative data, the paper studies the impact of those incentive-based reforms on observed changes in older workers’ employment patterns. We investigate how social security incentives and particularly their changes over time can explain the retirement decision. We calculate indicators of benefit entitlement and derive retirement incentive measures. Using micro-estimation techniques, we find that more generous retirement provision contribute to earlier retirement. Counterfactual reform simulations show strongly incentivizing effects at lower ages and more mixed results at higher ages – particularly for men.
    JEL: I30 J14 J26
    Date: 2023–08
  12. By: Adriaan Kalwij; Arie Kapteyn
    Abstract: In the Netherlands, from 1989 to 2013, in the age group 55-63 the annual exit rate from employment to receiving social insurance benefits in the following year decreased from around 17 percent to 7 percent for men, and from 14 percent to 5 percent for women. We found that less generous social insurance benefits have had small but significant negative effects on these exit rates: The annual exit rate to social insurance benefit receipt next year (at ages 56-64) would have been about 14 percent higher for both men and women in 2013 should social insurance benefits schemes of 1989 still have been in place. This increase amounts to staying, on average, three months longer in employment from age 55 onwards in 2013 than in 1989. These findings are driven to some extent by the reduction in the maximum duration of unemployment insurance benefits in 2007, but predominantly by making (early) retirement schemes actuarially fair from 2006 onwards. The increase in disability insurance’s income replacement rate in 2006 has led to a slight increase in the exit rate from employment, conditional on eligibility. As the estimated effects of changes in the social insurance benefits from 1989 to 2013 on working beyond age 55 are relatively small, they suggest the importance of other factors such as changes in workers’ skills, improved health (on which we provide some evidence), and social insurance’s tighter eligibility criteria.
    JEL: H0 J26
    Date: 2023–08
  13. By: Henry Redondo (Universidad Carlos III de Madrid)
    Abstract: This presentation explores how the local sectoral composition influences workers' adjustment to a large economic shock. I exploit the massive burst in the Spanish construction sector during the Great Recession. For identification, I leverage regional variation in the intensity of the employment decline among Spanish provinces and detailed longitudinal administrative data. The construction workers in heavily exposed provinces suffered a significant decline in total earnings between 2007 and 2012, consistent with the workers experiencing long periods of unemployment rather than wage cuts. I find evidence that the short-term labor market adjustment was intersectoral rather than interregional, even under asymmetric exposure. In order to understand the role of sectoral composition in an individual worker's response to the shock, I construct a reallocation index. This index captures the degree to which workers from the construction sector can reallocate into other sectors. Then, I examine how sectoral composition contributes to ameliorating the shock's impact. I provide evidence that workers' likelihood of changing sectors depends on having better outside opportunities in other sectors, which varies across provinces and workers' characteristics. Individuals with more evenly distributed characteristics across sectors were less affected by the shock because they were more likely to change sectors. This implies that, on average, workers are less likely to adapt to shocks when a region has a high level of sectoral concentration.
    Date: 2023–08–11
  14. By: Groß, Mona (Department of Health Care Management, University of Cologne, Germany); Hennig-Schmidt, Heike (Department of Economics, University of Bonn, Germany Departement of Health Economics and Health Management, University of Oslo, Norway); Wiesen, Daniel (Department of Health Care Management, University of Cologne, Germany)
    Abstract: We study how the heterogeneity in responses to performance pay can be explained by personality traits. We utilize data from behavioral experiments and surveys on personality traits with physicians, medical students, and non-medical students. Performance pay is introduced at a within-subject level and complements either fee-for-service or capitation. We find that the payment system matters regarding the behavioral impact of personality traits. More conscientious and more agreeable individuals provide higher quality of care under capitation. Although performance pay further improves the quality, more conscientious and agreeable individuals respond less to capitation-based performance pay. Other personality traits are not behaviorally relevant. Under fee-for-service-based schemes, personality traits do not significantly related to individuals’ behavior. Our findings inform the incentive design for physicians and the potential sorting into incentive schemes based on personality traits.
    Keywords: Fee-for-service; capitation; blended pay for performance; personality traits; quality of care; heterogeneity
    JEL: C91 I11
    Date: 2023–09–07
  15. By: Blanchflower, David G. (Dartmouth College); Bryson, Alex (University College London)
    Abstract: Using micro-data on six surveys – the Gallup World Poll 2005-2023, the U.S. Behavioral Risk Factor Surveillance System, 1993-2022, Eurobarometer 1991-2022, the UK Covid Social Survey Panel, 2020-2022, the European Social Survey 2002-2020 and the IPSOS Happiness Survey 2018-2023 – we show individuals' reports of subjective wellbeing in Europe did decline in the Great Recession of 2008/9 and during the Covid pandemic of 2020-2021 on most measures and on four bordering countries to Ukraine after the Russian invasion in 2022. However, the movements are not large and are not apparent everywhere. We also used data from the European Commission's Business and Consumer Surveys on people's expectations of life in general, their financial situation and the economic and employment situation in the country, all of which dropped markedly in the Great Recession and during Covid, but bounced back quickly, as did firms' expectations of the economy and the labor market. Neither the annual data from the United Nation's Humasn Development Index (HDI) nor data used in the World Happiness Report from the Gallup World Poll shifted much in response to negative shocks. The HDI has been rising in the last decade or so reflecting overall improvements in economic and social wellbeing, captured in part by real earnings growth, although it fell slightly after 2020 as life expectancy dipped. This secular improvement is mirrored in life satisfaction which has been rising in the last decade. However, so too have negative affect in Europe and despair in the United States.
    Keywords: subjective wellbeing, life satisfaction, expectations, Human Development Index, Great Recession, COVID-19
    JEL: I31
    Date: 2023–07
  16. By: Tobias Lehmann (University of Lausanne); Camille Terrier (Queen Mary University London); Rafael Lalive (University of Lausanne)
    Abstract: Congestion is a widespread phenomenon in two-sided markets, but evidence on its costs and benefits is limited. Using data from an online dating platform, we document a large excess demand, or congestion, for some women. By exploiting exogenous variation in the number of men and women using the platform, we show that congestion slows down matching time for men. Congestion benefits women who screen men’s profiles quickly, by increasing their choice set. This asymmetry implies that policies aimed at reducing congestion can harm the side of the market that benefits from congestion.
    Keywords: Congestion, two-sided markets, online platforms
    JEL: D4 D47 D62 D83
    Date: 2023–08–31

This nep-eur issue is ©2023 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.