nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2023‒09‒25
sixteen papers chosen by
Giuseppe Marotta, Università degli Studi di Modena e Reggio Emilia

  1. ‘Relabelling’ of individual retirement pension in Finland: application and behavioural responses using Finnish register data. By Kanabar, Ricky; Nivalainen, Satu; Järnefelt, Noora
  2. Maternal Life Satisfaction and Child Development from Toddlerhood to Adolescence By Nabanita Datta Gupta; Jonas Jessen; C. Katharina Spiess
  3. Real Exchange Rates and the Earnings of Immigrants By Dustmann, Christian; Ku, Hyejin; Surovtseva, Tetyana
  4. Job Displacement and Migrant Labor Market Assimilation By Mária Balgová; Hannah Illing
  5. Do Teachers' Labor Contracts Matter? By Ainoa Aparicio Fenoll; Roberto Quaranta
  6. Gender and beyond. Employment patterns during the Covid-19 pandemic in Italy. By Brini, Elisa; Scherer, Stefani; Vitali, Agnese
  7. Can vocational education improve schooling and labour outcomes? Evidence from a large expansion By Joao R. Ferreira; Pedro S. Martins
  8. ALL IS NOT LOST: Organized Crime and Social Capital Formation By Paolo Buonanno; Irene Ferrari; Alessandro Saia
  9. Does costlier waste treatment lead to less residual waste? Evidence from Swedish municipalities By Meens-Eriksson, Sef
  10. Making their own weather? Estimating employer labour-market power and its wage effects By Pedro S. Martins; Antonio P. Melo
  11. The Growth of Disability Insurance in Belgium: Determinants and Policy Implications By De Brouwer, Octave; Tojerow, Ilan
  12. Closing the Gap Between Vocational and General Education? Evidence from University Technical Colleges in England By Stephen Machin; Sandra McNally; Camille Terrier; Guglielmo Ventura
  13. International Trade and Job Polarization: Evidence at the Worker Level By Keller, Wolfgang; Utar, Hale
  14. Long-run consequences of informal elderly care and implications of public long-term care insurance By Korfhage, Thorben; Fischer-Weckemann, Björn
  15. Learning from the Origins By Yarkin, Alexander
  16. Confidence and College Applications: Evidence from a Randomized Intervention By Rustamdjan Hakimov; Renke Schmacker; Camille Terrier

  1. By: Kanabar, Ricky; Nivalainen, Satu; Järnefelt, Noora
    Abstract: Using rich Finnish population level registers, we examine the impact of fusing a flexible early retirement pathway with a more stringent pathway, without changing eligibility conditions, socalled ‘relabelling’, on individual application behaviour. Our findings show that among affected cohorts the likelihood of applying for (successfully claiming) disability-related early retirement declined by 1.8 (1.5) percentage points equivalent to a relative drop of approximately 37% (39%) following the reform. Individuals with below tertiary level education and stronger lifetime labour market attachment exhibit a stronger behavioural response to the reform. We find tentative evidence of programme substitution to early retirement pathways designed to keep individuals in the labour market albeit on a part time basis. Our findings suggest that social norms and lack of awareness associated with early retirement pathways can strongly influence application behaviour even when eligibility conditions remain unchanged, offering policymakers novel ways to extend working lives.
    Date: 2023–09–08
  2. By: Nabanita Datta Gupta; Jonas Jessen; C. Katharina Spiess
    Abstract: In this paper we analyse the association between maternal well-being and child development at different ages. We use data from the German Socio-Economic Panel (SOEP) which captures maternal life satisfaction and numerous cognitive and non-cognitive child development outcomes. We identify a strong positive association between mothers’ life satisfaction and their children’s development when these are toddlers (2-3 years, VAB scores), of primary school age (5-10 years, SEB scores and Big 5) and in adolescence (11-14 years, life satisfaction, school grades and self-reported Big 5). This relationship holds when we control for a wide range of potentially confounding factors, including maternal education, employment, household income and maternal personality traits. We confirm our main findings with an IV estimation where we instrument contemporaneous maternal life satisfaction with that measured pre-birth and with a value-added model as some child outcomes are observed twice at different ages. Our findings suggest that mothers’ life satisfaction is beneficial for their children’s development at all ages and that it is fruitful for policy makers to identify measures through which maternal well-being can be raised.
    Keywords: Life satisfaction, subjective well-being, mothers, child development, skill formation
    JEL: J13 I22
    Date: 2023
  3. By: Dustmann, Christian (University College London); Ku, Hyejin (University College London); Surovtseva, Tetyana (New York University, Abu Dhabi)
    Abstract: We relate origin-destination real price differences to immigrants' reservation wages and their career trajectories, exploiting administrative data from Germany and the 2004 enlargement of the European Union. We find that immigrants who enter Germany when a unit of earnings from Germany allows for larger consumption at home settle for lower entry wages, but subsequently catch up to those arriving with less favourable exchange rates, through transition to better-paying occupations and firms. Similar patterns hold in the US data. Our analysis offers one explanation for the widespread phenomenon of immigrants' downgrading, with new implications for immigrant cohort effects and assimilation profiles.
    Keywords: real exchange rate, reservation wage, immigrant downgrading, earnings assimilation
    JEL: J24 J31 J61 O15 O24
    Date: 2023–08
  4. By: Mária Balgová; Hannah Illing
    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: 2023–08
  5. By: Ainoa Aparicio Fenoll; Roberto Quaranta
    Abstract: Previous literature on the effect of tenured and tenure-track vs. non-tenure-track professors on students’ performance at university finds contrasting results. Our paper is the first to test whether tenured/tenure-track and non-tenure-track teachers differently affect students’ performance at school. We use data on standardized test scores of a representative sample of primary and secondary school students in Italy and information on their Italian and mathematics teachers’ labor contracts. Controlling for class- and subject-fixed effects, we find that non-tenure-track teachers decrease students’ performance by 0.21 standard deviation. This detrimental effect is fully explained because non-tenure-track teachers are less experienced. In line with previous findings on the adverse effects of teachers’ absences, non-tenure-track teachers are also associated with 0.1 standard deviation worse student performance when their contracts last less than a year.
    Keywords: Teachers, Labor Contracts, Students' Performance, Standardized Tests
    Date: 2023
  6. By: Brini, Elisa; Scherer, Stefani; Vitali, Agnese
    Abstract: This paper investigates employment changes during the pandemic for women and men in a country characterized by notoriously low female employment: Italy. In particular, the paper explores to what extent previously existing inequalities in employment were further exacerbated during the pandemic. Using data from Italian Labor Force Surveys for the years 2018 to 2020, we find evidence of a limited decline of employment, but a strong increase of persons working zero hours during the lockdown periods. This result holds for both men and women. The pandemic highlighted how gender inequalities in employment intersect with other socio-economic disadvantages: single mothers and low-educated women were more affected than their male counterparts, while single and foreign men were hit stronger than women with the same characteristics. The pandemic thus came with differentiated consequences for groups of persons, generally affecting harder those already in less advantaged situations. At the same time, results support the idea that women’s employment was relevant to counteract job-loss in the family, and some became the only breadwinner for their families – also exposing themselves to risks by working during the pandemic. All in all, the pandemic greatly accentuated pre-existing social inequalities in the Italian labor market, yet with apparently transitory effect at least regarding employment participation. We discuss reasons of why this was the case.
    Date: 2023–09–01
  7. By: Joao R. Ferreira; Pedro S. Martins
    Abstract: We evaluate the education and labour impact of vocational education and training (VET). Identification draws on a reform to reduce early school leaving, which involved a large-scale, staggered introduction of VET courses. Drawing on comprehensive student-school matched panel data, we find that VET increased upper secondary graduation rates considerably: our LATE estimates are as large as 50 percentage points. These effects are even stronger for low-achieving students and welfare recipients; and also hold when exploiting the large gender differences of VET, with many courses selected almost only by either boys or girls. Moreover, we find evidence of regional youth employment growth and VET wage premiums following VET expansion.
    Keywords: Educational attainment, Vocational education, Matched student-teacher-school, data, Portugal
    JEL: I21 I26 I28
    Date: 2023
  8. By: Paolo Buonanno; Irene Ferrari (Department of Economics, University Of Venice CÃ Foscari; NETSPAR); Alessandro Saia (Department of Economics, University Of Bologna)
    Abstract: We investigate how a disruptive social event, namely the emergence of organized crime infiltration in the local government, shapes social capital. We exploit the dismissal of city councils infiltrated by organized crime and a novel and fine-grained measure of social capital in Italy. Using a difference-indifferences strategy, we show that municipalities’ dissolution is associated with a significant and sizable increase in social capital. We document the mechanisms through which the presence of organized crime affects social capital, including trust diversion, changes in civic engagement, and its impact on local institutions and governance.
    Keywords: organized crime, social capital, Italy, 5 per Mille
    JEL: A13 D73 H71 K42 Z18
    Date: 2023
  9. By: Meens-Eriksson, Sef (Department of Economics, Umeå University)
    Abstract: In this paper, I study municipal price sensitivity of demand for disposal of residual waste (unsorted waste from households) and mechanisms underlying the relationship. First, I estimate the effect on households’ generation of residual waste with respect to municipal waste collection policies. Second, I estimate to what extent municipalities change waste policy in response to higher costs for disposal of municipal residual waste. The empirical analysis is based on data regarding Swedish municipalities’ waste management systems and disposal costs in the period 2010–2019. Results suggests that the price elasticity of demand is in the range 0.20–0.24. The effect is almost entirely driven by municipalities’ implementation of weight-based collection tariffs for residual waste in response to costlier disposal. Besides weight-based tariffs, separate collection of food waste and joint collection of residual waste and recyclables are also found to have substantial negative effects on residual waste quantities. Nevertheless, such waste policies are not more likely to be implemented in response to higher disposal costs for the municipality.
    Keywords: Demand for waste; waste economics; waste management; environmental taxes
    JEL: D10 Q01 Q50 Q53 Q58
    Date: 2023–09–11
  10. By: Pedro S. Martins; Antonio P. Melo
    Abstract: The subdued wage growth observed in many countries has spurred interest in monopsony views of regional labour markets. This study measures the extent and robustness of employer power and its wage implications exploiting comprehensive matched employer-employee data. We find average (employment-weighted) Herfindhal indices of 800 to 1, 100, stable over the 1986-2019 period covered, and that typically less than 9% of workers are exposed to concentration levels thought to raise market power concerns. When controlling for both worker and firm heterogeneity and instrumenting for concentration, we find that wages are negatively affected by employer concentration, with elasticities of around -1.4%. We also find that several methodological choices can change significantly both the measurement of concentration and its wage effects.
    Keywords: Oligopsony, Wages, Regional labour markets, Worker mobility, Portugal
    JEL: J42 J31 J63
    Date: 2023
  11. By: De Brouwer, Octave (Free University of Brussels); Tojerow, Ilan (Free University of Brussels)
    Abstract: Between 2005 and 2020, Belgium experienced a significant rise in the recipiency rate of long-term disability insurance (DI), rising from 3.5% to 6.8%. In this paper, we examine the potential factors driving this increase by exploiting administrative micro-level data covering the Belgian population from 2005 to 2015. Our analysis reveals that changes in observable characteristics, such as age, labor market participation among some groups of workers, and several job characteristics, can only marginally account for the increase in the long-term DI entry rate between 2005 and 2015. We also find evidence suggesting that reforms in unemployment insurance over the past two decades have contributed to the rise in the DI entry rate from unemployment. Finally, drawing on the literature on optimal DI policy, we discuss potential reforms aimed at decreasing the Belgian DI recipiency rate.
    Keywords: social insurance, disability insurance, unemployment insurance
    JEL: H53 H55 J65
    Date: 2023–08
  12. By: Stephen Machin (Department of Economics and Centre for Economic Performance, London School of Economics (Houghton Street, WC2A 2AE, London, United Kingdom).); Sandra McNally (Department of Economics, University of Surrey and Centre for Economic Performance, Centre for Vocational Education Research. London School of Economics (Houghton Street, WC2A 2AE, London); Camille Terrier (Queen Mary, University of London); Guglielmo Ventura (Centre for Economic Performance, Centre for Vocational Education Research. London School of Economics (Houghton Street, WC2A 2AE, London, United Kingdom))
    Abstract: Delivery of vocational education in schools is a controversial issue around the world and attempts to improve it have been tried for decades. A substantive innovation in vocational education provision came about in 2010 in England when a new form of hybrid schools was introduced that combine general and vocational education: University Technical Colleges (UTCs). This paper adopts an instrumental variable approach to evaluate the causal effect of attending a UTC on academic and vocational education, and on student short-term workforce outcomes. The research design takes advantage of geographic and cross-cohort variation in exposure to UTCs, and of different enrolment ages. For pupils entering UTCs at the unconventional age 14, enrolment in these schools dramatically reduces academic achievement on national exams at age 16. By contrast, for students who enter at the conventional age of 16, UTCs boost vocational achievement without harming academic achievement. UTCs also improve achievement in STEM qualifications, enrolment in apprenticeships, employment prospects (by age 19) and probability of going on to study STEM at university. The paper concludes that there has been both promise and disappointment in what the technical education offered by these new forms of hybrid schools has delivered to date. These mixed conclusions are important for refining the design of school based vocational education around the world.
    Keywords: Technical education; School value-added; University Technical Colleges
    JEL: I20 I21 I28
    Date: 2023–08–31
  13. By: Keller, Wolfgang (University of Colorado, Boulder); Utar, Hale (Grinnell College)
    Abstract: We employ employer-employee matched data from Denmark and utilize plausibly exogenous variation in the rise of import competition due to the dismantling of import quotas as China entered the World Trade Organization to show, first, that rising import competition has led to reduced employment in mid-wage occupations compensated by an increased likelihood of employment in both low-wage and high-wage occupations. Workers with higher education are more likely to move from mid- to high-wage occupations due to trade compared to moving from mid- to low-wage occupations. Employing task content information of detailed occupations, we also show that workers performing manual tasks are the ones most affected by import competition independently of the routine-task intensity of occupations. This implies that the effect of import competition is distinct from that of routine task-replacing technological change
    Keywords: job polarization, employer-employee matched data, import competition, job trajectories of individual workers, trade, technology, task, China, Denmark
    JEL: F14 F16 F66 J23 J24 J62
    Date: 2023–08
  14. By: Korfhage, Thorben; Fischer-Weckemann, Björn
    Abstract: We estimate a dynamic structural model of labor supply, retirement, and informal care supply, incorporating labor market frictions and the German tax and benefit system. We find that in the absence of Germany's public long-term insurance scheme, informal elderly care has adverse and persistent effects on labor market outcomes and, thus, negatively affects lifetime earnings and future pension benefits. These consequences of caregiving are heterogeneous and depend on age, previous earnings, and institutional regulations. Policy simulations suggest that public long-term care insurance policies are fiscally costly and induce negative labor market effects. But we also show that they can offset the personal costs of caregiving to a large extent and increase welfare for those providing care, especially for low-income individuals.
    Keywords: long-term care, informal care, long-term care insurance, labor supply, retirement, pension benefits, dynamic structural model
    JEL: I18 I38 J14 J22 J26
    Date: 2023
  15. By: Yarkin, Alexander
    Abstract: How do political preferences and voting behaviors respond to information coming from abroad? Focusing on the international migration network, I document that opinion changes at the origins spill over to 1st- and 2nd-generation immigrants abroad. Local diasporas, social media, and family ties to the origins facilitate the transmission, while social integration at destination weakens it. Using the variation in the magnitude, timing, and type of origin-country exposure to the European Refugee Crisis of 2015, I show that salient events trigger learning from the origins. Welcoming asylum policies at the origins decrease opposition to non-Europeans and far-right voting abroad. Transitory refugee flows through the origins send abroad the backlash. Data from Google Trends and Facebook suggests elevated attention to events at the origins and communication with like-minded groups as mechanisms. Similar spillovers following the passage of same-sex marriage laws show the phenomenon generalizes beyond refugee attitudes.
    Keywords: Immigration, Social Networks, Spillovers, Political Attitudes, Integration
    JEL: O15 Z13 D72 D83 P00 J61 F22
    Date: 2023
  16. By: Rustamdjan Hakimov (University of Lausanne); Renke Schmacker (University of Lausanne); Camille Terrier (Queen Mary University of London)
    Abstract: This paper investigates the role played by self-confidence in college applications. Using incentivized experiments, we measure the self-confidence of more than 2, 000 students applying to colleges in France. The best female students and students from low socioeconomic status (low-SES) significantly underestimate their rank in the grade distribution compared to male and high-SES students. By matching our survey data with administrative data on real college applications and admissions, we show that miscalibrated confidence affects college choice controlling for grades. We then estimate the impact of a randomized intervention that corrects students’ under-and overconfidence by informing them of their real rank in the grade distribution. The intervention fully offsets the impact of under- and overconfidence for college applications. Providing feedback also makes the best students, who were initially underconfident, apply to more ambitious programs with stronger effects for female and low-SES students. Among top students, our intervention closes 72% of the gender gap in admissions to elite programs, and 95% of the social gap. We conclude that confidence is an important behavioral consideration for the design of college admission markets.
    Keywords: college choice, confidence, information treatment, matching mecha-nism, gender and social gap, survey experiment
    JEL: I24 J24 D91 C90
    Date: 2023–08–31

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