nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2023‒10‒16
eighteen papers chosen by
Giuseppe Marotta, Università degli Studi di Modena e Reggio Emilia

  1. Firm‐specific pay premiums and the gender wage gap in Europe By Jan‐luca Hennig; Balazs Stadler
  2. Public Child Care and Mothers' Career Trajectories By Huber, Katrin; Rolvering, Geske
  3. Firm Expectations and News: Micro v Macro By Benjamin Born; Zeno Enders; Manuel Menkhoff; Gernot J. Müller; Knut Niemann
  4. Assessing the effectiveness of social protection measures in mitigating COVID-19-related income shocks in the European Union By Gasior, Katrin; Jara, H. Xavier; Makovec, Mattia
  5. Can Patience Account for Subnational Differences in Student Achievement? Regional Analysis with Facebook Interests By Eric A. Hanushek; Lavinia Kinne; Sancassani Pietro; Ludger Woessmann
  6. Vacancy posting, firm balance sheets, and pandemic policy By Van Dijcke, David; Buckmann, Marcus; Turrell, Arthur; Key, Tomas
  7. Terrorism and Voting: The Rise of Right-Wing Populism in Germany By Navid Sabet; Marius Liebald; Guido Friebel
  8. Homeownership rates, housing policies, and co-residence decisions By Grevenbrock, Nils; Ludwig, Alexander; Siassi, Nawid
  9. Childhood Health Shocks and the Intergenerational Transmission of Inequality By Eriksen, Tine Louise Mundbjerg; Gaulke, Amanda; Svensson, Jannet; Skipper, Niels; Thingholm, Peter Rønø
  10. The Intergenerational Transmission of Housing Wealth By N. Meltem Daysal; Michael F. Lovenheim; David N. Wasser
  11. Estimating Duration Dependence on Re-employment Wages When Reservation Wages Are Binding By Richard Grice; Victor Hernandez Martinez; Kaixin Liu
  12. The Relative Value of Suicide Prevention in Health Care Priority Setting By Andrén, Daniela; Laitila, Thomas; Ryen, Linda; Vimefall, Elin
  13. Retirement Consumption and Pension Design By Jonas Kolsrud; Camille Landais; Daniel Reck; Johannes Spinnewijn
  14. Who owns France? Uncovering the structure of property ownership for a better understanding of the socio-spatial distribution of wealth By Laure Casanova Enault; Martin Bocquet; Guilhem Boulay
  15. The labor market effects of disability benefit loss By Bíró, Anikó; Hornok, Cecília; Krekó, Judit; Prinz, Daniel; Scharle, Ágota
  16. Dining and Wining During the Pandemic? A Quasi-Experiment on Tax Cuts and Consumer Spending in Lithuania By Mr. Serhan Cevik
  17. The Cost of a Vowel: How the Gender-marked Job Title Affects Ratings of Female Lawyers By Sergiu Burlacu; Dominique Cappelletti; Sonia Marzadro; Alessandro Tondini
  18. The Accuracy of Job Seekers' Wage Expectations By Marco Caliendo; Robert Mahlstedt; Aiko Schmei{\ss}er; Sophie Wagner

  1. By: Jan‐luca Hennig (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Balazs Stadler (OCDE - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development)
    Abstract: We study how firm premia influence the gender wage gap for 21 European countries. We use a quadrennial harmonized matched employer-employee dataset to estimate gender-specific firm premia. Subsequently, we decompose the firm-specific wage premia differential into withinand between-firm components. On average, the former accounts mainly for the decline in the pay gap between 2002 and 2014. We pay particular attention to the development of each component by age group, and find that the between-firm component is associated with an increase in the gender pay gap over age. The decomposition of firm premia allows us to investigate how institutional settings relate to each component. We associate the within-firm component with collective bargaining at the national and firm levels, and the between-firm component with family policies. Decentralized wage bargaining is associated with a larger within-firm pay gap, whereas family policies incentivizing women to return to employment after family formation are linked to a smaller between-firm component.
    Date: 2023–04
  2. By: Huber, Katrin (University of Potsdam); Rolvering, Geske (University of Passau)
    Abstract: We study the impact of public child care on mothers' career trajectories, focusing on qualitative dimensions of career choices. Using an event study approach, we find that child care helps mothers to return to the labor market more quickly and that this effect is mainly due to an increase in part-time employment. At the same time, we find no short- or long-term effects of child care on the quality of maternal careers, as measured, for example, by employment stability, employment in occupations with abstract tasks, or employment in managerial positions. Furthermore, we find no evidence of heterogeneous effects across mothers.
    Keywords: child care, maternal employment, career costs of children, women's careers
    JEL: J08 J13 J22
    Date: 2023–09
  3. By: Benjamin Born; Zeno Enders; Manuel Menkhoff; Gernot J. Müller; Knut Niemann
    Abstract: Using firm-level data, we study how firm expectations adjust to news while accounting for a) the heterogeneity of news and b) the heterogeneity of firms. We classify news as either micro or macro, that is, information about firm-specific developments or information about the aggregate economy. Survey data for German and Italian firms allows us to reject rational expectations: Both types of news predict forecast errors at the firm level. Yet while firm expectations overreact to micro news, they underreact to macro news. We propose a general-equilibrium model where firms suffer from ‘island illusion’ to explain these patterns in the data.
    Keywords: Survey data, salience, overreaction, underreaction, micro news, macro news, island illusion, business cycle
    JEL: D84 C53 E71
    Date: 2023
  4. By: Gasior, Katrin; Jara, H. Xavier; Makovec, Mattia
    Abstract: By means of counterfactual simulation methods, this paper quantifies the role of tax– benefit policies in mitigating the shock of the COVID-19 pandemic to household income in the European Union. The tax-benefit microsimulation model for the European Union EUROMOD is used to decompose changes in the income distribution into the effects of: (i) earnings losses due to COVID-19, (ii) automatic stabilizers, (iii) monetary compensation schemes introduced during the pandemic; and (iv) COVID-19-specific reforms to taxes and benefits implemented by European Union governments. The results show a great deal of heterogeneity between countries in terms of earnings losses and the effect of tax-benefit policies during the COVID-19 pandemic. In most countries, the largest contribution to cushioning the economic shock of the pandemic comes from monetary compensation schemes. Automatic stabilizers also play a role, mainly through the effects of social insurance contributions, taxes, and unemployment insurance benefits. Tax-benefit systems cushioned incomes to a large extent even among those most severely affected by the shock to earnings, with an important role for monetary compensation schemes, but also a larger stabilizing effect of unemployment insurance. Among automatic stabilizers, social assistance benefits played an important role in cushioning the income shock for the poorest quintiles among the most severely affected, but only in selected countries.
    Keywords: social protection; social safety nets and transfers; social welfare; Covid-19; poverty and fiscal; financial and economic crisis; EU; income distribution
    JEL: D31 E24 H24 I38
    Date: 2023–09–01
  5. By: Eric A. Hanushek (Hoover Institution, Stanford University); Lavinia Kinne (ifo Institute); Sancassani Pietro (ifo Institute); Ludger Woessmann (LMU Munich)
    Abstract: Decisions to invest in human capital depend on people’s time preferences. We show that differences in patience are closely related to substantial subnational differences in educational achievement, leading to new perspectives on longstanding within-country disparities. We use social-media data – Facebook interests – to construct novel regional measures of patience within Italy and the United States. Patience is strongly positively associated with student achievement in both countries, accounting for two-thirds of the achievement variation across Italian regions and one-third across U.S. states. Results also hold for six other countries with more limited regional achievement data.
    Keywords: patience; student achievement; regions; social media;
    JEL: I21 Z10
    Date: 2023–09–18
  6. By: Van Dijcke, David (Department of Economics, University of Michigan); Buckmann, Marcus (Bank of England); Turrell, Arthur (Data Science Campus, Office for National Statistics); Key, Tomas (Bank of England)
    Abstract: We assess how balance sheets propagated labour demand shocks during Covid-19 using novel matched data on firms and online job postings. Exploiting regional and firm-level variation in three pandemic policies in the UK, we find that financially healthy firms increased vacancies more in response to positive shocks. Less-leveraged firms and firms with higher credit scores increased postings more in response to the Eat Out to Help Out’s local demand subsidies and after receiving a Bounce Back Loan Scheme loan, respectively. These findings complement the link between leverage and employment losses in response to negative shocks.
    Keywords: Covid-19; recession; vacancies; Indeed; job postings; job ads; heterogeneity; firm; firm-level; balance sheets; industry; big data; alternative data; labour market; natural language processing
    JEL: C50 D20 G30 H10 J20 J60
    Date: 2023–07–21
  7. By: Navid Sabet; Marius Liebald; Guido Friebel
    Abstract: Can right-wing terrorism increase support for far-right populist parties, and if so, why? Exploiting quasi-random variation between successful and failed attacks across German municipalities, we find that successful attacks lead to significant increases in the vote share for the right-wing, populist Alternative für Deutschland (AfD) party. Our results are predominantly observable in state elections, though attacks that receive high media coverage increase the AfD vote share in Federal elections. These patterns hold even though most attacks are motivated by right-wing causes and target migrants. Using a longitudinal panel of individuals, we find successful terror leads individuals to prefer the AfD more and worry more about migration. Exploiting news reports, we find that successful attacks receive more media coverage from local and regional publishers and that this coverage focuses on Islam and terror. Overall, and in contrast to previous work, we find terrorism is politically consequential in Western, multi-party democratic systems.
    Keywords: terrorism, populism, media, salience, voting
    JEL: D72 K42 L82
    Date: 2023
  8. By: Grevenbrock, Nils; Ludwig, Alexander; Siassi, Nawid
    Abstract: Homeownership rates differ widely across European countries. We document that part of this variation is driven by differences in the fraction of adults co-residing with their parents. Comparing Germany and Italy, we show that in contrast to homeownership rates per household, homeownership rates per individual are very similar during the first part of the life cycle. To understand these patterns, we build an overlapping-generations model where individuals face uninsurable income risk and make consumption-saving and housing tenure decisions. We embed an explicit intergenerational link between children and parents to capture the three-way trade-off between owning, renting, and co-residing. Calibrating the model to Germany we explore the role of income profiles, housing policies, and the taste for independence and show that a combination of these factors goes a long way in explaining the differential life-cycle patterns of living arrangements between the two countries.
    Keywords: Homeownership, Co-residence, Overlapping generations
    JEL: D15 E21 H31 R21
    Date: 2023
  9. By: Eriksen, Tine Louise Mundbjerg (VIVE - The Danish Centre for Social Science Research); Gaulke, Amanda (Kansas State University); Svensson, Jannet (Copenhagen University Hospital); Skipper, Niels (Aarhus University); Thingholm, Peter Rønø (Aarhus University)
    Abstract: We examine the role of health shocks in childhood and parental background in transmitting intergenerational inequality. We use Danish administrative registry data (a setting with universal access to health care) and the quasi-random onset of Type 1 Diabetes in childhood to document substantial penalties in adult employment and labor market income at age 30. We document wide disparities in treatment effects and show that high-socioeconomic parents mitigate the adverse impacts of the health shock. This gradient is partly driven by differential impacts on health and human capital across the socioeconomic distribution. Maternal educational attainment matters for adoption of new and more advanced treatment regimens.
    Keywords: intergenerational transmission of inequality, childhood health shocks, labor market outcomes
    JEL: I12 I14 I24
    Date: 2023–09
  10. By: N. Meltem Daysal; Michael F. Lovenheim; David N. Wasser
    Abstract: Rising wealth inequality has spurred an increased interest in understanding how and why wealth is correlated across generations. We exploit plausibly exogenous variation in housing wealth driven by home price changes in different areas to isolate the causal impact of parental housing wealth during different childhood periods on children’s long-run wealth accumulation. Using population-level Danish administrative data, we find that 27% and 25% of each Krone of parental housing wealth change during early-childhood is transmitted to children’s overall and housing wealth in adulthood, respectively. The corresponding transmission rates for parental housing wealth changes during middle-childhood are 25% and 15%, with a transmission to non-housing wealth of 10%. There is little evidence of transmission of parental housing wealth changes that occur during the teenage years. Examining mechanisms, we find that parental housing wealth changes in early and middle-childhood lead to modest increases in adult children’s home ownership, educational attainment, and earnings. However, earnings and education can explain only 20-30% of the intergenerational transmission of parental wealth gains during these periods. We argue that the transmission of parental housing wealth changes in childhood are driven in large part by changes to unobserved household environment and parental behaviors that are passed on to children and shape their savings behavior in adulthood.
    Keywords: intergenerational wealth transmission, housing wealth
    JEL: J62 D31
    Date: 2023
  11. By: Richard Grice; Victor Hernandez Martinez; Kaixin Liu
    Abstract: This paper documents a novel finding indicating that re-employment wages are elastic to the level of unemployment insurance (i.e., a binding reservation wage) and adapts the IV estimator for duration dependence in Schmieder et al. (2016) to account for this fact. Using administrative data from Spain, we find that unemployed workers lower their re-employment wages by 3 percent immediately after the exhaustion of unemployment insurance (UI) benefits. Workers’ characteristics and permanent unobserved heterogeneity cannot explain this. To estimate duration dependence, we extend the IV framework proposed by Schmieder et al. (2016), whose estimator of duration dependence is proportional to the response of wages to an extension of the potential duration of UI, to account for the response of reservation wages. We find that while extending the potential duration of UI has an insignificant effect on re-employment wages, duration dependence is strongly negative. We estimate that the degree of duration dependence in Spain is approximately 0.8 percent per month in daily wages. Workers’ inability to find full-time jobs as the duration of non-employment increases is an important mechanism behind this effect, since the duration dependence of hourly wages is 0.25 percent per month. Failing to account for the fact that reservation wages are binding would underestimate the magnitude of duration dependence by 15 to 20 percent.
    Keywords: unemployment; duration dependence; re-employment wages
    JEL: J65 J64
    Date: 2023–09–25
  12. By: Andrén, Daniela (Örebro University School of Business); Laitila, Thomas (Örebro University School of Business); Ryen, Linda (University Health Care Research Center, Faculty of Medicine and Health); Vimefall, Elin (Örebro University School of Business)
    Abstract: This article investigates how the Swedish population values a reduction in the number of suicides in relation to other life-saving interventions within the health care sector. An online discrete choice experiment was conducted with a sample of 1000 Swedish members of the web panel Userneeds to elicit the relative importance placed on reducing the number of suicides in comparison to deaths due to pancreatic cancer, breast cancer, and acute heart attack. The choice set consisted of three attributes: number of lives saved, cause of death, and age group affected. We found that respondents valued saving lives by suicide prevention lower than saving lives from pancreatic cancer, breast cancer, or acute heart attack.
    Keywords: relative value of suicide prevention; health care; priority setting; saving lives; discrete choice experiment; pancreatic cancer; breast cancer; or acute heart attack.
    JEL: D61 I10 I12 I18
    Date: 2023–09–26
  13. By: Jonas Kolsrud; Camille Landais; Daniel Reck; Johannes Spinnewijn
    Abstract: This paper analyzes consumption to evaluate the distributional effects of pension reforms. Using Swedish administrative data, we show that on average workers who retire earlier consume less while retired and experience larger drops in consumption around retirement. Interpreted via a theoretical model, these findings imply that reforms incentivizing later retirement incur a substantial consumption-smoothing cost. Turning to other features of pension policy, we find that reforms that redistribute based on early-career labor supply would have opposite-signed redistributive effects, while differentiating on wealth may help to target pension benefits toward those who are vulnerable to larger drops in consumption around retirement.
    JEL: H55
    Date: 2023–08
  14. By: Laure Casanova Enault (ESPACE - Études des Structures, des Processus d’Adaptation et des Changements de l’Espace - UNS - Université Nice Sophia Antipolis (1965 - 2019) - AU - Avignon Université - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur); Martin Bocquet (Cerema - Centre d'Etudes et d'Expertise sur les Risques, l'Environnement, la Mobilité et l'Aménagement); Guilhem Boulay (ESPACE - Études des Structures, des Processus d’Adaptation et des Changements de l’Espace - UNS - Université Nice Sophia Antipolis (1965 - 2019) - AU - Avignon Université - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur)
    Abstract: This paper investigates the structure of French property ownership and shows how it is crucial input to understand the socio-spatial distribution of wealth and inequalities in cities. To date only partial information exists on this given that we are in a period of financial opacity. In this paper, we provide a theoretical framework to analyze the structure of property ownership. It is defined by four dimensions: the distribution of properties among different categories of owners, the spatial patterns of the properties held by these categories, their estimated financial value, and their concentration within the categories—the latter not studied here, for legal and confidentiality reasons. Drawing on unpublished cadastral data on property owners and property transaction prices, we carry out an empirical analysis which reveals the dominance of household and public ownership, contrasting with the marginal position of private investors. Despite the fact that the structure of ownership is fairly uniform throughout the urban hierarchy, some groups of owners do however hold strategically located properties. Our results show the embeddedness of the property ownership in different accumulation regimes, and relativize any consideration of financialization or neoliberalism as a global all-encompassing framework when analyzing real estate property.
    Keywords: Land, housing, inequality
    Date: 2023
  15. By: Bíró, Anikó; Hornok, Cecília; Krekó, Judit; Prinz, Daniel; Scharle, Ágota
    Abstract: Disability benefits are costly and tend to reduce labor supply. While spending can be contained by careful targeting, correcting past flaws in eligibility rules or assessment procedures may entail welfare costs. We study a major reform in Hungary that reassessed the health and working capacity of a large share of beneficiaries. Leveraging age and health cutoffs in the reassessment, we estimate employment responses to loss or reduction of benefits. We find that among those who left disability insurance due to the reform 58% were employed in the primary labor market, 6% participated in public works and 36% were out of work without benefits in the post-reform period. The consequences of leaving disability insurance sharply differed by pre-reform employment status. 81% of beneficiaries who had some employment in the pre-reform year worked, while only 33% of those without pre-reform employment did. The gains of the reform in activating beneficiaries were small and strongly driven by pre-reform employment status. This points to the importance of combining financial incentives with broader labor market programs that increase employability.
    Keywords: disability insurance, benefit reduction, employment
    JEL: H55 J14
    Date: 2023
  16. By: Mr. Serhan Cevik
    Abstract: Could temporary tax cuts stimulate consumer spending? Sector-specific measures to the COVID-19 pandemic provides a quasi-experimental variation in consumption patterns to infer a causal effect of tax policy changes. Using a novel dataset of daily debit and credit card transactions, this paper investigates the effectiveness of Lithuania’s decision to cut the standard value-added tax (VAT) rate from 21 percent to 9 percent on restaurants and catering services during the pandemic in a difference-in-differences regression framework. I obtain robust evidence that the VAT reduction has had no statistically significant impact on consumer spending on restaurants and catering services, while other policy interventions such as mobility restrictions and vaccination have more pronounced effects. These results have important policy implications in terms of the expected stimulative effect of sector-specific VAT reductions and the effective design of fiscal policy interventions to counter the impact of pandemics during which mobility is highly constrained.
    Keywords: Tax policy; value-added tax; consumer spending; pandemic; difference-in-differences; Lithuania
    Date: 2023–09–08
  17. By: Sergiu Burlacu; Dominique Cappelletti; Sonia Marzadro; Alessandro Tondini
    Abstract: Through a vignette study in Italian, we show that using the feminine job title negatively impacts how female lawyers are perceived by other professionals. 227 respondents were presented with hypothetical legal issues and shown several realistic profiles of male and female lawyers, with varying professional characteristics, and then asked to indicate how likely they would be to contact each of the given profiles for assistance with the legal issue. We randomly varied whether all the profiles of female lawyers for a given respondent were presented with the predominantly used masculine term - avvocato - or with the feminine term - avvocata. We find that, ceteris paribus, female profiles with the feminine term get lower scores by 0.36 (out of 10, -5%, -0.16SD). The downgrade is stronger among women respondents. The magnitude of the effect is large relative to the effect of other characteristics varied randomly in the profiles, such as work experience or other quality signals.
    Keywords: gender language, gender markedness, job titles, vignette study
    JEL: J16 C93 J44
    Date: 2023–10
  18. By: Marco Caliendo; Robert Mahlstedt; Aiko Schmei{\ss}er; Sophie Wagner
    Abstract: Job seekers' misperceptions about the labor market can distort their decision-making and increase the risk of long-term unemployment. Our study establishes objective benchmarks for the subjective wage expectations of unemployed workers. This enables us to provide novel insights into the accuracy of job seekers' wage expectations. First, especially workers with low objective earnings potential tend to display excessively optimistic beliefs about their future wages and anchor their wage expectations too strongly to their pre-unemployment wages. Second, among long-term unemployed workers, overoptimism remains persistent throughout the unemployment spell. Third, higher extrinsic incentives to search more intensively lead job seekers to hold more optimistic wage expectations, yet this does not translate into higher realized wages for them. Lastly, we document a connection between overoptimistic wage expectations and job seekers' tendency to overestimate their reemployment chances. We discuss the role of information frictions and motivated beliefs as potential sources of job seekers' optimism and the heterogeneity in their beliefs.
    Date: 2023–09

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