nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2023‒10‒30
twenty-one papers chosen by
Giuseppe Marotta, Università degli Studi di Modena e Reggio Emilia

  1. Educational Mismatch and Labour Market Institutions: The Role of Gender By Theresa Geißler; Laszlo Goerke
  2. Inequality of Opportunity in Wealth: Levels, Trends, and Drivers By Graeber, Daniel; Hilbert, Viola; König, Johannes
  3. Can Vocational Education Improve Schooling and Labour Outcomes? Evidence from a Large Expansion By Ferreira, João R.; Martins, Pedro S.
  4. The Health Burden of Job Strain: Evidence from Europe By Petru Crudu; Giacomo Pasini
  5. The Parenthood Penalty in Mental Health: Evidence from Austria and Denmark By Ahammer, Alexander; Glogowsky, Ulrich; Halla, Martin; Hener, Timo
  6. Artificial Intelligence and Workers' Well-Being By Giuntella, Osea; König, Johannes; Stella, Luca
  7. Spillovers in Fields of Study: Siblings, Cousins, and Neighbors By Avdeev, Stanislav; Ketel, Nadine; Oosterbeek, Hessel; van der Klaauw, Bas
  8. The effect of the social environment during childhood on preferences in adulthood By Johannes Abeler; Toke Reinholt Fosgaard; Lars Garn Hansen
  9. Technological externalities and wages: new evidence from Italian provinces By Andrea Ricci; Claudia Vittori; Francesco Quartaro; Stefano Dughera
  10. The elusive impact of R&D grants on firm productivity By Fernando Alexandre; Diogo Ferreira; Sandro Mendonça; Miguel Portela
  11. The Effects of Adverse Childhood Experiences on Adults' Subjective Wellbeing By Blanchflower, David G.; Bryson, Alex
  12. Does mandatory saving crowd out voluntary saving? By Svend E. Hougaard Jensen; Sigurdur P. Olafsson; Arnaldur Stefansson; Thorsteinn S. Sveinsson; Gylfi Zoega
  13. Social Skills and the Individual Wage Growth of Less Educated Workers By Aghion, Philippe; Bergeaud, Antonin; Blundell, Richard; Griffith, Rachel
  14. Making Their Own Weather? Estimating Employer Labour-Market Power and Its Wage Effects By Martins, Pedro S.; Melo, António
  15. Robot Imports and Firm-Level Outcomes By Alessandra Bonfiglioli; Rosario Crinò; Herald Fadinger; Gino Gancia
  16. The Effects of Exposure to Refugees on Crime: Evidence from the Greek Islands By Rigissa Megalokonomou; Chrysovalantis Vasilakis
  17. Long-term effects of early adverse labour market conditions: A Causal Machine Learning approach By Petru Crudu
  18. Participation in supplementary pension savings in Iceland By Asgeir Danielsson; Rannveig Sigurdardottir; Svava J. Haraldsdottir
  19. Tax planning and investment responses to dividend taxation By Aliisa Koivisto
  20. Minimum Wages, Wage Dispersion and Financial Constraints in Firms By Arabzadeh, Hamzeh; Balleer, Almut; Gehrke, Britta; Taskin, Ahmet Ali
  21. Artificial intelligence, complementary assets and productivity: evidence from French firms By Flavio Calvino; Luca Fontanelli

  1. By: Theresa Geißler (IAAEU-Trier University); Laszlo Goerke (IAAEU-Trier University, IZA, CESifo)
    Abstract: Using the German Socio-Economic Panel data, we investigate the correlation between trade union membership and educational mismatch. Employing panel tobit and probit regressions, we find that union membership is negatively associated with overeducation, primarily among males. This finding remains consistent across subgroups of full-time or private sector male workers, as well as for males of all ages or residing in either East or West Germany. The same negative correlation is observed for females younger than the median age and residing in East Germany. Our results indicate that collective wage agreements and works councils do not drive this relationship. Conversely, no significant correlation is found between union membership and undereducation.
    Keywords: Educational mismatch, gender, German Socio-Economic-Panel, trade union membership
    JEL: I J
    Date: 2023
  2. By: Graeber, Daniel (DIW Berlin); Hilbert, Viola (DIW Berlin); König, Johannes (DIW Berlin)
    Abstract: While inequality of opportunity (IOp) in earnings is well studied, the literature on IOp in individual net wealth is scarce to non-existent. This is problematic because both theoretical and empirical evidence show that the position in the wealth and income distribution can significantly diverge. We measure ex-ante IOp in net wealth for Germany using data from the Socio-Economic Panel (SOEP). Ex-ante IOp is defined as the contribution of circumstances to the inequality in net wealth before effort is exerted. The SOEP allows for a direct mapping from individual circumstances to individual net wealth and for a detailed decomposition of net wealth inequality into a variety of circumstances; among them childhood background, intergenerational transfers, and regional characteristics. The ratio of inequality of opportunity to total inequality is stable from 2002 to 2019. This is in sharp contrast to labor earnings, where ex-ante IOp is declining over time. Our estimates suggest that about 62% of the inequality in net wealth is due to circumstances. The most important circumstances are intergenerational transfers, parental occupation, and the region of birth. In contrast, gender and individuals' own education are the most important circumstances for earnings.
    Keywords: inequality, wealth, inequality of opportunity, decomposition
    JEL: D63 J62 D31 J24
    Date: 2023–09
  3. By: Ferreira, João R. (Nova School of Business and Economics); Martins, Pedro S. (Nova School of Business and Economics)
    Abstract: We evaluate the education and labour impact of vocational education and training (VET). Identification draws on different IVs from the large-scale, staggered introduction of VET courses in public schools in Portugal from 2005. We also exploit the large gender differences in VET, with many courses selected almost only by either boys or girls. Drawing on rich student-school matched panel data, we find that VET increased upper-secondary graduation rates dramatically: our LATE estimates typically exceed 50 percentage points. These effects are even stronger for low-achieving students and welfare recipients. Moreover, we find evidence of regional youth employment growth following VET expansions. VET graduates also benefit from higher wages and other positive outcomes over several years, compared to both academic-track and lower-secondary graduates.
    Keywords: educational attainment, vocational education, matched student-teacher-school data, VET wage differentials
    JEL: I21 I26 I28 J24
    Date: 2023–09
  4. By: Petru Crudu (Department of Economics, University Of Venice CÃ Foscari); Giacomo Pasini (Department of Economics, University Of Venice CÃ Foscari; NETSPAR)
    Abstract: This study examines the impact of occupational stressors and tasks throughout an individual’s career on their health in older age. Leveraging comprehensive job occupation data from the SHARE dataset, we establish precise connections between stressors and specific jobs at the 4-digit ISCO code level. To ensure accurate measurement of physical exertion, we propose the use of Metabolic Equivalent of Task (MET) based on the metabolic rate consumption associated with each task. Our study makes two key contributions. First, we provide compelling evidence that individuals, especially women, engaged in physically demanding jobs experience significantly worse health in older age. Our results remain valid after conducting several robustness checks and after controlling for a rich set of variables. Secondly, we introduce a novel methodology to identify harmful tasks and measure overall Job Strain Intensity, which also incorporates unobserved occupational stressors. This approach allows us to pinpoint specific harmful tasks and 4-digit ISCO codes, providing valuable insights for targeted retirement schemes and addressing important considerations regarding the fairness of statutory retirement ages. Additionally, policymakers can benefit from our findings to foster healthier work environments and guide investments towards automating high-risk tasks, thereby improving overall workplace safety and well-being.
    Keywords: Health, Job Tasks, Working Conditions, MET
    JEL: I1 I14 I18 J24 J28
    Date: 2023
  5. By: Ahammer, Alexander (University of Linz); Glogowsky, Ulrich (Johannes Kepler University Linz); Halla, Martin (University of Linz); Hener, Timo (Aarhus University)
    Abstract: Using Austrian and Danish administrative data, we examine the impacts of parenthood on mental health. Parenthood imposes a greater mental health burden on mothers than on fathers. It creates a long-run gender gap in antidepressant prescriptions of about 93.2% (Austria) and 64.8% (Denmark). These parenthood penalties in mental health are unlikely to reflect differential help-seeking behavior across the sexes or postpartum depression. Instead, they are related to mothers' higher investments in childcare: Mothers who take extended maternity leave in quasi-experimental settings are more likely to face mental health problems.
    Keywords: gender equality, fertility, parenthood, motherhood, mental health, parental leave
    JEL: D63 J13 I10 J16 J22
    Date: 2023–09
  6. By: Giuntella, Osea (University of Pittsburgh); König, Johannes (DIW Berlin); Stella, Luca (Free University of Berlin)
    Abstract: This study explores the relationship between artificial intelligence (AI) and workers' well-being and mental health using longitudinal survey data from Germany (2000-2020). We construct a measure of individual exposure to AI technology based on the occupation in which workers in our sample were first employed and explore an event study design and a difference-in-differences approach to compare AI-exposed and non-exposed workers. Before AI became widely available, there is no evidence of differential pre-trends in workers' well-being and concerns about their economic futures. Since 2015, however, with the increasing adoption of AI in firms across Germany, we find that AI-exposed workers have become less satisfied with their life and job and more concerned about job security and their personal economic situation. However, we find no evidence of a significant impact of AI on workers' mental health, anxiety, or depression.
    Keywords: artificial intelligence, future of work, well-being, mental health
    JEL: I10 J28 O30
    Date: 2023–09
  7. By: Avdeev, Stanislav (University of Amsterdam); Ketel, Nadine (Vrije Universiteit Amsterdam); Oosterbeek, Hessel (University of Amsterdam); van der Klaauw, Bas (Vrije Universiteit Amsterdam)
    Abstract: We use admission lotteries for higher education studies in the Netherlands to investigate whether someone's field of study influences the study choices of their younger peers. We find that younger siblings and cousins are strongly affected. Also younger neighbors are affected but to a smaller extent. These findings indicate that a substantial part of the correlations in study choices between family members can be attributed to spillover effects and are not due to shared environments. Our findings contrast with those of recent studies based on admission thresholds, which find no sibling spillovers on field of study (major) choices. Because we also find spillovers from lottery participants at the lower end of the ability distribution, the contrasting findings cannot be attributed to the different research designs (leveraging admission lotteries versus admission thresholds). We believe that the different findings are due to the small differences in quality between universities in the Netherlands, making differences in the prestige of fields of study more prominent.
    Keywords: major choice, higher education, peer effects, admission lotteries
    JEL: I23 I24 J10
    Date: 2023–09
  8. By: Johannes Abeler (Department of Economics, University of Oxford); Toke Reinholt Fosgaard (Department of Food and Resource Economics, University of Copenhagen; Department of Technology, Management and Economics, Technical University of Denmark); Lars Garn Hansen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: Preferences are key for shaping decision-making, yet it remains an open question where preferences originate from. We investigate the causal effect of the childhood social environment on adults’ preferences. We utilize a natural experiment in Denmark, which randomized refugees to different neighbourhoods in the 1990s. We experimentally measure risk, time, and social preferences of adult refugees who were children at the time of arrival in Denmark. Using rich administrative register data on the entire Danish population we can measure a very broad range of aspects of the childhood social environment. We find that the randomly allocated childhood environment significantly affects adults’ preferences, in particular, patience.
    Keywords: Preference formation, natural experiment, register data
    JEL: C90 D15 D64 D81 D90 J62
    Date: 2023–10
  9. By: Andrea Ricci; Claudia Vittori; Francesco Quartaro; Stefano Dughera
    Abstract: In this paper, we investigate the relationship between local wages and the internal structure of the regional knowledge base. The purpose is to assess if the workers’ compensations are related to the peculiarities of the technological space where they supply their labor services. To test this hypothesis, we apply the concepts of related and unrelated variety to the firms’ patenting activity as to assess if wages grow more in a framework of ‘knowledge deepening’ (generated by firms innovating in related technological domains) or in one of ‘knowledge widening’ (generated by firms innovating in unrelated technological domains).
    Date: 2022–03–31
  10. By: Fernando Alexandre (NIPE/Center for Research in Economics and Management, University of Minho, Portugal); Diogo Ferreira (NIPE/Center for Research in Economics and Management, University of Minho, Portugal); Sandro Mendonça (Business Research Unit (BRU-IUL), University Institute of Lisbon; Research Unit on Complexity and Economics (UECE), Research in Economics and Mathematics (REM), Lisbon School of Economics & Management (ISEG), University of Lisbon; Science Policy Research Unit (SPRU), University of Sussex.); Miguel Portela (NIPE/Center for Research in Economics and Management, University of Minho, Portugal; IZA, Bonn)
    Abstract: This paper evaluates the effectiveness of R&D subsidies, provided by the European Regional Development Funds, on firms’ productivity. Using detailed longitudinal firm-level data covering the period 2007-2019, we employ state of the art differences-in-differences estimators to evaluate the impacts of R&D grants. Positive causal effects on gross value added and labour productivity are discernible for micro- and small-sized firms participating in co-promotion but not in individual projects. However, these effects seem to be elusive. No evidence of a positive effect of these grants on firm performance for medium- and large-sized firms or for individual R&D projects is found. This investigation contributes to a more comprehensive understanding of the relative effectiveness of productivity enhancement programs.
    Keywords: R&D grants; productivity; European funds; co-promotion
    JEL: D22 H25 L25 L52
    Date: 2023
  11. By: Blanchflower, David G. (Dartmouth College); Bryson, Alex (University College London)
    Abstract: Using four cross-sectional data files for the United States and Europe we show that Adverse Childhood Experiences (ACE) have a significant impact on subjective wellbeing (SWB) in adulthood. Death of a parent, parental separation or divorce, financial difficulties, the prolonged absence of a parent, quarreling between parents, parental unemployment, sexual assault, experiencing long-term health problems, being bullied at school and being beaten or punched as a child all have long-term impacts on wellbeing. These experiences impact a wide range of wellbeing measures in adulthood including satisfaction with many aspects of everyday life, happiness and life satisfaction, self-assessed health, and are positively linked to measures of negative affect including the GHQ6. The evidence linking ACEs to lower SWB in adulthood is consistent across fifty different measures including sixteen positive affect and twenty-six negative affect measures relating to assessments of one's one life, and eight variables capturing how the individual feels about the area she lives in, including unemployment, drugs, violence and vandalism plus democracy in their country. Trauma in childhood is long lasting.
    Keywords: childhood, neglect, abuse, family circumstances, bullying, subjective wellbeing
    JEL: I31 I10 J12
    Date: 2023–09
  12. By: Svend E. Hougaard Jensen; Sigurdur P. Olafsson; Arnaldur Stefansson; Thorsteinn S. Sveinsson; Gylfi Zoega
    Abstract: Recently, mandatory pension contributions in Iceland were increased substantially in the private sector while remaining unchanged in the public sector. Taking this as a large natural experiment, this paper studies the effects of this change on households’ voluntary saving using comprehensive third-party reported information on tax-payers’ income, assets and debt for all taxpayers. Using difference-in-differences, we find that households do not reduce voluntary saving when faced with a rise in mandatory saving. Our results are confirmed by an event study of workers switching from the private sector to the public sector. Survey evidence suggests widespread ignorance about the pension system.
    JEL: E21 E24
    Date: 2023–09
  13. By: Aghion, Philippe (LSE); Bergeaud, Antonin (HEC Paris); Blundell, Richard (University College London); Griffith, Rachel (University of Manchester)
    Abstract: We use matched employee-employer data from the UK to highlight the importance of social skills, including the ability to work well in a team and communicate effectively with co-workers, as a driver for individual wage growth for workers with few formal educational qualifications. We show that lower educated workers in occupations where social skills are more important experience steeper wage growth with tenure, and also higher early exit rates, than equivalent workers in occupations where social skills are less important. Moreover, the return to tenure in occupations where social skills are important is stronger in firms with a larger share of higher educated workers. We rationalize our findings using a model of wage bargaining with complementarity between the skills and abilities of less educated workers and the firm's other assets.
    Keywords: team work, social skills, individual wage growth, firm pay premium
    JEL: J31 J24 L25
    Date: 2023–09
  14. By: Martins, Pedro S. (Nova School of Business and Economics); Melo, António (University of Turin)
    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: 2023–09
  15. By: Alessandra Bonfiglioli; Rosario Crinò; Herald Fadinger; Gino Gancia
    Abstract: We use French data over the 1994-2013 period to study how imports of industrial robots affect firm-level outcomes. Guided by a simple model, we develop a novel empirical strategy to identify the causal effects of robot adoption. Our results suggest that, while demand shocks generate a positive correlation between robot imports and employment at the firm level, exogenous exposure to automation leads to job losses. We also find that robot exposure increases labor productivity and some evidence that it may raise the relative demand for high-skill professions.
    Keywords: Automation, Displacement, Firms, Robots
    JEL: J23 J24 O33 D22
    Date: 2023–10
  16. By: Rigissa Megalokonomou (Monash University, Monash Business School, Department of Economics, IZA and CESifo); Chrysovalantis Vasilakis (University of Bangor, Business School)
    Abstract: Recent political instability in the Middle East has triggered one of the largest influxes of refugees into Europe. The different departure points along the Turkish coast generate exogenous variation in refugee arrivals across Greek islands. We construct a new dataset on the number and nature of crime incidents and arrested offenders at island level using official police records and newspaper reports. Instrumental variables and difference-in-differences are employed to study the causal relationship between immigration and crime. We find that a 1-percentage-point increase in the share of refugees on destination islands increases crime incidents by 1.7-2.5 percentage points compared with neighboring unexposed islands. This is driven by crime incidents committed by refugees; there is no change in crimes committed by natives on those islands. We find a significant rise in property crime, knife attacks, and rape, but no increase in drug crimes. Results based on reported crimes exhibit a similar pattern. Our findings highlight the need for government provision in terms of infrastructure, social benefits, quicker evaluation for asylum, and social security.
    Keywords: rime, migration, natural experiment, Greek islands, difference-in-differences
    JEL: F61 F22 K42 J15
    Date: 2023–10
  17. By: Petru Crudu (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: This study estimates the long-term causal effects of completing education during adverse labour market conditions, measuring outcomes 35 years post-education. To achieve this, the study combines historical regional unemployment rates with detailed SHARE microdata for European cohorts completing education between 1960 and 1990 in a novel database. A systematic heterogeneity analysis is conducted by leveraging the Causal Forest, a causal machine learning estimator that allows estimates at various aggregation levels. Furthermore, the causal link is validated using an instrumental variable approach. The main findings reveal that a one-percentage-point increase in the unemployment rate at the time of completing education leads to a significant decline in earnings (-5.2%) and self-perceived health (-2.23%) after 35 years. The heterogeneity analysis uncovers that the results are primarily driven by less educated individuals and highlights a permanent disadvantage for women in labour market participation. This study also provides evidence that systematic divergence in life trajectories can be explained by search theory and human capital models. Overall, the research suggests that the consequences of limited post-education opportunities can be permanent, underscoring the importance of identifying vulnerable groups for effective policy interventions.
    Keywords: Long-term Effects, Unemployment, Heterogeneous Effects, GRF
    JEL: J31 I1 J24 I24 E24
    Date: 2023
  18. By: Asgeir Danielsson; Rannveig Sigurdardottir; Svava J. Haraldsdottir
    Abstract: We analyse participation in supplementary pension savings in Iceland using microdata on every person, aged 16 and over, registered in Iceland in 1999-2017. Although sizeable subsidies are offered, a large share of those eligible do not participate. The significant increase in subsidies in 2014 did affect participation, although less than expected. We find that women participate significantly more than men, apart from the youngest and oldest age groups. The difference between women and men is larger for single persons than for couples. It is also larger for those with only primary education than for those with tertiary education. The subsidies are such that the rate of return on the savings increases with age. Despite this, we find that participation rates are nearly constant between age 30 and age 60, whereupon participation starts to decline at around the time the savings can be withdrawn. We observe a significant correlation between the decision to start withdrawing funds and the decision to stop participating. Estimating equations for wage income using cross-sectional data, we find the usual concave (Mincer) shape, except for people in their late sixties, whose average wage income starts to increase, reflecting the tendency among higher-income people to retire later. We discuss the problems caused by the correlation between income and education, and between income and gender, and we use two-stage probit least squares to test for exogeneity of income.
    JEL: H2 H3 D12 D14
    Date: 2023–08
  19. By: Aliisa Koivisto (Finnish Centre of Excellence in Tax Systems Research, VATT Institute for Economic Research)
    Abstract: This study explores empirically how business owners respond to dividend taxes in a range of diferent margins including tax planning and investment. Using administrative tax data on all privately held Finnish corporations, I fnd exceptionally clear dividend payment responses to tax rate discontinuities and changes. Heterogeneity analysis suggests that more experienced owners and owners with lower income have higher tax base elasticities. Studying the income composition of owners around tax changes reveals clear income shifting between wage and dividends with negligible efect on gross income received from the frm. Evidence on the asset composition of frms indicates that a notable part of the payment response is due to inter-temporal income-smoothing, while changes in the tax schedule did not cause signifcant real responses in output or investment.
    Keywords: Dividend taxation, investment, income shifting, bunching
    JEL: G38 H21 H24 H25
    Date: 2023–09
  20. By: Arabzadeh, Hamzeh (RWTH Aachen University); Balleer, Almut (RWTH Aachen University); Gehrke, Britta (Freie Universität Berlin); Taskin, Ahmet Ali (Institute for Employment Research (IAB), Nuremberg)
    Abstract: This paper studies how minimum wages affect the wage distribution if firms face financial constraints. Using German employer-employee data and firm balance sheets, we document that the within-firm wage dispersion decreases more with higher minimum wages when firms are financially constrained. We introduce financial frictions into a search and matching labor market model with stochastic job matching, imperfect information, and endogenous effort. In line with the empirical literature, the model predicts that a higher minimum wage reduces hirings and separations. Firms become more selective such that their employment and wage dispersion fall. If effort increases strongly, firms may increase employment at the expense of higher wage dispersion. Financially constrained firms are more selective and reward effort less. As a result, within-firm wage dispersion and employment in these firms fall more with the minimum wage.
    Keywords: minimum wage, wage dispersion, financial frictions, search and matching, unemployment
    JEL: J31 J38 J63 J64
    Date: 2023–09
  21. By: Flavio Calvino; Luca Fontanelli
    Abstract: In this work we characterise French firms using artificial intelligence (AI) and explore the link between AI use and productivity. We relevantly distinguish AI users that source AI from external providers (AI buyers) from those developing their own AI systems (AI developers). AI buyers tend to be larger than other firms, while AI developers are also younger. The share of firms using AI is highest in the ICT sector, which exhibits a particularly high share of developers. Complementary assets, including skills, digital capabilities and infrastructure, play a key role for AI use, with AI buyers and developers leveraging different types of human capital. Overall, AI users tend to be more productive, however this appears largely related to the self-selection of more productive and digital-intensive firms into AI use. This is not the case for AI developers, for which the positive link between AI use and productivity remains evident beyond selection, suggesting a positive effect of AI on their productivity.
    Keywords: Technology Diffusion; Artificial Intelligence; Digitalisation; Productivity.
    Date: 2023–10–13

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