nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2023‒11‒06
twenty papers chosen by
Giuseppe Marotta, Università degli Studi di Modena e Reggio Emilia

  1. More Education Does Make You Happier – Unless You Are Unemployed By Bertermann, Alexander; Kamhöfer, Daniel A.; Schildberg-Hörisch, Hannah
  2. Structural Empirical Analysis of Vacancy Referrals with Imperfect Monitoring and the Strategic Use of Sickness Absence By van den Berg, Bernard; Foerster, Hanno; Uhlendorff, Arne
  3. The Parenthood Penalty in Mental Health: Evidence from Austria and Denmark By Alexander Ahammer; Ulrich Glogowsky; Martin Halla; Timo Hener
  4. On the Origins of Socio-Economic Inequalities: Evidence from Twin Families By Bingley, Paul; Cappellari, Lorenzo; Tatsiramos, Konstantinos
  5. Automation and Income Inequality in Europe By Doorley, Karina; Gromadzki, Jan; Lewandowski, Piotr; Tuda, Dora; Van Kerm, Philippe
  6. Effectiveness of Car Scrappage Schemes: Comparative Analysis of European Countries By Miroslav Svoboda; Michael Fanta; Jan Mosovsky
  7. Spillovers in Fields of Study: Siblings, Cousins, and Neighbors By Stanislav Avdeev; Nadine Ketel; Hessel Oosterbeek; Bas van der Klaauw
  8. The Impact of Restricting Fixed-Term Contracts on Labor and Skill Demand By Grasso, Giuseppe; Tatsiramos, Konstantinos
  9. The impact of family background on educational attainment in Dutch birth cohorts 1966-1995 By Tilbe Atav; Cornelius A. Rietveld; Hans van Kippersluis
  10. The Impact of Immigration on the Employment Dynamics of European Regions By Edo, Anthony; Özgüzel, Cem
  11. The Micro-Foundations of Employment Systems: An Empirical Case Study of Britain and France By Thomas Amosse; Alex Bryson; John Forth; Heloise Petit
  12. Retirement Decision of Belgian Couples and the Impact of the Social Security System By Cetin, Sefane; Jousten, Alain
  13. Tourism usage of digital collaborative economy platforms in Europe: situation, behaviours and implication for the digital policies By Mendieta-Aragón, Adrián; Rodríguez-Fernández, Laura; Navío-Marco, Julio
  14. Improving Performance Through Allocation and Competition: Evidence from a Patient Choice Reform By Kortelainen, Mika; Laine, Liisa T.; Lavaste, Konsta; Saxell, Tanja; Siciliani, Luigi
  15. Unobserved Components Model(s): Output Gaps and Financial Cycles By Bertrand Garbinti; Cecilia García Peñalosa; Vladimir Pecheu; Frédérique Savignac
  16. Are Senior Entrepreneurs Happier than Who? The Role of Income and Health By Michael Fritsch; Alina Sorgner; Michael Wyrwich
  17. Tax-Induced Emigration: Who Flees High Taxes? Evidence from the Netherlands By José Victor C. Giarola; Olivier Marie; Frank Cörvers; Hans Schmeets
  18. Marital Sorting, Household Inequality and Selection By Fernández-Val, Iván; van Vuuren, Aico; Vella, Francis
  19. The Effects of Price Regulation on Pharmaceutical Expenditure and Availability By Kortelainen, Mika; Markkanen, Jaakko; Siikanen, Markku; Toivanen, Otto
  20. Flying to Mars and Venus - the gendered nature of in-work poverty in Europe By Schwarz, Anna-Magdalena

  1. By: Bertermann, Alexander (LMU Munich); Kamhöfer, Daniel A. (Heinrich Heine University Düsseldorf); Schildberg-Hörisch, Hannah (Heinrich Heine University Düsseldorf)
    Abstract: This paper investigates the causal effect of education on life satisfaction, exploring effect heterogeneity along employment status. We use exogenous variation in compulsory schooling requirements and the build-up of new, academically more demanding schools, shifting educational attainment along the entire distribution of schooling. Leveraging plant closures and longitudinal information, we also address the endogeneity of employment status. We find a positive effect of education on life satisfaction for employed individuals, but a negative one for those without a job. We propose an aspiration-augmented utility function as a unifying explanation for the asymmetric effect of education on life satisfaction.
    Keywords: education, life satisfaction, employment status, compulsory schooling reforms, school openings, instrumental variable estimation
    JEL: I26 I31 C26
    Date: 2023–09
  2. By: van den Berg, Bernard (University of York); Foerster, Hanno (Boston College); Uhlendorff, Arne (CREST)
    Abstract: This paper provides a structural analysis of the role of job vacancy referrals (VRs) by public employment agencies in the job search behavior of unemployed individuals, incorporating institutional features of the monitoring of search behavior by the agencies. Notably, rejections of VRs may lead to sanctions (temporary benefits reductions) while workers may report sick to avoid those. We estimate models using German administrative data from social security records linked with caseworker recorded data on VRs, sick reporting and sanctions. The analysis highlights the influence of aspects of the health care system on unemployment durations. We estimate that for around 25% of unemployed workers, removing the channel that enables strategic sick reporting reduces the mean unemployment duration by 4 days.
    Keywords: unemployment, wage, sanctions, moral hazard, sickness absence, physician, structural estimation, counterfactual policy evaluation, unemployment duration
    JEL: J64 J65 C51 C54
    Date: 2023–10
  3. By: Alexander Ahammer; Ulrich Glogowsky; Martin Halla; Timo Hener
    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
  4. By: Bingley, Paul (VIVE - The Danish Centre for Applied Social Science); Cappellari, Lorenzo (Università Cattolica del Sacro Cuore); Tatsiramos, Konstantinos (University of Luxembourg, LISER)
    Abstract: We propose a twin family model linking twins with their spouses and children to quantify the relative importance of genetic and environmental factors in explaining the variance of socio-economic outcomes. Using data from the Danish Twins Registry and population registers, we test and relax the assumptions of the standard behavioral genetics model most frequently applied in economics using twins or adoptees. Exploiting an education reform differentially affecting parents, we find no evidence of gene-environment interactions. While we find some assortative mating based on genetic factors, differentially shared environments are key: they explain half of the variance in years of schooling, whereas genetic factors explain only nine percent. We find similar percentages for earnings, income, and wealth. Decomposing intergenerational elasticities reveals that shared environments explain 50% for earnings, 60% for income, 70% for wealth, and 80% for schooling. Family environments are more important than previously understood.
    Keywords: nature, nurture, family background, genes, environment, inequality
    JEL: D31 D63 E21 E24 I24
    Date: 2023–10
  5. By: Doorley, Karina (Economic and Social Research Institute, Dublin); Gromadzki, Jan (Vienna University of Economics and Business); Lewandowski, Piotr (Institute for Structural Research (IBS)); Tuda, Dora (Trinity College Dublin); Van Kerm, Philippe (LISER (CEPS/INSTEAD))
    Abstract: We study the effects of robot penetration on household income inequality in 14 European countries between 2006–2018, a period marked by the rapid adoption of industrial robots. Automation reduced relative hourly wages and employment of more exposed demographic groups, similarly to the results for the United States. Using robot-driven wage and employment shocks as input to the EUROMOD microsimulation model, we find that automation had minor effects on income inequality. Household labour income diversification and tax and welfare policies largely absorbed labour market shocks caused by automation. Transfers played a key role in cushioning the transmission of these shocks to household incomes.
    Keywords: robots, automation, tasks, income inequality, wage inequality, microsimulation
    JEL: J24 O33 J23
    Date: 2023–10
  6. By: Miroslav Svoboda (IREF Fellow and Anglo-American University, Prague, Czech Republic); Michael Fanta (Jan Evangelista PurkynÄ› University, Ústí nad Labem, Czech Republic); Jan Mosovsky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This study aims to investigate the effectiveness of car scrappage schemes implemented in the European Union (EU) during the economic crisis of 2009. The study uses a synthetic control variable and a difference-in-differences method to evaluate these policies. Using monthly data on new passenger car registrations in European countries, the study examines the impact of the schemes. The results show that the impact of scrappage schemes varies across countries, with statistically significant effects observed in Germany and Slovakia, followed by Greece and Italy, albeit limited in some aspects. The results of the study underline the need for careful policy design and show that the effectiveness of car scrappage schemes goes beyond the level of premiums or budget allocations. It is also influenced by other elements such as the duration of the scheme, the overarching policy environment and the novelty of the implementation strategies.
    Keywords: car scrappage schemes, synthetic control method, difference-in-differences
    JEL: H23 C21 R48
    Date: 2023–09
  7. By: Stanislav Avdeev (University of Amsterdam); Nadine Ketel (Vrije Universiteit Amsterdam); Hessel Oosterbeek (University of Amsterdam); Bas van der Klaauw (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: 2023–10–12
  8. By: Grasso, Giuseppe (University of Luxembourg, LISER); Tatsiramos, Konstantinos (University of Luxembourg, LISER)
    Abstract: This paper examines the impact of increasing the relative cost of fixed-term contracts on labor demand as well as the demand for standard measures of human capital and specific skill requirements. We evaluate a 2018 Italian labor law reform that raised the cost of fixed- term contracts while keeping permanent contract costs unchanged. We employ a difference-in-differences research design, leveraging the variation in firms' exposure to the reform resulting from their diverse reliance on fixed-term contracts due to differing reactions to earlier labor market reforms. Using rich data covering the near universe of online job vacancies in Italy, our findings indicate that the increase in hiring costs for temporary contracts led to a decrease in the relative demand for temporary workers and an increase in the demand for permanent workers. This shift in demand was accompanied by upskilling towards workers with higher levels of human capital and specific skill requirements. When offering jobs under permanent contracts, firms increased their demand for workers with a college degree and social skills. At the same time, they reduced their demand for workers with only a high school degree and no work experience. On the other hand, when offering jobs under fixed-term contracts, firms increased their demand for workers with some work experience and social skills. These findings suggest that while restricting fixed-term contracts encouraged the hiring of permanent workers, such reforms might have unintended consequences by raising the hiring standards for job entry, thereby reducing employment opportunities for less qualified workers.
    Keywords: hiring costs, employment protection, dual labor markets, skills
    JEL: J23 J24 J63 K31
    Date: 2023–10
  9. By: Tilbe Atav (Erasmus University Rotterdam); Cornelius A. Rietveld (Erasmus University Rotterdam); Hans van Kippersluis (Erasmus University Rotterdam)
    Abstract: We analyse the evolving impact of family background on educational attainment using administrative data on 2, 417, 460 individuals from 1, 341, 403 families born in the Netherlands between 1966 and 1995. Comparisons between parents and their children reveal intergenerational elasticities between 0.15-0.18, translating into a 1.8-2.2 month increase in the educational attainment of the child associated with a one- year increase in the educational attainment of the parent. Correlations between regular siblings explain 33 percent of the variance in educational attainment between individuals, with parental education accounting for approximately 75 percent of this share, suggesting that only around one-fourth of the variance is explained by factors that do not correlate with parental education. Strikingly, despite pervasive changes in the distribution of educational attainment over time, the share of the variance attributable to factors shared by siblings remains fairly stable at around 0.34 in the birth cohorts analysed. The intergenerational elasticity and intergenerational correlation also appear to be roughly stable across cohorts. Despite a reduction in overall education inequality, we conclude that family background has remained equally important for educational attainment in the analysed generations, although it appears to vary systematically by region of birth.
    Keywords: Relative correlations, intergenerational mobility, educational attainment
    JEL: D10 I24 J10 J62
    Date: 2023–10–12
  10. By: Edo, Anthony (CEPII, Paris); Özgüzel, Cem (OECD)
    Abstract: This paper provides the first evidence on the regional impact of immigration on native employment in a cross-country framework. By exploiting the richness of the European Labour Force Surveys and past censuses, we show that the rise in the share of immigrants across European regions over the 2010-2019 period had a modest impact on the employment-to-population rate of natives. However, the effects are highly uneven across regions and workers, and over time. First, the short-run estimates show adverse employment effects in response to immigration, while these effects disappear in the longer run. Second, low-educated native workers experience employment losses due to immigration, whereas high-educated ones are more likely to experience employment gains. Third, the presence of institutions that provide employment protection and high coverage of collective wage agreements exert a protective effect on native employment. Finally, economically dynamic regions can better absorb immigrant workers, resulting in little or no effect on the native workforce.
    Keywords: immigration, employment, labour supply, employment dynamics
    JEL: F22 J21 J61
    Date: 2023–09
  11. By: Thomas Amosse (Cnam, Lise, CEET); Alex Bryson (University College London); John Forth (City, University of London); Heloise Petit (Cnam, Lirsa, CEET)
    Abstract: Building on existing studies of national employment systems, we take a multi-dimensional approach to comparative employment relations where the national level remains meaningful but which emphasises within-country dynamics and heterogeneity. Analysing nationally representative workplace surveys for France and Great Britain we contrast the British model characterised by variability and heterogeneity with a French model characterised by stability and uniformity. We discuss ways in which these systems are shaped by differences in employer and employee networks, the financial and organisational links between firms, and other macro-institutions.
    Keywords: employment relations; survey; national models; employment regimes
    JEL: J21 J31 M51 P52
    Date: 2023–09–01
  12. By: Cetin, Sefane (Université catholique de Louvain); Jousten, Alain (University of Liège)
    Abstract: This paper investigates the retirement patterns of married couples in Belgium. To forecast retirement behavior, we use administrative Social Security data from 2003 to 2017 and a discrete choice random utility model. In particular, we concentrate on the spousal bonus of pension payments to comprehend how financial incentives resulting from the social security system's structural design affect both partners' retirement decisions. We simulate the effect of the elimination of the spousal bonus and find that a small portion of women delay their retirement whereas the rest substitute into alternative social security benefits. Our results do not only highlight the significance of cross-program spillovers between various Social Security benefits, but also the heterogeneity in preferences for retirement and asymmetry of retirement behavior between husbands and wives.
    Keywords: old-age labor supply, retirement incentives, spousal bonus, pension reforms
    JEL: D10 H55 J26
    Date: 2023–09
  13. By: Mendieta-Aragón, Adrián; Rodríguez-Fernández, Laura; Navío-Marco, Julio
    Abstract: This research analyses how tourists using digital sharing economy platforms have behaved in the European Union, whether there are differences between European regions and how they have evolved with the pandemic. Using spatial econometric techniques, this study provides a comparative analysis, in space and time, that identifies regional inequalities in terms of the intensity of demand for accommodation offered on digital sharing economy platforms. In particular, different clusters of high intensity of collaborative tourism have been detected, and spatial spillover effects and interdependencies of European regions in collaborative tourism have been recognised, finding a positive spatial autocorrelation in the intensity rate of collaborative tourism. An effect of tourist destination saturation on the use of accommodation offered on digital sharing economy platforms has also been observed. Several digital public policy implications have been discussed, promoting regulatory coordination at the interregional and pan-European levels to avoid inequalities and imbalances across Europe.
    Keywords: Digital tourism, platforms' economy, digital policies, European regions, sharing, ESDA, spatial models
    Date: 2023
  14. By: Kortelainen, Mika; Laine, Liisa T.; Lavaste, Konsta; Saxell, Tanja; Siciliani, Luigi
    Abstract: We study the allocative effects of enhancing consumer choice and non-price competition in markets with heterogeneous producers. We use comprehensive administrative data and a difference-in-differences design based on the introduction of a regional patient choice reform for planned surgeries in Finland. We find that large teaching hospitals attracted more patients and concentration increased in their markets. Waiting times decreased in hospitals exposed to the reform and more patients were treated, with little effect on clinical quality or average surgical expenditure after the reform. Our results suggest that increased choice can reallocate patients towards large producers and improve public hospital performance.
    Keywords: Reallocation, Heterogeneous Producers, Performance, Competition, Concentration, Patient Choice, Market Structure, Local public finance and provision of public services, I11, L11, I18, L32, L38, fi=Elinkeinopolitiikka|sv=Näringspolitik|en=Industrial and economic policy|, fi=Kunnat ja hyvinvointialueet|sv=Kommuner och välfärdsområden|en=Municipalities and wellbeing services counties|, fi=Terveyspalvelut|sv=Hälsovårdstjänster|en=Healthcare services|,
    Date: 2023
  15. By: Bertrand Garbinti; Cecilia García Peñalosa; Vladimir Pecheu; Frédérique Savignac
    Abstract: This paper is the first to compute lifetime earnings (LTE) in France for a large number of cohorts that entered the labour market between 1967 and 1987. We compare our results with evidence by Guvenen et al. (2022) for the US, documenting sharp differences between the two countries. Median LTE show similar flat trends in both countries, but in France this results from a moderate increase for both genders together with increased female participation, while in the US, LTE declines for men and sharply grows for women. There have been marked changes in age profiles, as for both genders younger cohorts have experienced a decrease in entry wages that has been more than offset by faster wage growth. Our analysis of inequality finds that it is lower when we focus on LTE than in the cross-section, and that it follows a U-shaped pattern, although the increase is much smaller in France than that observed in the US. Lastly, we also find that i) education (returns and changes in attainment) plays a key role in shaping LTE across cohorts, and ii) differences in working time explain an increasing part of the gender gap in LTE over time as both men and women have increased the number of years they work but women have done so largely through part-time employment.
    Keywords: Lifetime Earnings, Inequality, Gender Earnings Gaps
    JEL: J16 J31 J62
    Date: 2023
  16. By: Michael Fritsch (Friedrich Schiller University Jena, Germany); Alina Sorgner (John Cabot University Rome, Italy, Institute of Labor Economics (IZA), and Kiel Institute for the World Economy (IfW Kiel)); Michael Wyrwich (University of Groningen, The Netherlands, and Friedrich Schiller University Jena, Germany)
    Abstract: We propose an extension of the standard occupational choice model to analyze the life satisfaction of senior entrepreneurs as compared to paid employees and particularly retirees in Germany. The analysis identifies income and health status as main factors that shape the relationship between occupational status and life satisfaction. Senior entrepreneurs enjoy higher levels of life satisfaction than retirees and senior paid employees. This higher life satisfaction is mainly due to their higher income. Physical and mental health play a crucial role in determining both an individual’s occupational status and their overall life satisfaction. We find that senior self-employed report to be healthier compared to other groups of elderly individuals. However, when controlling for health, retirees exhibit an even higher level of life satisfaction compared to their self-employed counterparts. Heterogeneity analysis of various types of senior entrepreneurs and senior paid employees confirms this general pattern. In addition, we find some evidence indicating that senior entrepreneurs may compromise their leisure time, a main asset of retired individuals. Implications for research, policy, and practitioners are discussed.
    Keywords: Senior entrepreneurship, health conditions, well†being, life satisfaction, age
    JEL: L26 I31 J10 D91
    Date: 2023–10–20
  17. By: José Victor C. Giarola (Maastricht University); Olivier Marie (Erasmus University Rotterdam); Frank Cörvers (Maastricht University); Hans Schmeets (Maastricht University)
    Abstract: We study the impact of a policy change in the Netherlands that reduced preferential tax treatment duration for high-skilled migrants arriving from specific countries in certain years. Utilizing comprehensive tax and population data, we document substantial tax-induced emigration responses, primarily driven by the top 1% of earners. Highly mobile individuals within the top 5% also emigrate sooner, particularly to competing countries offering tax-breaks to attract skilled workers. Crucially, we uncover no change in mobility behavior among lower-earning workers. The increased tax receipts from lower-income individuals who remain offset the loss from fleeing high earners, making the policy fiscally cost-neutral.
    Keywords: Taxation, immigration, labor income, Netherlands.
    JEL: F22 H31 J61
    Date: 2023–10–12
  18. By: Fernández-Val, Iván (Boston University); van Vuuren, Aico (University of Groningen); Vella, Francis (Georgetown University)
    Abstract: Using CPS data for 1976 to 2022 we explore how wage inequality has evolved for married couples with both spouses working full time full year, and its impact on household income inequality. We also investigate how marriage sorting patterns have changed over this period. To determine the factors driving income inequality we estimate a model explaining the joint distribution of wages which accounts for the spouses' employment decisions. We find that income inequality has increased for these households and increased assortative matching of wages has exacerbated the inequality resulting from individual wage growth. We find that positive sorting partially reflects the correlation across unobservables influencing both members' of the marriage wages. We decompose the changes in sorting patterns over the 47 years comprising our sample into structural, composition and selection effects and find that the increase in positive sorting primarily reflects the increased skill premia for both observed and unobserved characteristics.
    Keywords: marital sorting, inequality, selection
    JEL: C30 J12 J31
    Date: 2023–10
  19. By: Kortelainen, Mika; Markkanen, Jaakko; Siikanen, Markku; Toivanen, Otto
    Abstract: Quasi-experimental evidence on the effectiveness of price regulation policies in curbing pharmaceutical expenditure is scarce. We analyze widely utilized generic substitution and reference price policies using data from the Nordic countries. Constructing treatment and control groups by matching data across countries by active ingredients and employing difference-in-difference methods on market-level observations, we find that expenditure per dose decreases by 40% moving from the laxest to the strictest regime. Prices decrease less: Reallocation of demand to cheaper products likely explains the difference. We find no adverse effects on pharmaceutical availability and non-existent or positive quantity effects.
    Keywords: pharmaceutical expenditure, pharmaceutical pricing, generic competition, reference pricing, regulation, Local public finance and provision of public services, I11, I18, H51, L51, L65, C23, fi=Elinkeinopolitiikka|sv=Näringspolitik|en=Industrial and economic policy|, fi=Terveyspalvelut|sv=Hälsovårdstjänster|en=Healthcare services|,
    Date: 2023
  20. By: Schwarz, Anna-Magdalena
    Abstract: This paper addresses the invisibility of women in in-work poverty research by analyzing the Eurostat in-work poverty indicator in combination with a novel individualized in-work poverty indicator. The latter relies on individual income, but still accounts for the household in defining the poverty threshold. I show that men are more often in-work poor due to assumed sharing with other household members, while women are mostly individually poor, but lifted out of poverty on the household level. The latter is not captured by the Eurostat indicator. This seems to be driven by household dynamics. Living with children makes women more financially dependent on their partner- increases individualized in-work poverty-, which in turn increases the burden on men's income - increases Eurostat in-work poverty. This pattern is most prevalent in countries with a stronger gender division of labor. My results uncover the blind spots in in-work poverty measurement and additionally highlight the potential of using the individualized indicator to measure financial dependency within the household.
    Keywords: poverty measurement; gender; intra-household inequality; in-work poverty
    Date: 2023–09

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