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on Microeconomic European Issues |
| By: | Bossler, Mario (Institute for Employment Research (IAB), Nuremberg); Liang, Ying (University of Mainz); Schank, Thorsten (University of Mainz) |
| Abstract: | In 2015, Germany introduced a national minimum wage. While the literature agrees on at most limited negative effects on the overall employment level, we go into detail and analyze the impact on the working hours dimension and on the subset of minijobs. Using data from the German Structure of Earnings Survey in 2010, 2014, and 2018, we find empirical evidence that the minimum wage significantly reduces inequality in hourly and monthly wages. While various theoretical mechanisms suggest a reduction in working hours, these remain unchanged on average. However, minijobbers experience a notable reduction in working hours which can be linked to the specific institutional framework. Regarding employment, the results show no effects for regular jobs, but there is a noteworthy decline in minijobs, driven by transitions to regular employment and non-employment. The transitions in non-employment imply a wage elasticity of employment of −0.1 for minijobs. Our findings highlight that the institutional setting leads to heterogeneous effects of the minimum wage. |
| Keywords: | minimum wage, working hours, monthly wages, hourly wages, minijobs |
| JEL: | J31 J38 J21 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16964&r= |
| By: | Mario Bossler; Lars Chittka; Thorsten Schank |
| Abstract: | We present the first empirical evidence on the 22 percent increase in the German minimum wage, implemented in 2022, raising it from Euro 9.82 to 10.45 in July and to Euro 12 in October. Leveraging the German Earnings Survey, a large and novel data source comprising around 8 million employee-level observations reported by employers each month, we apply a difference-in-difference-in-differences approach to analyze the policy's impact on hourly wages, monthly earnings, employment, and working hours. Our findings reveal significant positive effects on wages, affirming the policy's intended benefits for low-wage workers. Interestingly, we identify a negative effect on working hours, mainly driven by minijobbers. The hours effect results in an implied labor demand elasticity w.r.t. the employment volume of -0.17 which only partially offsets the monthly wage gains. We neither observe a negative effect on the individual's employment retention nor the regional employment levels. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2405.12608&r= |
| By: | Rogers, Ben; da Cruz, Nuno F.; Ripa, Francesco; Hamilton-Jones, Imogen |
| Abstract: | In recent years, post-growth ideas and policies have been catching the attention of policymakers, activists, and academics across the globe. Our research finds that European cities in particular are at the leading edge of the recent surge in interest. From Amsterdam to Glasgow, Barcelona to Vienna, European city governments and urban residents are seeking ways to realign their priorities away from Gross Domestic Product (GDP) growth and towards the pursuit of social and ecological well-being. Despite this trend, most of the existing thought on post-growth has focused on the national or global levels; much less attention has been paid to what a distinctly urban post-growth political agenda might look like. This article begins to fill that gap, focusing on the European case and the cities currently at the forefront of post-growth experimentation. We explore the emergence of post-growth thinking both globally and at the city level by analyzing related terms (such as circular economy or degrowth) in academic and policy publications, and in Google search trends. While post-growth-related terms have only recently begun to be linked to cities, our analysis shows that interest in urban post-growth is rising steeply, especially in Europe where even the most growth-critical terms are beginning to permeate mainstream political debates. To conclude, we step back to consider the relevance of post-growth ideas to European cities and to ask what an urban post-growth agenda might look like. |
| Keywords: | circular economy; Doughnut Economics; European cities; beyond GDP; urban post-growth; LSE Cities' European Cities Programme at the London School of Economics and Political Science is supported by Bloomberg Philanthropies |
| JEL: | O40 R00 |
| Date: | 2023–05–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:119483&r= |
| By: | Adam S. Tuzolele Mbuku (Université catholique du Congo - Université catholique du Congo) |
| Abstract: | Historically, Homo Economicus has been conceptualized as a perfectly rational individual who always seeks to maximize his utility. However, this assumption has been challenged by recent discoveries in neuroeconomics, which suggest that emotions and neural processes play a key role in economic decision-making. We have examined a variety of research works in the field of neuroeconomics, including those that explore the interaction between emotion and deliberation, the role of emotions in economic decisions, and how neural structures and mechanisms influence economic choices. These works have highlighted the importance of emotions in economic decision-making and have challenged the traditional assumption of Homo Economicus. Furthermore, we have explored how discoveries in neuroeconomics can help improve existing economic models by integrating knowledge about brain functioning. We have also discussed the potential implications of neuroeconomics for economic policy, particularly in the context of the Democratic Republic of Congo. |
| Abstract: | Historiquement, l'Homo Economicus a été conceptualisé comme un individu parfaitement rationnel qui cherche toujours à maximiser son utilité. Cependant, cette hypothèse a été remise en question par les découvertes récentes en neuroéconomie, qui suggèrent que les émotions et les processus neuronaux jouent un rôle clé dans la prise de décision économique. Nous avons examiné une variété de travaux de recherche dans le domaine de la neuroéconomie, y compris ceux qui explorent l'interaction entre émotion et délibération, le rôle des émotions dans les décisions économiques, et comment les structures et les mécanismes neuronaux influencent les choix économiques. Ces travaux ont mis en évidence l'importance des émotions dans la prise de décision économique et ont remis en question l'hypothèse traditionnelle de l'homo economicus. En outre, nous avons exploré comment les découvertes en neuroéconomie peuvent aider à améliorer les modèles économiques existants en intégrant les connaissances sur le fonctionnement du cerveau. Nous avons également discuté des implications potentielles de la neuroéconomie pour la politique économique, en particulier dans le contexte de la République Démocratique du Congo. |
| Keywords: | Neuroeconomics, Cognitive biases, Behavioral economics, Economic model, Homo economicus, Neuroéconomie, Biais cognitifs, Économie comportementale, Modèle économique |
| Date: | 2024–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04564775&r= |
| By: | Budzinski, Oliver; Stöhr, Annika |
| Abstract: | The model of perfect competition is one of the most famous, most important, and most misunderstood concepts in economics. Rather than aiming to be a full-blown model of real-world competitive markets, the perfect competition model isolates the decentralized coordination mechanism inherent in all competitive markets. Coordinating supply and demand is not the only feature of market competition, but it plays a central role regarding to its virtues, and understanding the working mechanism of this coordination is valuable for economic thinking and economic theory. However, the implications of the perfect competition model for competition law and policy are limited. Market power is a multifaceted phenomenon that consists of several distinguishable types. This contribution explains absolute market power (single-firm monopoly and dominance), collective market power, relative market power, and systemic market power. Due to the possibility of merit-driven paths to market power positions (especially disruptive innovations), market power is difficult to prohibit - despite its welfare-reducing effects within the affected markets (anticompetitive effects) and in other parts of the economy and society (rent-seeking, lobbying, distributional issues). Therefore, competition policy usually focuses on preventing non-merit paths to market power (merger control) and on combating the (anticompetitive) abuse of market power. Contestability refers to the openness of markets. More specifically, it is the ability of companies to overcome barriers to entry and exit as well as to expansion on markets. While the original economic theory of contestability defines very strict conditions for perfectly contestable markets, antitrust has employed the term contestability in broader and in varying ways, emphasizing the role of potential competition and potential market entries to discipline the behavior of powerful incumbents on monopoly or dominance markets. Recently, contestability is rising to new prominence as a major goal of the European regulation of digital ecosystems. |
| Keywords: | perfect competition, atomistic competition, coordination of supply and demand, market power, monopoly, market concentration, dominance, digital ecosystems, price setting, economic power, contestability, entry barriers, exit barriers, potential competition, open markets, Digital Markets Act (EU) |
| JEL: | A10 A20 B10 B20 D00 K21 L12 L13 L40 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:296473&r= |
| By: | Patrick Honohan (Peterson Institute for International Economics) |
| Abstract: | For most of the decade before the COVID-19 pandemic, undershooting rather than overshooting had been the main inflation problem of the European Central Bank (ECB). During 2020, consumer prices in the euro area were falling; by the end of that year, average inflation since the introduction of the euro two decades earlier stood at only 1.6 percent per year. Things began to snowball in 2021. The 12-month inflation rate steadily accelerated. It reached double digits in the final quarter of 2022--more than twice the level it had ever reached since the euro's introduction in 1999. Four striking features emerge from a review of the unexpected surge in European inflation since 2021: (1) The ECB's monetary policy response lagged behind that of the US Federal Reserve, reflecting the more gradual evolution of inflation in the euro area and its distinct pattern of causes; (2) the range of inflation rates across different euro area countries has been unprecedented. This largely reflects the differential impact of war-related energy shocks (especially for natural gas piped from Russia) as well as the differential fiscal response by national governments partially insulating consumers from these shocks; (3) not all households were net losers from the inflation, with some benefiting from the fact that inflation reduced the real value of their indebtedness; and (4) the speed with which inflation was returning toward target during 2023 prompted concerns that the ECB's monetary tightening might have been pushed too far, prolonging the output slowdown. |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:iie:pbrief:pb24-2&r= |
| By: | Francesco D’Acunto; Evangelos Charalambakis; Dimitris Georgarakos; Geoff Kenny; Justus Meyer; Michael Weber |
| Abstract: | This paper discusses the recent wave of research that has emphasized the importance of measures of consumers’ inflation expectations. In contrast to other measures of expected inflation, such as for experts or financial market participants, consumers’ inflation expectations capture the broader distribution of societal beliefs about inflation. This research has revealed very significant deviations from traditional assumptions about rationality in consumers’ expectations formation. However, households do act on their beliefs about inflation, though in heterogeneous ways that can depart from the predictions of conventional economic models. Recent euro area experiences highlight the importance of tracking the degree of anchoring in consumers’ inflation expectations in a way that considers their inherent complexity, heterogeneity, and subjectivity. On average, consumers’ medium and longer-term expectations deviate noticeably in levels from central bank targets and, in contrast with expert expectations, often co-move more closely with shorter-term inflation news. By stepping up their engagement with the wider public, central banks may be able to influence expectations by building up greater knowledge and trust and thereby support more effective monetary transmission. Communication efforts need to be persistent because central banks must compete with many other demands on consumers’ attention. |
| JEL: | E31 E52 E58 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32488&r= |
| By: | Alberto Binetti; Francesco Nuzzi; Stefanie Stantcheva |
| Abstract: | This paper studies people's understanding of inflation—their perceived causes, consequences, trade-offs—and the policies supported to mitigate its effects. We design a new, detailed online survey based on the rich existing literature in economics with two experimental components—a conjoint experiment and an information experiment—to examine how well public views align with established economic theories. Our key findings show that the major perceived causes of inflation include government actions, such as increased foreign aid and war-related expenditures, alongside rises in production costs attributed to recent events like the COVID-19 pandemic, oil price fluctuations, and supply chain disruptions. Respondents' anticipate many negative consequences of inflation but the most noted one is the increased complexity and difficulty in household decision-making. Partisan differences emerge distinctly, with Republicans more likely to attribute inflation to government policies and foresee broader negative outcomes, whereas Democrats anticipate greater inequality effects. Inflation is perceived as an unambiguously negative phenomenon without any potential positive economic correlates. Notably, there is a widespread belief that managing inflation can be achieved without significant trade-offs, such as reducing economic activity or increasing unemployment. These perceptions are hard to move experimentally. In terms of policy responses, there is resistance to monetary tightening, consistent with the perceived absence of trade-offs and the belief that it is unnecessary to reduce economic activity to fight inflation. The widespread misconception that inflation rises following increases in interest rates even leads to support for rate cuts to reduce inflation. There is a clear preference for policies that are perceived to have other benefits, such as reducing government debt in progressive ways or increasing corporate taxes, and for support for vulnerable households, despite potential inflationary effects. |
| JEL: | E03 E24 E31 E58 E71 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32497&r= |