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Current Program

Please note that the seminar will be held online during the summer term 2021.

Time: 12.15–1.30 p.m.

Klaus F. Zimmermann

Social Assimilation and Labor Market Outcomes of Migrants in China

Previous research has found identity to be relevant for international migration, but has neglected internal mobility as in the case of the Great Chinese Migration. However, the context of the identities of migrants and their adaption in the migration process is likely to be quite different. The gap is closed by examining social assimilation and the effect on the labourmarket outcomes of migrants in China, the country with the largest record of internal mobility. Using instrumental variable estimation, the study finds that identifying as local residents significantly increase migrants’ hourly wages and reduce hours worked, although their monthly earnings remained barely changed. Further findings suggest that migrants with strong local identity are more likely to use local networks in job search, and to obtain jobs with higher average wages and lower average hours worked per day.

Arnaud Chevalier

Asian Gold: Expected Returns to Crime and Thieves Behaviour

Where are crimes committed? We explore how variations in the expected returns to crime affects the location of burglaries in the UK. Our identify- cation strategy relies on the common perception in the UK that families of South Asian descent store a substantial amount of gold jewellery. Move- ments on the international market for gold affect the expected gains from targeting these households, and consequently the location of burglaries. Us- ing a neighbourhood level panel on reported crime, we find that when the price of gold increases, neighbourhoods with a larger share of South Asian households face a disproportionate increase in property crime relative to other neighbourhoods in the same local authority. We conduct a battery of tests to eliminate alternative explanations.

Bernd Fitzenberger

The role of unemployment and job changewhen estimating the returns to migration

Estimating the returns to migration from East to West Germany, we focus on pre-migration employment dynamics, earnings uncertainty, and job change. Migrants are found to be negatively selected with respect to labor market outcomes, with a large drop in earnings and employment during the last few months before migration. We find sizeable positive earnings and employment gains of migration both in comparison to staying or job change. The gains vary considerably with pre-migration earnings and with the counterfactual considered. Future migrants have worse expectations for their labor market prospects in the East and migrants show a greater openness to mobility.

Rory McGee

Old Age Savings and House Price Shocks

Elderly households hold most of their wealth in housing, maintain high levels of wealth throughout their retirement, and often leave bequests. The value of their houses are subject to potentially large shocks that can affect their financial circumstances in retirement. To what extent do these shocks affect their savings, consumption, and bequests? Answering this question requires separating precautionary savings, bequest motives, and the desire to remain in one's home. I develop and estimate a structural model of retirement savings decisions with realistic risks, housing, and heterogeneity in bequest preferences. I exploit exogenous policy changes to the taxation of housing and bequests, subjective bequest probabilities and rich longitudinal data on wealth composition to separately identify the different motives for holding wealth and spending in retirement. Estimated bequest motives differ across the households and roughly half of the sample has no bequest motive. House price changes are quantitatively important and a large fraction of increases are passed on to future generations. I use the estimated model to evaluate the current structure of disregard eligibility for (Medicaid-like) programs that insure retirees. I find that for every pound it costs the government, increasing the disregards for liquid assets provides more insurance value than increasing the disregards for houses.

Jan Pablo Burgard

Defining spatial dynamic microsimulations and the estimation of regional transition probabilities

Spatial dynamic microsimulations allow for the multivariate analysis of complex sys-tems with geographic segmentation. A synthetic replica of the system is stochastically projected into future periods using micro-level transition probabilities. These should accurately represent the dynamics of the system to allow for reliable simulation outcomes. In practice, transition probabilities are unknown and must be estimated from suitable survey data. This can be challenging when the dynamics vary locally. Survey data often lacks in regional detail due to confidentiality restrictions and limited sampling resources. In that case, transition probability estimates may misrepresent regional dynamics due to insufficient local observations and coverage problems. The simulation process subsequently fails to provide an authentic evolution of the system. A constrained maximum likelihood approach for probability alignment to solve these issues is proposed. It accounts for regional heterogeneity in transition dynamics through the consideration of external benchmarks from administrative records. It is proven that the method is consistent. A parametric bootstrap for uncertainty estimation is presented. Simulation experiments are conducted to compare the approach with an existing method for probability alignment. Furthermore, an empirical application to labor force estimation based on the German Microcensus is provided.

Libertad Gonzáles

Promoting Gender Equality? Paternity Leave and Household Choices

We consider a non-cooperative model in which the husband and wife decide on parental leave and the allocation of time between child rearing and the labor market. They can choose the non-cooperative outside option or cooperate by reaching an agreement of specialization, in which the wife specializes in raising kids while the husband works and transfers consumption to his wife. The model shows that "egalitarian" couples (with a sufficiently small gender wage gap) do not specialize and play the outside option, while "traditional" (with a medium gender wage gap) and "very traditional" (with a sufficiently high gender wage gap) couples do have such an agreement. A expansion in paternity leave reduces the net benefits from the agreement and moves traditional couples to their outside option, where women work more and men do more childcare. As a result, the cost of raising children increases, and fertility declines. Assuming a loss of utility from children in the case of divorce, lower fertility increases the probability of divorce. Using Spanish data and RDD analysis, we confirm our model’s predictions. Specifically, we find that, among traditional couples, the two-week paternity leave introduced in 2007 resulted in a reduction in fertility by up to 15%, an increase in the probability to divorce by 37%, an increase female employment by up to 7 percentage points, and an increase in father’s childcare time by as much as an hour per day. 

Evi Pappa

What are the likely macroeconomic effects of the EU Recovery plan

We examine the dynamic macroeconomic effects of the two largest EU regional structural funds. On average, ERDF funds have significant positive short term consequences on regional macroeconomic variables and gains dissipate almost entirely within three years. ESF funds have negative impact effects on regional variables, but their average cumulative medium term multipliers are positive and economically significant. We detect important regional asymmetries which may induce differential transition paths and outlooks for economic transformation. Location, level of development, EU tenure, Euro area membership and national borders account for part of the asymmetries. We present a two-region equilibrium model with sticky prices and endogenous growth through investment in R&D and human capital that reproduces the facts and explains some of the observed asymmetries. The policy implications for the newly created Recovery fund are discussed.

Markus Pannenberg

Wage Determination in the Shadow of the Law: The Case of Works Councilors in Germany

Abstract

The German law on co-determination at the plant level (Betriebsverfassungsgesetz) stipulates that works councilors are neither to be financially rewarded nor penalized for their activities. However, lavish payments to works councilors in some large firms have sparked a debate about the need to reform the law. This paper offers an empirical basis for the discussion and provides representative evidence on wage payments to works councilors for the period 2001 to 2015. We find wage premia of 2% to 6% in OLS-specifications, which are more pronounced for long-term works councilors. Because we observe no wage premia in linear fixed-effects panel data specifications, the OLS-results are likely to capture the effects of selection into works councillorship. We obtain no evidence for a delayed compensation, or a special treatment of works councilors released from work. Hence, our results indicate that payments to works councilors are broadly in line with legal regulations.

Jana Friedrichsen

Decomposing trust

Abstract

Trust is thought to be an important driver of economic growth and other economic outcomes. Previous studies suggest that the decision to trust is driven by a combination of risk attitudes, distributional preferences, betrayal aversion, and beliefs about the probability of being reciprocated. We compare the results of a binary trust game to the results of a series of control treatments that remove the effect of one or more of these components of trust by design. This allows us to decompose variation in trust behavior into its underlying factors. Our results imply that beliefs are the main driver of trust, and that the additional components only play a role when beliefs about reciprocity are sufficiently optimistic. Our decomposition approach can be applied to other settings where multiple factors that are not independent amongst each other affect behavior. We analyze its advantages over the more traditional approach of including measures of relevant factors derived from separate tasks, in particular with respect to measurement error and omitted-variable bias.

Josef Brüderl

The Age Trajectory of Happiness: How Lack of Causal Reasoning has Produced the Myth of a U-Shaped Age-Happiness Trajectory

A large interdisciplinary literature on the relationship between age and subjective well-being (happiness) has produced very mixed evidence. Virtually every conceivable age-happiness trajectory has been supported by empirical evidence and theoretical arguments. Sceptics may conclude that the social science of happiness can only produce arbitrary results. In this paper we argue that this conclusion is premature. Instead, the methodological toolbox that has been developed by the modern literature on causal inference gives scholars everything they need to arrive at valid conclusions: the causal inference toolbox only must be applied by happiness researchers. We identify four potential sources of bias that may distort the assessment of the age-happiness relationship. By causal reasoning we derive a model specification that avoids these biases. For an empirical illustration, we use the longest running panel study with information on happiness, the German Socio-Economic Panel (1984-2017; N persons=70,922; N person-years =565,703). With these data we demonstrate the relevance of the four biases and how combinations of different biases can reproduce almost any finding from the literature. Most biases tend to produce a spuriously U-shaped age trajectory, the most prominent finding from the literature. In contrast, with our specification we find a (nearly monotonic) declining age-happiness trajectory.

Asset Price Dynamics and Endogenous Trader Overconfidence

Steffen Ahrens

Overconfidence is one of the most important biases in financial decision making and commonly associated with excessive trading and asset price volatility. So far, most of the finance literature takes overconfidence as a given, “static” personality trait. Using a new experimental design, we show that trader overconfidence is endogenous and co-moves with asset prices; when asset prices go up, overconfidence rises, and when asset prices go down, overconfidence falls. Larger fluctuations in asset prices are met by larger changes in overconfidence. Hence, our results point towards a feedback loop in which overconfidence adds fuel to the flame of existing bubbles.