Showing papers in "Economist-netherlands in 2013"

Economic growth and longevity risk with adverse selection

Abstract: We study a closed economy featuring heterogeneous agents and exhibiting endogenous economic growth due to interfirm external effects. Individual agents differ in terms of their mortality profile. At birth, nature assigns a health status to each agent. Health type is private information and annuity firms can only observe an agent’s age. In the presence of longevity risk, agents want to annuitize their wealth conform the classic result by Yaari (1965). In the first-best case with perfect annuities, the market would feature a separating equilibrium (SE) in which each health type obtains an actuarially fair perfect insurance. In the SE all agents are savers throughout their lives. The informational asymmetry precludes the attainment of the first-best equilibrium, however, as healthy individuals have a strong incentive to misrepresent their type by claiming to be unhealthy. Using the equilibrium concept of Pauly (1974) and Abel (1986), we prove the existence of a second-best pooling equilibrium (PE) in which individuals of all types annuitize at a common pooling rate. As the unhealthy get close to their maximum attainable age, the pooling rate prompts such individuals to become net borrowers. But borrowing would reveal their health status, so the best the unhealthy can do is to impose a borrowing constraint on themselves during their autumn years. Using a plausibly calibrated version of the model we find that the growth- and welfare effects of PE versus SE are rather small, whilst those of PE versus no annuities at all (NAE) are rather large. An imperfect insurance is better than no insurance at all, both at the microeconomic and at the macroeconomic level.

When is the Price Cost Margin a Safe Way to Measure Changes in Competition

Abstract: The price cost margin (PCM) is a popular way to measure competition. Although we know that this measure is not without problems, we actually do not know how often and under which conditions a change in PCM points in the wrong direction. We use a new competition measure, the profit elasticity, which is more robust than PCM. Our empirical analysis based on Dutch data shows that when competition changes the probability that PCM points in the wrong direction increases with industry concentration.

Dilemmas of Downsizing During the Great Recession: Crisis Strategies of European Employers

Abstract: The present paper analyzes the choices faced by European employers when threatened with the prospect of the mass lay-off of their employees as a result of the Great Recession. By means of a representative survey among employers in Italy, Germany, Denmark, Poland, the Netherlands and Sweden in 2009, we show that employers mainly prefer to tackle such threats by offering short-time work, and by early retirement packages to older workers, in conjunction with buy-outs. The latter preference is particularly visible in countries where employers perceive the level of employment protection to be high. The only notable exception is Denmark, where employers prefer to reduce working hours. In general, a sense of generational fairness influences downsizing preferences, with those employers who favor younger workers particularly likely to use early retirement and buy-outs when downsizing, followed by working time reductions. Wage reductions and administrative dismissal are less favored by European employers. In particular, CEOs and owners are more inclined than lower-level managers to cut wages.

How sensitive are individual retirement expectations to raising the retirement age

Abstract: This paper investigates the causal effects of the announcement of an increase in the statutory pension age on employee retirement expectations. In June 2010, the Dutch government signed a new pension agreement with the employer and employee organizations that entailed an increase in the statutory pension age from 65 currently to 66 in 2020 for all inhabitants born after 1954. Given the expected increase in average life expectancy, it was also decided that in 2025 the pension age would be further increased to 67 for those born after 1959. This new pension agreement received huge media coverage. Using representative matched administrative and survey data of public sector employees, we find that the proposed policy reform increased the expected retirement age by 3.6 months for employees born between 1954 and 1959 and by 10.8 months for those born after 1959. This increase is reflected in a clear shift in the retirement peak from age 65 to ages 66 and 67 for the respective treated cohorts. Men respond less strongly to the policy reform than women, but within couples we find no evidence that the retirement expectations of one spouse are affected by an increase in the statutory pension age of the other. Furthermore, we show that treatment effects are largely driven by highly educated individuals but are lower for employees whose job involves physically demanding tasks or managerial and supervisory tasks.

Estimating Cash Usage: The Impact of Survey Design on Research Outcomes

Abstract: We employ a unique dataset of transaction records to analyse the impact of survey set-up on consumers’ payments registration behaviour. Survey data are used for econometric analyses and validated against other payments data. The results reveal that the length of the registration period influences consumers’ registration of payments. Measurement errors are minimised when consumers use a self-reported transaction diary for one single day. Around 40 % of the transactions registered in a one-day survey are missed out in a one-week survey. Apart from payments research, the results are, among others, also relevant for household expenditure and marketing research.

Subjective Well-Being Around Retirement

Abstract: This paper studies the effect of both retirement and unemployment on life satisfaction, using subjective satisfaction indicators from the German Socio-Economic Panel. Moreover, we analyze how accurate individuals anticipate changes in satisfaction around retirement, as well as the correlation between the forecast error in life satisfaction and the labor market status. Being unemployed has a significant negative effect on life satisfaction; (in)voluntary retirement on the other hand has no significant effect on life satisfaction. A new finding is that unemployed individuals underestimate future life satisfaction. That is, their current labor market status has temporary negative effects on well-being, but, after 5 years, individuals are happier with their life than previously anticipated. We find no effects of (in)voluntary retirement on the forecast error.

Labour-Market Outcomes of Older Workers in the Netherlands: Measuring Job Prospects Using the Occupational Age Structure

Abstract: This paper analyses changes in job opportunities of older workers in the Netherlands in the period 1996–2010. The standard human capital model predicts that, as a result of human capital obsolescence, mobility becomes more costly when workers become older. We measure and interpret how changing job opportunities across 96 occupations affect different age and skill groups. Older workers end up in shrinking occupations, in occupations with a lower share of high-skilled workers, in occupations facing a higher threat of offshoring tasks abroad, more focus on routine-intensive tasks and less rewarding job content. This process is not only observed for the oldest group of workers, but for workers aged 40 and above. Observing older workers in declining occupations is to a large extent a market outcome, but declining job opportunities in terms of less satisfying working conditions and job tasks and content could potentially raise incentives to retire early.

Offshoring and the Skill Structure of Labour Demand in Belgium

Abstract: A major concern regarding the consequences of offshoring is the worsening of the labour market position of low-skilled workers. This paper addresses this issue by providing evidence on the impact of offshoring on the skill structure of manufacturing employment in Belgium between 1995 and 2007. Offshoring is found to significantly lower the employment share of low-skilled workers. Its contribution to the fall in the employment share of low-skilled workers amounts to 35 %. This is mainly driven by offshoring to Central and Eastern European countries. While most of the previous papers on this subject focus on materials offshoring, we show that offshoring of business services also contributes significantly to the fall in the low-skilled employment share. As a complement to the existing literature, we compare the widely used current price measure of offshoring with a constant price measure that is based on a deflation with separate price indices for domestic output and imports. This reveals that the former underestimate the extent of offshoring and its impact on low-skilled employment. Finally, we also find that the impact of offshoring on low-skilled employment is significantly smaller in industries with a higher ICT capital intensity.

The Effect of Competition on Process and Outcome Quality of Hospital Care in the Netherlands

Abstract: This study examines the impact of competition on hospital quality. Our panel covers all Dutch hospitals in the period 2004–2008, in which the transparency of hospital quality information increased substantially. The paper contributes to the existing literature by including both outcome and process indicators of quality. We find that competition explains the cross-sectional differences in process indicators, but not in outcome indicators. In particular, more competition in the hospital’s catchment area leads to more operation cancellations at short notice and more delays of hip fracture injury operations for elderly patients. Both results suggest that competition increases the utilization of operation capacity. At the same time, hospitals that face more competition perform check-ups for chronic patients more frequently and organize diagnostic processes more efficiently.

Re-employment Rates of Older Unemployed Workers: Decomposing the Effect of Birth Cohorts and Policy Changes

Abstract: In many European countries, re-employment probabilities of older unemployed workers are relatively low. While there is evidence that financial incentives and search obligations are effective to increase the job prospects of older workers, recent research also stresses the importance of birth cohort effects. These cohort effects may in turn stem from higher educational attainment levels and better health conditions of future generations of older workers. This paper empirically assesses the relative importance of both explanations, using a registered data set of unemployment insurance spells between 1999 and 2008 for the Netherlands. Using a Linear Probability Model, we decompose the effects of birth cohorts, age, calendar time and two policy measures that were targeted at older unemployed workers—i.e. increased job search obligations in 2004 and shorter potential benefit durations (PBD) in 2006. We find that policy effects predominantly explain the increased job return rates of unemployed of 55 years and older from 1999 to 2008. The introduction of search requirements has increased the one-year re-employment probability of eligible older men with about 5 % point, while the reduction in PBD has caused the one-year re-employment probability of eligible men to increase with 3 % point.

Cross-Country Private Saving Heterogeneity and Culture

Abstract: Motivated by the dominant role of cross-country heterogeneity in private saving in the creation of Eurozone imbalances over the past decade, we empirically investigate the determinants of private saving for a sample of 30 OECD countries over the period 1990–2010. In addition to standard macroeconomic variables, we include three country-specific cultural indicators, derived from the World and European Value Surveys. We find these three variables—thrift, trust and religiosity—to significantly contribute to the explanation of cross country saving heterogeneity both for the OECD group at large and for the Eurozone countries separately.

Crisis and Pension System Design in the EU: International Spillover Effects Via Factor Mobility and Trade

Abstract: Many European Union states have adjusted pension benefits or reformed the pension system in reaction to the recent economic crisis, while other member states have postponed this type of adjustments. In this paper we study to what extent countries that responded quickly to the crisis are harmed by the lingering in other member states via international spillover effects caused by factor mobility and trade. We show that this depends crucially on the degree of labour mobility in the short run. In fact, countries with more flexible pensions can benefit from the inflexibility of pensions in other countries if they can temporarily limit immigration.

French Retirement Reforms and Intragenerational Equity in Retirement Duration

Abstract: As most developed countries, France has gone over the last 20 years through a process of pension system reforms, mainly aiming at increasing the average retirement age, through increasing the required number of contribution years or through postponing legal (minimal and/or normal) ages. Public debates over which lever should be preferred have been paramount in France, with concerns focusing on redistribution issues between high wage high life-expectancy and low-wage low life-expectancy workers. In this paper, we empirically address this issue by simulating the differentiated impacts of the past French reforms on average retirement ages across wage quartiles. Our simulations show that increasing the required duration criterion—as was done by the 1993 and 2003 reforms–have redistributive impact as regards retirement age, while increasing the normal age—as was done by the 2010 reform—has a counter-distributive impact. The redistributive impact on average of the required duration criterion however only holds thanks to the fact that disabled workers—most of them in the lowest wage quartile—are exempted from it. Last, increasing minimal age has ambiguous impacts according to gender: redistributive among women but counter-distributive among men.

Unemployment of Non-western Immigrants in the Great Recession

Abstract: This paper examines whether unemployment of non-western immigrant workers in the Netherlands was disproportionally affected by the Great Recession. We analyze unemployment data covering the period November 2007–February 2013 finding that the Great Recession affected unemployment rates of non-western immigrant workers in absolute terms more than unemployment rates of native workers. However, in relative terms there is not much of a difference. We also find that the sensitivity of individual job finding rates to the aggregate state of the labor market does not differ between natives and non-western immigrants. In combination our findings suggest that the Great Recession did not have a different impact on the unemployment of non-westerns immigrants and native Dutch.

The Contribution of Migration to Economic Development in Holland 1570–1800

Abstract: Migration always played an important role in Dutch society. However, little quantitative evidence on its effect on economic development is known for the period before the twentieth century even though some stories exist about their effect on the Golden Age. Applying a VAR analysis on a new dataset on migration and growth for the period 1570–1800, we find that migration had a positive effect on factor accumulation during the whole period, and a positive direct effect on the per capita income during the Golden Age. This seems to confirm those studies that claim that the Dutch economy during its Golden Age at least partially benefitted from immigration.

Taxes, Agglomeration Rents and Location Decisions of Firms

Abstract: The goal of this paper is to analyze the individual impact of tax rates and agglomeration rents as well as their interaction on location decisions of manufacturing firms within Belgium Theoretically, both location determinants may weaken each other’s impact Using a unique 10-year dataset concerning the number of newly setup manufacturing firms at the sector level for 43 Belgian districts, we show that local effective tax rates have a negative impact on location decisions Moreover, location-specific supply-side agglomeration rents attract new firms and their impact appears to be even stronger for more spatially concentrated sectors Finally, we show that a higher effective tax rate in a district does not necessarily deter new firms in more agglomerated districts, pointing to the existence of taxable location-specific agglomeration rents

The Scope for Increasing Total Hours Worked

Abstract: Dutch women who work long hours mostly prefer to work shorter hours whereas women who work short hours mostly prefer to work longer hours. This paper shows that the point where preferred and actual working hours are on average equal depends on individual characteristics. This heterogeneity is of interest to policy makers who are aiming to increase the total number of hours worked by women. The tool this paper develops is informative in two ways. First, it shows in what hours range we find individuals of a certain type who want to work longer or shorter hours. Second, it calculates the relative sizes of these groups to examine the scope for policy.

Can Financial Incentives for Regional Education Authorities Reduce School Dropout

Abstract: This paper investigates the effect of a new type of financial incentive in education targeted at regional authorities. Previous studies have focused on financial incentives for students, teachers or schools. We identify the effect by exploiting the gradual introduction of a new policy aimed at reducing school dropout in the Netherlands. The introduction of the policy in 14 out of 39 regions and the use of a specific selection rule for the participating regions allow us to estimate local difference-in-differences models. Using administrative data for all Dutch students in the year before and the year after the introduction of the new policy we find no effect of the financial incentive scheme on school dropout. In addition, we find suggestive evidence for manipulation of outcomes in response to the program.

Did Cultural and Artistic Education in the Netherlands increase Student Participation in High Cultural Events

Abstract: This study examines whether Cultural and Artistic Education in the Netherlands caused students to participate more in high cultural events. A unique feature of the intervention was that students were free to choose the type of cultural event they participated in. So the intervention relied on the intrinsic motivation of students to participate in high cultural events, while there was no reason to assume that this motivation was present given the existing literature. We find that Cultural and Artistic Education increased the participation in high culture, but not the participation in popular culture. The effect of the intervention is, however, small. Student characteristics do not influence high cultural participation, but the fraction of immigrant students in the class does: the lower this fraction, the more students participate in high cultural events. Finally, the effect seems to represent (at least partly) the intrinsic motivation of students for high culture.

Introduction to De Economist Special Issue “Retirement and Employment Opportunities for Older Workers”

Abstract: Since the seminal work of Gruber and Wise (1999), for many countries there is a continuing stream of papers that addresses the role of financial incentives in the retirement decision of workers. Generally, these papers show that workers do respond to incentives that encourage them to retire later, thus contributing to a sufficiently large workforce and adding to the sustainability of pension systems. At the same time, many Western European countries have gone through a process of pension system reforms, with benefit cuts, higher statutory pensioning ages and stricter eligibility constraints as most common policy measures. And while labor participation rates of older individuals have increased as a result of this, the new question has risen how the additional of older labor supply should be mobilized at best—thus tackling the so called ‘age-productivity-pay nexus’.1 While there is consensus on the impact of financial incentives on retirement behavior, the desirability of pension reforms is still highly disputed in most countries. In light of the current global economic crisis, this is not very surprising. With low or even negative economic growth, increasing retirement age seems less urgent, or— from another perspective—can even be perceived as ‘unfair’ to younger workers who face a high risk of unemployment. At the same time, if older workers become unemployed, they typically have low return-to-work rates. Increasing statutory retirement ages may therefore lead to an increased use of other schemes, like Unemployment Insurance, SocialAssistance orDisability Insurance.Understanding thesemechanisms is important in assessing the overall desirability of pension reforms. Unfortunately, the evidence on these matters is still scarce, particularly on the income effects of reforms

Retirement Incentives in Belgium: Estimations and Simulations Using SHARE Data

Abstract: The paper studies retirement behavior of wage-earners in Belgium—for the first time using a rich survey dataset to analyze retirement incentives as faced by individuals. Specifically, we use SHARE data to estimate a model a la Stock and Wise (Econom Econ Soc 58(5):1151–1180, 1990). Exploring the data on individual life-histories from SHARELIFE, we construct a measure of financial incentive to retire. Our analysis explicitly takes into account the different take-up rates of the various early retirement exit paths across time and ages. The results show that financial incentives play a strong role. Health and education also matter, as do regional differences. Against the general background of the 2020 strategy, we perform a set of policy simulations and illustrate the scope but also the limits associated with selective parametric reforms.