Where Do STEM Graduates Stem from? The Intergenerational Transmission of Comparative Skill Advantages
Eric A. Hanushek, Babs Jacobs, Guido Schwerdt, Rolf van der Velden, Stan Vermeulen, Simon Wiederhold
IWH Discussion Papers,
No. 13,
2023
Abstract
The standard economic model of occupational choice following a basic Roy model emphasizes individual selection and comparative advantage, but the sources of comparative advantage are not well understood. We employ a unique combination of Dutch survey and registry data that links math and language skills across generations and permits analysis of the intergenerational transmission of comparative skill advantages. Exploiting within-family between-subject variation in skills, we show that comparative advantages in math of parents are significantly linked to those of their children. A causal interpretation follows from a novel IV estimation that isolates variation in parent skill advantages due to their teacher and classroom peer quality. Finally, we show the strong influence of family skill transmission on children’s choices of STEM fields.
Read article
Discrimination in Universal Social Programs? A Nationwide Field Experiment on Access to Child Care
Henning Hermes, Philipp Lergetporer, Fabian Mierisch, Frauke Peter, Simon Wiederhold
IWH Discussion Papers,
No. 12,
2023
Abstract
Although explicit discrimination in access to social programs is typically prohibited, more subtle forms of discrimination prior to the formal application process may still exist. Unveiling this phenomenon, we provide the first causal evidence of discrimination against migrants seeking child care. We send emails from fictitious parents to > 18, 000 early child care centers across Germany, inquiring about slot availability and application procedures. Randomly varying names to signal migration background, we find that migrants receive 4.4 percentage points fewer responses. Replies to migrants contain fewer slot offers, provide less helpful content, and are less encouraging. Exploring mechanisms using three additional treatments, we show that discrimination is stronger against migrant boys. This finding suggests that anticipated higher effort required for migrants partly drives discrimination, which is also supported by additional survey and administrative data. Our results highlight that difficult-to-detect discrimination in the pre-application phase could hinder migrants’ access to universal social programs.
Read article
Employment Effects of Investment Grants and Firm Heterogeneity – Evidence from a Staggered Adoption Approach
Eva Dettmann, Mirko Titze, Antje Weyh
IWH Discussion Papers,
No. 6,
2023
Abstract
This study estimates the firm-level employment effects of investment grants in Germany. In addition to the average treatment effect on the treated, we examine discrimination in the funding rules as potential source of effect heterogeneity. We combine a staggered difference-in-differences approach that explicitly models variations in treatment timing with a matching procedure at the cohort level. The findings reveal a positive effect of investment grants on employment development in the full sample. The subsample analysis yields strong evidence for heterogeneous effects based on firm characteristics and the economic environment. This can help to improve the future design of the program.
Read article
Management Capability and Innovation
Bill Francis, Iftekhar Hasan, Gokhan Yilmaz
Stephen P. Ferris, Kose John, Anil K. Makhija (eds): Empirical Research in Banking and Corporate Finance. Advances in Financial Economics 21, Emerald,
2022
Abstract
This chapter investigates whether core competence of managers and their expansive (vs. specialized) managerial style affects firms' innovative ability, capacity, and efficiency. Using exogenous CEO departures as a natural experiment, it establishes a causal link between managerial capability and innovation. Importantly, it reveals that firms with talented managers receive significantly more nonself citations; make significantly lower self-citations and lesser citations to the others, indicating novel and explorative innovation achievements. Also, managers with higher general (specialized) ability are cited more (less) by patents from a wider range of fields. Lastly, career concern is identified as a mechanism linking higher ability and innovation.
Read article
Identifying Rent-sharing Using Firms‘ Energy Input Mix
Matthias Mertens, Steffen Müller, Georg Neuschäffer
IWH Discussion Papers,
No. 19,
2022
Abstract
We present causal evidence on the rent-sharing elasticity of German manufacturing firms. We develop a new firm-level Bartik instrument for firm rents that combines the firms‘ predetermined energy input mix with national energy carrier price changes. Reduced-form evidence shows that higher energy prices depress wages. Instrumental variable estimation yields a rent-sharing elasticity of approximately 0.20. Rent-sharing induced by energy price variation is asymmetric and driven by energy price increases, implying that workers do not benefit from energy price reductions but are harmed by price increases. The rent-sharing elasticity is substantially larger in small (0.26) than in large (0.17) firms.
Read article
The Value of Firm Networks: A Natural Experiment on Board Connections
Ester Faia, Maximilian Mayer, Vincenzo Pezone
SAFE Working Papers,
No. 269,
2022
Abstract
We present causal evidence on the effect of boardroom networks on firm value and compensation policies. We exploit a ban on interlocking directorates of Italian financial and insurance companies as exogenous variation and show that firms that lose centrality in the network experience negative abnormal returns around the announcement date. The key driver of our results is the role of boardroom connections in reducing asymmetric information. The complementarities with the input-output and cross-ownership networks are consistent with this channel. Using hand-collected data, we also show that network centrality has a positive effect on directors’ compensation, providing evidence of rent sharing.
Read article
Banking Reform, Risk-Taking, and Accounting Quality: Evidence from Post-Soviet Transition States
Yiwei Fang, Wassim Dbouk, Iftekhar Hasan, Lingxiang Li
Journal of International Accounting Research,
No. 1,
2022
Abstract
The drastic banking reform within Central and Eastern Europe following the collapse of the Soviet Union provides an ideal quasi-experimental design to examine the causal effects of institutional development on accounting quality (AQ). We find that banking reform spurs significant improvement in predictive power of earnings and reductions in earnings smoothing, earnings-inflating discretionary provisions, and avoidance of reporting losses. These effects hold under alternative model specifications and after considering concurrent institutional developments. In contrast, corporate reform shows no such effects, refuting the alternative explanation that unobserved factors affect both reform speed in general and the quality of financial reporting. We further identify four specific reformative actions that are integral to the drastic banking reform process where prudential regulation contributes the most to the observed AQ improvement. It supports the conjecture that banking reform improves AQ by reducing banks' risk-taking behaviors and, as a result, their motive behind accounting manipulation.
Read article
The Intergenerational Transmission of Cognitive Skills
Eric A. Hanushek, Babs Jacobs, Guido Schwerdt, Rolf van der Velden, Stan Vermeulen, Simon Wiederhold
VoxEU,
February
2022
Abstract
Parents influence their children in many ways, but which family features actually cause the strong intergenerational linkages that we observe? This column presents the first causal evidence on cognitive skill transmission in the family. Using Dutch survey and registry data, the authors show that parents’ maths and language skills strongly affect the same skills in their children, and that skills within dynasties are not just genetically determined but are significantly affected by educational experiences. This highlights the importance of good educational environments in alleviating persistent inequalities.
Read article
Stock Liquidity and Corporate Labor Investment
Mong Shan Ee, Iftekhar Hasan, He Huang
Journal of Corporate Finance,
February
2022
Abstract
Labor is among the most crucial factors of production that maintain a firm's competitiveness. Given its economic importance, drivers of firms' labor investment policy have gained increasing attention in the financial economics literature. This study investigates the relation between stock liquidity and labor investment efficiency. We establish a causal relation between the two phenomena using an exogenous shock to liquidity: the 2001 decimalization of stock trading. We find that labor investment efficiency improves following an increase in stock liquidity, and the effect is prevalent in firms experiencing overinvestment in labor. Our findings further support the argument that stock liquidity improves the efficiency of labor investment by enhancing governance through shareholder exit threat.
Read article
How Does Economic Policy Uncertainty Affect Corporate Debt Maturity?
Xiang Li
IWH Discussion Papers,
No. 5,
2022
Abstract
This paper investigates whether and how economic policy uncertainty affects corporate debt maturity. Using a large firm-level dataset for four European countries, we find that an increase in economic policy uncertainty is significantly associated with a shortened debt maturity. Moreover, the impacts are stronger for innovation-intensive firms. We use firms’ flexibility in changing debt maturity and the deviation to leverage target to gauge the causal relationship, and identify the reduced investment and steepened term structure as the transmission mechanisms.
Read article
