Who Benefits from Place-based Policies? Evidence from Matched Employer-Employee Data
Philipp Grunau, Florian Hoffmann, Thomas Lemieux, Mirko Titze
IWH Discussion Papers,
Nr. 11,
2024
Abstract
We study the wage and employment effects of a German place-based policy using a research design that exploits conditionally exogenous EU-wide rules governing the program parameters at the regional level. The place-based program subsidizes investments to create jobs with a subsidy rate that varies across labor market regions. The analysis uses matched data on the universe of establishments and their employees, establishment-level panel data on program participation, and regional scores that generate spatial discontinuities in program eligibility and generosity. These rich data enable us to study the incidence of the place-based program on different groups of individuals. We find that the program helps establishments create jobs that disproportionately benefit younger and less-educated workers. Funded establishments increase their wages but, unlike employment, wage gains do not persist in the long run. Employment effects estimated at the local area level are slightly larger than establishment-level estimates, suggesting limited spillover effects. Using subsidy rates as an instrumental variable for actual subsidies indicates that it costs approximately EUR 25,000 to create a new job in the economically disadvantaged areas targeted by the program.
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Fiscal Policy under the Eyes of Wary Bondholders
Ruben Staffa, Gregor von Schweinitz
IWH Discussion Papers,
Nr. 26,
2023
Abstract
This paper studies the interaction between fiscal policy and bondholders against the backdrop of high sovereign debt levels. For our analysis, we investigate the case of Italy, a country that has dealt with high public debt levels for a long time, using a Bayesian structural VAR model. We extend a canonical three variable macro mode to include a bond market, consisting of a fiscal rule and a bond demand schedule for long-term government bonds. To identify the model in the presence of political uncertainty and forward-looking investors, we derive an external instrument for bond demand shocks from a novel news ticker data set. Our main results are threefold. First, the interaction between fiscal policy and bondholders’ expectations is critical for the evolution of prices. Fiscal policy reinforces contractionary monetary policy through sustained increases in primary surpluses and investors provide incentives for “passive” fiscal policy. Second, investors’ expectations matter for inflation, and we document a Fisherian response of inflation across all maturities in response to a bond demand shock. Third, domestic politics is critical in the determination of bondholders’ expectations and an increase in the perceived riskiness of sovereign debt increases inflation and thus complicates the task of controlling price growth.
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Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
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IWH-Subventionsdatenbank
IWH-Subventionsdatenbank Die Mikrodatenbank umfasst zurzeit neun Datensätze zu Programmen direkter Unternehmenssubventionen in Deutschland. Die von den Projektträgern und den…
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Eine Hochfrequenzanalyse zur Abgrenzung von überlagernden Effekten am Beispiel des Ausfallrisikos italienischer Staatsanleihen
Ruben Staffa
Wirtschaft im Wandel,
Nr. 2,
2023
Abstract
Die wirtschaftliche Aktivität und das Ausfallrisiko staatlicher Schulden beeinflussen sich gegenseitig. Sinkt die wirtschaftliche Aktivität einer Volkswirtschaft, steigt wegen fallender Steuereinnahmen das Risiko, dass der Staat Zinszahlungen und Tilgungen auf Staatsanleihen nicht zurückzahlen kann. Umgekehrt kann das staatliche Ausfallrisiko seinerseits die wirtschaftliche Aktivität beeinflussen. Steigt das Ausfallrisiko, geraten Banken unter Druck, die Staatsanleihen in ihren Bilanzen führen, und reduzieren die Kreditvergabe an Unternehmen. In der Konsequenz sinkt die wirtschaftliche Aktivität. Dieser Beitrag nutzt hochfrequente News-Ticker-Daten zur Ableitung politischer Ereignisse und davon ausgelöster Fluktuationen im Staatsschuldenrisiko. Diese allein politisch bedingten Fluktuationen ermöglichen es, den Effekt des Staatsschuldenrisikos auf die wirtschaftliche Aktivität zu messen, ohne dass die Schätzung von der gegenläufigen Beziehung der Variablen beeinträchtigt wird. Das Vorgehen wird am Beispiel Italiens erläutert.
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Uncovering Disaggregated Oil Market Dynamics: A Full-Information Approach to Granular Instrumental Variables
Christiane Baumeister, James D. Hamilton
Working Paper,
2023
Abstract
The world price of oil is determined by the interactions of multiple producers and consumers who face different constraints and shocks. We show how this feature of the oil market can be used to estimate local and global elasticities of supply and demand and provide a rich set of testable restrictions. We develop a novel approach to estimation based on full-information maximum likelihood that generalizes the insights from granular instrumental variables. We conclude that the supply responses of Saudi Arabia and adjustments of inventories have historically played a key role in stabilizing the price of oil. We illustrate how our structural model can be used to analyze how individual producers and consumers would dynamically adapt to a geopolitical event such as a major disruption in the supply of oil from Russia.
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Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
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Monetary Policy in an Oil-dependent Economy in the Presence of Multiple Shocks
Andrej Drygalla
Review of World Economics,
February
2023
Abstract
Russian monetary policy has been challenged by large and continuous private capital outflows and a sharp drop in oil prices during 2014. Both contributed to significant depreciation pressures on the ruble and led the central bank to give up its exchange rate management strategy. Against this background, this work estimates a small open economy model for Russia, featuring an oil price sector and extended by a specification of the foreign exchange market to correctly account for systematic central bank interventions. We find that shocks to the oil price and private capital flows substantially affect domestic variables such as inflation and output. Simulations for the estimated actual strategy and alternative regimes suggest that the vulnerability of the Russian economy to external shocks can substantially be lowered by adopting some form of inflation targeting. Strategies to target the nominal exchange rate or the ruble price of oil prove to be inferior.
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The State Expropriation Risk and the Pricing of Foreign Earnings
Iftekhar Hasan, Ibrahim Siraj, Amine Tarazi, Qiang Wu
Journal of International Accounting Research,
Nr. 2,
2021
Abstract
We examine the pricing of U.S. multinational firms' foreign earnings in regard to their risk of expropriation and unfair treatment by the governments of the countries in which their international subsidiaries are located. Using 8,891 firm-years observations during the 2001–2013 period, we find that the value relevance of foreign earnings increases with the improvement of the protection from state expropriation risk in the subsidiary host-countries. Our results are not driven by the earnings management practice, investor distraction, country informativeness, and political and trade relationship of a foreign country with the U.S. Furthermore, our results are robust to the confounding effects of country factors, measurement error in the variable of the risk of expropriation, the influence of private contracting institutions, and endogeneity in the decision of the location of subsidiaries.
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Involuntary Unemployment and the Business Cycle
Lawrence J. Christiano, Mathias Trabandt, Karl Walentin
Review of Economic Dynamics,
January
2021
Abstract
Can a model with limited labor market insurance explain standard macro and labor market data jointly? We construct a monetary model in which: i) the unemployed are worse off than the employed, i.e. unemployment is involuntary and ii) the labor force participation rate varies with the business cycle. To illustrate key features of our model, we start with the simplest possible framework. We then integrate the model into a medium-sized DSGE model and show that the resulting model does as well as existing models at accounting for the response of standard macroeconomic variables to monetary policy shocks and two technology shocks. In addition, the model does well at accounting for the response of the labor force and unemployment rate to these three shocks.
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