Changes in the Czech wage structure: Does immigration matter?

Using the Albrecht et al. (2003) version of the Machado and Mata (2005) decomposition technique along the wage distribution, we find that immigrant workers do not affect changes in the Czech wage structure between 2002 and 2006 despite their substantial inflows. Instead, changes in the wage structure are explained solely by increasing returns of native workers, while changes in the observed characteristics of native workers, particularly a rising level of education, are responsible for increasing wage dispersion. The sizeable inflows of foreign workers in the sample years are concentrated among young workers with primary and tertiary education and are primarily due to rising labour demand. The negative immigrant-native wage gaps are persistent along the wage distribution and are explained mainly by differences in observed characteristics. We provide evidence on increasing returns to education of native workers along the wage distribution. The returns are higher in 2006 than in 2002, in line with the evidence in the previous literature. JEL Classification: J31, J21immigration, matched employer-employee data, quantile regression, wage gap decomposition, Wage Structure

Changes in the Czech Wage Structure: Does Immigration Matter?

Using the Albrecht et al. (2003) version of the Machado and Mata (2005) decomposition technique along the wage distribution, we find that immigrant workers do not affect changes in the Czech wage structure between 2002 and 2006 despite their substantial inflows. Instead, changes in the wage structure are explained solely by increasing returns of native workers, while changes in the observed characteristics of native workers, particularly a rising level of education, are responsible for increasing wage dispersion. The sizeable inflows of foreign workers in the sample years are concentrated among young workers with primary and tertiary education and are primarily due to rising labour demand. The negative immigrant-native wage gaps are persistent along the wage distribution and are explained mainly by differences in observed characteristics. We provide evidence on increasing returns to education of native workers along the wage distribution. The returns are higher in 2006 than in 2002, in line with the evidence in the previous literature.Immigration, matched employer-employee data, quantile regression, wage gap decomposition, wage structure.

Generational Accounts in the Czech Republic

The government intertemporal budget constraint states that all public liabilities have to be financed by either current or future generations. The generational accounting approach incorporates the expected demographic development and the parameters of the current fiscal policy into the intertemporal government budget constraint. By contrast with the public debt and deficit, the indicators based on generational accounting are forward looking and provide us with additional information about the current fiscal policy. To assess the sustainability of public budgets we constructed the first set of generational accounts for the Czech Republic. We found that a representative living agent obtains more benefits than he/she pays in taxes in 2004, i.e. the generational account of this representati ve agent is negative. In addition, the total amount of the government liabilities resulting from the current fiscal policy pursued to 2150 reaches about 300% of GDP in 2004. Finally, the costs of postponed adjustment of government revenues and expenditures seem to be considerable. We conclude that the present fiscal policy is not sustainable, i.e. public budgets in the Czech Republic should be stabilized by changing the current system of taxes and benefits to reflect potential demographic development.Fiscal sustainability, generational accounting.

Generational Accounts in the Czech Republic (in English)

The generational accounting approach used in this paper incorporates projected demographic development and the parameters of current Czech fiscal policy into an intertemporal government budget constraint. Compared with public-debt and deficit data, the economic indicators based on generational accounting are forward looking and yield additional information about fiscal policy. To assess the sustainability of Czech public budgets, the authors constructed the first set of generational accounts for the Czech Republic. They found that, for 2004, a representative agent obtained more benefits than paid taxes; that is, the generational account of the representative agent was negative. In addition, the total amount of government liabilities resulting from the current fiscal policy, projected to 2150, was estimated at about 300 percent of the national GDP in 2004. The authors conclude that Czech fiscal policy is not sustainable; current taxes and benefits should be modified in line with demographic projections in an effort to stabilize public budgets.fiscal sustainability, generational accounting

Survey on Wage and Price Formation of Czech Firms

Using an ad-hoc survey at the firm level, we investigate the determinants of wage and price-setting practices in Czech firms, the presence and sources of wage rigidity, and reactions of firms to hypothetical shocks. Although the evidence of downward wage rigidity is not widespread, we find particular relevance of efficiency wage models for wage rigidity, while implicit contract theory is relevant in firms employing mainly highskilled labour. The survey further suggests that prices are less rigid than wages, while the link between wage and price changes is weak. As a response to unanticipated shocks such as a demand drop, an increase in the cost of an intermediate input or a wage increase, firms mainly reduce costs by reducing non-labour costs and temporary employment.Downward wage rigidity, price setting, survey data, wage setting.

The role of technology in health care expenditure in the EU

Total health care expenditure in the EU countries accounts for between 4 and 11% of GDP, out of which between 3 and 9% of GDP is financed from public sources. As it accounts for between 10 and 18 % of total government spending, health care is therefore among the most significant items of social public expenditure. In addition, public expenditure on health care has been growing over most of the second half of the 20th century, not only in absolute terms, but also in relation to the national income.The paper analyses past developments of health care expenditure in EU Member States. The methodology used expands the set of standard explanatory variables, such as demographic structure, income and health status of the population, by a variable characterising the effect of the technological progress on health care spending.Subsequently the paper provides a projection of the long-term development of health care expenditure, with the methodology based on the EC-EPC model extended by the impact of technological development.Baltic States financial accelerator dynamic general equilibrium Roeger Lendvai External Deficits in the Baltics 1995 to 2007 Catching Up or Imbalances

Macroeconomic Shocks and the Fiscal Stance within the EU: A Panel Regression Analysis

The recent global financial crisis has had a diverse effect on countries’ fiscal stance, especially throughout the EU. This paper examines the impact of macroeconomic shocks, including those to government revenues and expenditures, on EU countries’ fiscal stance, on aggregate, and within the EU’s sub-regions as defined by the length of countries’ membership in the EU and their level of indebtedness. The fiscal stance is measured by means of the government deficit, and the impact of macroeconomic shocks is examined using impulse responses from a structural vector autoregression (SVAR) model estimated on annual panel data. The analyzed system of macroeconomic variables includes, government revenues and expenditures, GDP growth, CPI inflation, the interest rate, the terms of trade, and the real effective exchange rate. The paper discusses the policy implications and the challenges for the EU and its sub-regions concerning the fiscal policy setting and balanced fiscal stance.Macroeconomic shocks, Fiscal Stance, European Union, Panel Data Analysis, Structural Vector Autoregression Models

The Impact of Population Ageing on the Czech Economy

The Czech Republic is facing a population ageing phenomenon. In addition, its demographic structure is expected to change dramatically over the next 50 years. We apply a stylised overlapping generation model in order to analyse the potential effects of the expected demographic changes on aggregate economic performance taking into account alternative fiscal policy set-ups. We provide a rough estimate of the amendments necessary on the revenue and expenditure sides in order to keep the current system financially balanced. We also discuss the implications for the development of other economic variables. In particular, we separately simulate future developments in the cases of adjustment in either the contribution rate or the value of public benefit. In addition, we demonstrate that parametric changes, such as an increase in the statutory retirement age, cannot eliminate the impact of the deterioration in the demographic structure on the course of the economy.Population ageing, public pension systems, social security.

Assessing the short-term impact of pension reforms on older workers' participation rates in the EU: a diff-in-diff approach

After presenting an extensive overview of the reforms undertaken in the EU between 1990 and 2006, The paper assess with a diff-in-diff technique the short-term effects of pension reforms on the participation rates of individuals aged between 50 and 64 years. The analysis suggests that in the short-term pension reforms have different effects on the participation rate of men and women. First, reforms tightening the access to early retirement have a positive effect on female participation, but reduce somewhat male participation rates. Second, the results for non-fundamental reforms are more uncertain. Third, reforms that change the way of financing pensions or the eligibility conditions (what we dubbed fundamental reforms), usually with long phasing-in periods, may have unintended short-run effects on the female participation rate. Thus, our findings point at the importance of designing pension reforms and strategies to reform social security that reduce the risks of undesired effects on the decision to remain in the labour market. Workers' information about pension rules and uncertainties about long transition periods may influence in the short-term the retirement decision in a way which is not consistent with the intended effects of the reformDiff-in-Diff, pension reforms, participation rates, Arpaia, Dybczak, Pierini

Effects of Price Shocks to Consumer Demand. Estimating the QUAIDS Demand System on Czech Household Budget Survey Data

The purpose of his paper is to describe consumer behavior in the Czech Republic by estimating a demand system in which demand depends on income and prices, but also on other factors such as age, size of the household, and position on the labor market. We combine Household Budget Survey data with information on prices from alternative sources between 2000 and 2008. The main focus of our analysis is to provide estimates of both own-and cross-price and income elasticities, which can be used among other things when analyzing the impact of exogenous price changes on consumer demand. Based on our estimates, the commodity bundles of food, energy, and health and bodycare are necessary goods, as their budget elasticity is positive and below one at the same time. Clothing and shoes, transportation and communication, and education and leisure are luxury goods, with income elasticity above one. The own-price elasticities are negative for all commodity groups, as expected. The cross elasticities seem to be smaller than the own elasticities.We found expenditure on energy and transportation and communication to be the most affected by changes in their own prices. We use our estimates to analyze the impact of regulated price changes on consumer demand and discuss the further potential use of our results.Consumer behavior, demand systems, price and income elasticities, regulated prices.