Policy Evaluation and Economic Policy Advice

Arguably, one of the most important developments in the field of applied economics during the last decades has been the emergence of systematic policy evaluation, with its distinct focus on the establishment of causality.By contrast to the natural sciences, the objects of our scientific interest typically exert some influence on their treatment status under the policy to be evaluated and on their economic outcomes. Thus, economic policy advice can only be successful, if it is based on an appropriate study design, experimental or observational. It will strive in societies that provide liberal access to data, accept the merits of randomized assignment and guard the independence of research institutions.Policy evaluation, applied economics, causality, policy advice

Rejecting capital-skill complementarity at all costs

Any serious empirical study of factor substitutability has to allow the data to display complementarity as well as substitutability. The standard approach reflecting this idea is a translog specification – this is also the approach used by numerous studies analyzing the relative capital-skill complementarity hypothesis formulated by GRILICHES (1969). According to this hypothesis, the degree of substitutability between skilled labor and capital is lower than that for unskilled labor and capital. Yet, the results of empirical studies investigating this hypothesis are controversial. This paper offers a straightforward explanation: Using a translog approach reduces the issue of factor substitutability or complementarity to a question of cost shares. Our review of translog studies mentioned in HAMERMESH?s (1993) summary on the demand for heterogeneous labor demonstrates that this argument is empirically relevant – all these studies can be reconciled with each other on the basis of the cost-share argument. --Substitutability,Translog Cost Function

WTP vs. WTA: Christmas Presents and the Endowment Effect

Using data on the valuation of Christmas gifts received by students in different fields at a German university, we investigate whether the endowment effect differs between students of economics and other respondents and whether it varies with the market price of the object under consideration. Our estimation results suggest that economics students have both, a significant lower WTP and WTA, indicating that existing studies on the efficiency loss of holiday gifts and experimental studies on the endowment effect that rely on data from economics students may be biased. The result further indicates that the endowment effect is independent of the market price of the object.loss aversion, endowment effect, Christmas presents, deadweight loss

Mobility within Europe - What Do We (Still Not) Know?

Intensified European integration, enlargement of the EU, and increasing migration activity worldwide have pushed migration and migration policy to the forfront of the European agenda. This paper identifies the salient questions to be addressed by any educated migration policy. It embeds this discussion into a systematic classification of economic migration research according to its major conceptual and applied questions. The state of theoretical and empirical research in the different strands of the taxonomy is reviewed briefly, with a focus on European aspects. Furthermore, we offer some empirical evidence on the determinants of intra-EU-migration by an analysis of the Eurobarometer. The paper concludes with an outline of the major open research questions in the European context. Specifically, at this junctur e the generation of individual-based detailed and comprehensive data material covering the phenomenon is imperative.

Smoking in Germany: Stylized Facts, Behavioral Models, and Health Policy

It is well known that smoking causes severe adverse health effects, and it seems evident that governments are justified or even obliged to implement measures of tobacco control to mitigate these effects.Yet, as this paper argues with a distinct focus on Germany, the three most important and still largely open questions in the design and implementation of economic and health policy are, whether government action is justified at all, what behavioral patterns this policy should try to alter, and whether the policy measures chosen indeed exert any substantial effects on the targeted outcomes.We conclude that the case for control measures aiming at the prevention of smoking initiation among adolescents is indeed strong, but also that their proper design would benefit from a better understanding of behavioral issues and that their empirical evaluation requires (non-experimental) study designs that facilitate the identification of causal effects.Tobacco, tobacco control, rational addiction

Heterogeneity in the Intergenerational Transmission of Alcohol Consumption – A Quantile Regression Approach

This paper addresses the question of whether the effect of parental drinking on children’s later consumption of alcohol – which is frequently found to be of positive sign – exhibits a certain pattern of heterogeneity. In particular, if this eff ect is more prominent in the upper tail than elsewhere in the distribution of children’s alcohol consumption, conventional regression analyses that focus on the mean eff ect may substantially underrate parental drinking as a risk factor for children’s later alcohol abuse. In our empirical application, we address this issue by applying censored quantile regression methods to German survey data. The supposed pattern of heterogeneity is indeed found in the data, at least for daily parental drinking. In addition, the intergenerational transmission of alcohol consumption exhibits gender-specific heterogeneity.Alcohol consumption; intergenerational transmission; heterogeneity; censored quantile regression

Mobility within Europe – The Attitudes of European Youngsters

Intensified European integration, enlargement of the EU, and increasing migration activity worldwide have pushed migration and migration policy to the forefront of the European agenda. While many observers hesitate to embrace immigration emanating from outside Europe, sectoral skill shortages and social security systems under demographic pressure have fostered an almost unanimous call for larger mobility within Europe. Yet, neither does intra-European migration respond to this request, nor are the possible consequences of increased migration activity well understood. This paper embeds this discussion into a systematic classification of economic migration research according to its major conceptual and applied questions. The state of theoretical and empirical research in this literature is reviewed briefly, with a focus on intra-European migration. We conclude that the relatively positive assessment of this type of migration mainly derives from its high skill content. To prepare the prediction of future developments, we offer empirical evidence on the determinants of intra-EU-migration by an analysis of the Eurobarometer survey. Unless information deficits, traces of xenophobic tendencies, and the perception of prohibitively high levels of bureaucratic red tape are overcome, intra-European migration will not play the role it is hoped for.Labor mobility, migration intention, intra-EU-migration

On the Restrictiveness of Separability: The Significance of Energy in German Manufacturing

Any researcher would certainly agree with Hamermesh’s (1993:34) intuition about separability that the ease of substitution between any two production factors should be unaffected by a third factor that is separable from the others. This paper emphasizes that such a notion of separability needs to be more restrictive than the classical separability concept is.We thus coin the notion of strict separability that implies the classical concept. By applying both separability concepts in a translog approach to German manufacturing data (1978–1990), we focus on the empirical question of whether the omission of energy affects the conclusions about the ease of substitution among nonenergy factors. We find ample empirical evidence to doubt the assumption that energy is separable from all other production factors even in the relatively mild form of classical separability. At least under separability aspects, therefore, energy appears to be an indispensable production factorSubstitution, Translog Cost Functions

Measuring Energy Security – A Conceptual Note

Along with the oil price, concerns about the security of energy supply have soared once again in recent years.Yet, more than 30 years after the OPEC oil embargo in 1973, energy security still remains a diffuse concept. This paper conceives a statistical indicator that aims at characterizing the energy supply risk of nations that are heavily dependent on energy imports. Our indicator condenses the bulk of empirical information on the imports of fossil fuels originating from a multitude of export countries as well as data on the indigenous contribution to the domestic energy supply into a single parameter. Applying the proposed concept to empirical energy data on Germany and the U.S. (1980–2004), we find that there is a large gap in the energy supply risks between both countries, with Germany suffering much more from a tensed energy supply situation today than the U.S.Herfindahl index, energy supply risk indicator

Gerontocracy in Motion? – European Cross-Country Evidence on the Labor Market Consequences of Population Ageing

Taking a European cross-country perspective, this paper addresses the most important issues in the nexus of population ageing and labor markets.We start from a descriptive overview of the demographic change currently shaping European societies.The subsequent section intensively discusses the potential consequences of these demographic processes for and interdependencies with the labor market situation in Europe.We place particular emphasis on the issue of non-competitive wage setting. In our empirical application we demonstrate that moderately large birth cohorts seem to experience lower employment rates, but also that education investments might be able to mitigate these consequences, and that the relative economic success of large cohorts might even be disproportionately positive. Finally, in the concluding section we review possible policy options for coping with the consequences of population ageing.Demographic change, cohort size, unemployment