CPB Discussion papers 2007
n° 95 - décembre 2007
Market share and price in Dutch home care: market power or quality?
MOSCA Ilaria., POMP Marc., SHESTALOVA Victoria
A change of legislation in 2004 of the Dutch Exceptional Medical Expenses Act (EMEA) allowed for more competition among suppliers of home care. The new law made it possible for the 32 regional healthcare purchasing agencies to contract suppliers selectively and to negotiate over prices and quality. Since, at least in some regions, one or two providers dominate the market, there are concerns about the effect of providers' market power on the pricing of home care services. This paper tries to assess whether these concerns are justified. Using complete data on contracted prices and quantities for 2004-2006, we find that, indeed, providers with a larger market share are able to contract at a higher price. We also find significant differences in contracted prices for some healthcare purchasing agencies, which points towards differences in their regional situations and/or policies. It is conceivable that both differences in market share and differences in price are driven by unobserved differences in quality. However, our analysis based on quality data reported in a consumer survey does not support this explanation.
n° 94 - décembre 2007
Non-profit provision of job training and mediation services; an empirical analysis using contract data of job training service providers
KONING Pierre
This paper analyses the relative performance and selection behaviour of not-for-profit (NFP) job training service providers, using contract data from the Dutch social benefit administration. Our analysis takes full account of selection effects, both ex ante (before the contracting process) as well as ex post (at the start of the program). First, for each cohort type of unemployed clients, cohorts that are contracted are ex ante equivalent for providers that are procured. Thus, within cohort type variation in performance outcomes suffices to obtain consistent estimates of performance differentials. Second, ex post selection of clients by providers, at the start of programs, is measured explicitly in our data. Our estimation results show that FPs are more active in selecting clients, both by sending back more of them, and indirectly, by encouraging clients to start a program, so as to receive additional (fixed) payments by the social benefit administration (per client at the start of a program). Regarding the estimation results for the job placement rates, we find NFP job training service providers only to outperform FPs slightly in the durability of job contracts. This effect is however too small to lead to overall better placement rates.
n° 93 - décembre 2007
The trend in female labour force participation; what can be expected for the future?
EUWALS Rob, KNOEF Marike, VAN VUUREN Daniel
During the 1980s and 1990s, the Netherlands experienced a strong increase in the labour force participation of women. This study investigates the increase of participation over the successive generations of women, and produces an educated guess for future participation. For this purpose, we estimate a binary age-period-cohort model for the generations born between 1925 and 1986, using data from the Dutch Labour Force Survey 1992-2004. The results indicate that the increasing level of education, the diminishing negative effect of children, and unobserved cohort effects have played an important role. According to our estimates, the increase in unobserved cohort effects has stopped since the generation born in 1955. This result is in line with results of studies on social norms and attitudes towards the combination of female employment and family responsibilities, which show a similar pattern over the successive generations. We conclude that the growth of female participation is likely to slow down in the near future.
n° 92 - décembre 2007
On the optimality of expert-adjusted forecasts
FRANSES Philip Hans, KRANENDONK Henk, LANSER Debby
Official forecasts of international institutions are never purely model-based. Preliminary results of models are adjusted with expert opinions. What is the impact of these adjustments for the forecasts? Are they necessary to get 'optimal' forecasts? When model-based forecasts are adjusted by experts, the loss function of these forecasts is not a mean squared error loss function. In fact, the overall loss function is unknown. To examine the quality of these forecasts, one can rely on the tests for forecast optimality under unknown loss function as developed in Patton and Timmermann (2007). We apply one of these tests to ten variables for which we have model-based forecasts and expert-adjusted forecasts, all generated by the Netherlands Bureau for Economic Policy Analysis (CPB). For almost all variables the added expertise yields better forecasts in terms of fit. In terms of optimality, the effect of adjustments for the forecasts is limited, because for most variables the assumption that the forecast are not optimal can be rejected for both the model-based and the expert-adjusted forecasts.
n° 91 - décembre 2007
How (not) to measure competition
BOONE Jan, VAN OURS Jan, VAN DER WIEL Henry
We discuss and apply a new measure of competition: the elasticity of a firm's profits with respect to its cost level. A higher value of this profit elasticity (PE) signals more intense competition. Using firm level data we compare PE with the most popular competition measures such as the price cost margin (PCM). We show that PE and PCM are highly correlated on average. However, PCM tends to misrepresent the development of competition over time in markets with few firms and high concentration, i.e. in markets with high relevance for competition policy and regulation. So, just when it is needed the most PCM fails whereas PE does not. From this, we conclude that PE is a more reliable measure of competition.
n° 90 - novembre 2007
Measuring annual price elasticities in Dutch health insurance; a new method
DOUVEN Rudy, LIEVERDINK Harm, LIGTHART Marco, VERMEULEN Ivan
This paper proposes a new method for estimating annual price elasticities from market share data of health insurers. In contrast to traditional methods the elasticity is derived from bilateral price elasticities which relate the net share of switchers between two health insurers not only to their premium difference but also to the market share and premium of the higher priced health insurer. Our new method explains the annual variation in the Dutch market share data better than the traditional methods. We find in the Dutch social health insurance for the period 1996-2005 rather low negative annual price elasticities ranging between 1 and 0. In that period stickiness of insurer choices was high and less than 5% of the population switched annually from health insurer. This result, however, was in sharp contrast with an exceptional high price elasticity of 7 for the year 2006, where after a major health care reform about 18% of the population switched mostly to lower priced health insurers. Besides large media coverage, one important difference with previous years was that many consumers holding an individual contract could switch to a lower priced group contract.
(texte du n° 90)
n° 89 - octobre 2007
Globalisation and the Dutch economy; a case study to the influence of the emergence of China and Eastern Europe on Dutch international trade
DE GROOT Henri., BAKENS Jessie
This paper investigates the impact of the emergence of China and Eastern Europe as increasingly important players on the world market for a small open economy such as the Netherlands. We describe and compare in detail revealed comparative advantages across the different country groups. This allows us to characterize the sectors in the Dutch economy that are most likely to experience enhanced competition in the face of globalization. This analysis is complemented with a gravity analysis that adds a second dimension to the competitive impact, viz. the extent to which markets are localized as opposed to global. We conclude that the overlap in revealed comparative advantages between China and the Netherlands is limited. The major impact of the emergence of China for Dutch trade is that it is likely to foster the position of the Netherlands as a gateway to Europe. Furthermore, we show that the overlap in comparative advantage between China and Eastern Europe is relatively large, implying that competition from Eastern Europe are likely to be stronger than from China.
( texte du n° 89)
n° 88 - septembre 2007
Reinventing the Dutch tax-benefit system. Exploring the frontier of the equity-efficiency trade-offDE MOOIJ Ruud
European governments aim to raise labour supply, cut unemployment and, at the same time,
maintain social cohesion. Yet, economists have stressed the trade-off between these objectives.
This paper reviews the key policy insights from optimal tax theory to identify options for
reform in the tax-benefit system that can potentially improve the equity-efficiency trade-off.
Using a comprehensive applied general equilibrium model, we then explore whether reforms
along these lines in the actual Dutch tax-benefit system will raise employment without
sacrificing equality. The analysis reveals that selective tax relief for elastic secondary earners
and low-skilled workers have this potential. A flat income tax structure - possibly combined
with a negative income tax - worsens the equity-efficiency trade-off.
( texte du n° 88)
n° 87 - septembre 2007
Housing supply in the NetherlandsVERMEULEN Wouter, ROUWENDAL Jan
In spite of a growing recognition of the importance of supply conditions for the level and
volatility of house prices, empirical work on housing supply outside the US is scarce. This
paper considers various measures of housing supply in the Netherlands, where real house prices
have roughly tripled since 1970. Besides the volume of investment in residential structures and
new housing construction in units, we derive time series of structure and location quality in a
hedonic analysis. Each of these variables appears to be almost fully inelastic with respect to
house prices in at least the short to medium long run. Further analysis of the quality of location
index shows that conventional models of competitive land and housing markets cannot account
for these findings. However, they may be well explained in terms of the rather extensive body
of interventions by the Dutch government.
( texte du n° 87)
n° 86 - août 2007
The impact of homeownership on unemployment in the NetherlandsVAN VUUREN A., VAN LEUVENSTEIJN M.
We analyze the impact of homeownership on unemployment duration using a theoretical model of job search. Earlier studies suggest that this relationship should be positive because workers are less mobile when they own a home. Nevertheless, most of the empirical studies in Europe find an opposite relationship. In this paper, we investigate whether this is due to an omission in the original analysis or whether it is due to an endogeneity problem, i.e. those who can leave unemployment easily are more likely to be a homeowner. In our empirical analysis, we use additional information about the differences in unemployment benefits between homeowners and renters. We find that homeowners have higher hazard rates out of unemployment to a job in the local labour market. The impact is significant but not very large. Homeownership has a negative but insignificant impact on the hazard to leave unemployment to the non-local labour market. Finally, we find that homeowners would reduce their probability to receive a job offer from the local labour market when they become renters. The probability to receive a job offer from the non-local labour market would increase for short spells of unemployment when home owners become renters. However, this probability would be reduced for long spells of unemployment.
( texte du n° 86)
n° 85 - juillet 2007
Fiscal Prefunding in Response to Demographic Uncertainty
ARMSTRONG A., DRAPER nick, NIBBLINK André, WESTERHOUT Ed.
Uncertainty in demographic developments lowers expected future welfare levels. Increasing current tax rates and decreasing expected future tax rates may compensate part of the welfare loss that is due to demographic uncertainty. In doing so, the government effectively pursues a precautionary fiscal policy analogous to the precautionary life-cycle saving behaviour that households may exhibit in the presence of income uncertainty.
( texte du n° 85)n° 84 - juillet 2007
A New Approach to Measuring Competition in the Loan Markets of the Euro Area
VAN LEUVENSTEIJN M., BIKKER J.A., RIXTEL A.A.R.J.M., KOK-SORENSEN C.
This paper is the first that applies a recently introduced measure of competition, the Boone indicator, to the banking industry. This approach is able to measure competition of bank market segments, such as the loan market, whereas many well-known measures of competition can consider the entire banking market only. A caveat of the Boone-indicator may be that it assumes that banks generally pass on at least part of their efficiency gains to their clients. Like most other model-based measures, this approach ignores differences in bank product quality and design, as well as the attractiveness of innovations. We measure competition on the lending markets in the five major EU countries as well as, for comparison, the UK, the US and Japan. Bearing the mentioned caveats in mind, our findings indicate that over the period 1994-2004 the US had the most competitive loan market, whereas overall loan markets in Germany and Spain were among the best competitive in the EU. The Netherlands occupied a more intermediate position, whereas in Italy competition declined significantly over time. The French, Japanese and UK loan markets were generally less competitive. Turning to competition among specific types of banks, commercial banks tend to be more competitive, particularly in Germany and the US, than savings and cooperative banks.
n° 83 - juin 2007
Do School Inspections Improve Primary School Performance?LUGINBUHL Rob, WEBBINK Dinand, DE WOLF Inge
Inspectors from the Dutch Inspectorate of Education inspect primary schools, write inspection reports on each inspected school, and make recommendations as to how each school can improve. We test whether these inspections result in better school performance. Using a fixed-effects model, we find evidence that school inspections do lead to measurably better school performance. Our assessment of school performance is based on the Cito test scores of pupils in their final year of primary school. Therefore school improvement means increased Cito test scores. The results indicate that the Cito test scores improve by 2% to 3% of a standard deviation of the test score in the two years following an inspection. The arithmetic component shows the largest improvement. Our estimates are the result of an analysis of two types of school inspections performed between 1999 and 2002, where one type was more intensive than the other. In one fixed-effects model, we assume that the effect of the two types of school inspections was the same. We cannot, however, be sure that the estimates from this model are free from the problem of endogeneity bias. Therefore, we also obtain estimates for a less restrictive fixed-effects model. In this less restrictive model, we make use of the fact that a subset of the more intensive school inspections occurs at a representative selection of primary schools. Based on this smaller, essentially randomly drawn sample of schools, we can be confident that these estimates of the effect of school inspections are free from endogeneity bias. Due to the limited number of inspections at randomly selected schools, these estimates are not significantly different from zero. These estimates are, however, consistent with the effects found based on all inspections. The less restrictive model also allows for the effect of the more intensive inspections to differ from that for the less intensive ones. We find evidence that the more intensive inspections are responsible for larger increases in the Cito test scores than the less intensive ones.
( texte du n° 83)n° 82 - juin 2007
The Impact of Housing Market Institutions on Labour MobilityA European Cross-Country Comparison
VAN LEUVENSTEIJN Michiel
In this paper, we study the effects of housing market institutions on labour mobility. We construct durations for individuals leaving their current job for a different job, becoming unemployed or leaving the labour market, from a sample of households from 14 European countries in 1994–2001. We merge this data with country specific housing market institutions, such as transaction taxes, and language and religion diversity. Similar to previous studies, estimated hazards indicate that home-ownership reduces job-to-job mobility as well as the probability to become unemployed or economically inactive on a individual level. However, a comparison between countries reveals that countries with high levels of homeownership rates also have high levels of unemployment. Therefore, this paper is able to reconcile the seemingly contrasting empirical results from both the macroeconomic and the microeconomic level.
( texte du n° 82)
n° 81 - juin 2007
Measuring Lifetime Redistribution in Dutch Occupational PensionsBONENKAMP Jan
This paper quantifies lifetime redistribution in Dutch occupational pension schemes associated with uniform pricing. Information about the extent of redistribution is important because it will influence the public acceptance of the pension system. The uniform contribution rate is split up into a saving share and a transfer share for different socioeconomic groups. The transfer share, in turn, consists of intergenerational and intragenerational transfers. We find that the relative size of the saving- and transfer shares strongly depends on socioeconomic characteristics, such as gender and level of education. The saving part is higher for females than for males and it increases with the level of education, which implies that uniform pricing involves a large transfer from males to females and from low educated to higher educated workers. The impact of intergenerational transfers is modest.
( texte du n° 81)
n° 80 - mars 2007
Opening Services Markets within EuropeModelling Foreign Establishments in a CGE Framework
LEJOUR Arjan, ROJAS-ROMAGOSA Hugo, VERWEIJ Gerard
In services, the activities of foreign affiliates often exceed the value of cross-border trade. A complete analysis of services liberalisation therefore requires the modelling of FDI. This paper presents the treatment of FDI in our CGE model WorldScan based on the ideas of Petri (1997) and Markusen (2002). They assume that firms establishing affiliates abroad also transfer firm-specific knowledge. Consequently, capital and products differ from existing capital and products in the host country. As an illustration, we apply this model to assess the proposals of the European Commission to open up services markets. FDI in services could increase by 20% to 35%. However, the overall economic impact is limited. Our assessment suggests that GDP in the EU25 could increase up to 0.4%. These effects could be up to 0.8% higher if foreign capital also increases the overall productivity of the services sector.
( texte du n° 80)
n° 79 - mars 2007
The Labour Market Position of Turkish Immigrants in Germany and the NetherlandsReason for Migration, Naturalisation and Language Proficiency
EUWALS Rob, DAGEVOS Jaco, GIJSBERTS Mérove, ROODENBURG Hans
On the basis of two datasets, the German Socio-Economic Panel 2002 and the Dutch Social Position and Use of Provision Survey 2002, we investigate the importance of characteristics related to immigration for the labour market position of Turkish immigrants. We use regression techniques to correct for composition effects in employment rates, tenured job rates and job prestige scores (ISEI). First, we find that educational attainment and language proficiency have a higher return in the Netherlands than in Germany. Second, we find that second generation immigrants have improved their labour market position relative to the first generation of labour migrants and their partners. The improvement is largely due to an improvement in educational attainment and language proficiency. Third, for the Netherlands we find a positive relation between naturalisation and labour market position, while for Germany we find a negative relation with tenured employment. The contrasting results on tenured employment may be explained partly by differences in immigration rules. In Germany, economic self-reliance is more important than in the Netherlands, and this may lead to a stronger incentive to naturalise for workers with a temporary contract.
( texte du n° 79)
n° 78 - février 2007
Co-payment systems in health care: between moral hazard and risk reduction
WESTERHOUT Ed., FOLMER Kees
It is well-known that co-payments in health insurance may increase social welfare by reducing moral hazard. Considerably less is known about the form co-payment schemes should ideally take. This paper investigates what co-payment rate and co-payment maximum characterize the optimal scheme, i.e. the scheme that achieves the highest level of social welfare, within the class of two-part co-payment schemes of which the second part features a zero rate. It also quantifies the welfare losses that correspond with sub-optimal co-payment schemes. The paper uses a model with optimizing households that are risk-averse, exercise price-elastic demand and are aware of the kinks in their budget constraints. Numerical simulations with this model indicate that the optimal scheme combines a 80% rate with a maximum of about 600 euro. Sensitivity analysis shows that the maximum varies a lot with changes in basic parameters; the 80% value for the optimal co-payment rate is quite robust, though. The welfare losses that correspond to alternative co-payment schemes are generally quite small.
n° 77 - janvier 2007
Home and Mortage Ownership of the Dutch Elderly - Explaining Cohort, Time and Age Effects
VAN DER SCHORS Anna, ALESSIE Rob J.M., MASTROGIACOMO Mauro
The relationship between home ownership of Dutch elderly households and age is strongly negative. Other studies suggest that this age gradient should be attributed to a cohort effect. In this paper, we investigate where those cohort effects come from. We also observe that mortgage ownership among elderly home-owners increased considerably during the nineties. Using panel data, we estimate models explaining home and mortgage ownership by age, cohort, and time effects, as well as other factors. Cohort and time effects are modelled explicitly using macro economic and housing market related variables. We find that the level of GDP per capita when the household head was young is the main factor explaining generation effects in home ownership among the elderly. After accounting for cohort effects it also appears that home ownership decreases slightly with age. Mortgage ownership among elderly home owners rose considerably during the nineties due to house price increases and due to financial innovation in the mortgage market. Cohort effects are also important. A supplementary analysis suggests that those cohort effects are due to the fact that the accidental bequest motive is becoming less important.
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