CPB Discussion papers

n°319, December 2015

Do Extrinsically Motivated Mental Health Care Providers Have Better Treatment Outcomes
DOUVEN Rudy, REMMERSWAAL Minke, ZOUTENBIER Robin

This study compares different responses to financial incentives between self-employed providers in Dutch mental health care. We find that these different responses are related to differences in treatment duration and treatment outcome. In 2008, a new compensation scheme was introduced for self-employed mental health care providers in the Netherlands. The compensation that self-employed psychologists and psychiatrists received for each patient is based on the total treatment duration. The compensation increases step-wise after 800, 1800 and 3000 minutes of treatment with a large amount. It therefore provides strong financial incentives for providers to prolong their treatment till just after the threshold. Using a large administrative dataset, we exploit these different responses by providers to separate more extrinsically from non-extrinsically motivated providers. We find that the majority of the providers are, to some degree, extrinsically motivated and strategically set treatment duration to exploit the thresholds in the compensation scheme. Some providers choose to end all treatments at 800, 1800 or 3000 minutes, most providers choose to occasionally set the treatment duration strategically and some providers do not take the thresholds into account at all. Next, we study total treatment duration and treatment outcomes of all providers. Treatment outcome is measured with the increase of the GAF score of patients (the Global Assessment of Functioning is a subjective assessment by the provider regarding the mental well-being of the patient and the patient's functioning in daily life). We find that non-extrinsically motivated providers, who do not strategically set treatment duration, treat mental health patients shorter, receive less compensation and report better treatment outcomes, as measured by the improvement in GAF score. This suggests that the compensation scheme rewards inefficient or low quality providers.?

(texte intégral du n° 319)

n° 318, December 2015

Home Ownership and Household Portfolio Choice
MICHIELSEN Thomas, MOCKING Remco, VAN VELDHUIZEN Sander

We study the effect of home equity and indebtedness on financial portfolio choices of Dutch households during the period 2006-2012. Using a large administrative dataset at the household level we estimate how home equity and the outstanding mortgage amount influence the share of liquid assets held in stocks. We apply different econometric methods to take selection and endogeneity into account. In our preferred specifications both home equity and the household's amount of mortgage debt have a non-significant impact on the risky asset share.

(texte intégral du n° 318)

n° 317, December 2015

The allocation of financial risks during the life cycle in individual and collective DC pension contracts
LEVER Marcel, BOELAARS Ilja, COX Ryanne, MEHLKOPF Roel

This paper measures how financial shocks - equity market, interest rate or inflation shocks - affect different generations of participants in pension schemes. We show that an individual scheme, by using a life cycle investment strategy, can largely replicate the allocation of traded risks across generations of a collective pension scheme that gradually adjusts pensions after financial shocks. Collective schemes can shift some financial risk to generations that will participate in the future, whereas individual accounts cannot. In the current institutional setting this shift of traded risk in collective contracts to future generations is limited. Collective pension schemes are able to reallocate non-traded risks among the participants to obtain a more efficient distribution of risk across generations. In schemes with individual accounts, risk sharing is limited to risks traded on financial markets.

(texte intégral du n° 317)

n° 316, December 2015

The effects of higher teacher pay on teacher retention
GERRITSEN Sander, KUIJPERS Sonny, VAN DER STEEG Marc

This paper investigates the effects of higher teacher pay for secondary school teachers on their teacher retention decision and enrollment in additional schooling. We exploit variation in teacher pay induced by the introduction of a new remuneration policy. This policy provided schools in an urbanized region with extra funds to place a larger share of teachers in a higher salary scale. We exploit this policy in an IV-setup to estimate the effects of higher teacher pay on our outcomes. The main finding is that we find no effects of higher teacher pay on the probability to stay in the teaching profession. The policy however succeeded in keeping a slightly larger share of teachers in the targeted region. In addition, our findings suggest that the policy increased teachers’ enrollment in bachelor or master degree programs from 2.3% to 3.2%. This finding is consistent with the setup of the policy in which one of the criteria for placement in a higher salary scale is that teachers would obtain extra qualifications or gain extra expertise.

(texte intégral du n° 316)

n° 315, November 2015

Measuring Downward Nominal and Real Wage Rigidity - Why Methods Matter
DEELEN Anja, VERBEEK Wouter

Although wage rigidity is an important topic, there is no full consensus in the literature on how to measure downward nominal and real wage rigidity. We conceptually and empirically compare the three commonly used methods for estimating wage rigidity. The simple approach as developed by the International Wage Flexibility Project (IWFP), the model based IWFP approach and the Maximum Likelihood approach. We estimate the three models on administrative panel data at the individual level for the Netherlands (2006-2012). One main nding is that assumptions regarding the 'notional' wage change distribution (which would prevail in the absence of wage rigidity) are an important determinant of the level of wage rigidity measured. We conclude that the model-based IWFP approach is the preferred model of the three, for it has the most sophisticated method to address measurement error and the assumptions regarding the wage change distribution that would prevail in absence of wage rigidity are most plausible. Furthermore we have researched the correlation between wage rigidity and worker and rm characteristics. Although the methods do not agree on the amount of rigidity, they agree for a large part on what variables have a positive or negative relation with downward nominal or real wage rigidity. We nd that the presence of wage rigidity is unevenly distributed among groups of workers: downward nominal and real wage rigidity in the Netherlands are positively related to a higher age, higher education, open-end contracts, full-time contracts and to working in a rm that experiences zero or positive employment growth. The consistency in the ndings regarding the determinants of wage rigidity indicate that all three methods measure the same phenomenon, which implies that estimates of determinants of wage rigidity can be compared over countries using any of the three methods. However, for measuring the fraction of workers covered by downward nominal or real wage rigidity, the choice of the method matters. Besides, we contribute to the literature by providing accurate, internationally comparable estimates of wage rigidity in the Netherlands. The overall picture is that the Netherlands has a less than average amount of downward nominal wage rigidity but and an above average level of downward real wage rigidity, compared internationally.

(texte intégral du n° 315)

n° 314, November 2015

Estimating the weight of opportunity costs in housing consumption
VAN DIJK Machiel

People tend to neglect or underweight opportunity costs. Strong empirical evidence for the size of the underweighting appears to be absent. What are the weights people attach to opportunity costs relative to out-of-pocket costs? In this paper I estimate the weight of opportunity costs in probably the largest economic decision that households make: buying a house. I show that homeowners attach approximately twice as much weight to out-of-pocket costs of their housing consumption than to the opportunity costs associated with this. Highlights Housing consumption lends itself well for empirically analyzing opportunity costs. I split up the user costs of housing in out-of-pocket and opportunity costs. Homeowners weigh in their opportunity costs at only 50 to 65 percent. It is unclear whether homeowners underestimate these costs or simply care less about them.

(texte intégral du n° 314)

n° 313, September 2015

A macroeconomic analysis of the returns to public R&D investments
VAN ELK Roel, TER WEEL Bas, VAN DER WIEL Karen, WOUTERSE Bram, VERSPAGEN Bart

This paper analyses the economic returns to public R&D investments in 22 OECD countries. We exploit a dataset containing time-series from 1963 to 2011 and estimate and compare the outcomes of different types of production function models. Robustness analyses are performed to test the sensitivity of the outcomes for particular model specifications, sample selections, assumptions with respect to the construction of R&D stocks, and variable definitions. Analyses based on Cobb-Douglas and translog production functions mostly yield statistically insignificant or negative returns. In these models we control for private and foreign R&D investments and the primary production factors. Models including additional controls, such as public capital, the stock of inward and outward foreign direct investment, and the shares of high-tech imports and exports, yield more positive returns. Our findings suggest that public R&D investments do not automatically foster GDP and TFP growth. The economic return to scientific research seems to depend on the specific national context.

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n° 312, September 2015

A structural analysis of labour supply and involuntary unemployment in the Netherlands
DE BOER Henk-Wim

Most structural models for labour supply ignore the possibility of involuntary unemployment which may lead to biased behavioural responses. This may have important policy implications. We estimate a structural model for labour supply without and with involuntary unemployment for the Netherlands, using data for the period 2006-2009. We estimate both models for four groups separately: singles without children, single parents, couples without children and couples with children. We use information on job search behaviour to estimate the determinants of involuntary unemployment. We find that average labour supply elasticities are only slightly lower in the model with involuntary unemployment than in the model without involuntary unemploy- ment. The main reason for this small bias is the relatively small share of individuals who are involuntary unemployed in the period 2006-2009. A simulation of tax-benefit reforms confirms that the upward bias in average labour supply responses is limited in the model without involuntary unemployment. Only for subgroups with a high risk of being involuntary unemployed, such as lower educated individuals and immigrants, we find a relatively large upward bias in labour supply elasticities in the model without involuntary unemployment.

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n° 311, September 2015

Earnings responses to discontinuities in social security contributions: Evidence from Dutch administrative data
BOSCH Nicole, SCHARF Maja Micevska

We analyse the effects of social security contributions (SSCs) by examining the distribution of earnings close to thresholds in the schedule in the Netherlands. The shape of the earnings distribution provides information on behavioural and incidence effects of SSC. We consider three earnings concepts, four types of contributions and five thresholds at which marginal rates change. The basic idea is that a discontinuity in the marginal SSC rate should cause a discontinuity in the distribution of at least one of three earnings concepts: labour costs, gross earnings and net earnings. We use a rich administrative dataset containing observed payments on most SSCs for the entire working population for the years 2006-2012. Our finding that the density of gross earnings is smooth is an indication of small behavioural responses and is consistent with the results in recent empirical studies that attribute this to the complexity of the tax system, small changes and non-salience. Smoothness of gross earnings challenges the standard incidence theory prediction of full shifting of SSCs to employees. New and more puzzling is the finding of a smooth distribution of both net earnings and labour costs. The smooth distribution of these earnings concepts renders the results on incidence inconclusive. This lack of ‘deterministic’ discontinuity can mainly be explained by measurement errors resulting from the complexity of the institutional system and the rather small changes in marginal rates. A general finding of this paper is that this kind of cross-sectional analysis requests high quality data on SSCs which are rare.

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n° 310, June 2015

Quasi-experimental evidence on the relation between child care subsidies and child care quality
AKGUNDUZ Emre, JONGEN Egbert, LESEMAN Paul P.M., PLANTENGA Janneke

In this article we present quasi-experimental evidence on the relation between child care subsidies and child care quality. We exploit the difference in funding of private and public centers in the Netherlands. A recent subsidy cut reduced funding for private centers while funding for public centers was unaffected. The quality measurements are from a panel survey in which centers' quality was evaluated through classroom assessments by trained observers. Using differences-in-differences we find that the subsidy reduction caused a statistically significant decrease in quality of one fifth of a standard deviation. We also present results for nonlinear differences-in-differences estimators. The decline in quality is robust across specifications and appears to be driven by a decline in the middle of the distribution. A limitation of our data set is that our pre-reform period is short, so that we can not perform pre-reform placebo tests.

(texte intégral téléchargeable du n° 310)

n° 309, June 2015

More R&D with tax incentives? A meta-analysis
LADINSKA Elina, NON Marielle, STRAATHOF Bas

R&D tax incentives are widely used to stimulate private R&D. We review their effectiveness using meta regression analysis. The literature mainly consists of two families of micro-econometric studies. Read the accompanying press release .The first family (16 studies with 82 estimates by the end of 2014) estimates the elasticity between the user cost of R&D capital and private R&D expenditure (stock or flow). Correlations between R&D expenditure and the presence of an R&D tax incentive scheme are provided by the second family (9 studies with 95 estimates). For both types of studies we find strong evidence of publication bias. After correcting for this, we find that a reduction in the user cost of capital of ten percent raises stock of R&D capital by 1.3 percent and flow of R&D expenditure by 2.1 percent. For the second family we find that presence of a scheme is associated with seven percent more R&D expenditure

(texte intégral téléchargeable du n° 309)

n° 308, June 2015

The stimulative effect of an unconditional block grant on the decentralized provision of care
KATTENBERG Mark, VERMEULEN Wouter

Understanding the impact of central government grants on decentralized health care provision is of crucial importance for the design of grant systems, yet empirical evidence on the prevalence of flypaper effects in this domain is rare. We study the decentralization of home care in the Netherlands and exploit the gradual introduction of formula-based equalization to identify the effect of exogenous changes in an unconditional block grant on local expenditure and utilization. A one euro increase in central government grants raises local expenditure by fifty cents, while adjustments occur through the number of hours as well as through substitution between basic and more advanced types of assistance. These findings suggest that conditioning of grants is not required for the central government to retain some control over the decentralized provision of care.

(texte intégral téléchargeable du n° 308)

n° 307, May 2015

Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route
ROJAS-ROMAGOSA Hugo, BEKKERS Eddy, FRANCOIS Joseph F.

A consequence of melting Arctic ice caps is the commercial viability of the Northern Sea Route, connecting North-East Asia with North-Western Europe. This will represent a sizeable reduction in shipping distances and a decrease in the average transportation days by around one-third compared to the currently used Southern Sea Route. We examine the economic impact of the opening of the Northern Sea Route in a multi-sector Eaton and Kortum model with intermediate linkages. This includes a remarkable shift of bilateral trade flows between Asia and Europe, diversion of trade within Europe, heavy shipping traffic in the Arctic, and a substantial drop in traffic through Suez. These global trade changes are reflected in real income and welfare effects for the countries involved. The estimated redirection of trade has also major geopolitical implications: the reorganisation of global supply chains within Europe and between Europe and Asia, and the highlighted political interest and environmental pressure on the Arctic.

(texte intégral téléchargeable du n° 307)

n° 306, April 2015

What drives cybercrime? Empirical evidence from DDoS attacks
OVERVEST Bastiaan, STRAATHOF Bas

Distributed Denial of Service (DDoS) attacks are a frequently occurring type of cybercrime, with potentially large costs to the real economy. We propose a simple model of the size and direction of DDoS attacks. The main predictions of the model are that effective botnets are located in countries with many internet users and high internet speeds, and that the most attractive targets of DDoS attacks are countries with many internet users. We use a theoretical framework to derive a structural equation that resembles the â€gravity equations†common in the literature on international trade. The empirical results are consistent with the predictions of the model. The number of internet users is strongly related to the number of international DDoS attacks: our results suggest that a ten percent increase in the number of internet users worldwide would raise the total number of DDoS attacks by eight percent. Bandwidth in the country of origin is also significantly related to attacks, but quantitatively not very important. The vulnerability of computers does not seem influential. We use international data from www.digitalattackmap.com on 55,000 DDoS attacks in 2013 and 2014. The vast majority of attacks originate from the United States (6,256 attacks in 2013/2014) and China (2851 attacks). The Netherlands ranks third with 834 attacks. We estimate an econometric model with economic and technological variables in order to explain observed DDoS patterns. Our model is inspired by models from the international trade literature that explain trade patterns. Trade relations are significantly related to attacks, while other economic factors including GDP per capita do not appear to play a role. The geographical distance between countries is not relevant, while historical ties between countries are significantly related to the number of attacks. This paper is one of the first to explore possible determinants of cybercrime at an aggregate level. We hope that by uncovering some general patterns in the data, our research may contribute to the growing and exciting field of cybersecurity economics.

(texte intégral téléchargeable du n° 306)

n° 305, April 2015

The effect of schooling vouchers on higher education enrollment and completion of teachers: A regression discontinuity analysis
VAN DER STEEG Marc, VAN ELK Roel

This paper investigates the effects of education vouchers for teachers. We study effects on enrollment and completion of higher education programs, and on the retention of teachers in the education sector. We do this by exploiting a fuzzy regression discontinuity design. Read also the accompanying Background Document (only in Dutch). The discontinuity in the probability of being assigned a voucher arises due to budget constraints in the first application period. Our estimates suggest that effects of voucher assignment on both higher education enrollment and completion rates are in the order of 10 to 20 percentage points as measured five and a half years after application. Relative to a baseline enrollment rate of 77 percent and a baseline completion rate of 54 percent (i.e. of applicants that were not assigned a voucher), these effect estimates correspond to a 12 to 29 percent higher enrollment and to a 17 to 42 percent higher completion. Effects on enrollment and completion are relatively small for shorter studies (up to one year) and for teachers that had already started at the time of application. The teacher voucher crowds out both funding by schools out of their regular professional development budgets as well as financial contributions by teachers themselves. Our results suggest small positive effects of voucher assignment on retention in education as measured four years after application.

(texte intégral téléchargeable du n° 305)

n° 304, February 2015

Estimating the Impact of Forced Sales on House Prices
MOCKING Remco, OVERVEST Bastiaan

We study the price effects of forced sales on the Dutch housing market. A forced sale may result in a lower transaction price because of e.g. suboptimal incentives for revenue maximization. The lower transaction price may also spill over to regular (unforced) nearby transactions. We aim to measure both the forced sale discount and the spillover effect. We employ an unusual rich dataset for house transactions in the Netherlands between 2007 and 2013. To identify the effects of forced sales we control for very local neighborhood trends and detailed house characteristics. We find that a forced sale results in a price discount of about five percent. Each nearby forced sale reduces the transaction price by about 0.4 percent.

(texte téléchargeable du n° 304)

n° 303, February 2015

Mismatch on the Dutch labour market in the Great Recession
ERKEN Hugo, VAN LOON Eric, VERBEEK Wouter

The Great Recession has caused unemployment in the Netherlands to rise from 3.1% in 2008 to over 7% at the beginning of 2014. Structural imbalances caused by labour mismatch could be one of the explanations underlying this high rate. The goal of this paper is to examine this hypothesis. We adopt an eclectic approach to study if mismatch has increased during the Great Recession. First, we examine the development of the Beveridge curve. We estimate so-called “steady-state†Beveridge curves based on underlying labour market flows. Outward shifts of these curves are associated with decreasing matching efficiency. Second, we construct a mismatch index which enables us to calculate the contribution of sector mismatch to the unemployment level. Our analyses show little support for the hypothesis that mismatch currently is a problem on the Dutch labour market. At the aggregate level, the Beveridge curve has not shifted outwards. Furthermore, at most one-seventh of Dutch unemployment can be attributed to sector mismatch, which is comparable to or below periods prior to the Great Recession.

(texte téléchargeable du n° 303)

n° 302, January 2015

Fiscal policy and CO2 emissions of new passenger cars in the EU
MICHIELSEN Thomas, GERLAGH Reyer, VAN DEN BIJGAART Inge, NIJLAND Hans

To what extent have national fiscal policies contributed to the decarbonisation of newly sold passenger cars? We construct a simple model that generates predictions regarding the effect of fiscal policies on average CO 2 emissions of new cars, and then test the model empirically. Our empirical strategy combines a diverse series of data. First, we use a large database of vehicleâ€specific taxes in 15 EU countries over 2001â€2010 to construct a measure for the vehicle registration and annual road tax levels, and separately, for the CO 2 sensitivity of these taxes. We find that for many countries the fiscal policies have become more sensitive to CO 2 emissions of new cars. We then use these constructed measures to estimate the effect of fiscal policies on the CO 2 emissions of the new car fleet. The increased CO 2â€sensitivity of registration taxes have reduced the CO2 emission intensity of the average new car by 1,3 percent, partly through an induced increase of the share of dieselâ€fuelled cars by 6,5 percentage points. Higher fuel taxes lead to the purchase of more fuel efficient cars, but higher annual road taxes have no or an adverse effect. Key Words: vehicle registration taxes, fuel taxes, CO 2 emissions

(texte téléchargeable du n° 302)   

n° 301, January 2015

Technological Uncertainty in Meeting Europe's Decarbonisation Goals
AALBERS Rob, BOLLEN Johannes, FOLMER Kees, BLANFORD Geoffrey J.

(texte téléchargeable du n° 301)

n° 300, January 2015

Does the teacher beat the test? The additional value of teacher assessment in predicting student ability
TER WEEL Bas, FERON Eva, SCHILS Trudie

This research investigates to what extent subjective teacher assessment of children's ability adds to the use of test scores in the explanation of children's outcomes in the transition from elementary to secondary school. This in terms of initial track allocation, track switching in the first three years of secondary education and subsequent test scores. We apply micro-data from the Netherlands about cognitive test scores and teacher assessment in elementary schools and about track placement, track switching and test scores in secondary schools. Our estimates suggest that subjective teacher assessment is about twice as important as the elementary school cognitive test scores for initial track placement in secondary school. In addition, teacher assessment is more predictive of track allocation in 9th grade compared to cognitive test scores. Next, children who switch tracks are more likely to be placed in tracks based on test scores. Also, test scores in 9th grade are predicted by subjective teacher assessment, not by test scores in sixth grade. Finally, a back-of-the-envelope calculation shows that switching could be reduced by at least ten percent if children would have been allocated according to the teacher's assessment.

(texte téléchargeable du n° 300)

n° 299, January 2015

House Price Shocks and Household Savings: evidence from Dutch administrative data
VAN BEERS Nancy, BIJLSMA Michiel, MOCKING Remco

We study the effect of house price shocks on the savings behaviour of Dutch homeowners over the period 2006-2011. Using unique administrative data, we build a balanced panel of slightly less than 2 million Dutch home owning households, containing information on house values, wealth, income and other background characteristics. We find a negative relationship between house price changes and savings, with the largest effects for young households with negative housing equity. In our baseline specification, we find larger effects for house price increases compared to house price decreases. Households of age 30 with loan-to-value ratios above one, save roughly 3 euro less for a 100 euro increase in house prices, while they save around 1 euro more for a 100 euro decrease. The asymmetric effect of price declines versus increases holds in most, but not all specifications.

(texte téléchargeable du n° 299)

n° 298, January 2015

The Regional Impact of Bilateral Investment Treaties on Foreign Direct Investment
LEJOUR Arjan, SALFI Maria

We examine the impact of bilateral investment treaties (BITs) on bilateral FDI stocks using extensive data from 1985 until 2011. We correct for endogeneity using indicators for governance and membership of international organisations. We find that ratified BITs increase on average bilateral FDI stocks by 35% compared to those of country pairs without a treaty. Upper middle income countries seem to benefit the most from ratified treaties whereas high income countries with high governance levels do not profit at all. In addition, lower middle and low income countries experience significantly larger inward FDI stocks from partner's countries. Distinguishing by region, we find that ratified BITs increase FDI stocks mainly in East Asia and Middle & Eastern Europe.

(texte téléchargeable du n° 298)