CPB Discussion paper
n° 338, December 2016
The Effects of Additional Study Choice Activities: Evidence from a Randomized Controlled Trial
DEELEN Anja, KUIJPERS Sonny
This paper analyses the eff ect of additional study choice activities on the probability that subscribers withdraw from the study field of their preference before the study actually commences, as well as on the study performance of students who actually start with the study. Subscribers were randomly assigned to a study choice activity, which consisted of an assignment (representative of the first year curriculum) that provided them with additional information on the content of the study field of their preference. The data contain subscribers at three Dutch faculties in 2013/2014 - 2014/2015. Estimates suggest that the assignments did not cause a signifi cant increase in the probability of withdrawal before the start of the study. We also fi nd no signifi cant eff ects of the intervention on the study results of enrolled students. Although we cannot exclude that other, more rigorous, interventions may generate signi ficant positive eff ects on the quality of choice, our paper therefore suggests that small-scale interventions such as a single assignment - provided on top of other study choice activities - are ine ffective.
n° 336,September 2016
A Data-Driven Procedure to Determine the Bunching Window - An Application to the Netherlands
BOSCH Nicole, DEKKER Vincent, STROHMAIER Kristina
This paper presents empirical evidence on taxpayers' responsiveness to taxation by estimating the compensated elasticity of taxable income with respect to the net-of-tax rate in the Netherlands. Applying the bunching approach introduced by Saez (2010), we fi nd clear evidence of bunching behaviour at the thresholds of the Dutch tax schedule with a precise estimated elasticity of 0.023 at the upper threshold. In line with the literature, we fi nd much larger estimates for women and self-employed individuals. We also identify signi cant bunching behaviour for individuals in paid employment which we attribute to tax deductions for couples. This paper adds to the literature on bunching by proposing the use of information criteria to determine the counterfactual model, and by the development of an intuitive, data-driven procedure to determine the bunching window.
n° 335, September 2016
The Impact of Uncertainty Shocks: Continental Europe versus the Anglo-Saxon World
DE WIND Joris, GRABSKA Katarzyna
For economic forecasting it is important to know how the real economy responds to major events such as the fall of the Soviet Union, the Greek debt crisis, the recent terrorism attacks in Europe, and the Brexit. In addition to potential direct effects, such major events lead to an increase in uncertainty about the economy and consequently firms will postpone their investments. This paper quantifies the economic consequences of the increased uncertainty. For various countries, including the United States, Canada, United Kingdom, Germany, France, the Netherlands, and various small open economies, we have estimated the real economic effects of an increase in uncertainty, based on a structural Vector Autoregression with a similar specification as Bloom (2009). Our empirical results show that uncertainty shocks are followed by deeper recessions in Continental Europe than in the Anglo-Saxon World. Moreover, our variance decomposition indicates that the conditional variance of economic activity related to only uncertainty shocks is much larger in Continental Europe. We associate these findings with country heterogeneity in labor and capital market flexibility, since firms are less capable to deal with uncertain situations when investment and hiring decisions are less easy to reverse, as suggested by Bloom (2009) and consistent with the findings of Bartelsman, Gautier, and de Wind (2016). The empirical results of this paper can be used for scenario analyses, and in fact have been used in Veenendaal, Grabska, Lanser, Ligthart, and de Wind (2014) for a CPB scenario about the conflict between Russia and the Ukraine (report only available in Dutch). Moreover, the upcoming MEV projections will include a scenario analysis on the short run after the Brexit and is partly based on the uncertainty effects analyzed in this paper.
n° 334, August 2016
How do severance pay and job search assistance jointly affect unemployment duration and job quality?
VAN DEN BERGE Wiljan
Many countries require firms to pay severance pay to workers displaced in a mass layoff .Displaced workers often also receive some form of job search assistance. While these may be useful policies on their own, severance pay could undermine job search assistance efforts. Yet, we know very little about the net effects of these policies. This paper uses multistateduration models to examine the joint effects of severance pay and job search assistance on unemployment duration and wages. A unique dataset of social compensation plans that include both severance pay and an off er of job search assistance for each displaced worker is combined with administrative data on employment status of workers in the Netherlands. The effects are identied by comparing workers displaced through a bankruptcy, who don't get any compensation, with workers displaced with a social compensation plan. There are three main findings. First, social compensation plans have a positive effect on the probability to start a new job right after the current job ends. Second, for those who start an unemployment spell, social compensation plans lead to longer unemployment durations. The overall job-finding probability declines. Third, social compensation plans have a negative effect on subsequent job quality in terms of wages.
n° 333, August 2016
Love conquers all but nicotine; spousal peer e ffects on the decision to quit smoking
PALALI Ali, VAN OURS Jan C.
If two partners smoke, their quit behavior may be related through correlation in un-
observed individual characteristics and common external shocks. However, there may
also be a causal effect whereby the quit behavior of one partner is affected by the quit
decision of the other partner. We use data on Dutch partnered individuals to study
the relevance of such spousal peer effects. After controlling for common unobserved
heterogeneity and common external shocks, we find that such spousal peer effects in
the decision to quit smoking do not exist. Apparently, love conquers all but nicotine
addiction.
n° 331, June 2016
Potential economic effects of TTIP for the Netherlands
ROJAS-ROMAGOSA Hugo
The Transatlantic Trade and Investment Partnership (TTIP) is a comprehensive preferential trade agreement that is expected to have a significant effect in EU and US bilateral trade and investment relations. Negotiations are ongoing, so we use a scenario analysis to estimate the potential effects of TTIP under likely negotiated outcomes. In our main scenario, we assume a final trade deal where current tariffs are eliminated and non-tariff barriers are significantly re-
duced. Using a CGE model (WorldScan) we simulate the potential economic effects for the Netherlands. We find that US-Dutch bilateral trade doubles and this is translated into a positive but moderate effect on income of 1.7% for the Netherlands by the year 2030. These potential gains are higher than those for the EU and the US (both around 1%).
n° 330, July 2016
Do national borders slow down knowledge diffusion within new technological fields? The case of big data in Europe
KISELEVA Tatiana, PALALI Ali, STRAATHOF Bas
Big data technologies enhance the storage, processing, and analysis of large data sets and can
be applied economy-wide. Despite this potential, only one percent of big data patents come
from Europe. This paper investigates the diffusion of big data technologies across national
borders by using speed of big data patent citations. Using mixed proportional hazard models
with fixed effects and censoring correction we compare big data patents to non-big data ICT
patents that have been filed at the USPTO. We find that big data patents are cited slower
compared to other ICT patents. This delay fades as big data technologies mature. National
borders do not systematically affect the diffusion of big data technology, also for regions which host little big data innovation like Europe.
n° 329, March 2016
Sorting around the discontinuity threshold: The case of a neighbourhood investment programme
GERRITSEN Sander, TER WEEL Bas, WEBBINK Dinand
This paper investigates the empirical validity of the setup of a large-scale government
neighbourhood investment programme in the Netherlands. Selection of neighbourhoods into the programme was determined by their score on a predetermined index. At first sight this is a textbook example for the application of a regression discontinuity (RD) design to estimate the causal effect of the programme on neighbourhood outcomes. However, at the discontinuity threshold we find a large gap in the share of non-Western immigrants. In addition, the pattern of non-compliance with the assignment rule is consistent with investing in neighbourhoods with a high share of non-Western immigrants. Finally, the way of selecting neighbourhoods into the programme could be a likely explanation for the imbalance at the discontinuity threshold. This case illustrates that RD designs can become invalid even when treatment and control groups have no influence on the assignment.
n° 328, March 2016
Impact of funding targeted pre-school interventions on school readiness: Evidence from the Netherlands
AKGUNDUZ Emre, HEIJNEN Suzanne
We analyze the effectiveness of the early childhood programme (ECP) in the Nether-
lands. The programme is designed for 2.5 to 4 year olds from disadvantaged back-
grounds. 37 municipalities received an additional subsidy to expand ECP programmes,
which allows us to analyze the effects of the programme within a difference-in-difference-
in-differences framework. Most children first enroll in primary schools at age 4 in the
Netherlands, but pupils begin to learn reading and mathematics in grade 3 at age 6.
We use grade repetition constructed from school registry data from 2008 to 2015 in
the first two grades as an indicator of school readiness. Our results show significantly
lower grade repetition rates for targeted boys who are in regions that receive the sub-
sidy. Grade repetition drops by 1 to 3 percentage points from a mean of 10.5 percent
for the disadvantaged group targeted by the programme.
n° 327, March 2016
Does independent needs assessment limit supply-side moral hazard in long-term care?
DOUVEN Rudy, BAKX Pieter, SCHUT Frederik T.
The decision about the amount and type of care that a patient needs may be entrusted to health care providers or be delegated to an independent assessor. An independent assessment limits the scope for supply-side moral hazard and occurs frequently in long-term care (LTC), e.g. in the Netherlands, Germany, Belgium, Switzerland, and Japan. The characteristics of LTC, the potential lack of incentives for efficient use for consumers, providers and third-party payers, and the absence of other restrictions of supply and demand, suggest that there may be room for excessive LTC use in the Netherlands, so there might be a case for independent needs assessment. Unique individual level data about LTC-eligibility decisions and use show that consumers make use of the indicated type of care but that for virtually all subgroups in the population there is considerable non-take-up, meaning that the independent assessment does not limit the amount of care that patients use. This finding suggests that the independent needs assessment may only have a small effect on preventing supply-side moral hazard in LTC.
n° 326, March 2016
Tax bunching by owners of small corporations
BETTENDORF Leon, LEJOUR Arjan Lejour & , VAN'T RIET Maarten
In the Netherlands owners of small corporations face taxation of corporate, labour and capital income. Taxation of the latter may be deferred. We study their options for income shifting using bunching techniques. Based on individual tax records over the period 2007-2011 we report four main findings. The first is that the distribution of gross labour income strongly peaks at the legal 'minimum' level. Second, taxable labour income bunches at the cut-offs of the tax brackets. The elasticity of taxable income at the top tax cut-off ranges from 0.06 to 0.11. Third, we show that distributed profits strongly responded to the temporary tax cut from 25 to 22% in 2007, which doubled tax revenues on dividends. Fourth, using a Heckman selection model we find that the size of own equity has a positive effect on the probability of distributing profits and the size. We reconfirm the importance of intertemporal income shifting for business owners.
n° 325, February 2016
Internet searches and transactions on the housing market
VAN VELDHUIZEN Sander, VOGT Benedikt, VOOGT Bart
We use Google searches of the word "mortgage" to explain housing transactions in the Netherlands in the period from 2004 until 2015. Our estimates indicate that Google searches of the previous months are significantly positively associated with housing transactions in the current month. This provides evidence that internet search data can provide information about real market behaviour.
n° 324, February 2016
Tackling Spillovers by Taxing Corporate Income in the European Union at Source
CNOSSEN Sijbren
This paper surveys and evaluates the corporation tax (CT) systems of the Member States of the European Union on the basis of a comprehensive taxonomy of actual and potential regimes, which have as their base either profits, profits and interest, or economic rents. The current regimes give rise to various instate and interstate spillovers, which violate the basic tenets - neutrality and subsidiarity - of the single market. The trade-offs between the implications of these tenets - harmonization and diversity, respectively - can be reconciled by a bottom-up, reversible strategy of strengthening source-based taxation and approximating tax rates. The strategy starts with dual income taxation, proceeds with final source withholding taxes and rate approximation, and is made complete by comprehensive business income taxation. Common base taxation, if desired, should probably be left to the Member States themselves.
n° 323, February 2016
Negative Home Equity and Household Mobility: Evidence from Administrative Data
VAN VELDHUIZEN Sander, VOGT Benedikt, VOOGT Bart
We investigate the impact of negative home equity on household mobility. We investigate the impact of negative home equity on household mobility. We employ a unique administrative data set, which contains annual mobility and a large set of homeownercharacteristics of more than two million Dutch households. We exploit the regional variation of the substantial and unanticipated housing market bust starting in 2008 until 2012 to identify the effect of negative home equity on mobility. We find that households falling into negative equity due to unanticipated declining house prices are 18 percent less likely to move compared to households maintaining positive home equity. Read also: Discussion Paper 345 'Negative home equity and job mobility' .
n° 322, January 2016
House prices and accessibility: Evidence from a natural experiment in transport infrastructure
HOOGENDOOM Sander, VAN GEMEREN Joost, VERSTRATEN Paul, FOLMER Kees
This paper studies the impact of accessibility on house prices, based on a natural experiment in the Netherlands: the Westerscheldetunnel. We exploit the fact that the opening of the tunnel caused a substantial shift in accessibility for people and firms in the connected regions. Our results indicate that the elasticity between house prices and accessibility is equal to 0.8. We also find support for the idea of anticipation: about half of the accessibility effect already materializes more than one year before the opening of the tunnel. Moreover, our analyses suggest that the impact of accessibility differs across regions.
n° 321, January 2016
The ability to pay for long-term care in the Netherlands: a life-cycle perspective
TER RELE Harry, HUSSEM Arjen, VAN EWIJ Casper, WONG Albert
This paper uses synthetic life-cycle paths at the individual level to analyze the distribution of long-term care expenditures in the Netherlands. Using a comprehensive set of administrative data 20,000 synthetic life-cycle paths of household income and long-term care costs are constructed using the nearest neighbor resampling method. We show that the distribution of these costs is less skewed when measured over the life-cycle than on a cross-sectional basis. This may provide an argument for self-insurance by smoothing these costs over the life-cycle. Yet costs are concentrated at older ages, which limits the scope for self-insurance. Furthermore, the paper investigates the relation between long-term care expenditures, household composition, and income over the life-cycle. The expenditures on a lifetime basis from the age of 65 are higher for low income households, and (single) women.
n° 320, January 2016
Credit Supply Shocks in the Netherlands
ELBOURNE Adam, DUCHI Fabio
This study looks at the effects of credit supply shocks in the Netherlands and provides estimates of how important credit supply disturbances have been for explaining the recent disappointing economic growth. We find that domestic credit supply shocks can account for about half of the below trend growth in 2009 but that they have played very little role from the end of 2012 until the end of our sample period in 2014. The banking crisis in 2008 has been followed by a sustained period of low growth. Whilst this is a common finding after a banking crisis, many other things have happened beside problems with the banks. For example, the collapse of world trade, the euro crisis and government austerity. How much of our recent disappointing economic performance is due to contractions in credit supply and how much to these other factors? To answer this we use a vector auto regression (VAR) identified with sign and zero restrictions on data from 1998 to 2014. We start by looking at what a contraction in credit supply does to the macro economy before estimating when credit supply shocks hit the Netherlands and how big they were. The set of restrictions we use relies on supply and demand shocks pushing prices and quantities in different directions. An adverse credit supply shock raises the price of credit but contracts the quantity of loans. In contrast, an adverse loan demand shock decreases both the price and the quantity. With enough of these restrictions we can use the model to back out a time series of the size and timing of the shocks that hit the economy. We find that a typical credit supply shock depresses inflation, GDP growth and lending growth. Interestingly, we find evidence across all of the specifications we estimate that lending growth recovers more quickly than GDP growth, which suggests that firms and households can, with time, switch some of their external finance needs to other sources of credit. We also look at investments and consumption separately, since there have been many reports of households and small firms being unable to obtain credit. We find that investments are hit considerably harder than consumption but that they recover much more quickly.
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