CPB Discussion papers
n° 367, December 2017
Cost-Sharing Design Matters: A Comparison of the Rebate and Deductible in Healthcare
REMMERSWAAL Minke, BOONE Jan, BIJLSMA Michiel, DOUVEN Rudy
Since 2006, the Dutch population has faced two different cost-sharing schemes in health insurance for curative care: a mandatory rebate of 255 euros in 2006 and 2007, and since 2008 a mandatory deductible. Using administrative data for the entire Dutch population, we compare the effect of both cost-sharing schemes on healthcare consumption between 2006 and 2013.
(texte intégral du n° 367)
n° 368, November 2017
Cheaper and More Haircuts After VAT Cut? Evidence From the Netherlands
JONGEN Egbert, LEJOUR Arjan, MASSENZ Gabriella
We study the effect of the reduction in the VAT rate on services by hairdressers from 17.5 to 6 percent in the Netherlands in January 2000.
n° 358, November 2017
Employment Polarization in local labor markets: the Dutch case
TERZIDIS Nikolaos, VAN MAARSEVEEN Raoul, ORTEGA-ARGILÉS Raquel
Recent literature documents the pervasiveness of job polarization in the labor markets of the developed world. However, relatively little is known about polarization on a sub-national level.
(texte intégral du n° 358)
n° 363, November 2017
Co-payments in long-term home care: do they affect the use of care?
NON Marielle
We study the effect of a policy change in co-payments on the use of long-term home care in The Netherlands. The change increased co-payments for persons with considerable household financial assets. For identification we apply a difference-in-difference analysis with matched treatment and control groups.
n° 366, October 2017
Premium levels and demand response in health insurance: relative thinking and zero-price effects
DOUVEN Rudy, VAN DER HEIJDEN Ron, McGUIRE Thomas, SCHUT Erik
In health care systems with a competitive health insurance market, governments or other sponsors (e.g. employers) often subsidize premiums to encourage enrolment. These subsidies are typically independent of plan choice leaving the absolute premium differences in place so as not to distort consumer choice of plan.
(texte intégral du n° 366)
n° 365, October 2017
Preventing NEETs During the Great Recession: The Effects of a Mandatory Activation Program for Young Welfare Recipients
CAMMERAAT Emile, JONGEN Egbert, KONING Pierre
We study the impact of a mandatory activation program for young welfare recipients in the Netherlands. Introduced at the end of 2009, the goal of the program was to prevent so-called NEETs (individuals not in employment, education or training).
(texte intégral du n° 365)
n° 364, October 2017
Distributionally Weighted Cost-Benefit Analysis: From Theory to Practice
VAN DER POL Thomas, BOS Frits, ROMIJN Gerbert
In CBA practices around the world, benefits are valued regardless of to whom they accrue. This disregards basic economic principles, like declining marginal utility of income, or inequality aversion. This paper argues that if redistribution matters, net benefits must be aggregated using a distributionally weighted CBA.
(texte intégral du n° 364)
n° 362, October 2017
The effect of geographical distance on online transactions: Evidence from the Netherlands
PALALI Ali, STRAATHOF Bas, WINDIG Rinske
The rise of online trade alters the role of distance between (potential) buyers and sellers. We use data from eBay subsidiary Marktplaats.nl, one of the largest online trading platforms in the Netherlands, to estimate how distance affects the probability of a transaction between small geographical regions.
(texte intégral du n° 362)
n° 361, September 2017
Optimal Income Support for Lone Parents in the Netherlands: Are We There Yet?
DE BOER Henk-Wim, JONGEN Egbert
The Netherlands witnessed major reforms in income support for lone parents over the past decade. The goals of these reforms were to improve the financial incentives to work and to simplify the system. We consider whether the new system can be considered (closer to) `optimal'.
(texte intégral du n° 361)
n° 360, September 2017
SMOOTHIES: A Toolbox for the Exact Nonlinear and Non-Gaussian Kalman Smoother
DE WIND Joris
In this paper, I present a new toolbox that implements the exact nonlinear and non-Gaussian Kalman smoother for a wide class of discrete-time state space models, including models with implicit functions and equality constraints.
(texte intégral du n° 360)
n° 359, September 2017
Exact Nonlinear and Non-Gaussian Kalman Smoother for State Space Models with Implicit Functions and Equality Constraints
DE WIND Joris
In this paper, I present a novel implementation of the exact nonlinear and non-Gaussian Kalman smoother that can also deal with implicit functions in the measurement and/or state equations as well as equality constraints.
(texte intégral du n° 359)
n° 357, August 2017
Capital structure determinants and adjustment speed: An empirical analysis of Dutch SMEs
MOCKING Remco, STEEGMANS Joep
This paper presents empirical evidence of both the determinants and the adjustment speed of capital structure of small and medium-sized enterprises (SMEs) in the Netherlands.
(texte intégral du n° 257)
n° 356, July 2017
A lost generation? The early career effects of graduating during a recession
VAN DEN BERGE Wiljan, BROUWERS Arne
We estimate the effect of graduating during a recession on the early careers of high educated graduates in the Netherlands between 1996 and 2012. Exploiting field-specifi c differences in un-employment rates, we fi nd that graduates on average suffer a 2.3% lower wage in a typical recession in their first year. The wage loss fades out four years after graduation. Employment probabilities are hardly affected. We fi nd that women suffer larger wage losses than men. Poor entry conditions are associated with an increased probability of employment at lower quality employers. The primary mechanism through which graduates catch up to their luckier counterparts is mobility across jobs and sectors to better paying employers. We show that those who graduate during a recession are more likely to switch jobs earlier, and less likely to switch jobs later in their career. This suggests an intertemporal shift in job-search effort. While both men and women who graduate during a recession are more likely to switch employers in the short-run, the average returns to successful job search are much higher for men than for women.
n° 355, June 2017
The Performance of Publicly Managed Venture Capital Funds
DUBOVIK Andrei, STEEGMANS Joep
Governments, when designing support for venture capital financing, face a choice to either sponsor existing private VC funds or organize and manage their own public VC funds. There is emerging evidence that syndicated financing by private and publicly sponsored VC funds is correlated with better exit performance. At the same time little research has been done into the effectiveness of publicly managed VC funds. We show that syndicated financing by private and publicly managed VC funds leads to a 5.1 p.p smaller chance of a successful exit compared to purely private financing. This finding is robust to reputation and culture/distance effects.
n° 354, June 2017
The Elasticity of Taxable Income for the Self-Employed: Heterogeneity across Reforms and Income Levels
BOSCH Nicole, DE BOER Henk-Wim
This paper studies the causal relation between effective marginal tax rates for the self-employed and their taxable income using panel data for the period 1999-2012. This period contains three tax reforms that we use to identify the elasticity of taxable income (ETI). We estimate an ETI of 0.3 for the self-employed. Individuals respond stronger to the major tax reform in 2001 than to two smaller reforms in 2005 and 2007. We reveal signifi cant heterogeneity in ETI across the income distribution and occupational choice. Contrary to earlier studies, the ETI is higher for self-employed with a lower income than for self-employed with a higher income. We also find that self-employed respond much stronger to financial incentives than wage earners. However, there is little heterogeneity in responses for demographic subgroups: women only have a slightly higher ETI than men, and the ETI is roughly similar across educational levels. We carefully assess our instruments using recent insights in the ETI literature. Instruments based on lagged income are not preferable for our sample of self-employed who experience high variation in income. And the choice of sampling weights - base-year income or lagged income - matters in our analysis which again demonstrates the high heterogeneity across income levels.
n° 353, June 2017
Using Tax Deductions to Promote Lifelong Learning: Real and Shifting Responses
VAN DEN BERGE Wiljan, JONGEN Egbert, VAN DER WIEL Karen
Policymakers are concerned about potential underinvestment in lifelong learning. In this paper we study to what extent a tax deduction helps to stimulate post-initial training. Speci fically, we employ a regression kink and regression discontinuity design as jumps in tax bracket rates generate exogenous variation in the effective costs of lifelong learning. Using high quality data on tax returns of the universe of Dutch taxpayers, we nd that the tax deduction has heterogeneous effects on lifelong learning. Low-income singles show no response. For high-income singles we nd an effect of 10% on the probability to use the tax deduction. Furthermore, ignoring shifting of expenses between partners leads to spurious large estimates for primary earners and spurious negative estimates for secondary earners.
n° 352, June 2017
The urban economics of retail
OSSOKINA Ioulia, TEULINGS Coen, SVITAK Jan
This paper is the first to document empirically that urban shopping areas have a pronounced centre where the rents are the highest, and a negative rent gradient. We use this insight to build and test empirically a simple theoretical model of the competition between the residential and the retail land in a city. The model predicts that rents and occupancy rates on the edges of shopping areas are most sensitive to changes in economic conditions. Demand shocks may lead to transformations between retail and residential land use, mostly at the edge, and to a contraction or expansion of shopping areas. The model predictions are tested on unique data on the location and characteristics of all retail and non-retail properties within 300 largest shopping areas in the Netherlands in 2004-2014, a period including the Great Recession. With every 100 metre distance from the centre of a shopping area rents fall, on average, by 15 percent. Shopping streets, areas located on attractive sites and areas o¤ering free parking have a ‡atter distance decay. The vacancy rate on the edge of a shopping area is almost twice as high as in the centre. During the Great Recession some 2% of the retail properties were transformed into other use, mostly on the edges of the shopping areas.
n° 351, May 2017
Collateral Damage? Decreasing House Prices and Entrepreneurial Lending
MOCKING Remco, VOGT Benedikt, HASSINK Wolter
We study the effect of housing collateral on entrepreneurial lending in the Netherlands. This residential collateral channel is especially relevant for sole proprietors for whom there is no legal distinction between the owner and the business. We make use of unique administrative data on outstanding bank credit of all Dutch sole proprietorships in the period 2007 - 2012. Our estimates indicate that home owning entrepreneurs were hit less severe in the times of crisis than renting entrepreneurs. Relative to renters, during the economic crisis, the incidence of having outstanding bank credit decreased 2% percent less for home owners. Home owners also experience a 40 basis points weaker increase in costs of credit compared to renters. Within the group of home owners higher LTVs only go along with higher prices during the crisis relative to lower LTVs.
n° 350, May 2017
Tax arbitrage incentives for mortgage prepayment behavior: Evidence from Dutch micro data
GROOT Stefan, LEJOUR Arjan
This paper exploits a unique set of Dutch micro data to analyze the response in prepayment behavior to changes in incentives for prepaying. The paper shows that the effect of mortgage interest rates on the value of prepaying a mortgage (also taking taxes and returns on savings into account) is equivalent to a change in the tax rate on financial wealth. This feature is used to estimate tax elasticities (i.e. the elasticity of changes in wealth tax revenues resulting from changes in prepayment with respect to the wealth tax rate). Using a linear probability model with the Arellano-Bond estimator, the paper finds that the prepayment probability increases by 0.5% point if the prepayment value as a fraction of the mortgage increases by 1% point. The effect is about six times as high for households owning more than 200,000 euro and it is not statistically significant for households with little financial wealth.
n° 349, May 2017
Optimal Tax Routing: Network Analysis of FDI diversion
VAN'T RIED Maarten, LEJOUR Arjan
The international corporate tax system is considered as a network and, just like for transportation, 'shortest' paths are computed, minimizing tax payments for multinational enterprises when repatriating profits. We include corporate income tax rates, withholding taxes on dividends, double tax treaties and the double taxation relief methods. We find that treaty shopping leads to an average potential reduction of the tax burden on repatriated dividends of about 6 percentage points. Moreover, an indicator for centrality in the tax network identifies the United Kingdom, Luxembourg and the Netherlands, amongst others, as the most important conduit countries. Tax havens do not have a crucial role in treaty shopping. In the regression analysis we find that the centrality indicators are robustly significant explanatory variables for bilateral FDI stocks. This also holds for our treaty shopping indicator.
n° 348, April 2017
Knowledge diffusion across regions and countries: evidence from patent citations
VAN DEN BERGE Wiljan, BOLHAAR Jonneke, VAN ELK Roel
We study knowledge spillovers from European universities and other research organizations using data from patent citations at the EPO. Using matching techniques to construct a sample of control patents, we show that the probability to cite a university patent declines with distance. In particular, we fi nd a sharp cut-o ff at around 25 kilometers. For longer distances the probability to cite a university patent is more or less constant. For other research organizations we find no evidence that distance plays a role. Country borders are shown to play an important role in restricting the diff usion of patents of both universities and other research organizations. These results are in line with recent literature for the U.S. and suggest that knowledge spillovers and tacit knowledge are important when using knowledge embodied in university patents.
n° 347, March 2017
Are good researchers also good teachers? The relationship between research quality and teaching quality
PALALI Ali, VAN ELK Roel, BOLHAAR Jonneke, RUD Iryna
We investigate the relationship between research quality and teaching quality using data from Maastricht University, the Netherlands, where students are randomly allocated to different teachers within the same course. We measure research quality by the publication records of the teachers and teaching quality by both student evaluations of the teachers and final student grades. We find that being taught by teachers with high quality publications leads to higher grades for master students. This is not fully reflected in the student evaluations of teachers. Master students do not give higher scores to teachers with high quality of publications, bachelor students give lower scores.
n° 346, March 2017
The Impact of House Price Shocks on the Savings of Dutch Homeowners and Renters
BIJLSMA Michiel, MOCKING Remco
We study the impact of changes in house prices on savings using administrative panel data on Dutch owner-occupying and renting households over the period 2006-2013. We analyze the immediate response as well as the response aggregated over several years. We find a marginal propensity to save (MPS) out of housing wealth in the short-run between 0 and -0.05, while the long-run effect ranges from -0.02 to -0.13. Younger homeowners consistently respond more strongly both in the short and the long-run, while pre-crisis leverage has a non-homogeneous effect in the short-run and no effect in the long-run. We only find a small, significant, and positive shortrun effect for old renters and no effect for all other groups of renters, suggesting that our results are not driven by common causality.
n° 345, March 2017
Negative home equity and job mobility
VAN VELDHUIZEN Sander, VOOGT Bart, VOGT Benedikt, MORESCALCHI Andrea
We investigate the impact of negative home equity on job mobility. Panel fixed effects estimation is carried out by making use of Dutch administrative panel in the period 2006-2011. To control for self-selection into negative home equity, we consider homeowners who fall into negative home equity because of an exogenous price decline in their house. We compare them to homeowners with positive equity. Negative home equity has a moderate negative effect on the probability to switch jobs. If a household plunges into negative home equity, then the head of the household is about 5.2% less likely to switch jobs. Read also: Discussion Paper 323 'Negative Home Equity and Household Mobility: Evidence from Administrative Data' .
n° 344, March 2017
The role of inflation-linked bonds
WESTERHOUT Ed, CIOCYTE Ona
The market for inflation-linked bonds (ILBs) is growing, but still small when compared to the market for nominal bonds. This paper raises the question why governments do not rely more on ILBs to finance their public debts? The obvious starting point for an analysis of ILBs is that they protect investors from the risk of inflation. ILBs are also known to be relatively illiquid, however. This paper derives that the average rate of return on ILBs can therefore be lower or higher than the one on corresponding nominal bonds. Inspection of the yields on nominal bonds and ILBs during the last fifteen years suggests that the liquidity premium is substantial and may be even larger than the inflation risk premium. A literature review of econometric estimates of the inflation risk premium and the liquidity premium leads to the same result. This result may be not surprising, given that inflation has been historically low during the last fifteen years. Consequently, ILBs may turn out to be a more expensive for the government than nominal bonds. We have also derived that ILBs help to stabilize the public debt ratio, but add to the volatility of the public deficit ratio. The latter is a con for countries in the eurozone because of the rules laid down in the Stability and Growth Pact. Combining these two results helps to explain why governments in euro countries do not rely much more on ILBs. We have also looked at the case of the Netherlands more specifically. Some observers expect that the demand for ILBs from Dutch pension funds would be huge if the Dutch government would start issuing ILBs. We do not disagree that demand could potentially be large, but warn that it is also possible that demand may actually turn out to be rather limited. Given that there are ample opportunities for pension funds to invest in ILBs issued by other euro countries, the fact that pension funds have refrained thus far from investing huge amounts in ILBs makes us think that pension funds will not change their ILB holdings dramatically if the Dutch government were to issue ILBs. This may relate to the fact that ILBs add to the volatility of the coverage ratio of pension funds, which is particularly painful in case of low coverage ratios.
n° 343, February 2017
Switching gains and health plan price elasticities: 20 years of managed competition reforms in the Netherlands
DOUVEN Rudy, KATONA Katalin, SCHUT Erik, SHESTALOVA Victoria
In this paper we estimate health plan price elasticities and financial switching gains for consumers over a 20 years period in which managed competition was introduced in the Dutch health insurance market. The period is characterised by a major health insurance reform in 2006 to provide health insurers with more incentives and tools to compete, and to provide consumers with a more differentiated choice of products. Prior to the reform, in the period 1995-2005, we find a low number of switchers, between 2-4% a year, modest average total switching gains of 2 million euro per year and short-term health plan price elasticities ranging from -0.1 to -0.4. The major reform in 2006 resulted in an all-time high switching rate of 18%, total switching gains of 130 million euro, and a high short-term price elasticity of -5.7. During 2007-2015 switching rates returned to lower levels between 4-8% per year, with total switching gains in the order of 40 million euro per year on average. Total switching gains could have been 10 times higher if all consumers would have switched to one of the cheapest plans. We find short-term price elasticities ranging between -0.9 and -2.2. Our estimations suggest substantial consumer inertia throughout the entire period as we find degrees of choice persistence ranging from about 0.8 to 0.9.
n° 342, February 2017
Understanding employment decentralization by estimating the spatial scope of agglomeration economies
VERSTRATEN Paul, VERWEIJ Gerard, ZWANEVELD Peter
This paper argues that the spatial decay function of agglomeration economies is much more complex than is often assumed in the agglomeration literature. We provide insight into this issue by analyzing a nationwide and spatially rich wage panel. The key finding is that wages and urbanization are not significantly related on short distances ( This positive effect attenuates across geographic space and becomes insignificant after 40-80km. This non-monotone relation between wages and distance to economic mass is in line with recently observed trend towards employment decentralization, because it suggests that agglomeration economies on short distances, i.e. in city centers, are offset by congestion externalities. Additionally, this paper finds no evidence that foreign economic mass affects wages in the Netherlands, which suggests that national borders are still a substantial barrier for economic interaction.
n° 341, February 2017
VAT and Agriculture: Lessons from Europe
CNOSSEN Sijbren
Little has been written about the treatment of agriculture under the value added tax (VAT). This article attempts to fill the void by surveying and evaluating the situation in the Member States of the European Union (EU) and some other countries. Farmers are often exempted from VAT for administrative and political reasons. But this means that the VAT on their inputs cannot be 'washed out' through the tax deduction/credit mechanism. It then has to be borne by the farmers themselves or becomes an indeterminate and capricious element in consumer prices. To compensate farmers for the uncompensated VAT on inputs, the EU has devised a flat-rate scheme that permits them to charge a presumptive rate (approximately equal to the effective VAT rate on sector-wide inputs) on their sales to taxable agro-processing firms which, in turn, are permitted to take a deduction for this flat-rate addition from the VAT on their sales. Obviously, the flat-rate scheme is an arbitrary way of trying to achieve equal treatment between exempt and taxable farmers and between exempt farm products and other taxable goods and services. Full taxation, subject to the general threshold, appears to be the preferred choice.
n° 340, January 2017
The effect of financial development on economic growth: a meta-analysis
BIJLSMA Michiel, KOOL Clemens, NON Marielle
The financial crisis has renewed interest in the finance-growth relationship. We analyze the empirical literature and find a moderate positive but decreasing effect of finance on growth. Empirical studies on the finance-growth relationship show a wide range of estimated effects. We perform a meta-analysis on in total 551 estimates from 68 empirical studies that take private credit to GDP as a measure for financial development and distinguish between linear and logarithmic specifications. First, we find evidence of significantly positive publication bias in both the linear and log-linear specifications. This contrasts with findings in two other recent meta-studies, possibly due to a distortion introduced by their transformation procedure. Second, the logarithmic estimates give a robust significantly positive average effect of financial development on economic growth after correction for publication bias. In our preferred specification a 10 percent increase in credit to the private sector increases economic growth with 0.09 percentage points. For the linear estimates, no significant effect of credit to the private sector on economic growth is found on average. Overall, the evidence points to a positive but decreasing effect of financial development on growth.
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