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The increase in employment polarization observed in several high-income economies has coincided with a reduction in inter-generational mobility. This paper argues that the disappearance of middling jobs can drive changes in mobility, notably by removing a stepping stone towards high-paying occupations for those from less well-off family backgrounds. Using data from two British cohorts who entered the labour market at two points in time with very different degrees of employment polarization, we examine how parental income affects both entry occupations and occupational upgrading over careers. We find that transitions across occupations are key to mobility and that the impact of parental income has grown over time. At regional level, using a shift-share IV-strategy, we show that the impact of parental income has increased the most in regions experiencing the greatest increase in polarisation. This indicates that the disappearance of middling jobs played a role in the observed decline in mobility.
This year‘s report addresses the future role governments and the challenges they are confronted with in post-pandemic times. It takes a broader perspective and relates the current situation to economic and political developments since the 1970s and examines whether and how the role of governments will change after the Covid-19 crisis.
A large literature characterises urbanisation as resulting from productivity growth attracting rural workers to cities. Incorporating economic geography elements into a growth model, we suggest that causation runs the other way: when rural workers move to cities, the resulting urbanisation produces technological change and productivity growth. Urban density leads to knowledge exchange and innovation, thus creating a positive feedback loop between city size and productivity that initiates sustained economic growth. This model is consistent with the fact that urbanisation rates in western Europe, most notably England, reached unprecedented levels by the mid-eighteenth century, the eve of the Industrial Revolution.
The 20th EEAG report, entitled “Beyond the Coronavirus Crisis: Investing for a Viable Future” has been released. Economists from Europe and the US are calling for changes to the Next Generation EU (NGEU) package to repair the damage caused by the coronavirus crisis.
The corona pandemic has created a health and economic crisis without modern parallel. As it hit affected countries ill-prepared and spread quickly within the EU, member states had to adopt more interventionist approaches than ever before – particularly in the areas of fiscal and monetary policy, labor markets and redistribution, and industrial policy. EU member states started controversial discussions about how to support those that were hit particularly hard. This debate has become a litmus test for solidarity in the world's richest bloc of nations.
The decisions and measures taken in each country and at the European level will set the course for economic development in the coming years and shape the countries' long-term prospects for decades to come. This EEAG policy brief is a supplement to the group's usual annual report. The authors examine the various effects of the crisis, how Europe can react effectively and how political measures should evolve as the pandemic subsides. In addition, the authors analyze how an efficient supranational insurance mechanism might look like.
In the 1930s, countries fought destructive trade conflicts – now we have a similar situation, but the conflicts are taking place in the tax system. These conflicts arise out of the twin impacts of globalization and digitalization. Once upon a time, there was an implicit understanding of fairness in taxation, meaning how countries tax within their borders and how the tax burden is distributed. More specifically, companies and individuals were taxed based on their residence and consumption in the destination country. Such an approach worked while these events were mostly perceived as national. However, the world has changed, and in an increasingly globalized, digitalized, and mobile world, these understandings no longer appear to work smoothly, efficiently, and uncontentiously.
The Great Recession has strongly influenced employment patterns across skill and gender groups in EU countries. We analyse how these changes in workforce composition might distort comparisons of conventional measures of gender wage gaps via non-random selection of workers into EU labour markets. We document that male selection (traditionally disregarded) has become positive during the recession, particularly in Southern Europe. As for female selection (traditionally positive), our findings are twofold. Following an increase in the labour-force participation of less-skilled women, due to an added-worker effect, these biases declined in some countries where new female entrants were able to find jobs, whereas they went up in other countries which suffered large female employment losses. Finally, we document that most of these changes in selection patterns were reversed during the subsequent recovery phase, confirming their cyclical nature.
The promotion system for French academic economists provides an interesting environment to examine the promotion gap between men and women. Promotions occur through national competitions for which we have information both on candidates and on those eligible to be candidates. Thus, we can examine the two stages of the process: application and success. Women are less likely to seek promotion, and this accounts for up to 76 percent of the promotion gap. Being a woman also reduces the probability of promotion conditional on applying, although the gender difference is not statistically significant. Our results highlight the importance of the decision to apply.
This articles focuses on the recent research efforts to incorporate income, wage and wealth inequality in macroeconomic models. I start by reviewing recent models on the impact of inequality on, on the one hand, long-run growth and, on the other, and macroeconomic fluctuations. The articles then reviews the literature concerned with the macroeconomic determinants of wage and wealth inequality. It concludes by discussing a number of possible avenues of research that seem to me particularly important, such as the impact of macroeconomic policy on distribution or the effect that firm size can have on both growth and wage inequality.