Risk Aversion and Sorting into Public Sector Employment

Abstract. This research note uses two German datasets – the large‐scale German Socioeconomic Panel and unique data from own student questionnaires – to analyse the relationship between risk aversion and the choice for public sector employment. Main results are (1) more risk‐averse individuals sort into public sector employment, (2) the impact of career‐specific and unemployment risk attitudes is larger than the impact of general risk attitudes and (3) risk taking is rewarded with higher wages in the private but not in the public sector.     

Public sector performance measurement and stakeholder support

Over the past several decades there has been dramatically increased attention paid to measuring the performance of public sector and nonprofit organizations in the United States and elsewhere. Recent research has indicated that public sector and nonprofit organizations are responsive to performance measurement in both productive and unproductive ways. However, it is not yet known how stakeholders respond to this measurement. This paper makes use of a unique panel survey dataset of the population of elementary and middle schools in the state of Florida to directly investigate this question. We exploit the fact that Florida changed its school grading system in 2002 and study the degree to which private contributions to schools are responsive to the information contained in school grades. We find evidence that school grades can have substantial effects on a school's ability to obtain private contributions. We also observe that schools serving different clienteles are treated differently in response to changes in school grades.     

The impact of entrepreneurship education on entrepreneurship skills and motivation

This paper analyzes the impact of a leading entrepreneurship education program on college students’ entrepreneurship skills and motivation using an instrumental variables approach in a difference-in-differences framework. We exploit that the program was offered to students at one location of a school but not at another location of the same school. Location choice (and thereby treatment) is instrumented by the relative distance of locations to parents’ place of residence. The results show that the program does not have the intended effects: the effect on students’ self-assessed entrepreneurial skills is insignificant and the effect on the intention to become an entrepreneur is even negative.     

The Relationship between Output and Unemployment with Efficiency Wages

Abstract. We construct a stylised model of the supply side with goods and labour market imperfections to show that an economy can rationally operate at a low-effort state in which the relationship between output and unemployment is positive. We examine data from the G7 countries over 1960–2001 and find that only German data strongly favour a persistent negative relationship between the level of output and rate of unemployment. The consequence of this is that circumstances exist in which market imperfections could pose serious obstacles to the smooth working of expansionary and/or stabilisation policies and a positive demand shock might have adverse effects on employment.     

Does accrual accounting alter fiscal policy decisions? - Evidence from Germany

Many governments have replaced traditional cash-based accounting with some form of accrual-based accounting system. However, empirical evidence on the effects of the public accounting system on fiscal policy is scarce. Following rules by the federal states, municipalities in Germany have adopted accrual-based accounting systems gradually. By exploiting variations over time and across states I find no evidence for an impact on the overall financial balance. However, my findings suggest that accrual accounting has altered the structure of the budget. Revenues from the sales of non-financial assets have decreased significantly. This supports the hypothesis that municipalities had used these one-off measures before to meet fiscal constraints. Using data on entities controlled by the municipalities, the analysis provides no evidence for repercussions on these public funds, institutions or enterprises.     

Public or Private Sector Wage Leadership? An International Perspective*

Whether a government acts as a wage leader, placing pressure on private‐sector wages (more open to competition), or whether it plays a passive role and merely follows wage negotiations in the private sector, there are important implications for macroeconomic development, particularly in small open economies and/or countries that are members of a monetary union, such as those of the European Monetary Union. With the notable exception of the case of Sweden, opinion on this issue is still divided. In this paper, we look at public‐ and private‐sector wage interactions from an international perspective (18 OECD countries). We focus on the causal two‐way relationship between public and private wage setting, confirming that the private sector, on the whole, appears to have a stronger influence on the public sector, rather than vice versa. However, we also find evidence of feedback effects from public wage setting, which affect private‐sector wages in a number of countries. When the private sector takes the lead on wages, there are few feedback effects from the public sector, while public wage leadership is typically accompanied by private‐sector feedback effects.     

Experience Rating versus Employment Protection Laws in a Model where Firms Monitor Workers*

While layoff costs in the U.S. are mostly due to experience‐rated unemployment insurance, layoff costs in European labour markets are primarily a consequence of employment protection laws. In this paper we compare the effects of experience rating and employment protection laws on employment and welfare in a model where unemployment arises due to efficiency wage setting and where labour turnover is inefficiently high. We show that a revenue‐neutral introduction of experience rating reduces labour turnover and increases employment and welfare. The introduction of employment protection laws may also reduce labour turnover but employment declines.