Pub Date : 2025-12-30DOI: 10.1016/j.euroecorev.2025.105243
Christophe Cahn , Patrick Fève , Julien Matheron
This paper examines the long-run macroeconomic effects of a Fiscal Rebalancing reform that shifts taxation from payroll to consumption under a balanced-budget constraint. Using a heterogeneous-agent model calibrated to French data, we compare pre- and post-reform steady states. The reform increases both aggregate labor and capital, with a stronger impact on capital in the heterogeneous-agent model than in its representative-agent counterpart. It also heightens wealth inequality, as a disproportionate share of the increase in aggregate wealth accrues to wealthier households. A welfare analysis that accounts for transition dynamics reveals positive average welfare effects overall, although high-wealth and, separately, low-productivity households experience welfare losses. The results are robust across alternative calibrations and model specifications.
{"title":"The long-run effects of Fiscal Rebalancing in a heterogeneous-agent model","authors":"Christophe Cahn , Patrick Fève , Julien Matheron","doi":"10.1016/j.euroecorev.2025.105243","DOIUrl":"10.1016/j.euroecorev.2025.105243","url":null,"abstract":"<div><div>This paper examines the long-run macroeconomic effects of a Fiscal Rebalancing reform that shifts taxation from payroll to consumption under a balanced-budget constraint. Using a heterogeneous-agent model calibrated to French data, we compare pre- and post-reform steady states. The reform increases both aggregate labor and capital, with a stronger impact on capital in the heterogeneous-agent model than in its representative-agent counterpart. It also heightens wealth inequality, as a disproportionate share of the increase in aggregate wealth accrues to wealthier households. A welfare analysis that accounts for transition dynamics reveals positive average welfare effects overall, although high-wealth and, separately, low-productivity households experience welfare losses. The results are robust across alternative calibrations and model specifications.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"184 ","pages":"Article 105243"},"PeriodicalIF":2.4,"publicationDate":"2025-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145885965","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-30DOI: 10.1016/j.euroecorev.2025.105242
Jacob Kerspien , Jakob B. Madsen , Holger Strulik
This paper argues that the decline in the labor share is not driven by the overall quantity of capital, but by its changing composition. Constructing annual macro data for 16 advanced countries over two centuries, we show that, since 1980, the relative decline in buildings capital and the associated increase in real prices of buildings have reduced the labor share because buildings and labor are complements. The decline in the labor share has been reinforced by the increase in machinery capital and the associated decline of real prices of machinery capital because machinery capital and labor are substitutes. Together, these shifts in capital composition account for a substantial portion of the observed decline in the labor share of income.
{"title":"Capital composition and the decline of the labor share: Why buildings matter","authors":"Jacob Kerspien , Jakob B. Madsen , Holger Strulik","doi":"10.1016/j.euroecorev.2025.105242","DOIUrl":"10.1016/j.euroecorev.2025.105242","url":null,"abstract":"<div><div>This paper argues that the decline in the labor share is not driven by the overall quantity of capital, but by its changing composition. Constructing annual macro data for 16 advanced countries over two centuries, we show that, since 1980, the relative decline in buildings capital and the associated increase in real prices of buildings have reduced the labor share because buildings and labor are complements. The decline in the labor share has been reinforced by the increase in machinery capital and the associated decline of real prices of machinery capital because machinery capital and labor are substitutes. Together, these shifts in capital composition account for a substantial portion of the observed decline in the labor share of income.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"184 ","pages":"Article 105242"},"PeriodicalIF":2.4,"publicationDate":"2025-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145885966","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We survey young job seekers in rural India to understand the determinants of enrollment in a government training program with guaranteed placement into urban jobs. Respondents are over-optimistic: they expect jobs that pay more and are closer to home than actual placement opportunities. We implement an RCT and provide them with objective information on the distribution of placement salaries or job locations. The intervention successfully corrects subjects’ beliefs, which affects their decision to enroll in the program. By revealed preferences, our estimates suggest that job seekers need to be paid 50% more to work outside their home state.
{"title":"How do beliefs and preferences over jobs affect enrollment in vocational training: Experimental evidence from India","authors":"Apurav Yash Bhatiya , Bhaskar Chakravorty , Clément Imbert , Roland Rathelot","doi":"10.1016/j.euroecorev.2025.105238","DOIUrl":"10.1016/j.euroecorev.2025.105238","url":null,"abstract":"<div><div>We survey young job seekers in rural India to understand the determinants of enrollment in a government training program with guaranteed placement into urban jobs. Respondents are over-optimistic: they expect jobs that pay more and are closer to home than actual placement opportunities. We implement an RCT and provide them with objective information on the distribution of placement salaries or job locations. The intervention successfully corrects subjects’ beliefs, which affects their decision to enroll in the program. By revealed preferences, our estimates suggest that job seekers need to be paid 50% more to work outside their home state.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"184 ","pages":"Article 105238"},"PeriodicalIF":2.4,"publicationDate":"2025-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145885961","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-29DOI: 10.1016/j.euroecorev.2025.105235
Laura Muñoz-Blanco
What are the long-term impacts of large inflows of forcibly displaced persons on displaced-hosting social participation outcomes? This paper addresses this question by exploring the construction of reservoirs during the Spanish dictatorship (1936–1975), which forced thousands of people into displacement. I implement an instrumental variable approach using the margin of whether the reservoir closest to a municipality was planned before the dictatorship, as well as its size and distance. To this end, I rely on a newly assembled historical panel dataset on forced displacement and social participation. I show that host municipalities experience a long-term and sizable decrease in voter turnout and new associations between 1977 and 2019. In turn, a higher share of the internally displaced population relative to natives mitigate these effects. I propose two mechanisms associated with the drop in institutional and general trust in host municipalities. The findings highlight the need to strengthen social cohesion between natives and forcibly displaced groups.
{"title":"Reservoir-induced displacement and social participation: Evidence from the Spanish dictatorship","authors":"Laura Muñoz-Blanco","doi":"10.1016/j.euroecorev.2025.105235","DOIUrl":"10.1016/j.euroecorev.2025.105235","url":null,"abstract":"<div><div>What are the long-term impacts of large inflows of forcibly displaced persons on displaced-hosting social participation outcomes? This paper addresses this question by exploring the construction of reservoirs during the Spanish dictatorship (1936–1975), which forced thousands of people into displacement. I implement an instrumental variable approach using the margin of whether the reservoir closest to a municipality was planned before the dictatorship, as well as its size and distance. To this end, I rely on a newly assembled historical panel dataset on forced displacement and social participation. I show that <em>host</em> municipalities experience a long-term and sizable decrease in voter turnout and new associations between 1977 and 2019. In turn, a higher share of the internally displaced population relative to natives mitigate these effects. I propose two mechanisms associated with the drop in institutional and general trust in <em>host</em> municipalities. The findings highlight the need to strengthen social cohesion between natives and forcibly displaced groups.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"184 ","pages":"Article 105235"},"PeriodicalIF":2.4,"publicationDate":"2025-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145885964","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-26DOI: 10.1016/j.euroecorev.2025.105237
Conny Olovsson , David Vestin
Using a New-Keynesian model with an energy sector, we show that a green transition requires the real price of energy to increase and the real wage to fall. We prove analytically that if energy is not used in production and nominal wages and goods prices are rigid, a flexible energy price and a monetary policy rule that sees through energy-price changes are sufficient for replicating the flex-price allocation. If energy is used, there will be deviations from efficiency. Since energy’s share of income is small, these deviations are marginal unless the carbon tax is raised aggressively and/or monetary policy is ill-suited.
{"title":"Greenflation?","authors":"Conny Olovsson , David Vestin","doi":"10.1016/j.euroecorev.2025.105237","DOIUrl":"10.1016/j.euroecorev.2025.105237","url":null,"abstract":"<div><div>Using a New-Keynesian model with an energy sector, we show that a green transition requires the real price of energy to increase and the real wage to fall. We prove analytically that if energy is not used in production and nominal wages and goods prices are rigid, a flexible energy price and a monetary policy rule that sees through energy-price changes are sufficient for replicating the flex-price allocation. If energy is used, there will be deviations from efficiency. Since energy’s share of income is small, these deviations are marginal unless the carbon tax is raised aggressively and/or monetary policy is ill-suited.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"184 ","pages":"Article 105237"},"PeriodicalIF":2.4,"publicationDate":"2025-12-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145885963","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A puzzle is that price-to-rent ratios in the housing market of a given urban area vary a lot in time and space. In some contexts, accounting for differences in local discount rates or rent growth differences is not sufficient. We propose a variant of asset pricing equations for housing markets that include a price gradient in space. It is analogous to the transport equation in physics and generates a new range of solutions consistent with the facts. The main rationale for the price gradient in the asset pricing equation is the existence of spatial search frictions for housing, but other informational frictions are discussed. The main mechanism is supported by the data analysis of a large urban area, Paris region.
{"title":"Housing prices propagation: A theory of spatial interactions","authors":"Christophe Bruneel-Zupanc , Guillaume Chapelle , Jean-Benoît Eyméoud , Etienne Wasmer","doi":"10.1016/j.euroecorev.2025.105252","DOIUrl":"10.1016/j.euroecorev.2025.105252","url":null,"abstract":"<div><div>A puzzle is that price-to-rent ratios in the housing market of a given urban area vary a lot in time and space. In some contexts, accounting for differences in local discount rates or rent growth differences is not sufficient. We propose a variant of asset pricing equations for housing markets that include a price gradient in space. It is analogous to the transport equation in physics and generates a new range of solutions consistent with the facts. The main rationale for the price gradient in the asset pricing equation is the existence of spatial search frictions for housing, but other informational frictions are discussed. The main mechanism is supported by the data analysis of a large urban area, Paris region.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"184 ","pages":"Article 105252"},"PeriodicalIF":2.4,"publicationDate":"2025-12-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145885960","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-22DOI: 10.1016/j.euroecorev.2025.105245
Jonas Jessen , Lavinia Kinne , Michele Battisti
This paper estimates child penalties in labour-market-relevant cognitive skills, such as numeracy but also literacy and problem-solving competencies. We use international PIAAC data and adapt a pseudo-panel approach to a single cross-section covering 29 countries. Numeracy scores, which are associated with the largest returns to skills and pronounced gender differences, decline by 0.11 standard deviations for fathers and an additional 0.07 for mothers. We find no evidence of a deterioration in the occupational skill match for either mothers or fathers. Our findings suggest that changes in general labour market skills such as numeracy competencies explain at most 10% of child penalties in earnings. We additionally show that cross-sectional estimates of child penalties can be sensitive to controlling for predetermined characteristics that vary across cohorts, in our case education.
{"title":"Child penalties in labour market skills","authors":"Jonas Jessen , Lavinia Kinne , Michele Battisti","doi":"10.1016/j.euroecorev.2025.105245","DOIUrl":"10.1016/j.euroecorev.2025.105245","url":null,"abstract":"<div><div>This paper estimates child penalties in labour-market-relevant cognitive skills, such as numeracy but also literacy and problem-solving competencies. We use international PIAAC data and adapt a pseudo-panel approach to a single cross-section covering 29 countries. Numeracy scores, which are associated with the largest returns to skills and pronounced gender differences, decline by 0.11 standard deviations for fathers and an additional 0.07 for mothers. We find no evidence of a deterioration in the occupational skill match for either mothers or fathers. Our findings suggest that changes in general labour market skills such as numeracy competencies explain at most 10% of child penalties in earnings. We additionally show that cross-sectional estimates of child penalties can be sensitive to controlling for predetermined characteristics that vary across cohorts, in our case education.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"184 ","pages":"Article 105245"},"PeriodicalIF":2.4,"publicationDate":"2025-12-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145814311","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-19DOI: 10.1016/j.euroecorev.2025.105241
Michael Ehrmann , Paul Hubert
Exploiting the “quiet period” before European Central Bank (ECB) announcements, this paper studies ECB-related content on X/Twitter to better understand how investors acquire information about upcoming monetary policy decisions in the absence of central bank signals. We first document that attention is endogenous, as tweet traffic positively correlates with the magnitude of subsequent monetary policy surprises. Second, when there is large disagreement about the economic outlook, more tweet traffic is associated with an improved accuracy of market expectations already during the quiet period, thereby leading to smaller monetary policy surprises. This suggests that information exchange can improve expectation formation.
{"title":"Information acquisition ahead of monetary policy announcements","authors":"Michael Ehrmann , Paul Hubert","doi":"10.1016/j.euroecorev.2025.105241","DOIUrl":"10.1016/j.euroecorev.2025.105241","url":null,"abstract":"<div><div>Exploiting the “quiet period” before European Central Bank (ECB) announcements, this paper studies ECB-related content on X/Twitter to better understand how investors acquire information about upcoming monetary policy decisions in the absence of central bank signals. We first document that attention is endogenous, as tweet traffic positively correlates with the magnitude of subsequent monetary policy surprises. Second, when there is large disagreement about the economic outlook, more tweet traffic is associated with an improved accuracy of market expectations already during the quiet period, thereby leading to smaller monetary policy surprises. This suggests that information exchange can improve expectation formation.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"184 ","pages":"Article 105241"},"PeriodicalIF":2.4,"publicationDate":"2025-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145842799","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-19DOI: 10.1016/j.euroecorev.2025.105240
Tinna Laufey Ásgeirsdóttir , Marco Francesconi , Ásthildur M. Jóhannsdóttir , Gylfi Zoega
Leveraging administrative data from the University of Iceland, which cover more than 60% of the undergraduate population in the country, we examine how home exams and peer networks shape grades around the COVID-19 crisis. Using difference-in-difference models with a rich set of fixed effects, we find that home exams taken during university closures raised grades by about 0.5 points () relative to invigilated in-person exams outside the pandemic period. Access to a larger share of high-school peers leads to an average grade increase of up to two-fifths of a point, and exposure to higher-quality peers yielded additional, but smaller gains. Interactions between peer-network measures and the COVID/home-exam indicators are near zero, providing no evidence that peer networks amplified home-exam gains during the pandemic.
{"title":"How home exams and peers affect college grades in unprecedented times","authors":"Tinna Laufey Ásgeirsdóttir , Marco Francesconi , Ásthildur M. Jóhannsdóttir , Gylfi Zoega","doi":"10.1016/j.euroecorev.2025.105240","DOIUrl":"10.1016/j.euroecorev.2025.105240","url":null,"abstract":"<div><div>Leveraging administrative data from the University of Iceland, which cover more than 60% of the undergraduate population in the country, we examine how home exams and peer networks shape grades around the COVID-19 crisis. Using difference-in-difference models with a rich set of fixed effects, we find that home exams taken during university closures raised grades by about 0.5 points (<span><math><mrow><mo>≈</mo><mn>7</mn><mtext>%</mtext></mrow></math></span>) relative to invigilated in-person exams outside the pandemic period. Access to a larger share of high-school peers leads to an average grade increase of up to two-fifths of a point, and exposure to higher-quality peers yielded additional, but smaller gains. Interactions between peer-network measures and the COVID/home-exam indicators are near zero, providing no evidence that peer networks amplified home-exam gains during the pandemic.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"183 ","pages":"Article 105240"},"PeriodicalIF":2.4,"publicationDate":"2025-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145840691","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-11DOI: 10.1016/j.euroecorev.2025.105236
Anton Barabasch , Kamila Cygan-Rehm , Andreas Leibing
This paper investigates the long-run consequences of a later school entry for personality traits. For identification, we exploit the statutory cutoff rules for school enrollment in Germany within a regression discontinuity design. We find that relatively older school starters have persistently lower levels of neuroticism in adulthood. This effect is entirely driven by women, which has important implications for gender gaps in the labor market, as women typically score significantly higher on neuroticism at all stages of life, which puts them at a disadvantage. Our results suggest that family decisions regarding compliance with enrollment cutoffs may have lasting implications for gender gaps in socio-emotional skills.
{"title":"Timing of school entry and personality traits in adulthood","authors":"Anton Barabasch , Kamila Cygan-Rehm , Andreas Leibing","doi":"10.1016/j.euroecorev.2025.105236","DOIUrl":"10.1016/j.euroecorev.2025.105236","url":null,"abstract":"<div><div>This paper investigates the long-run consequences of a later school entry for personality traits. For identification, we exploit the statutory cutoff rules for school enrollment in Germany within a regression discontinuity design. We find that relatively older school starters have persistently lower levels of neuroticism in adulthood. This effect is entirely driven by women, which has important implications for gender gaps in the labor market, as women typically score significantly higher on neuroticism at all stages of life, which puts them at a disadvantage. Our results suggest that family decisions regarding compliance with enrollment cutoffs may have lasting implications for gender gaps in socio-emotional skills.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"183 ","pages":"Article 105236"},"PeriodicalIF":2.4,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145797362","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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