CEU Electronic Theses and Dissertations, 2020
| Author | Kreko, Judit |
|---|---|
| Title | Essays in Empirical Analysis of Economic Policy |
| Summary | Two of the three essays investigate the role of employment policies in labor market outcomes of disabled persons, focusing on Hungarian policy reforms and using administrative data. The first chapter explores the effect of the disability quota-levy system. The chapter concludes that firms react sensitively to the financial incentive, however, low effective labor supply hampers the effectiveness of the quota regulation. The second chapter focuses on the effects of earnings limit accompanied to disability benefits and it demonstrates that a low earnings limit might reduce earnings and employment rate of partially disabled beneficiaries. The third chapter (with Gábor Oblath) investigates the relationship between economic growth and real exchange rate misalignment within the European Union, using panel econometric techniques. In this essay we find that deviation in the price level of GDP and the internal relative price from levels consistent with economic development affects economic growth in the EU and analyze the role of different factors influencing this effect. Chapter 1: Effect of employment tax incentives: the case of disability quota in Hungary The first chapter evaluates the effect of the Hungarian disability quota - levy system on disabled employment and firm behavior, and also aims to shed light on factors influencing the effectiveness of employment tax incentives. According to the quota rule, firms above a certain size threshold, have to employ at least five percent disabled employees or pay a levy in case of non-compliance. The special feature of the Hungarian quota system is the uniquely high levy, which is accompanied by poor labor market integration of the disabled. The estimation exploits two significant policy changes: the drastic increase in the levy in 2010 and the increase in the firm size threshold from 20 to 25 employees in 2012. The policy effect on disabled employment is estimated on firm level data with regression discontinuity design (RDD). The baseline RDD results are adjusted to account for the potential bias arising from non-random firm selection, as many firms adjust their size to avoid the quota. The estimated disabled employment effect is high in international comparison, however, almost three-quarter of the quota is not fulfilled. I find evidence that the ratio of disabled population influences the disabled employment effect of the quota. This suggests that low effective labor supply is a factor behind low quota fulfillment. Chapter 2: Earnings limit for disability benefits: is it really a cash-cliff? The second chapter aims to evaluate the effect of disability benefit earnings limits on labor supply of moderately disabled individuals. Earnings limits accompanied to disability benefits are often blamed for their negative work incentive, though their impact on labor supply is ambiguous even a priori and the empirical evidence is mixed. This paper adds to this debate by analyzing the effect of a policy reform which decreased the earnings ceiling accompanied to the main benefit of moderately disabled persons in Hungary, the regular social assistance (RSA), from 80% of the pre-disability wage to 80% of the statutory minimum wage. The impact of tighter restrictions is estimated in a regression discontinuity (RD) design and in a difference in difference (DiD) framework, using administrative data. Both RD and DiD results confirm that the lower earnings ceiling has not induced more beneficiaries to exit the benefit and take a job paid above the new limit. However, it reduced both earnings and employment of beneficiaries. The results suggest that the substitution effect dominates the income effect in labor supply reactions to the new earnings limit. The results suggest that the substitution effect dominates the income effect the labor supply reactions to the new wage limit. Despite the low wage ceiling and the low amount of the benefit, many RSA recipients choose staying below the threshold rather than leaving the benefit and take a better paid job under the stricter wage restrictions, resulting in discontinuously lower income of new entrants. Chapter 3: Economic growth and real exchange rate misalignments in the European Union (joint with Gábor Oblath) In this chapter we investigate the relationship between economic growth and real exchange rate (RER) misalignments within the European Union (EU) during the period 1995-2016. In addition to the relative price level of GDP, we quantify an alternative indicator for the RER: the internal relative price of services to goods. We interpret RER-misalignments as deviations from levels consistent with levels of economic development among EU countries. Using pooled OLS and dynamic panel techniques, we find that within the EU over- (under-) valuations, both in the relative price level of GDP and the internal relative price indicator are associated with lower (higher) growth. This is mainly due to developments in countries operating under fixed exchange rate regimes. Our results indicate that the level of development does not influence the strength of the growth-misalignment relationship within the EU. Regarding the price level of GDP, we find that the positive relationship between undervaluation and growth diminishes with the degree of undervaluation. We find that overvaluation has a statistically significant negative effect on export market shares and private investments, indicating that both the competitiveness and the investment channels play a role in the relationship between growth and RER misalignments. The policy implications of the analysis point to the importance of a growth strategy avoiding overvaluation on the one hand, and to the futility of aiming at excessive undervaluation, on the other. |
| Supervisor | Andrea Weber, Róbert Lieli, Álmos Telegdy, |
| Department | Economics PhD |
| Full text | https://www.etd.ceu.edu/2020/kreko_judit.pdf |
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