BICEPS, in cooperation with partners from Vienna University of Economics and Business, IT-company Dolphin Technologies (Austria) and Swedish National Road and Transport Research Institute, has successfully applied for the ERA-NET Cofund Urban Accessibility and Connectivity (ENUAC) third call titled “Innovations for Managing Sustainable Urban Accessibility”. The funding agencies from participating countries agreed to support our proposed research project “City Tolls That Works”. The respective local funding agency for this grant is the Latvian Council of Science.
The project aims to identify ways to improve public attitude toward road congestion tolls in cities. Most economists recognize city tolls as an effective policy measure to fight traffic jams and decrease the negative environmental impacts of car traffic in cities. However, unlike paid car parking, a transport policy measure that is present in almost every urban area in Europe, city tolls tend to face strong public backlash. Singapore, London, Milan, Stockholm and Gothenburg are noticeable exceptions of cities with working road congestion pricing. Public acceptability of the pricing mechanism is low mainly due to concerns that tolls lack fairness, affecting some population groups more negatively than others. Such public resistance makes the idea of city tolls de facto non-operational – there was no progress in the introduction of road congestion tolls in European cities over the past decade. This motivates our search for road tolling schemes that can really work in cities, i.e., that make cities more accessible and sustainable, while also being perceived as fair and having broad public support.
To succeed, one first needs to gain a solid understanding of what population groups actually benefit and lose under existing city tolls and why. Project’s Swedish partner will use unique real-world congestion pricing and registry data of the full Swedish population to acquire new insights on long-term distributional effects of city tolls. These will inform our project further, as BICEPS will propose and measure public support in Riga and Vienna (together with the Austrian partners) for innovative road-pricing schemes, including one with a cash-back component, in which collected tolls are returned directly back to drivers in the form of public transport tokens. BICEPS will then support Austrian partners that will design and implement a field experiment in Vienna that measures behavioral reactions to such novel pricing instruments.
The research consortium is led by Vienna University of Economics and Business. The project period runs from April 2023 until October 2025. Sergejs Gubins is BICEPS senior researcher associated with the project.
Congratulations to Zane Vārpiņa, Marija Krūmiņa, Kata Fredheim, and Anders Paalzow on the publication of their article “Back for business: The link between foreign experience and entrepreneurship in Latvia” in the International Migration journal!
Research shows that return migrants have a higher propensity to set up an entrepreneurial activity or be self-employed compared to non-migrants. We take a multidisciplinary approach and empirically study the case of Latvia as a migration donor country to learn how re-migrants participate in entrepreneurship back at home. We are interested if return migrants can be seen as a vehicle for entrepreneurship development and if it is worth looking at them as agents of business growth and innovation. Not only we measure the fact of being entrepreneurial but also explore sources that contribute to the higher propensity, attitudes to creating own business venture, level of ambitions and population sentiment towards entrepreneurs. Based on a nationally representative adult population survey of 8000 observations, we find that early-stage entrepreneurial activity, established business ownership as well as intrapreneurship for return migrants exceed that of the non-migrant population. The self-perceived capabilities to start business is higher for those who have lived abroad, and fear of failure is lower. Return migrants also have better business networks and higher growth and export ambitions. Latvian return migrant entrepreneurship is not necessity driven but rather motivated by opportunities. Migration experience, length of stay aboard and capital accumulated abroad are found to be significant predictors of probability to become entrepreneur when controlled for socioeconomic and personal factors.
We are happy to invite you to a BICEPS/SSE Riga research seminar, which will take place on Thursday, March 30, at 17:00 at SSE Riga, room 411.
We are delighted to welcome Andris Saulītis as the speaker. Andris is a Senior Researcher at the University of Latvia’s Institute of Philosophy and Sociology. He earned his PhD in sociology from the European University Institute in Florence, Italy. Andris Saulītis’ research centers on household financial behavior and experimental methodology.
Speaker: Andris Saulītis (Institute of Philosophy and Sociology, University of Latvia)
Title: Nudging or Gambling to Save? A Field Experiment on Savings Behaviour (co-authored with Lea Kroeger, Humboldt University of Berlin)
Time: Thursday, March 30, 17:00
Venue: SSE Riga, room 411
This experimental study aims to investigate the effect of nudges and prize-linked savings (PLS) account and examine the external validity of laboratory experiments on savings behaviour. We employ a natural setting in collaboration with a professional survey company operating in Latvia and Estonia. The company recruits respondents on a daily basis to take part in commissioned surveys in return for a payment. While usually the payment to the individuals is done immediately after filling out a survey, the experimental design presented participants with a choice between immediate and delayed consumption of the money earned. The experimental design consisted of three experimental groups. In baseline offer, respondents were given the choice between receiving 10 euros immediately or depositing all or part of the amount in a virtual savings account for six months, with a maximum payout of 12 euros. In the social norm treatment, respondents were informed before the choice question that the survey focuses on household financial behaviour and that previous surveys revealed that the majority of respondents choose to save. The PLS account treatment offered individuals, who allocated all 10 euros to the savings account, to participate in a lottery with the chance to win an additional 5 euros on the top of the interest earned. The experimental results show that both social norm nudge and PLS account treatments tend to increase the number of individuals who decide to save. However, it is much lower than found in the laboratory experiments that have examined the effect of PLS accounts on savings behaviour. Both treatments resulted in approximately similar 8% points increase in the number of individuals who opted for savings. The introduction of the PLS account increased savings by 13%, while the social norm treatment increased it by 24%. At the same time, we identify several suggestive savings patterns that are in line with previous studies. First, individuals who play lotteries are more likely to invest in PLS, while non-lottery players are more responsive to social norms. Second, Estonians tend to save more often than Latvians, a trend that has been found in many empirical studies. Taken together, the results of this field experiment provide a more accurate representation of the true behaviour of individuals when it comes to savings and investment decisions. It also suggests that social norms can be as persuasive as financial incentives to increase the savings level.
We are happy to invite you to a BICEPS/SSE Riga research seminar, which will take place on Thursday, February 16, at 17:00 at SSE Riga, room 411.
We are delighted to welcome Ellam Kulati as the speaker. Ellam is a PhD Scholar at the Centre for Economic Analysis (CenEA, Poland) and a Quantitative Psychology and Economics PhD candidate at the University of Warsaw.
Speaker: Ellam Kulati (Centre for Economic Analysis (CenEA), University of Warsaw, Quantitative Psychology and Economics (QPE))
Title: Ageing and Urban Demand for Existing Homes
Time: Thursday, February 16, 17:00
Venue: SSE Riga, room 411
How does demographic ageing translate into the housing market? Despite the popularity of hedonic models in housing demand studies, situations where quantity changes better reflect demand adjustments have previously been identified. Using uniquely compiled data on 65 Polish city districts, spanning from 2010 to 2020, this paper interrogates price and turnover as measures of demand while empirically determining the demand adjustment patterns rendered by an ageing population. Results from the implemented spatial panel models reveal an inverse relationship of ageing to the demand for homeownership, predominantly reflected in price relative to quantity responses. The findings are robust to non-spatial model specifications.
We invite you to a BICEPS/SSE Riga research seminar, which will take place on Thursday, November 24, at SSE Riga, room 411 (note a room change).
We are delighted to welcome Anikó Bíró as the speaker. Anikó is a senior researcher at the Institute of Economics, Centre for Economic and Regional Studies in Budapest, Hungary. She holds a PhD from Central European University. Anikó does empirical research in the fields of Labour Economics, Health Economics, and the Economics of Ageing. Her work has been published in journals such as the Journal of Public Economics, Labour Economics and Health Economics. Read more about the speaker here.
Speaker: Anikó Bíró (Institute of Economics, Centre for Economic and Regional Studies, Hungary)
Title: Firm Heterogeneity and the Impact of Payroll Taxes (co-authored with Réka Branyiczki, Attila Lindner, Lili Márk and Dániel Prinz)
Time: Thursday, November 24, 17:00
Venue: SSE Riga, room 411 (not the usual 611)
We study the impact of a large payroll tax cut for older workers in Hungary. Motivated by the predictions of a standard equilibrium job search model, we examine the heterogeneous impact of the policy. Employment increases most at low-productivity firms offering lower-wage jobs, which tend to hire from unemployment, while the effects are more muted for high-productivity firms offering high-wage jobs. At the same time, wages only increase at high-productivity firms. These results point to important heterogeneity in the incidence of payroll tax cuts across firms and highlight that payroll taxes have a significant impact on the composition of jobs in the labor market.
No prior registration for the seminar is necessary. For any questions about the seminar, or if you have a colleague that would like to be added to the distribution list, please write to Nicolas Gavoille.
On August 23, Nicolas Gavoille presented the paper “What we pay in the shadow: Labor tax evasion, minimum wage hike and employment” at EEA-ESEM 2022 Conference in Milan.
The conference webpage: https://eea-esem-2022.org/
Saskaņā ar Dzimumu līdztiesības indeksu Latvija ir otrā līdztiesīgākā valsts Eiropas Savienībā, runājot par sieviešu un vīriešu iesaistīšanos aprūpes pienākumos, kā arī viņu ieguldījumu ēdiena gatavošanā un mājas darbos. Šajā rakstā es pievērsīšos Latvijas stiprajām un vājajām pusēm dzimumu nelīdztiesības novēršanai neapmaksātos mājas darbos un aprūpē. Jo īpaši es parādīšu, ka, par spīti plaši izplatītajam labvēlīgajam viedoklim par dzimumu līdztiesību ģimenes dzīvē, Latvijas mājsaimniecībās liels aprūpes un mājas darbu slogs joprojām gulstas uz sieviešu pleciem.
Pilns raksts ir pieejams šeit.
Raksti no Armēnijas, Baltkrievijas, Gruzijas, Polijas, Ukrainas un Krievijas ir pieejami angļu valodā un vasts valodās šeit.
Par FROGEE Policy Briefs
FROGEE Policy Briefs ir īpaša rakstu sērija, kuras mērķis ir sniegt pārskatus un popularizēt ekonomiskos pētījumus, kas saistīti ar dzimumu līdztiesības jautājumiem. Debates par politiku, kas saistīta ar dzimumu līdztiesību, bieži ir ļoti politizētas. Mēs uzskatām, ka, izmantojot argumentus, kas iegūti no jaunākajām pētniecībā balstītām zināšanām, mēs varētu veidot auglīgāku diskusiju par politikas priekšlikumiem un galu galā sasniegt labākus rezultātus.
Rakstu mērķis ir uzlabot izpratni par pētniecībā balstītiem argumentiem un to nozīmi, aptverot galvenās teorijas un svarīgākos atklājumus jomās, kas izraisa īpašo interesi pašreizējās debates. Raksti sākas ar īsiem vispārīgiem pārskatiem par konkrēto tēmu, kam seko valstij raksturīgais konteksts, konkrētu politikas izaicinājumu, īstenoto reformu un citu politikas iespēju apspriešana.
Atruna: rakstos ir izteikti autoru viedokļi; tie ne vienmēr atspoguļo FREE tīkla un tā pētniecības institūtu viedokli.
New SSE Riga/BICEPS research paper by Nicolas Gavoille (SSE Riga, BICEPS) and Anna Zasova (BICEPS).
Abstract. The interactions between minimum wage policy and tax evasion remain largely unknown. We study firm-level employment effects of a large and biting minimum wage increase in Latvia conditional on labor tax compliance. The Latvian labor market is characterized by the prevalence of envelope wages, i.e., unreported cash-in-hand complements to the official wage. We apply machine learning to classify firms between compliant and tax-evading using a unique combination of administrative and survey data. We then show that firms engaged in labor tax evasion are insensitive to the minimum wage shock. Our results suggest that these firms use wage underreporting as an adjustment margin, converting (part of) the envelope into legal wage. Increasing minimum wage contributes to tax rule enforcement, but this comes at the cost of negative employment consequences for compliant firms.
Keywords: Minimum wage, employment, tax evasion
JEL: J08, H26, E26
Baltic International Centre for Economic Policy Studies (BICEPS) is a partner in the Nordic-Baltic project Global2Micro on how companies deal with economic uncertainty.
BICEPS is participating in the Baltic Research Program project “Micro-level responses to socio-economic challenges in face of global uncertainties” (Global2Micro) funded by the European Economic Area (EEA) countries (Iceland and Lichtenstein) and Norway grants for the period 2014–2021.
The aim of the project is to achieve a deeper understanding of how firms adjust their behaviour in the uncertain and evolving environment caused by events such as an increased concentration on domestic matters and engagement in trade wars by the US, the British decision to leave the European Union and an increase in global political and economic power by China, as well as current pandemic and global lockdowns.
These broad socio-economic challenges will be tackled by analysing in detail, firstly, how firms adjust to trade and labour market shocks in terms of their labour allocations, human capital and technological investments; secondly, concentrating on how the two major adjustments of firms’ production functions – labour and technology – interact in response to increasing global uncertainty, especially in the face of deglobalisation and the fragmentation of global trade links; finally, combining the empirical insights from the first and the second blocks, and building a theoretical framework on the labour market adjustments, paying special attention to the complementarity/substitutability of new types of labour and capital as well as labour and technology (automation). The three blocks will take three different approaches – empirical analysis based on administrative data, empirical analysis based on the new big data methods, theoretical and structural analysis – and dovetail in the plan to understand the firm- and individual-level adjustments.
BICEPS will mainly contribute to the analysis of firms’ reaction to minimum wage shocks. How do firms adapt to such changes in the labour market policy? How does a minimum wage hikes affect employment? A particular characteristic of the labour markets in the region is the prevalence of the so-called “envelope wages”, i.e., unreported cash-in-hand complements to the official wage. In this setup, minimum wage policy can become a fiscal policy tool: a minimum wage hike pushes firms to convert part of the envelope into official wage to comply with the new level, so that they remain under the tax authorities’ radar. Can wage underreporting act as a buffer to absorb minimum wage shocks?
The first study completed by BICEPS researchers under the Global2Micro project is available as SSE Riga/BICEPS Research paper What we pay in the shadow: Labor tax evasion, minimum wage hike and employment.
The expected project consortium results include not less than 12 theoretical and empirical publication in high level academic journals, a number of working papers and policy notes to foster economic policy debate among economic agents and equip the policy makers with relevant economic policy tools, the creation of new databases available to economic researchers in the future, the organization of one large international conference and enhanced research network that would serve as a platform for future collaborations.
The project period runs from January 2021 until the end of 2023.
The research consortium is led by Vilnius University. Other research partners are Tallinn University of Technology, BI Norwegian Business School, University of Tartu and Hong Kong University of Science and Technology.
Marija Krumina is BICEPS project manager for the Global2Micro project. Nicolas Gavoille and Anna Zasova are BICEPS senior researchers associated with the Global2Micro project. Nicolas Gavoille is also a contact person for the project.
Project contract with the Research Council of Lithuania is S-BMT-21-8 (LT08-2-LMT-K-01-073).
Transition and Beyond: Women on the Labour Market in the Context of Changing Social Norms. A new FROGEE policy brief on the situation in the region, containing an overview of the situation in Latvia written by Anna Zasova (BICEPS).
After a short overview of women’s position on the labour market, this brief presents a simple exercise focusing on the top of the earnings distribution, which illustrates the development of gender earnings differences in Latvia since 1996. The results suggest that Latvian women are well-represented among top earners: the share of women in the top earnings percentile is about 30%. This share was growing until mid-2000s, but since then it has been gradually declining . The gender gap in median earnings is the largest at the top end of the distribution. We also show that older workers faced the largest gender earnings gap in 1996, but it has been steadily declining since then.
The full Report is available here.
Reports from Armenia, Belarus, Georgia, Poland, Ukraine and Russia are available in English and the national languages here.
About FROGEE Policy Briefs
FROGEE Policy Briefs is a special series aimed at providing overviews and the popularization of economic research related to gender equality issues. Debates around policies related to gender equality are often highly politicized. We believe that using arguments derived from the most up to date research-based knowledge would help us build a more fruitful discussion of policy proposals and in the end achieve better outcomes.
The aim of the briefs is to improve the understanding of research-based arguments and their implications, by covering the key theories and the most important findings in areas of special interest to the current debate. The briefs start with short general overviews of a given theme, which are followed by a presentation of country-specific contexts, specific policy challenges, implemented reforms and a discussion of other policy options.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.