• Can market mechanisms solve the refugee crisis? Updated

    The combination of tradable quotas and matching would benefit host countries as well as refugees

    Ever since the major inflow of refugees (the “refugee crisis”) in 2015 and 2016, there has been heated debate about the appropriate distribution of refugees in the EU. Current policies revolve around mandatory quotas, which disregard the preferences of EU members and refugees alike. This problem can be addressed with two market mechanisms. First, tradable quotas minimize the cost of asylum provision for host countries. Second, a matching system gives refugees more discretion over where they are sheltered. While this proposal is theoretically appealing, it has yet to be tested in practice.
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  • Cash wage payments in transition economies: Consequences of envelope wages Updated

    Reducing under-reporting of salaries requires institutional changes

    In transition economies, a significant number of companies reduce their tax and social contributions by paying their staff an official salary, described in a registered formal employment agreement, and an extra, undeclared “envelope wage,” via a verbal unwritten agreement. The consequences include a loss of government income and a lack of fair play for lawful companies. For employees, accepting under-reported wages reduces their access to credit and their social protections. Addressing this issue will help increase the quality of working conditions, strengthen trade unions, and reduce unfair competition.
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  • The minimum wage versus the earned income tax credit for reducing poverty Updated

    Enhancing the earned income tax credit would do more to reduce poverty, at less cost, than increasing the minimum wage

    Minimum wage increases are not an effective mechanism for reducing poverty. And there is little causal evidence that they do so. Most workers who gain from minimum wage increases do not live in poor (or near-poor) families, while some who do live in poor families lose their job as a result of such increases. The earned income tax credit is an effective way to reduce poverty. It raises only the after-tax wage rates of workers in low- and moderate-income families, the tax credit increases with the number of dependent children, and evidence shows that it increases labor force participation and employment in these families.
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  • Early-life medical care and human capital accumulation Updated

    Medical care and public health interventions in early childhood may improve human capital accumulation as well as child health

    Ample empirical evidence links adverse conditions during early childhood (the period from conception to age five) to worse health outcomes and lower academic achievement in adulthood. Can early-life medical care and public health interventions ameliorate these effects? Recent research suggests that both types of interventions may benefit not only child health but also long-term educational outcomes. In some cases, the effects of interventions may spillover to other family members. These findings can be used to design policies that improve long-term outcomes and reduce economic inequality.
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  • Noncompete agreements in employment contracts

    Can regulation ensure that noncompete agreements benefit both workers and firms?

    Kurt Lavetti , September 2021
    Labor market institutions that may weaken workers’ bargaining leverage have received increased scrutiny in recent years. One example is noncompete agreements, which prevent workers from freely moving across employers, potentially weakening earnings growth. New data sources and empirical evidence have led policymakers to consider sharp restrictions on their use, especially among lower-income workers. These restrictions take many different forms, each of which has unique tradeoffs between the desire to protect workers while allowing firms to use noncompetes in cases where they may create social value.
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  • Interaction between technology and recruiting practices

    While technology has improved sharing and managing information, there are legitimate concerns about the quality of information and its use in recruitment

    Vera Brencic , August 2021
    Employers are steadily increasing their reliance on technology when recruiting. On the one hand, this technology enables the wide dissemination of information and the management of large quantities of data at a relatively low cost. On the other hand, it introduces new costs and risks. The ease with which information can be shared, for example, can lead to its unauthorized use and obsolescence. Recruiting technologies are also susceptible to misuse and to biases built into their underlying algorithms. Better understanding of these trade-offs can inform government policies aiming to reduce search frictions in the labor market.
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  • Alcoholism and mortality in Eastern Europe Updated

    Excessive drinking is the main cause of high male mortality rates, but the problem can be addressed

    Evgeny Yakovlev , August 2021
    Eastern European countries, particularly former Soviet Union economies, traditionally have the highest rates of alcohol consumption in the world. Consequently, they also have some of the highest male mortality rates in the world. Regulation can be effective in significantly decreasing excessive drinking and its related negative effects, such as low labor productivity and high rates of mortality. Understanding the consequences of specific regulatory measures and what tools should be used to combat excessive alcohol consumption is essential for designing effective policies.
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  • Is training effective for older workers? Updated

    Training programs that meet the learning needs of older workers can improve their employability

    Matteo Picchio , July 2021
    The labor market position of older workers is cause for concern in many industrialized countries. Rapid population aging is challenging pension systems. The recent economic crisis has forced many older adults out of the workforce, into either pre-retirement or non-employment. Encouraging people to work longer and fostering the employability of older workers have become priorities for policymakers. Training specifically designed for older workers might help attain these goals, since it may refresh human capital and reduce the pay–productivity gap. Training older workers might also benefit employers and society as a whole.
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  • Corporate income taxes and entrepreneurship Updated

    The type, quality, and quantity of entrepreneurship are influenced significantly by corporate income taxes—though only slightly

    Jörn Block , July 2021
    Corporate income taxation influences the quantity and type of entrepreneurship, which in turn affects economic development. Empirical evidence shows that higher corporate income tax rates reduce business density and entrepreneurship entry rates and increase the capital size of new firms. The progressivity of tax rates increases entrepreneurship entry rates, whereas highly complex tax codes reduce them. Policymakers should understand the effects and underlying mechanisms that determine how corporate income taxation influences entrepreneurship in order to provide a favorable business environment.
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  • Do in-work benefits work for low-skilled workers? Updated

    To boost the employment rate of the low-skilled trapped in inactivity is it sufficient to supplement their earnings?

    High risk of poverty and low employment rates are widespread among low-skilled groups, especially in the case of some household compositions (e.g. single mothers). “Making-work-pay” policies have been advocated for and implemented to address these issues. They alleviate the above-mentioned problems without providing a disincentive to work. However, do they deliver on their promises? If they do reduce poverty and enhance employment, is it possible to determine their effects on indicators of well-being, such as mental health and life satisfaction, or on the acquisition of human capital?
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