Empirical Essays on the Socioeconomic Consequences of Economic Uncertainty
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A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Auer, Wolfgang Research Report Empirical Essays on the Socioeconomic Consequences of Economic Uncertainty ifo Beiträge zur Wirtschaftsforschung, No. 79 Provided in Cooperation with: Ifo Institute – Leibniz Institute for Economic Research at the University of Munich Suggested Citation: Auer, Wolfgang (2018) : Empirical Essays on the Socioeconomic Consequences of Economic Uncertainty, ifo Beiträge zur Wirtschaftsforschung, No. 79, ISBN 978-3-95942-047-1, ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München, München This Version is available at: http://hdl.handle.net/10419/191297 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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ISBN: 978-3-95942-047-1 Alle Rechte, insbesondere das der Übersetzung in fremde Sprachen, vorbehalten. Ohne ausdrückliche Genehmigung des Verlags ist es auch nicht gestattet, dieses Buch oder Teile daraus auf photomechanischem Wege (Photokopie, Mikrokopie) oder auf andere Art zu vervielfältigen. c ifo Institut, München 2018 Druck: ifo Institut, München ifo Institut im Internet: http://www.cesifo-group.de Acknowledgements This dissertation represents the work of my doctoral studies. Numerous people helped me along the way. While an exhaustive listing of all people who supported me in writing this dissertation would go well beyond the scope of this page of acknowledgments, I want to take the opportunity to name a few to whom I am particularly thankful. First and foremost, I would like to thank my supervisor Helmut Rainer for his constant guid- ance and support throughout the last years. I am grateful for the excellent academic advice, constructive discussions, and valuable and helpful suggestions on my work. I also thank Jörg Althammer for being my second supervisor and Daniel Baumgarten for joining the thesis committee. I am grateful to Natalia Danzer whose scientific advice and encouraging spirit have been very important to me during my doctoral studies. Furthermore, I thank her for collaboration on the third chapter of this dissertation and for the inspiration to write the fourth chapter. I also owe many thanks to my current and former colleagues at the ifo Institute Edith Banner, Stefan Bauernschuster, Anita Fichtl, Wido Geis, Timo Hener, Herbert Hofmann, Christian Holzner, Volker Meier, Sybille Lehwald, Wolfgang Nagl, Janina Reinkowski, Marina Riem, Judith Saurer, Bastian Schulz and all other colleagues at ifo for sharing ideas at conferences, in seminars and in discussions, as well as for a very enjoyable time. I also received support, comments, and suggestions from many other friends and colleagues that unfortunately cannot all be mentioned here. For excellent research assistance, I would like to thank among many others Maria Reese and Christina Stork. Financial support from the ifo Institute in Munich and the Institute for Structural Research (IBS) in Warsaw is gratefully acknowledged. Sincere thanks to the statistical oice in Munich – in particular to Heiko Bergmann and Nina Storfinger – for providing the data for the first and the second chapter. Last but not least, I thank my family and friends for the support throughout my life and in particular during the last couple of years. I am deeply grateful to my wife Carmen for her patience, love, and her motivating spirit. iii Preface Germany has a fertility rate far below replacement level, meaning that its population is pro- jected to shrink. Thus, fertility behavior is of highest interest for both policymakers and researchers. Figure 1 shows the development of the total fertility rate (TFR) for West and East Germany. The TFR is a hypothetical measure of how many children a woman would have over her lifetime if she were to experience the current age-specific fertility pattern. Since the baby boom in the middle of the 1960s, the West German TFR has been falling. The replacement rate of 2.1 children per woman was reached for the last time in 1970. Now, the TFR is stag- nating at a very low level of around 1.4 children per woman, making it one of the lowest in the developed world. The long-run trend for East Germany looks similar – negative and far below the replacement level. However, East Germany’s short-run fertility trend is dierent than that of West Germany. It has been argued that the tremendous fall in the eastern part of the country’s TFR to 0.8 children per woman in the period 1991 to 1994 is partly due to the uncertainty surrounding German Reunification and the transition from a socialist to a market-based economy. Indeed, the German Reunification is an example, among others, of economic uncertainty. Figure 1 : Total fertility rate from 1950 to 2013 in West and East Germany 2.5 2 1.5 1 .5 1950 1960 1970 1980 1990 2000 2010 West Germany East Germany Source: Destatis (1950-2013) Apart from demographers and also sociologists who have been interested in fertility behavior for decades, even economists have started to focus on this topic. The economic literature identifies several determinants of the fertility level, including preferences and values (Easterlin, 1973; Easterlin, Pollak, and Wachter, 1980), socioeconomic factors (Becker, 1991; Schultz, 1974), and institutional settings (Lundberg and Pollak, 2007). As pointed out by Becker (1960) early on, economic circumstances and, especially, labor market conditions are of major importance in fertility decisions since they determine the opportunity costs of childbearing. In a very simple framework, couples of reproductive age devote their disposable time either to working in the labor market or to childrearing at home. Therefore, labor market conditions can I Preface influence the time allocation within households and, consequently, fertility. The contribution of this dissertation is that it explicitly investigates the socioeconomic consequences arising from economic uncertainty on the labor market. Measuring economic uncertainty, however, is non-trivial. Situations that some individuals assess as uncertain in the sense of unpredictable future developments might be interpreted by other individuals in a more positive way as either challenging or even beneficial. At the individual level, uncertainty can be measured subjectively or objectively. For instance, indi- viduals can subjectively assess the economic situation in general as well as the security of their own particular employment. However, it is not clear whether self-assessed uncertainty is comparable across individuals. Thus, an oen preferred way of measuring uncertainty is to use observable and objective characteristics. More precisely, spells of unemployment and atypical employment, like marginal or fixed-term employment, are considered. Unemployment – and, to some extent, marginal employment – leads to career interruptions and uncertainty about future job and income prospects, whereas the economic uncertainty aspect of fixed-term employment involves the unemployment risk once the contract ends. At the aggregate level, economic uncertainty is basically measured by national or local economic conditions. One way of measuring economic uncertainty at the aggregate level is the unemployment rate in a certain area. For employed individuals in that area, it represents the risk of becoming unemployed. Thus, not the realized shock, but the inherent risk of becoming unemployment causes the uncertainty. This dissertation is comprised of four stand-alone research papers in which I analyze the socioeconomic consequences of economic uncertainty. At the aggregate level, I focus on local labor market conditions and how they aect period fertility measures in the short run (Chapter 1) and cohort fertility in the long run (Chapter 2). At the individual level, I empirically investigate the eects of starting a career with a fixed-term contract on the quantum and timing of fertility (Chapter 3) and on health conditions and well-being (Chapter