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Do Politicians Affect Firm Outcomes? Evidence from Connections to the German Federal Parliament

André Diegmann, Laura Pohlan, Andrea Weber
IWH Discussion Papers, No. 15, 2024
Abstract

We study how connections to German federal parliamentarians affect firm dynamics by constructing a novel dataset linking politicians and election candidates to the universe of firms. To identify the causal effect of access to political power, we exploit (i) new appointments to the company leadership team and (ii) discontinuities around the marginal seat of party election lists. Our results reveal that connections lead to reductions in firm exits, gradual increases in employment growth without improvements in productivity. Adding information on credit ratings, subsidies and procurement contracts allows us to distinguish between mechanisms driving the effects over the politician’s career.

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Early Child Care, Maternal Labor Supply, and Gender Equality: A Randomized Controlled Trial?

Henning Hermes, Marina Krauß, Philipp Lergetporer, Frauke Peter, Simon Wiederhold
IWH Discussion Papers, No. 14, 2024
Abstract
We provide experimental evidence that enabling access to universal early child care increases maternal labor supply and promotes gender equality among families with lower socioeconomic status (SES). Our intervention offers information and customized help with child care applications, leading to a boost in child care enrollment among lower-SES families. 18 months after the intervention, we find substantial increases in maternal full-time employment (+160%), maternal earnings (+22%), and household income (+10%). Intriguingly, the positive employment effects are not only driven by extended hours at child care centers, but also by an increase in care hours by fathers. Gender equality also benefits more broadly from better access to child care: The treatment improves a gender equality index that combines information on intra-household division of working hours, care hours, and earnings by 40% of a standard deviation, with significant increases in each dimension. For higher-SES families, we consistently observe negligible, insignificant treatment effects.
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Application Barriers and the Socioeconomic Gap in Child Care Enrollment

Henning Hermes, Philipp Lergetporer, Frauke Peter, Simon Wiederhold
IWH Discussion Papers, No. 13, 2024
published in: Journal of the European Economic Association
Abstract
Why are children with lower socioeconomic status (SES) substantially less likely to be enrolled in child care? We study whether barriers in the application process work against lower-SES children — the group known to benefit strongest from child care enrollment. In an RCT in Germany with highly subsidized child care (N = 607), we offer treated families information and personal assistance for applications. We find substantial, equity-enhancing effects of the treatment, closing half of the large SES gap in child care enrollment. Increased enrollment for lower-SES families is likely driven by altered application knowledge and behavior. We discuss scalability of our intervention and derive policy implications for the design of universal child care programs.
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How Do EU Banks’ Funding Costs Respond to the CRD IV? An Assessment Based on the Banking Union Directives Database

Thomas Krause, Eleonora Sfrappini, Lena Tonzer, Cristina Zgherea
IWH Discussion Papers, No. 12, 2024
published in: Journal of Financial Stability
Abstract
The establishment of the European Banking Union constitutes a major change in the regulatory framework of the banking system. Main parts are implemented via directives that show staggered transposition timing across EU member states. Based on the newly compiled Banking Union Directives Database, we assess how banks’ funding costs responded to the Capital Requirements Directive IV (CRD IV). Our findings show an upward trend in funding costs which is driven by an increase in cost of equity and partially offset by a decline in cost of debt. The diverging trends are most present in countries with an ex-ante lower regulatory capital stringency, which is in line with banks’ short-run adjustment needs but longer-run benefits from increased financial stability.
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Who Benefits from Place-based Policies? Evidence from Matched Employer-Employee Data

Philipp Grunau, Florian Hoffmann, Thomas Lemieux, Mirko Titze
IWH Discussion Papers, No. 11, 2024
Abstract

We study the granular wage and employment effects of a German place-based policy using a research design that leverages conditionally exogenous EU-wide rules governing program parameters at the regional level. The place-based program subsidizes investments to create jobs with a subsidy rate that varies across labor market regions. The analysis uses matched data on the universe of establishments and their employees, establishment-level panel data on program participation, and regional scores that generate spatial discontinuities in program eligibility and generosity. Spatial spillovers of the program linked to changing commuting patterns can be assessed using information on place of work and place of residence, a unique feature of the data. These rich data enable us to study the incidence of the place-based program on different groups of individuals. We find that the program helps establishments create jobs that disproportionately benefit younger and less-educated workers. Funded establishments increase their wages but, unlike employment, wage gains do not persist in the long run. Employment effects estimated at the local area level are slightly larger than establishment- level estimates, suggesting limited economic spillover effects. On the other hand, spatial spillovers are large as over half of the employment increase comes from commuters. Using subsidy rates as an instrumental variable for actual subsidies indicates that it costs approximately EUR 25,000 to create a new job in the economically disadvantaged areas targeted by the program.

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Inflation Concerns and Green Product Consumption: Evidence from a Nationwide Survey and a Framed Field Experiment

Sabrina Jeworrek, Lena Tonzer
IWH Discussion Papers, No. 10, 2024
Abstract
Promoting green product consumption is one important element in building a sustainable society. Yet green products are usually more costly. In times of high inflation, not only budget constraints but also the fear that prices will continue to rise might dampen green product consumption and, hence, limit the effectiveness of exerted efforts to promote sustainable behaviors. To test this suggestion, we conducted a Germany-wide survey with almost 1,200 respondents, followed by a framed field experiment (N=500) to confirm causality. In the survey, respondents’ stated “green” purchasing behavior is, as to be expected, positively correlated with concerns about climate change. It is also negatively correlated with concerns about future inflation and energy costs, but after controlling for observable characteristics such as income and educational level only the correlation with concerns about future prices remains significant. This result is driven by individuals with below-median environmental attitude. In the framed field experiment, we use the priming method to manipulate the saliency of inflation concerns. Whereas sizably relaxing the budget constraint (i.e., by 50 percent) has no impact on the share of organic products in participants’ baskets, the priming significantly decreases the share of organic products for individuals with below-median environmental attitude, similar to the survey data.
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Climate Stress Tests, Bank Lending, and the Transition to the Carbon-neutral Economy

Larissa Fuchs, Huyen Nguyen, Trang Nguyen, Klaus Schaeck
IWH Discussion Papers, No. 9, 2024
Abstract
We ask if bank supervisors’ efforts to combat climate change affect banks’ lending and their borrowers’ transition to the carbon-neutral economy. Combining information from the French supervisory agency’s climate pilot exercise with borrowers’ emission data, we first show that banks that participate in the exercise increase lending to high-carbon emitters but simultaneously charge higher interest rates. Second, participating banks collect new information about climate risks, and boost lending for green purposes. Third, receiving credit from a participating bank facilitates borrowers’ efforts to improve environmental performance. Our findings establish a hitherto undocumented link between banking supervision and the transition to net-zero.
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Import Shocks and Voting Behavior in Europe Revisited

Annika Backes, Steffen Müller
IWH Discussion Papers, No. 8, 2024
published in: European Journal of Political Economy
Abstract
We provide first evidence for the long-run causal impact that Chinese imports to European regions had on voting outcomes and revisit earlier estimates of the short-run impact for a methodological reason. The fringes of the political spectrum gained ground many years after the China shock plateaued and, unlike an earlier study by Colantone and Stanig (2018b), we do not find any robust evidence for a short-run effect on far-right votes. Instead, far-left and populist parties gained in the short run. We identify persistent long-run effects of import shocks on voting. These effects are biased towards populism and, to a lesser extent, to the far-right.
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Do Public Bank Guarantees Affect Labor Market Outcomes? Evidence from Individual Employment and Wages

Laura Baessler, Georg Gebhardt, Reint E. Gropp, Andre Guettler, Ahmet Taskin
IWH Discussion Papers, No. 7, 2024
Abstract
We investigate whether employees in Germany benefit from public bank guarantees in terms of employment probability and wages. To that end, we exploit the removal of public bank guarantees in Germany in 2001 as a quasi-natural experiment. Our results show that bank guarantees lead to higher employment, but lower wage prospects for employees after working in affected establishments. Overall the results suggest that employees do not benefit from bank guarantees.
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Forecasting Economic Activity Using a Neural Network in Uncertain Times: Monte Carlo Evidence and Application to the German GDP

Oliver Holtemöller, Boris Kozyrev
IWH Discussion Papers, No. 6, 2024
Abstract
In this study, we analyzed the forecasting and nowcasting performance of a generalized regression neural network (GRNN). We provide evidence from Monte Carlo simulations for the relative forecast performance of GRNN depending on the data-generating process. We show that GRNN outperforms an autoregressive benchmark model in many practically relevant cases. Then, we applied GRNN to forecast quarterly German GDP growth by extending univariate GRNN to multivariate and mixed-frequency settings. We could distinguish between “normal” times and situations where the time-series behavior is very different from “normal” times such as during the COVID-19 recession and recovery. GRNN was superior in terms of root mean forecast errors compared to an autoregressive model and to more sophisticated approaches such as dynamic factor models if applied appropriately.
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