We argue that wage inertia plays a pivotal role in allowing empirically plausible variants of the standard search and matching model to account for the large countercyclical response of unemployment to shocks.

We examine how management ability affects the extent to which capital markets rely on earnings to value equity. Using a measure of ability that captures a management team’s capacity for generating revenues with a given level of resources compared to other industry peers, we find a strong positive association between managerial ability and the value relevance of earnings. Additional tests show that our results are robust to controlling for earnings attributes and investment efficiency. We use propensity score matching and the 2SLS instrumental variable approach to deal with the issue of endogeneity. For further identification, we examine CEO turnover and find that newly hired CEOs with better managerial abilities than the replaced CEOs increase the value relevance of earnings. We identify weak corporate governance and product market power as the two important channels through which superior management practices play an important role in the corporate decision-making process that positively influence the value relevance of earnings. Overall, our findings suggest that better managers make accounting information significantly more relevant in the market valuation of equity.

We explore the interaction between labour market reforms and financial frictions. Our study combines a new cross-country reform database on labour market reforms with matched firm-bank data for nine euro area countries over the period 1999 to 2013. While we find that labour market reforms are overall effective in increasing employment, restricted access to bank credit can undo up to half of long-term employment gains at the firm-level. Entrepreneurs without sufficient access to credit cannot reap the full benefits of more flexible employment regulation.

Does the administrative organization of police affect crime? In answering this question, we focus on the reorganization of local police agencies. Specifically, we study the effects police force reallocation via station closures has on local crime. We do this by exploiting a quasi-experiment where a reform substantially reduced the number of police stations. Combining a matching strategy with an event-study design, we find no effects on total theft. Police station closures, however, open up tempting opportunities for criminals in car theft and burglary in residential properties. We can rule out that our effects arise from incapacitation, crime displacement, or changes in employment of local police forces. Our results suggest that criminals are less deterred after police station closures and use the opportunity to steal more costly goods.

This paper studies the effects of the introduction of a new mass medium on sex crime in Germany. I use unique data on criminal offenses and broadband internet measured at the municipal level to shed light on this issue. In order to address endogeneity in broadband internet availability, I exploit technical peculiarities at the regional level that determine the roll-out of high-speed internet. Results provide evidence of a substitution effect of internet exposure on sex crime. The substitution effect is neither driven by differences in reporting behavior, nor by matching processes at the victim and offender side. This suggests that the consumption of extreme media plays an important role in explaining the documented high-speed internet effect.

We use rich microeconomic data on performance and choices of students at college entry to analyze interactions between the selection mechanism, eliciting college preferences through exams, and the allocation mechanism. We set up a framework in which success probabilities and student preferences are shown to be identified from data on their choices and their exam grades under exclusion restrictions and support conditions. The counterfactuals we consider balance the severity of congestion and the quality of the match between schools and students. Moving to deferred acceptance or inverting the timing of choices and exams are shown to increase welfare. Redistribution among students and among schools is also sizeable in all counterfactual experiments.

We explore the interaction between labour market reforms and financial frictions. Our study combines a new cross-country reform database on labour market reforms with matched firm-bank data for nine euro area countries over the period 1999 to 2013. While we find that labour market reforms are overall effective in increasing employment, restricted access to bank credit can undo up to half of long-term employment gains at the firm-level. Entrepreneurs without sufficient access to credit cannot reap the full benefits of more flexible employment regulation.

One explanation for the emergence of the housing market bubble and the subprime crisis is that increases in individuals’ income led to higher increases in the amount of mortgage loans demanded, especially for the middle class. This hypothesis translates to an increase in the income elasticity of mortgage loan demand before 2007. Using applicant‐level data, we test this hypothesis and find that the income elasticity of mortgage loan demand in fact declines in the years before 2007, especially for the mid‐ and lower‐middle income groups. Our finding implies that increases in house prices were not matched by increases in loan applicants’ income.

>>A completely revised version of this paper has been published as: Dettmann, Eva; Giebler, Alexander; Weyh, Antje: flexpaneldid. A Stata Toolbox for Causal Analysis with Varying Treatment Time and Duration. IWH Discussion Paper 3/2020. Halle (Saale) 2020.<<

The paper presents a modification of the matching and difference-in-differences approach of Heckman et al. (1998) and its Stata implementation, the command flexpaneldid. The approach is particularly useful for causal analysis of treatments with varying start dates and varying treatment durations (like investment grants or other subsidy schemes). Introducing more flexibility enables the user to consider individual treatment and outcome periods for the treated observations. The flexpaneldid command for panel data implements the developed flexible difference-in-differences approach and commonly used alternatives like CEM Matching and difference-in-differences models. The novelty of this tool is an extensive data preprocessing to include time information into the matching approach and the treatment effect estimation. The core of the paper gives two comprehensive examples to explain the use of flexpaneldid and its options on the basis of a publicly accessible data set.

We study the impact of higher capital requirements on banks’ balance sheets and their transmission to the real economy. The 2011 EBA capital exercise is an almost ideal quasi-natural experiment to identify this impact with a difference-in-differences matching estimator. We find that treated banks increase their capital ratios by reducing their risk-weighted assets, not by raising their levels of equity, consistent with debt overhang. Banks reduce lending to corporate and retail customers, resulting in lower asset, investment, and sales growth for firms obtaining a larger share of their bank credit from the treated banks.