Műhelytanulmányok

We study three basic welfare axioms for school choice mechanisms with a reserve or quota-based affirmative action policy, namely non-wastefulness, respecting the affirmative action policy, and minimal responsiveness, and show that none of the previously proposed mechanisms satisfy all of them. Then we introduce a new mechanism which satisfies these three axioms. This mechanism issues immediate acceptances to minority students for minority reserve seats and otherwise it employs deferred acceptance. We analyze the fairness and incentive properties of this newly proposed affirmative action mechanism and provide possibility and impossibility results which highlight the trade-offs.

Anikó Bíró, Cecília Hornok, Judit Krekó, Dániel Prinz, Ágota Scharle

MKE-WP-38973

Disability benefits are costly and tend to reduce labor supply. While spending can be contained by careful targeting, correcting past flaws in eligibility rules or assessment procedures may entail welfare costs. We study a major reform in Hungary that reassessed the health and working capacity of a large share of beneficiaries while leaving work incentives unchanged. Leveraging birthday and health cutoffs in the reassessment, we estimate employment responses to termination or reduction of benefits driven by income effects. We find that among those who exited disability insurance due to the reform, 60% were employed in the primary labor market, 3% participated in public works and 37% were out of work without benefits in the post-reform period. The consequences of exiting disability insurance sharply differed by pre-reform employment status. 80% of beneficiaries who had some employment in the pre-reform year worked in the primary labor market, compared to only 38% of those without pre-reform employment.

Anikó Bíró, Réka Branyiczki, Attila Lindner, Lili Márk, Dániel Prinz

MKE-WP-38970

We study the impact of a large payroll tax cut for older workers on employment and wages in Hungary. By exploiting administrative data and applying a difference-in-differences empirical strategy, we document a modest employment increase equivalent to a labor demand elasticity of -0.3 and a pass-through rate of 22%. These average effects mask large heterogeneity across different firms. Employment mainly increases at low-productivity, low-paying firms, while no jobs are created at high-productivity, high-paying firms. At the same time, the tax cut is passed through to wages only at high-productivity, high-paying firms, while low-productivity, low-paying firms do not share the benefits of the tax cut with their workers. These results point to important heterogeneity in the incidence of payroll tax cuts across firms, highlighting that workers at different firms benefit differently from payroll taxes. They also demonstrate that payroll taxes can have a significant impact on the composition of jobs in the labor market.

Eric French, Attila Lindner, Cormac O'Dea,Tom Zawisza

MKE-WP-38967

We estimate the impact of public pension incentives on labor supply far from the normal retirement age by exploiting Poland's switch from a Defined Benefit to a Notional Defined Contribution scheme for men born after 1948. Using the universe of taxpayers and this sharp cohort-based discontinuity in the link between current contributions and future bene ts, we estimate an employment elasticity with respect to the return to work of 0.44 for ages 51-54. We estimate a lifecycle model that matches these results. The model implies that the change in the contribution-bene t link from the reform increases employment among those in their 30s but decreases it at older ages, reducing overall labor supply across the lifecycle by two months.

Jonathan Cohen, Andrew C. Johnston, and Attila Lindner

MKE-WP-38964

We use a panel of survey responses linked to administrative data in Germany to measure the depreciation of general skills while workers are unemployed. Both the reemployment hazard rate and reemployment earnings steadily fall with unemployment duration, and indicators of depression and loneliness rise substantially. Despite this, we find no decline in a wide range of cognitive and non-cognitive skills while workers remain unemployed. We find the same pattern in a panel of American workers. The results imply that skill depreciation in general human capital is unlikely to be a major explanation for duration dependence.

Giulia Giupponi, Robert Joyce, Attila Lindner, Tom Waters, Thomas Wernham, Xiaowei Xu

MKE-WP-38961

We assess the impact of nationwide minimum wages on employment throughout the whole wage distribution by exploiting geographical variation in the level of wages à la Card (1992). We find a substantial increase in wages at the bottom of the wage distribution, while we detect a small, statistically insignificant negative effect on employment. Combining the estimated change in the wage distribution with a tax and benefit micro-simulation model, we show that the minimum wage generates considerable proportional income gains up to the middle of the household income distribution.

Multi-stage tournaments consisting of a round-robin group stage followed by a knockout phase are ubiquitous in sports. However, this format is incentive incompatible if at least two teams from a group advance to the knockout stage where the brackets are predetermined. A model is developed to quantify the risk of tanking in these contests. The suggested approach is applied to the 2022 FIFA World Cup to uncover how its design could have been improved by changing group labelling (a reform that has received no attention before) and the schedule of group matches. Scheduling is found to be a surprisingly weak intervention compared to previous results on the risk of collusion in a group. The probability of tanking, which is disturbingly high around 25%, cannot be reduced by more than 3 percentage points via these policies. Tournament organisers need to consider more fundamental changes against tanking.

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