EconPol Working Paper Series

Cover of EconPol Working Paper 61

Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment

Jouko Verho (VATT Institute for Economic Research), Kari Hämäläinen (VATT Institute for Economic Research), and Ohto Kanninen (Labour Institute for Economic Research)

Replacing minimum unemployment benefits with a guaranteed basic income of equal size has minor employment effects in an advanced country, researchers from the Finnish VATT Institute for Economic Research and the Labour Institute for Economic Research find. The study examined 2,000 benefit recipients in Finland who were randomized to receive a monthly basic income between 2017 and 2018. The experiment sought to remove potential welfare traps that unemployed persons face by diminishing administrative barriers through a monthly basic income combined with a considerable improvement in the monetary incentives for employment. The authors of the study find that the 95% confidence interval of the first-year primary outcome estimate, measured in annual employment days, ranges from -2.3 to 5.4, concluding that the experiment had minor employment effects at best.

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Cover of EconPol Working Paper 60

Corruption and Economic Growth: Does the Size of the Government Matter?

António Afonso (EconPol Europe; ISEG – School of Economics and Management, Universidade de Lisboa; REM – Research in Economics and Mathematics, UECE), Eduardo de Sá Fortes Leitão Rodrigues (ISEG – School of Economics and Management, Universidade de Lisboa)

Corruption has a negative effect on the economy - specifically on the level and growth of GDP - and large governments register less benefit from reducing corruption than small governments. This working paper from António Afonso and Eduardo de Sá Fortes Leitão Rodrigues finds that developing economies, regardless of government size, benefit less from reducing corruption and government size is not sufficient to explain the influence of corruption on economic activity - although the level of effectiveness of public services is crucial. The findings suggest that private investment is a potential transmission channel for corruption. 

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Cover of EconPol Working Paper 59

Survey-Based Structural Budget Balances

Marcell Göttert, Timo Wollmershäuser (EconPol Europe, ifo Institute – Leibniz Institute for Economic Research at the University of Munich)

The budget dispute between Italy and the European Commission in 2018 gave new impetus for the debate about the reliability of output gap estimation methods and their use for calculating structural budget balances. In this paper, Marcell Göttert and Timo Wollmershäuser review the main properties of the mainstream approaches. They show that the structural budget balances resulting from the production function approach and the time series approach are imprecise, subject to large revisions and often biased. Apart from these technical flaws, the mainstream approaches also suffer from political economy problems. As the computation of structural budget balances in the mainstream approach is difficult and model-dependent, it is not easy to explain to the public and prone to manipulation. In addition, the first ex post estimation is only available late with the first publication of GDP. The authors propose an alternative approach to calculate structural budget balances on the basis of a business survey.

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Cover of EconPol Working Paper 58

Robots at Work? Pitfalls of Industry Level Data

Karim Bekhtiar, Benjamin Bittschi, Richard Sellner (EconPol Europe, Institute for Advanced Studies [IHS], Vienna)

An analysis of data from the International Federation of Robotics (IFR), currently the most widely used data on the economic effects of robotization, has found that robotization has significantly lower productivity effects than previously assumed and may cause falling wages. Authors Karim Bekhtiar, Benjamin Bittschi and Richard Sellner (EconPol Europe, IHS Vienna) claim that using the data can be misleading if information on sectors that are either unaffected by or only marginally exposed to robotization is combined with those which are heavily affected, such as manufacturing.The study also rejects previous research findings that the technology causes skill-biased technological change and instead finds the opposite to be true.

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Cover EconPol Working Paper 57

The Role of Fiscal Policies for External Imbalances: Evidence from the European Union

António Afonso and José Carlos Coelho (EconPol Europe, ISEG - Lisbon School of Economics & Management, Universidade de Lisboa; REM/UECE)

This research from António Afonso and José Carlos Coelho studies the existence of a causal relationship between the general government balance and the current account balance (assessed as a percentage of GDP) for 28 European Union countries, using annual data for 1996 to 2019. They find that an increase in budget deficit of 1 pp of GDP results in a deterioration of the current account deficit of 0.318 pp of GDP, which supports the Twin Deficits Hypothesis.

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