Air pollution impairs productivity of professional soccer players

smoccerAir pollution is the top environmental risk factor of premature death. Annual costs of environmental damage for the European countries range between 60 and 200 billion euros, according to the European Environment Agency. The trade-off between the population health benefits of limiting air pollution and the negative impacts on industrial activity and employment has been well documented in the economics literature. A new paper by IZA researchers Andreas Lichter, Nico Pestel and Eric Sommer looks at an aspect that is highly relevant in this context – the negative effect of environmental pollution on individual labor productivity.

The study is based on panel data for professional soccer players in Germany over the period 1999-2011. Professional sports data offer consistent and comparable measures of productivity, which are largely missing for other occupations. The authors use a player’s total number of passes per match as the main productivity indicator and combine this data with hourly information on the concentration of particulate matter in spatial proximity to each stadium at the time of kickoff. The match scheduling rules of the “Bundesliga” are beyond the control of teams and players. This setting creates exogenous variation in the players’ exposure to air pollution, thus overcoming endogeneity concerns arising from residential sorting and avoidance behavior.

The findings indicate negative and non-linear effects of air pollution on short-run productivity even for levels well below the current limits set by the European Union. The impairment of performance further increases with the age of players and is stronger if they face an additional physical burden. Given that even moderate concentrations of particulate matter negatively affect the productivity of a selective group of young and male athletes to a considerable extent, the authors conclude that environmental pollution does not only affect population health but also impedes economic growth.

Download IZA Discussion Paper No. 8964 (PDF):
Productivity Effects of Air Pollution: Evidence from Professional Soccer

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Jan Svejnar wins 2015 IZA Prize in Labor Economics

jan_svejnarThe 2015 IZA Prize in Labor Economics goes to Czech-born economist Jan Svejnar, the James T. Shotwell Professor of Global Political Economy and Director of the Center on Global Economic Governance at Columbia University’s School of International and Public Affairs, New York.

Professor Svejnar will receive the IZA Prize, widely regarded as the most prestigious science award in the field of labor economics, for his major contributions to comparative economics in general and the economics of transition in particular. The award ceremony will be held during the annual IZA/World Bank Conference on Employment and Development in Bonn, Germany, June 4-6, 2015.

iza_prize_medalAccording to the award statement by the IZA Prize Committee, Professor Svejnar’s research on the transition from socialist to market economies “has broadened our understanding of this process in a fundamental way”. Soon after the fall of the Iron Curtain, Svejnar provided an elaborated policy agenda for a successful transition from socialist to market economies. In a seminal article published in the Journal of Economic Perspectives (1991), he emphasized the need for micro adjustments to achieve macro stabilization in the transforming socialist economies.

Svejnar’s policy proposal emphasized the importance of a suitable legal framework to guide economic activity, the need for firms to become more efficient through strong incentives for managers and workers of state enterprises, as well as specific social and labor market reforms to enhance labor mobility. His reform proposals, particularly concerning the legal framework and corporate governance, contributed substantially to the performance of the transition economies.

Beyond his academic accomplishments, Professor Svejnar has served as an advisor to governments, international institutions, non-profit organizations and private-sector companies. He also served as Economic Advisor to the late Czech President Vaclav Havel and was one of two presidential candidates in the Czech Republic in 2008.

See press releases by: IZA | SIPA, Columbia University

Read what other prominent economists say:

“Jan Svejnar is among those top economists who always have a policy perspective in mind. His insights have provided policymakers with the tools to master Europe’s greatest post-war challenge – the successful transition of the formerly socialist economies.”

(Klaus F. Zimmermann, IZA Director, University of Bonn)

stiglitz_cr“I want to congratulate my colleague Jan Svejnar for receiving the prestigious IZA Prize in Labor Economics. His contributions to our understanding of governance, globalization, and government policy – among many other topics – very much deserve this honor.”

(Joseph E. Stiglitz, Columbia University, 2001 Nobel Laureate
in Economics, 2005-2007 IZA Prize Committee)

ashenfelterJan Svejnar’s pioneering work on the transition of economies from centrally planned to market oriented has had enormous influence on both public policy and academic scholarship. Born in Czechoslovakia, Jan is himself an example of successful transition and an ideal selection for the prestigious IZA Prize.

(Orley C. Ashenfelter, Princeton University, 2003 IZA Prize Laureate)

krueger_cr“Jan Svejnar is a wonderful choice for the 2015 IZA Prize.  From his research on worker participation in firm management to the economics of transitioning communist countries, Jan Svejnar has had a profound influence on economics.  Indeed, Svejnar helped to establish the entire field of transition economics.”

(Alan B. Krueger, Princeton University, 2006 IZA Prize Laureate)

blank_cr“Jan Svejnar’s work has deepened our understanding of the pitfalls and opportunities facing emerging market economies. His analysis has contributed to economists’ theory and knowledge, but also has had direct effects on the policy choices made in various countries. The IZA Prize is a well-earned honor.”

(Rebecca M. Blank, University of Wisconsin-Madison,
2015 IZA Prize Committee)

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What France can learn from Italy about labor market reforms

kfz-italy-franceIn an opinion piece published in the Wall Street Journal, IZA Director Klaus F. Zimmermann analyzes European policymakers’ latest efforts at implementing difficult but necessary labor market reforms. Zimmermann sees remarkable progress in Italy, but lack of action in France. These are the key points he makes:

  • The coming battles over Europe’s troubled economy will be won not in Athens — but mainly in Paris and Rome.
  • The real surprise now is that it is Italy, not France, that has taken serious steps on enacting key measures on labor market reform.
  • While it is now more enticing to hire in Italy than it has been in years, things in France are progressing much more tentatively.
  • The Italian government has shown the way by creating the legislative framework for overcoming the two-tier labor market, while the French government is still dabbling with reforms that are only slightly more than symbolic.
  • Paris still shies away from other essential steps, such as making its rigid work-week regime more flexible by reforming the 35-hour work week and addressing overly rigid employment protection. These measures would bring the goal of economic growth and lower unemployment closer.

Read the full article (subscription required).


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What’s new with Germany’s minimum wage?

Alexander Spermann

Alexander Spermann

January 1st brought a pay raise for (potentially) four million people in Germany: The country’s first statutory minimum wage of 8.50 euros per hour went into effect. Due to concerns about negative employment effects in the low-wage sector, certain industries – such as hairdressing and meatpacking – were granted a two-year transitional period. The hotel and restaurant industry, on the other hand, already has to pay the minimum wage because bargaining partners did not agree on a collective wage agreement below 8.50 euros.

Among the labor market groups that are exempt from the minimum wage are young workers under 18, long-term unemployed (for the first six months of re-employment), interns (if the internship is required as part of the curriculum), newspaper deliverers, and seasonal workers. Transit truckers and amateur athletes were recently added to this list.

For recommendations on future adjustments of the minimum wage level, the government has installed a minimum wage commission consisting of seven members, which is formally identical with the Low Pay Commission in the UK. However, in contrast with the British model, the two economists on the German commission only play an advisory role with no voting power.

With the minimum wage in effect for 100 days now, what has happened with the German labor market? By coincidence, the timing of this profound reform was perfect – in the midst of upward-revised growth forecasts, record-low unemployment and close-to-zero inflation.

Evidence on the labor market impact is mostly anecdotal to date: Many workers receive higher hourly wages, some cab drivers are out of work, and the number of marginal jobs (“mini-jobs”) has fallen. But much of the current debate focuses on employer strategies to circumvent the minimum wage:

(1) Employees are urged to work unpaid overtime. It is unclear, however, if this is actually happening more frequently, or if media coverage of this practice has simply risen.
(2) Employees are forced into (or voluntarily choose) self-employment. Again, it is unclear whether this is an existing, perhaps accelerated trend. One may need to keep an eye on new instances of single-person self-employment.
(3) Service contracts seem to replace regular employment contracts more often.
(4) Piece rate pay has been implemented, for example, for cleaning hotel rooms.

Since counterfactual evidence is not available (what would have happened in the absence of a minimum wage?), one can only speculate whether these are genuine circumvention strategies.

What we are seeing is some price hikes in such areas of daily life as bakeries, hairdressers, and taxi services, which may lead to a drop in demand: People may consider staying at home or switching to cheaper bread and do-it-yourself haircuts. But price increases would have to be substantial in order for consumer demand to drop sharply during the current economic boom. The tide may turn if growth slows down and unemployment rises.

What’s with all the warning voices prior to the introduction of the minimum wage? Have economists actually overstated an economic danger in this case? No. They were right to push for transitional periods, exemptions and scientific evaluation to minimize the chances of negative employment effects. In mid-2016, when the minimum wage adjustment for 2017 will be decided, economics will provide valuable insights to facilitate an appropriate decision.

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International Roma Day: Empirical evidence on Roma integration and discrimination in Europe


Flag of the Romani people

April 8 marks International Roma Day. The Roma are Europe’s largest ethnic minority group, whose members face high levels of discrimination in all areas of every-day life, education, employment, housing, healthcare and policing.

IZA fellow Martin Kahanec is one of the leading experts on the economic discrimination of Roma in Europe and co-editor (with IZA Director Klaus F. Zimmermann) of “Ethnic Diversity in European Labor Markets: Challenges and Solutions”.

Read his interview on the key challenges for European policymakers (or see the video). He also provides a survey on the economic literature on Roma integration in European labor markets in his recent IZA World of Labor article.

See these IZA discussion papers for more on Roma integration and discrimination:

Read also:

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Debunking the myth of job-stealing immigrants: NYT article draws on research from the IZA network

construction-workers-199695_150In the face of increasing migrant flows, public discourse often focuses on the perceived negative effects on the native population. But do less educated immigrants really displace similarly skilled native workers? Or do they rather complement native skills, thus stimulating natives’ specialization and increasing their job opportunities and wages? A recent New York Times article seeks to debunk the myth of “job-stealing” immigrants. It cites research by various IZA network members including Giovanni Peri (University of California, Davis), one of the leading experts on this topic.

In a new IZA Discussion Paper, Mette Foged and Giovanni Peri examine the labor market outcomes of low-skilled natives in response to massive inflows of immigrants to Denmark during the period 1991-2008. The inflow, mainly caused by refugees from Former Yugoslavia, Somalia, Afghanistan and Iraq, consisted of mostly low-skilled workers, who were distributed across Danish municipalities through a centralized program. This administered distribution of immigrants provides a “natural experiment” to assess the impact of immigration on native labor market success.

Figure 1: Drivers of non-EU immigration growth

Figure 1: Drivers of non-EU immigration growth in Denmark, 1991-2008

Natives benefit from occupational upgrading and specialization

The findings suggest an occupational upgrading and specialization of natives in the face of immigrant inflows. While immigrants are initially restricted to occupations and jobs consisting of manual tasks due to their language problems, natives leave these jobs by specializing in more complex jobs with a primarily interactive task content. Accordingly, immigration increased native low-skilled wages and mobility. Contrary to popular belief, but in line with previous research, the study does not find an increase in the probability of unemployment for unskilled natives.

Figure 2: Mean complexity of tasks over time for groups of workers

Figure 2: Mean complexity of tasks over time for groups of workers

A geographically wider approach was applied by Peri in joint work with Cristina Cattaneo and Carlo V. Fiorio in their paper “Immigration and careers of European workers: effects and the role of policies” (published in the IZA Journal of European Labor Studies), which examined the effect of immigrants on the career of natives using data from eleven European countries. They found that in countries and occupations with larger immigrant competition, natives are pushed to faster occupational upgrades towards jobs using more sophisticated skills, requiring higher education and paying higher wages.

Natives are also more likely to undertake entrepreneurial activities in response to larger immigrant competition. This implies that immigrants “push up” natives in the labor market, and the overall effect on wages and income of natives is small and usually positive. While some natives may still be crowded out, new job opportunities are created at the same time as foreigners take jobs complementary to those of natives.

No negative effects on wages and job opportunities

These articles enrich an already extensive literature on the effect of immigration on native wages, which Peri has summarized in his IZA World of Labor article “Do immigrant workers depress the wages of native workers?”. It is based on a review of 27 original studies published between 1982 and 2013. Most of these studies for industrialized countries have found, on average, no effect on the wages of native workers. To understand the impact of immigrant workers on wages, immigration and the response of firms and workers must be analyzed together. Such studies show that native workers’ wages have been insulated by differences in skills between native and immigrant workers, adjustments in local demand and technology, expansion of production, and specialization of native workers in response to rising immigration.

The implications of Peri’s findings are that immigrants do not hurt, but may even improve, native labor market opportunities by filling manual and less-skilled occupations. More open immigration policies, combined with flexible labor markets, could thus result in better career opportunities for natives. Overall, the fear of immigrants “stealing” native jobs is clearly unjustified.

Evidence from Syrian refugees in Turkey

This also applies to refugee flows, as another recent IZA Discussion Paper shows for the local economy of southeast Turkey. While the massive influx of refugees from Syria increased food prices and – to a lesser degree – housing prices, the labor market appears unaffected in the regions bordering Syria. This can only partially be explained by Turks moving away from the Syrian border as there are far more refugees arriving than residents leaving the region.

Read more:

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Robots at work: Boosting productivity without killing jobs?

robots at workWhat have industrial robots done for growth and employment? IZA affiliate Georg Graetz and Guy Michaels answer this question using novel data on industrial robots in 14 different industries in 17 developed countries including Germany, Australia, South Korea, and the US, over the period 1993-2007.

Their findings: Robots account for one-sixth of productivity growth on average across countries. They also account for more than a tenth of total GDP growth. And while robots do not seem to reduce overall employment, there is some evidence that they reduce the employment of low-skilled and, to a lesser extent, middle-skilled workers.

By Georg Graetz and Guy Michaels

Robots’ capacity for autonomous movement and their ability to perform an expanding set of tasks have captured writers’ imaginations for almost a century. But more recently, robots have emerged from the pages of science fiction novels into the real world, and discussions of their possible economic effects have become ubiquitous (see e.g. The Economist 2014, Brynjolfsson and McAfee 2014). However, there has so far been no systematic empirical analysis of the effects that robots are already having.

We compile a new dataset spanning 14 industries (mainly manufacturing industries, but also agriculture and utilities) in 17 developed countries (including European countries, Australia, South Korea, and the US). Uniquely, our dataset includes a measure of the use of industrial robots employed in each industry, in each of these countries, and how it has changed from 1993-2007. Our data on these robots come from the International Federation of Robotics (IFR). We obtain information on other economic performance indicators from the EUKLEMS database. Continue reading

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