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IZA – Institute of Labor Economics

Social ties increase the chance of getting published in economics journals

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Social connections influence individual behavior and ultimately affect a variety of economic outcomes, such as welfare program participation, criminal activity, and labor supply. For professional careers, social networks undoubtedly play a crucial role, but they can cut both ways: Personally knowing a job candidate might improve the outcome of a selection process but also bears the risk of favoritism.

A vast literature in labor economics has investigated the use and beneficial effects of network membership on labor market outcomes (see e.g. IZA DP 5240). A new IZA Discussion Paper by Tommaso Colussi focuses on the efficiency of connections and whether they harm or improve the outcomes of selection processes.

His study analyzes the role of social connections in the publication process in economics, looking at the ties between editors and authors. His results show that an editor’s former PhD students and faculty colleagues experience an increase in their publication outcomes when the editor is in charge of a journal. At the same time, these connections improve the quality of published papers, as the analysis of citation suggests.

The ecosystem of economists

It is no secret that knowing the right people can help your career. But assessing the real impact of social ties and favoritism is more difficult than it seems, given that reliable data on social connections among (future) colleagues is often not available. The academic sector provides a rewarding exception, as scholars openly publish their academic histories and reveal much about their social connections. Colussi exploits this situation to empirically investigate the extent to which connections between authors and editors influence the selection (and quality) of articles in economics journals.

The world of economists who publish in high-impact journals is small and composed of interconnected scholars. Descriptive statistics show that about 43% of papers published in the journals considered are authored by at least one scholar that is connected to at least one editor at the time of the publication. Moreover, 72% of authors become connected to at least one editor at some point in time.

In order to explain the role which social ties play in this situation, Colussi built a unique dataset on articles, authors and editors of the top general interest journals in economics (American Economic Review, Journal of Political Economy, Econometrica and Quarterly Journal of Economics) over the period 2000-2006. These data allow to identify whether social ties between each author and each editor exist along various dimensions. An author was considered to be connected to an editor if he/she is a faculty colleague, a former PhD student, from the same PhD program, or a co-author.

Knowing the editor helps getting published, but doesn’t hurt quality

The results of Colussi’s study reveal that social ties with editors positively increase the chance for an author to get published. When a scholar is in charge of a journal, the number of papers published by his connections increases by about two papers in three years. Furthermore, editors tend to publish papers of scholars’ faculty colleagues and former graduate students. Connected scholars are also more likely to publish lead and longer articles.

To verify his findings, Colussi examined if his results could also be explained by other factors. For example, a journal’s preference towards papers in a particular research field could simultaneously affect the appointment of an editor, who is a prominent scholar in that field, and the publication outcomes of his connections. But the robustness checks showed that neither this “field effect”, nor other unobserved characteristics of connected scholars generated the correlation. Colussi illustrates that due to tastes and technological complementarities between connected scholars, editors always prefer to publish papers authored by researchers they are connected to.

In the second part of his study, Colussi looked at how this apparent academic favoritism affected the quality of the papers. He analyzed the effect of social ties on the number of citations that papers receive. The results showed that papers authored by an editor’s former PhD students increase the number of citations by more than 27% when this editor is in charge. However, this positive effect on quality does not apply to papers authored by past and current faculty colleagues.

In sum, Colussi found a twofold effect of social connections in academia: While editors clearly tend to favor connected authors, the connections are also likely to improve selection decisions and, in the case of former PhD students, lead to better results.

Image source: pixabay

Implications of human dignity for international development theory and practice

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In her contribution to the second international Human Dignity and Human Development Conference hosted by the University of Notre Dame’s Kellogg Institute for International Studies, IZA Research Asssociate Milena Nikolova related human dignity to subjective well-being measures in the context of development.

“From subjective well-being research, we learn how to operationalize normative concepts like dignity, develop relevant measures, and use the information to better understand human experience,” she said.

At the conference, development practitioners and scholars examined the implications of human dignity for development theory and practice, considering whether human dignity can serve as a common connector among predominant development frameworks, including the capability, well-being, and happiness approaches.

“Approaching human development from the perspective of human dignity serves as a locus across differences that might otherwise be intractable in the global environment,” said Kellogg Institute Director and legal scholar Paolo Carozza, who leads the initiative.

The conference is part of a multi-year research initiative investigating the role of human dignity in the practice of international development. [read more]

Photo: courtesy of the Kellogg Institute for International Studies.

How the “bobos” change cities and raise commuting costs

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How do the “bobos”, the new leftist bourgeoisie populating Western capitals’ city centers, alter the character and the policies in those cities? A new IZA discussion paper by Gilles Saint-Paul (Paris School of Economics and IZA) provides a theoretical model that explains the consequences of the bobo takeover: greater investment in urban amenities, socialized recreational events and “clean” means of transport, such as public transport and bike sharing. But these perks come at a price: The costs of housing and commuting by car go up. Saint-Paul proposes that bobos should subsidize social housing in their cities because ultimately everyone would profit from a greater level of social equilibrium in the cities.

The term “bobo” stands for “Bourgeois Bohème” and was coined by David Brooks (2000) in a famous book about the rise of a new knowledge elite. This new kind of bourgeoisie is generally considered as prevalent in globalized capital cities, and its lifestyle and political attitude stands in contrast to that of the traditional bourgeoisie. While bobos are likewise a politically powerful group, they generally support environmentalists and socialist parties. They have been instrumental in bringing about left-wing governments in municipalities such as Berlin, Paris or San Francisco, despite the relatively high economic status of this social class. The political consequences of the bobo takeover are recognizably different from the ones implemented both by the right and by the traditional left. They focus on:

  • greater investment in collective urban amenities and socialized recreational events;
  • reduced urban space for cars, generally coupled with a reduction in parking space, higher taxes and stricter regulations for the use of personal vehicles;
  • more investment in public transportation and in dedicated areas for bicycles, skate-boards, roller skates, etc. coupled with deregulation of the promotion of cheap bike and electrical car rental;
  • promotion of “social mixity” and “diversity” by means of transfer policies or subsidized housing to maintain a critical mass of lower class dwellers in the city center.

Bobos versus old-economy skilled workers

While many might consider these policies as positive, the advent of the bobo has also provoked resistance. Rising housing prices have pushed the intermediate classes out of the city centers and into the periphery. Saint-Paul’s paper provides a “purely economic perspective” on the effects of this bobo takeover. Instead of just assuming that bobos are a new kind of individuals with their own preferences, he attempts to explain them as a consequence of technological developments. The paper focuses on the relative roles of, and conflict of interest between, two kinds of bourgeoisie: The skilled workers of the old economy versus the skilled workers of the new economy (bobos). The former work in activities that are more land intensive, while still preferring to live in a city center. As a result they derive more utility from commuting and are less willing to raise commuting costs in order to improve urban amenities than the bobos.

As the new economy grows faster than the old economy, the bobos overtake the cadres as the politically decisive group in the city. As a result, the level of urban amenities goes up and so do transportation costs for car users. Saint-Paul also shows that it may be profitable for the decisive bobo class to subsidize locations for lower class unskilled workers in the city, even in the absence of any altruism toward them or intrinsic taste for a socially diverse makeup of the city. Such subsidies would force the economy to settle in a “bunkerized” equilibrium, in which the service providers to city dwellers are located in the city, so that the price of services no longer goes up with the amenity level. As a result, ex-post there is no cost to raising the amenity level in the city, and the resulting political equilibrium involves the highest possible level of amenities, while commuting has disappeared.

Finally, Saint-Paul provides evidence from France, where urban areas with the highest investments in amenities are those that (i) had a greater employment share in the new economy initially, (ii) experienced the fastest growth in house prices, and (iii) tended to have a greater increase in service employment as well as the proportion of inhabitants in public rent-controlled housing.

image source: pixabay

How language influences children’s economic behavior

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Patience is an important trait in children that can make a difference for a lifetime. Many disciplines, including economics, have studied how patience in intertemporal choices – preferring a later but larger reward over a sooner but smaller reward – is related to health and wealth outcomes.

For instance, it has been shown that more patient adults perform better at work and stay in their job longer; they have lower credit card debt and are less likely to smoke. For teenagers, a positive relation between patience and school performance or a healthy lifestyle has also been documented. Even more impressive, long-term studies have shown that a child’s degree of patience is positively related to long-term outcomes in adulthood, such as higher education, higher income, better health status (by being less likely obese, drinking or smoking) or lower crime rates.

A recent study by Matthias Sutter (University of Cologne), Silvia Angerer (IHS Carinthia), Daniela Glätzle-Rützler (University of Innsbruck) and Philipp Lergetporer (Ifo Institute) examines whether the language that children speak is related to how patient they are in experimental choices.

Why language makes a difference for intertemporal choice

The “linguistic-savings” hypothesis introduced by Keith Chen states that languages which grammatically separate the future and the present induce less future-oriented behavior than languages in which speakers can refer to the future by using present tense. In English, one could say “it will be cold tomorrow”, but not “it is cold tomorrow”. The former example characterizes languages that are said to have strong future-time reference (s-FTR). The latter example, however, sounds fine in languages like German that are said to have weak future-time reference (w-FTR).

In English or Italian (both s-FTR), where future tense is used, the future may seem more distant when referring to future events, thus inhibiting future-oriented behavior, due to the separation of future and present in a grammatically proper use of the language. In German (w-FTR), the ability to refer to future events by using present tense may reduce the magnitude with which future events are discounted because they seem closer to the present and more certain to manifest, thus making future-oriented choices more attractive. The grammatical difference between s-FTR and w-FTR languages may thus affect economic behavior, in particular decisions with intertemporal consequences.

German-speaking kids are more patient than their Italian-speaking peers

The authors test this influence of language on intertemporal choices in a controlled and incentivized experiment in the North Italian city of Meran, which is German- and Italian-speaking in equal parts. This offers an almost ideal experimental setup. Citizens of both language groups live next-door to one another, but schools are segregated by language, despite serving children from the same neighborhoods.

In the experiment, time preferences of 86% of all primary school kids (860 children) were measured with three simple choice problems referring to choose between few gifts today or more gifts in a few weeks. The results show that German-speaking children are significantly more patient in their choices than Italian-speaking children and are more willing to delay gratification. This general pattern persists across all age groups, indicating that already at the age of six years there is a strong difference between both groups of children (see figure below).

The authors show that these results are not related to differences in socio-demographic background data, IQ and risk attitudes. Interestingly, when parents in a household speak both languages, then the child’s level of patience in experimental choices is intermediate to the cases when both parents in the household speak only one language, either Italian or German.

Promote future-oriented behavior: Patience can be trained

A straightforward implication of the main finding in this paper is the question how one can contain the higher degree of impatience in speakers of s-FTR languages. This is where recent work in behavioral economics can potentially offer a starting point for future studies. Setting appropriate defaults, encouraging active decision-making (by making the choice options more transparent and forcing subjects to make a choice), or providing commitment facilities have been identified as useful instruments to promote future-oriented behavior.

Given the findings on the relation between language and intertemporal choices, it is an interesting question for future research whether these instruments work equally well in languages with weak or strong future-time reference and how they could be used to train the patience of children. Given the long-term benefits of patience, answering these questions promises great benefits for individuals and society as a whole.

Image sources: pixabay, IZA DP No. 9383

Sexual harassment on the job is detrimental to job stability, productivity and well-being

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More than 75 countries have enacted legislation prohibiting workplace sexual harassment as a violation of human rights. Still, it remains a pervasive – and blatantly underreported – phenomenon that lowers workplace productivity and job satisfaction, thereby increasing absenteeism and quits.

In a recent IZA World of Labor article, Joni Hersch of Vanderbilt University surveys and compares the available international evidence. She finds that sexual harassment is much more common than one might think: On average 30 to 50 percent of women have experienced sexual harassment, with rates ranging from 11 percent in Denmark to 81 percent in Australia. These striking differences, however, are not entirely due to cultural differences as survey methods differ by country.

Workplace sexual harassment rates by country and sex (percent reporting having been sexually harassed)

Although men experience sexual harassment as well (on average about 10 percent in countries where this has been measured), the typical victims are young females holding a lower-rank job in a male-dominated environment. The harassers, on the other hand, are predominantly males who work at the same or higher hierarchical level. Organizational characteristics play a role as well, especially when it comes to large power differentials in the hierarchical structure and the organization’s tolerance for sexual harassment.

Tolerance seems to vary by industry. The construction industry, transportation and utilities are especially prone to sexual harassment in terms of charges filed. Yet, this evidence might grossly understate the problem since, for instance, 90 percent of US government workers who had experienced sexually harassing behaviors did not take formal action, possibly fearing retaliation and a worse working situation subsequently.

Sexual harassment charges by women in the United States vary by industry and peak at ages 25–44

Costs of sexual harassment are likely to be severe and occur in form of lower job satisfaction, worse psychological and physical health, higher absenteeism, less commitment to the organizations, and a higher likelihood of quitting one’s job. For the US, estimated costs of sexual harassment over a period of two years accounted for about $327 million. A second source estimated an individual cost of $22,500 per person affected by sexual harassment, both numbers primarily driven by reduced productivity.

What can be done from a policy perspective?

Although empirical evidence on the efficacy of workplace policies in reducing sexual harassment is limited, there is a consensus that emphasizing prevention, issuing strong policy statements of no tolerance, and providing a safe mechanism for complaints of sexual harassment can be considered best practices. Trainings for appropriate behavior might also help since workers who become more aware of what behaviors constitute sexual harassment may be motivated to avoid such behaviors as well as to enforce that norm in their workgroup.

However, one should be careful not to define sexual harassment too broadly to include behavior intended as collegial or friendly, potentially creating an atmosphere of distrust and ambiguity as feared by many male co-workers in the US. Also, not all countries worldwide have legally acknowledged sexual harassment to begin with. Especially many countries in the Middle East, but also Japan, currently do not possess a law that makes sexual harassment an illegal practice.

Mental health costs of access to unsafe drinking water

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 Fulfilling one of the UN’s Millennium Development Goals five years before schedule, 2.6 billion people gained access to sources of clean drinking water between 1990 and 2015. But with water arguably the most valuable resource on earth, the euphoria surrounding the announcement by the UN also hides that there is still a long way to go. More than 750 million people do not yet have access to clean water.

The case of Bangladesh provides an extreme example: The ground water in the country is widely contaminated by naturally occurring arsenic. About 45 million people are at risk of drinking water out of tube wells with an arsenic level higher than the WHO’s recommended maximum level, putting them at risk to arsenicosis – the disease related to drinking arsenic contaminated water over a prolonged period. It includes serious physical health effects, such as visible skin problems, different types of cancer, and reproductive disorders. Moreover, arsenic contamination has been shown to be associated with lower labor supply, lower productivity, and educational achievement. The WHO has labeled this contamination “the largest poisoning of a population in history”.

A new IZA discussion paper by Shyamal Chowdhury (University of Sydney and IZA), Annabelle Krause (IZA), and Klaus F. Zimmermann (IZA and University of Bonn) adds to the empirical evidence on the massive costs of the contamination by investigating the effect of drinking arsenic contaminated water on mental health.

The analysis is complicated by the fact that households using contaminated wells are likely to differ from households refraining from the usage, which in turn might influence their mental health. Hence, simply comparing both kinds of households ignores differences along characteristics unobservable to the researchers. To account for this possibility, the authors use the fact that the Bangladeshi public only became aware of the threat of arsenicosis in 1999, when the government began disseminating information on contaminations and testing all then-existing tube wells for arsenic. So, pre-1999 well usage was only affected by distance to the well, but arguably unrelated to well contamination.

The results are striking: Suffering from an arsenicosis symptom is strongly related to lower mental health, with spill-over effects to other household members. Back-of-the-envelope calculations of the costs of arsenic contamination reveal that the average affected individual would need to be compensated by a full average annual household income. This number highlights the need for immediate policy action through providing information both about safe wells and investing in water filtering for safe drinking usage. On the other hand, information campaigns clarifying facts about arsenicosis have to increase awareness and empathy, reducing psychological costs of arsenicosis-related stigmatization of victims.

On October 10, 2015, IZA Director Klaus F. Zimmermann devoted his keynote speech at the Annual Conference of the Indian Society of Labour Economics to this issue of water contamination and mental health. See picture on the right.

image sources: pixabay, ISLE

From challenge to opportunity: Europe and the refugee crisis

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Up until recently, many Europeans knew images of large refugee camps and desperate families trying to cross borders only from TV screens. The unprecedented influx of refugees into Europe, the largest since World War II, have made these scenes reality in many European neighborhoods. Feelings of empathy and shock are increasingly joined by worries about the consequences the refugee crisis will have on society, welfare institutions and labor markets. In the EU these worries drive public opinion and political action, causing closings of Schengen borders and the resistance against a fair allocation of refugees among EU member states.

Scientific evidence proves that many of these worries are unfounded. Various empirical studies by members of the IZA network of international labor economists point to the economic opportunities of immigration and present ideas of how Europe could achieve a fair and effective allocation of migrants that preserves European principles and European unity. The empirical findings are unambiguous and should be taken into account by European policymakers in their efforts to establish a functioning integration policy.

In recent weeks many European tabloids spread the preconception of the job-stealing immigrant. IZA Research Fellows Giovanni Peri and Mette Foged reject that myth in a thorough study on how the massive influx of immigrants to Denmark during the period 1991-2008 impacted the labor market outcomes of low-skilled natives. Contrary to popular belief, the researchers do not find an increase in the probability of unemployment for the unskilled Danish population. Instead, the findings suggest that the immigrants, who in this case were mainly refugees from Former Yugoslavia, Somalia, Afghanistan and Iraq, caused an “occupational upgrading and specialization” of native Danish employees. 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 occupations with a primarily interactive task content. Accordingly, the immigrating refugees had a positive effect on wages and mobility of native low-skilled population.

Immigrants “push up” native employees

To test such effects on a larger scale, IZA Fellow Peri examined the effect of immigrants on the career of natives using data from eleven European countries in a joint study with Cristina Cattaneo and Carlo V. Fiorio. The results point in the same direction: 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 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.

However, actual impacts depend on the local institutional settings. A study by IZA Fellow Semih Tumen (co-authored by Evren Ceritoglu, H. Burcu Gürcihan Yüncüler and Huzeyfe Torun) analyzed the effect of the recent inflow of Syrian refugees into Southeast Turkey. While wages were unaffected, the influx did in fact increase unemployment among the Turkish residents. But a closer looks reveals that the locals who lost their jobs worked in Turkey’s large informal sector. Here, the refugee inflows reduced the informal employment ratio by approximately 2.2 percent. The authors conclude that the prevalence of informal employment in Turkey has amplified the negative impact of Syrian refugee inflows on natives’ labor market outcomes. For refugees, the informal sector is the only place they can find work, as the Turkish government does not give out working permits to refugees.

The need to open up European labor markets to immigrants

The Turkish case shows the importance of granting immigrants access to local labor markets. Many of those who come to Europe for humanitarian reasons are endowed with valuable human capital that can strengthen Europe’s economy. Many have good skills and professional qualifications, and – as Germany’s President Joachim Gauck put it – they are “highly mobile, flexible, multilingual, motivated and willing to take risks.” But until recently, they have been effectively barred from seeking employment. In line with what IZA experts have long demanded, Germany has recently eased the restrictions on labor market access for refugees. This gives them a chance to earn their own living, to develop their professional skills further, and to achieve social integration. The next logical step is to allow qualified refugees to enter into the regular immigration process. The EU Commissioner for Migration and Home Affairs, Dimitris Avramopoulos, is well advised to further develop the EU Blue Card Directive along these lines. After all, his declared goal is to “help Europe address skills shortages and attract the talents it needs.”

But for now, Brussels does not seem to focus on the potential economic opportunities of the refugee influx. At the last EU emergency summit, after confrontational negotiations and only after outvoting Hungary, Slovakia, Romania and the Czech Republic, EU leaders agreed on a one-time relocation of 160,000 people among EU member states. A sustainable reallocation mechanism based on a quota system is still far from becoming reality. Under current circumstances the share of inflows borne by EU member states is more than ever heavily skewed to a small number of receiving countries. As the ongoing public discussion shows, this unequal distribution gives rise to general resentment of immigration and negative attitudes towards asylum seekers in particular.

Ever since the beginning of the refugee crisis, IZA Director Klaus F. Zimmermann has repeatedly called for a transparent quota system guaranteeing a balanced distribution of asylum-seekers across EU member countries. Countries like Sweden and Germany have accepted above-average numbers of asylum applications over the past years, while France, the UK and the central and eastern European members have been rather reluctant. The definition of a “fair share” should take into account both the population and the economic strength of each country. To handle the massive coordinative task, the European Asylum Support Office could be equipped with new competencies. In the long term, all related issues should be bundled under the responsibility of a European commissioner for refugees.

Tradable refugee quota system could ensure fair EU-wide allocation

IZA Fellows Jesús Fernández-Huertas Moraga and Hillel Rapoport have put forward an innovative proposal for a fair allocation of refugees. In a new IZA Discussion Paper they propose an EU-wide market for tradable refugee quotas to better coordinate national asylum policies. Their idea starts with the observation that offering asylum to refugees with valid claims is considered an international public good, but for the particular receiving country it constitutes a significant financial burden. The authors show that a market mechanism could efficiently distribute immigrants to the country with the lowest costs. This covers all the expenditures that are generated by hosting refugees: direct costs of accommodation, administrative costs and costs for social and political distress. Fernández-Huertas Moraga and Rapoport couple this system with a matching mechanism that links countries’ and migrants’ preferences, such as cultural and linguistic inclinations. The resulting solution could lead to a fair distribution of costs, which would potentially increase public acceptance and reduce the probability of social distress created by the increasing asylum-seeker flows.

The refugee crisis represents one of the largest challenges for European societies, European labor markets and the unity of the EU. If Europe wants to master this humanitarian challenge without surrendering its core values, it needs to resort to smart solutions. This means a fair and effective allocation of refugees among all member states and allowing refugees access to European labor markets.

Human capital formation would boost remittances

Europe must transform the refugee crisis from challenge to opportunity. By doing so, Europeans would not only strengthen their own economies: Enabling refugees to build up their human capital would also give new momentum to developing disadvantaged regions of the world. Although many political refugees are unlikely to consider returning home in the medium run, remittances to their countries of origin would substantially grow with their integration into European societies.

An edited version of this article appeared in the Huffington Post:
Transforming the European Refugee Crisis into Opportunity – Looking at the Evidence

image source: pixabay

ADHD diagnoses depend on relative age

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Attention deficit hyperactivity disorder (ADHD) is one of the most common diagnoses of behavioral problems among school-aged children. ADHD diagnoses remain controversial since they are perceived as stigmatizing, and drug-based therapies may be accompanied by severe side effects.

Against this background, IZA fellow Hannes Schwandt (University of Zurich) and Amelie Wuppermann (LMU Munich) report a stunning empirical finding: the probability of being diagnosed with ADHD strongly depends on the relative age of a student in their grade.

In Germany, the age of primary school entry is governed by a cutoff date. A few days between birthday and cutoff date thus determine whether a student is among the oldest or youngest of the school cohort. This may have severe consequences, the study shows.

Based on administrative health claims records of 7 million children between 4 and 14 years in 2008-2011, the authors find that children born in the last month before the cutoff date, who are usually among the youngest in their class, have a significantly higher probability of ADHD diagnosis (5.3 %) than children born in the month after the cutoff date (4.3 %). The figure illustrates the discontinuities around the cutoff dates:

Probability of ADHD diagnoses by age

According to the researchers, this may be due to teachers and parents comparing children to their grade mates. Higher prevalence of impulsive behavior and inattention among younger children is then potentially misdiagnosed as ADHD.

“It is crucial to raise the awareness among doctors, parents and teachers that ADHD symptoms depend on a child’s actual age while differences in age are large within today’s classrooms,” the authors say, hoping that their findings are recognized in medical practice to reduce ADHD misdiagnoses. They also suggest making school-starting age regulations more flexible and deciding on a case-by-case basis to account for the individual development of students.

image source: pixabay

On occasion of German Reunification Day: New Article on “Children of the Wall”

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Today marks the 25th anniversary of German reunification. The signing of the German unification treaty had set in stone what Germans had not expected, but long desired: the unity of the German people. At the time, former German Chancellor Willy Brandt marked the iconic words: “Now what belongs together will grow together”. For this statement to become true, Germany had to make unprecedented efforts with regards to institutional, economic and societal unification. Especially in East Germany, the transition from a socialist planned economy to a free market economy had profound implications for the labor market and affected every aspect of life. Over the last ten years, the IZA has accompanied this process with various economic studies. One of the most recent contributions is a study by Arnaud Chevalier and Olivier Marie, to be published in the Journal of Political Economy, which analyses the effects of the ‘fertility shock’ that followed the fall of the Berlin wall.

Of the many areas that were affected by the collapse of the German Democratic Republic (GDR), demography was probably one of the least regarded. But the demographic ramifications were profound: Following the collapse of the Communist regimes, fertility in Eastern Germany dropped by 50% in the first three years, which has been described by demographers as the most substantial fall in birth rates that ever occurred in peacetime. For the IZA researchers, this provided a unique “natural experiment” that could be used for their study. In a first step Arnaud Chevalier and Olivier Marie sought to find out, which part of the population decided against parenthood in the wake of the GDR’s collapse. Next, they wanted to better understand the link between the fertility decision and the future developments of these ‘Children of the Wall’ (children born in East Germany between 1991 and 1993).

They found out that women, who gave birth during this period of economic and political uncertainties were on average younger, less educated, and more likely to be unmarried mothers. These are typical traits associated with lower “parental skills”, which lead their children to display worse outcomes on various socio-economic measures, including criminal participation. In their paper, Chevalier and Marie show that the offending behavior of the ‘Children of the Wall’ is much worse than could be expected. From age eight onwards, they exhibit arrest rates at least 50 percent higher than comparable peers. They explain this with the fact that parents who decided to have children amid the uncertainty of the GDR collapse were much worse in building up strong personal bonds to their children. At age 17, Children of the Wall are relatively similar to their peers in terms of broad educational attainment measures, but they report significantly worse emotional relationships with their parents. Chevalier and Marie also considered the risk attitude of mothers and children, which may have a strong impact on both fertility and offending decisions. They found that the women who gave birth just after the end of Communism in East Germany are much more willing to take risk and this is also true for their children. The findings of their study fit well with recent evidence on inter-generational risk attitude transmission and form perhaps one of the crucial pieces in understanding the fertility-crime relationship puzzle.

Beyond demography, IZA research on German reunification has mostly focused on the labor market consequences of the transition process. Ten years after unification, Holger Bonin and Klaus F. Zimmermann critically reviewed the effectiveness of labor market policies and job creation and training programs. In 2002, Paul Frijters, John P. Haisken-DeNew and Michael A. Shields touched upon the sensitive issue of East German welfare expectations after reunification and found that East Germans significantly over-estimated the welfare gains in the newly united German State. Axel Heitmueller and Kostas G. Mavromaras analyzed, how public and private pay in Germany developed in the 1990s, finding that wage convergence took place only in the public sector, while a pay gap between East and West remained in the private sector. In 2006 Dennis J. Snower and Christian Merkl provided a sober assessment of the East German labor market, suggesting that some of the problems have been aggravated by various well-intentioned forms of “care”, such as support in bargaining, unemployment benefits and job security provisions. The question of life satisfaction after unification was tackled several times by the IZA research community. The 2006 study by Richard A. Easterlin and Anke C. Zimmermann provides a detailed account of the wellbeing of different demographic groups in both East and West Germany. Differences in life satisfaction between east and west remain until today: This year’s paper by Christian Pfeifer and Inna Petrunyk reports that on average life satisfaction remains lower in the East, but the East-West gap continues to decrease for younger birth cohorts.

Image Source: Pixabay

Street prostitution zones make cities safer

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Designated zones for street prostitution have reduce crime in the Netherlands. Data from 1994-2011 for Dutch cities show a decrease in registered sexual abuse and rape by up to 40% in the first two years after introduction of prostitution zones. While perceived crime also dropped, positive long-term effects are only reported for prostitution zones that included a licensing system. These are the findings of an IZA paper by Paul Bisschop, Stephen Kastoryano, and Bas van der Klaauw.

In the Netherlands, the first legal street prostitution zones were opened in the early 1980s to deal with residents’ complaints and to improve the safety and health conditions of prostitutes. These so-called “tippelzones” – derived from tippelen, the Dutch word for street walking – are designated zones in which soliciting and purchasing sex is tolerated between strict opening and closing hours at night. Some zones are regulated further, requiring prostitutes to acquire licenses for practicing their profession. Since illegal prostitution is known to be related to international trafficking organizations and other forms of crime, the authors examined whether tippelzones had an effect on actual and perceived crime.

Decrease in registered and perceived crime

Using data from the Dutch Ministry of Justice on registered crime in the 25 largest Dutch municipalities, the authors were able to prove a connection between regulation of prostitution and crime. Once a street prostitution zone was opened, regardless of licensing practice, sexual abuse and rape decreased by 30% to 40% in the first two years. In cities that enforced licensed tippelzones from the start, registered drug crime dropped by 25%.

Perceived crime was also affected by the opening of tippelzones. According to data from the Population Police Monitor for the period of 1993 until 2006, residents of prostitution zones reported an increase in drug nuisance of over 5% in the first two years after opening. However, the further people lived away from the zones, the less they complained about drug crime in their neighborhood. In the long term, city-wide positive effects on perceived crime could only be reported in prostitution zones that included a licensing system.

Connection between prostitution and drug offenses

The findings suggest that the market for sex is connected to drug crime and sexual violence. Many prostitutes are illegal residents, which makes them more vulnerable to sexual violence and abuse, while drug use by prostitutes and clients attracts people in the drug trade. By establishing a designated zone, where prostitution is legally tolerated, municipal governments can deprive criminals of an important coordination hub. At the same time, the health and safety of sex workers is improved. Street prostitution zones usually provide resting quarters with washing facilities, clean needles, local medical assistance and a safer working environment.

Even after 30 years, tippelzones remain controversial in the Netherlands. Critics argue that they promote prostitution and encourage human trafficking, while residents of the zones complain about drug crime at their doorsteps. Public acceptance depends largely on the knowledge about the positive effects. The IZA paper is the first empirical study on the spillover effects of regulating street prostitutes on crime.

Image source: pixabay