This paper estimates income tax underreporting for the case of Germany, by income category and along the income distribution. Comparing weighted samples of survey and tax data, we find patterns that are in line with the literature: Average income from self-employment and from rent and lease in the survey is higher than in the tax data, increasing in upper quintiles. Income underreporting to the tax authorities may be one of several possible explanations for these descriptive findings. We therefore expand our analysis with the Pissarides & Weber (1989) approach that has been applied to a range of countries and data sources before. We use the German Socioeconomic Panel and the Taxpayer Panel, estimating food, housing cost and donation regressions. Results indicate that self-employment is associated with higher housing cost but not with higher food expenditure in the SOEP. In the TPP we find more robust indication of underreporting as self-employment and business incomes are signi_cantly associated with higher donations and even more so for the top-income decile. We use our results to derive tentative estimates of aggregate tax revenue losses due to underreporting of self-employment and other non-wage incomes.

This study deals with the impact of the 2015 European Refugee Crisis on the ethnic identity of resident migrants in Germany. To derive plausibly causal estimates, I exploit the quasi-experimental setting in Germany, by which refugees are allocated to different counties by state authorities without being able to choose their locations themselves. This study finds that higher shares of refugees in a county increased migrants’ attachment to their home countries, while not affecting their perceived belonging to Germany. Further analyses uncover strong heterogeneities with respect to country of origin and immigrant characteristics and suggest that the observed effects may be primarily driven by experiences of discrimination and the consumption of foreign media. Lastly, I find that changes in ethnic identity coincide with the political polarization of migrants. These results have various policy implications in terms of the dispersal of asylum seekers, the modes of communication with different migrant groups and the importance of antidiscrimination measures.

This paper develops high-frequency econometric methods to test for jumps in the spread of bond yields. We derive a coherent inference procedure that detects a jump in the yield spread only if at least one of the two underlying bonds displays a jump. We formalize the test as a sequential procedure in the context of an intersection union test in multiple testing and introduce a new bivariate jump test for pre-averaged intra-day returns. In an empirical application involving high-frequency data of U.S. government bonds, we contrast response patterns of term spreads and break-even inflation across monetary policy announcements, inflation, and employment news releases.

During a global shock two forces act upon international remittances in opposite directions: income losses among migrants may reduce their ability to send remittances and, at the same time, migrants’ concern for their family’s wellbeing may prompt them to send more remittances back home. Which of these drivers prevail is an empirical matter. We assemble quarterly data at the subnational level in Mexico to study the behavior of remittances during the Covid-19 pandemic. We estimate elasticities of remittances with respect to employment conditions at both origin and destination places of Mexican migrants. Our results show that destination country conditions have been the main driver of remittances to Mexico, whereas origin country conditions had no discernible effect on remittances during the pandemic. We also show that contractions in consumption in Mexico are associated with reductions in remittances. We conclude that risk-coping via remittances provides limited protection during global crises.

Using the exact wording of the ECB’s definition of price-stability, we started a representative online survey of German citizens in January 2019 that is designed to measure long-term inflation expectations and the credibility of the inflation target. Our results indicate that credibility has decreased in our sample period, particularly in the course of the deep recession implied by the COVID-19 pandemic. Interestingly, even though inflation rates in Germany have been clearly below 2% for several years, credibility has declined mainly because Germans increasingly expect that inflation will be much higher than 2% over the medium term. We investigate how inflation expectations and the impact of the pandemic depend on personal characteristics including age, gender, education, income, and political attitude.

This paper analyzes fairness and bargaining in a dynamic bilateral matching market. Traders from both sides of the market are pairwise matched to share the gains from trade. The bargaining outcome depends on the traders’ fairness attitudes. In equilibrium fairness matters because of market frictions. But, when these frictions become negligible, the equilibrium approaches theWalrasian competitive equilibrium, independently of the traders’ inequity aversion. Fairness may yield a Pareto improvement; but also the contrary is possible. Overall, the market implications of fairness are very different from its effects in isolated bilateral bargaining.

Der vorliegende Beitrag analysiert das Steuerplanungsverhalten deutscher Unternehmen und Steuerberater unter Unsicherheit. Untersucht werden die Reaktionen auf befürchtete steuerrechtliche Änderungen durch den Brexit. Hinsichtlich möglicher Steuerplanungsmaßnahmen wird dabei die Nutzung kurzfristiger Steuergestaltungspotentiale von der Durchführung langfristiger Geschäftsanpassungen abgegrenzt. Nach einer Onlineumfrage, an der 79 Unternehmen und 95 Steuerberater teilgenommen haben, unterscheidet sich das unternehmerische Steuerplanungsverhalten deutlich von den Empfehlungen der Steuerberaterpraxis: Steuerberater raten häufiger zur Umsetzung von Steuerplanungsmaßnahmen, als Unternehmen diese nutzen. Bei den befragten Unternehmen zeigt sich ein deutlicher Trade-off zwischen der empfundenen Rechtsunsicherheit und den Kosten der Maßnahme zur Vermeidung von Steuerrisiken. Vergleichsweise günstige Steuergestaltungsmaßnahmen werden bei hoher Rechtsunsicherheit frühzeitig umgesetzt. Langfristige Geschäftsanpassungen hingegen werden im Sinne einer „Wait & See“-Strategie zunächst nur geplant.

The scholarly debate on currency internationalization focuses on country characteristics and policies as the main determinants in currency competition. However, this literature has neglected the fact that, given the intertwined nature of the international monetary system, other countries’ actions and the functioning logic of international finance can also impact a currency's international status. This article shows that RMB usage has been boosted not only by Chinese statecraft but also by economic actors’ recent difficulties in using the dollar. The American financial sanctions against Chinese trade partners, the cyclical instability of international finance, as well as peripheral countries' low inflows of dollars have encouraged firms and banks to use the renminbi as an alternative to the dollar. In addition to contributing to a broader understanding of the drivers of currency internationalization, this article proposes a model that explains the mechanisms that push firms and banks away from the incumbent international currency. I posit that changes in domestic and international conditions influence currency transaction costs, thereby propelling economic actors to increase their use of currencies with relatively lower transaction costs. Interviews with Chinese senior officials from the PBOC and the Ministry of Commerce, manufacturing companies, and bank staff are the main primary sources for this article. I triangulate this information with news reports and speeches both in Chinese and English.

In this paper, I analyze how the higher education decision of young adults in Germany depends on their expected future earnings. For this, I estimate a microeconometric model in which individuals maximize life-time utility by choosing whether or not to enter higher education. To forecast individual life cycles in terms of employment, earnings, and family formation under higher education and its alternative, vocational training, I use a dynamic microsimulation model and regression techniques. I take into account that while individuals generally choose between two options, higher education and vocational training, they are aware of multiple potential realizations under both options, such as leaving higher education with a bachelor degree or taking up higher education after first having earned a vocational degree. Using the estimates from the decision model, I simulate the introduction of different tuition fee and graduate tax scenarios. I find that the impact of these education policies on the higher education decision is limited and only few individuals would change their educational decisions as a reaction to these policies.

Using detailed establishment-level micro data, this paper analyzes for the German case the hypothesis by Aghion, Bergeaud, Boppart, Klenow, and Li (2019), stating that officially published figures for real output growth would be systematically understated. The effect rests on overstated inflation estimates due to imputed prices for disappearing goods and services varieties, where measurable plant entry and exit dynamics play a crucial rule. Our main results regarding understated real output growth lie in the range of 0:39 to 0:54 average annual percentage points for 1998-2016, which is quite closely in line with existing findings for France, the USA, and Japan (in different periods). We also find that services sectors appear most affected, and that the effect in East Germany is somewhat larger. We investigate different market share proxies, provide additional robustness analysis and also discuss limitations of the approach.

Using new quarterly U.S. data for the past 120 years, I show that sudden reversals in equity and credit market sentiment approximated by several measures of corporate securities issuance are highly predictive of banking crises and recessions. Deviations in equity issuance from historical averages also help to explain economic activity over the business cycle. Crises and recessions often occur independently of domestic leverage, making the credit-to-GDP gap a deficient early-warning indicator historically. The fact that equity issuance reversals predict banking crises without elevated private credit levels, suggests that changes in investor sentiment can trigger financial crises even in the absence of underlying banking fragility.

This essay examines how different individual and collective actors interpreted the initial weeks of the worldwide COVID-19 outbreak from the German perspective. During this early phase, knowledge about COVID-19 was quite limited and uncertain, which also influenced the ability to assess (potential) impacts. The analysis relies on twitter data and traces the main arguments in the public German discourse between January and March 2020. It shows that actors ascribed different meanings to the outbreak – either recognizing or negating the gravity of the COVID-19 threat. Shortly before the first German lockdown, the seriousness of the COVID-19 threat had begun to feature prominently within the public discourse.

This study is an empirical investigation of the empty nest syndrome, commonly understood as a situation where there are feelings of loss or loneliness for mothers and/or fathers following the departure of the last child from the family home. This investigation makes use of rich, longitudinal, nationally representative German data to assess whether there is evidence for such a syndrome. Furthermore, the analysis considers the role of two key economic variables: consumption and leisure via the standard economic concept of utility maximisation. The analysis highlights a conflict between what economic theory predicts - more disposable income and a gain of leisure time - and the psychological (and cultural) notion of the lonely, sad empty nester. This conflict is an empirical question and here it is resolved via an assessment of the change in life satisfaction that is reported when parents become empty nesters. Importantly, this investigation also tracks what the last child leaving the household goes on to do: The found reduced life satisfaction seems to be wholly moderated if the last child leaves the nest for the purposes of education, but not if for purposes of employment.

Top distributions of income and wealth are still incompletely measured in many national statistics, particularly when using survey data. This paper develops the technique of incorporating the joint distributional relationship to enhance the estimation of these two top distributions by using the best data available for Germany. We leverage the bivariate copula to extrapolate both income and wealth distributions from German PHF (Panel on Household Finance) data under the incidental truncation model. The copula modelling grants the separability in choosing the estimation domain as well as the parametric specification between the marginal distribution and dependence structure. One distinct feature of our paper is to complement the model fit with external validation. The copula estimate can help us to perform out-of-sample prediction on the very top of the tail distribution from one margin conditional on the characteristics of the other. The validation exercises show that our copula-based approach can approximate much closer to the top tax data and wealth “rich list” than those unconditional marginal extrapolations. The data and effectiveness of our copula-based approach also verify our presumption of incidental truncation and differential detectability in the top lists.

This paper examines the effect of weather shocks on violent crime using disaggregated data from Brazilian municipalities over the period 1991-2015. I document that adverse weather shocks in the form of droughts lead to a significant increase in violent crime, with the effect appearing to persist beyond the growing season and over the medium run. To explain this persistence, I show that weather uctuations are positively associated not only with agriculture yields, but also with the overall economic activity. Moreover, evidence shows the dominance of opportunity cost mechanism reected in the uctuations of the labor income especially for the agriculture and unskilled workers, giving credence that it is indeed the labor income that matters and not the general socio-economic conditions. Other factors such as local government budget capacity, (un)-employment, poverty, inequality, and psychological factors do not seem to explain violent crime rates.

This paper analyzes higher education funding in Germany from a distributional perspective. For this, I first compare the quantitative importance of different funding instruments, from free tuition to subsidized health insurance for students. I show that free tuition is, by far, the most important instrument. Then, I take a lifetime perspective and assess how individuals of different expected lifetime incomes benefit from higher education funding. I distinguish between different fields of study as there are large differences in both the expected lifetime earnings of graduating from a specific field and the social cost of tuition associated with each field. Finally, I focus exclusively on the instrument of subsidized tuition and simulate the introduction of different tuition fee schemes with income-contingent loans. While the distributional effects would be sizable in absolute terms, I estimate that they would cause few individuals to change their educational decisions.