title: Empirical essays in economic policy: on labour markets, social mobility and trade
Creators: name: Kalambaden, Preetha
Publisher: name: Universität Bern
Year: 2022
Subjects: subject: 330 Economics

description: This thesis is a collection of three empirical essays in economic policy. All essays are independent and contribute to various fields of economic policy decision-making, which have gained importance in recent years. The first one analyses the introduction of a family-friendly policy and its impact on maternal labour market participation. To combat skills shortages, promoting female participation in the labour market has become one of the most important measures. The second essay tackles the question of whether individuals have equal opportunities in society. In major advanced economies, increasing inequality raises questions about equality of opportunity. And the third essay deals with multinational firms and their allocation of labour worldwide. All chapters share the same motivation, namely the importance of the policy framework in shaping decisions on an individual, family, and firm level. They also show the importance of access to large-scale data and the application of appropriate econometric models. Both are fundamental elements to better understand complex channels and mechanisms, which are crucial determinants for designing the right policies.

The first chapter analyses the labour market impact of a childcare reform in the city of Bern within a quasi-experimental setting. Using data from individual-level tax records, I study the effects of the introduction of the childcare voucher system in 2014 on maternal labour market outcomes in a difference-in-difference and event-study framework. My results show that easier access to subsidised childcare increases maternal employment and labour earnings, especially for those mothers in low-income households and those having only one child. I address the ultimate question of net benefits of this childcare reform in the second part. Within a back-on-an-envelop cost-benefit analysis, I show that one additional franc spent on childcare subsidies increases maternal earnings by more than one franc. This chapter shows that it is crucial how policies are designed. More target-oriented policies might create large incentives to increase labour market participation of vulnerable people. Childcare subsidies, finally, pays out from a welfare perspective, especially in the long run.

Chapter 2, co-authored with Isabel Z. Martìnez, sheds light on different dimensions of intergenerational mobility. Prior work has shown that intergenerational mobility in Switzerland is high compared to other countries. Our study, however, emphasises that intergenerational mobility has multiple dimensions and looking at only one outcome does not fully capture (in)equality of opportunity. We find that while mobility in income is very high, it is lower in wealth and considerably lower in education and occupation status. Individual's education and occupation choices are, therefore, more driven by family background. Furthermore, there is significant heterogeneity among subgroups by gender and migratory background. Each dimension implies a different conclusion on equality of opportunity in Switzerland, holding large variation among different groups of individuals.

In Chapter 3, co-authored with Daniel Steffen, we study the effect of outward foreign direct investment on domestic employment using firm-level data. Switzerland is a relatively small country with a high relative outward FDI stock. We aim to answer whether firms that engage in outward FDI increase or decrease home employment due to foreign activities. Economic theory suggests that there are negative (displacement effect) as well as positive effects (output effect) in place of offshoring on domestic labour demand. Using firm-level data and an instrumental variable approach, we find no evidence of the negative displacement effect but a positive and significant output effect of FDI to all countries, especially to high-income countries. On the other hand, we find a significant and negative displacement effect that outweighs the positive output effect for FDI to lower middle-income countries. Overall, outward FDI does not endanger the total number of domestic jobs in Switzerland, which is highly dependent on foreign relations. Foreign economic policy is, therefore, essential for individual firms in shaping their investment decisions abroad, which in the end has an impact on domestic labour.