Research Papers

Severance pay may generate employment effects if wages are rigid. We study this by analysing a reform introduced during a recession that reduced severance pay for new hires while leaving it unchanged for previously-hired employees. We exploit this grandfathering dimension using a regression-discontinuity approach and long monthly data.

We introduce a new joint test for the order of fractional integration of a multivariate fractionally integrated vector autoregressive (FIVAR) time series based on applying the Lagrange multiplier principle to a feasible generalised least squares estimate of the FIVAR model obtained under the null hypothesis. A key feature of the test we propose is that it is constructed using a heteroskedasticity‐robust estimate of the variance matrix.

We document a strong empirical relationship between higher income inequality and stronger recessive impacts of fiscal consolidation episodes across time and space. To explain this finding, we develop a life-cycle economy with uninsurable income risk. We calibrate our model to match key characteristics of several European economies, including inequality and fiscal structures, and study the effects of fiscal consolidation programs.

We look at the effect of exchange rate regimes on fiscal discipline, taking into account the effect of underlying political conditions. We present a model where strong politics (defined as policymakers facing longer political horizon and higher cohesion) are associated with better fiscal performance, but fixed exchange rates may revert this result and lead to less fiscal discipline.

Countries differ in their academic upper-secondary school systems whereby some require their students to choose a specialization track from a set of areas–typically natural sciences, economic sciences, or humanities–and follow that specialization for the course of their upper secondary education years whereas, by contrast, others follow a general curriculum in which students are not required to follow a single specialization and thus, may receive a more general education.