GSOEP Data Research Articles

Why do German students reject free money?

ABSTRACT Numerous eligible German students do not apply for heavily subsidized student aid (BAföG). Our theoretical model shows how imperfect information, risk aversion, debt aversion, and student income can incentivize rational students to abstain from an application. We use GSOEP data from 2001 to 2013 to simulate BAföG eligibility and find that in particular risk averse students with low income are discouraged if they have little information about the application procedure. Moreover, debt-averse students are more reluctant to apply. This suggests that a non-transparent and complicated student aid system disproportionally discourages poor students with little experience with the BAföG system.

An empirically based just linear income tax system

ABSTRACT This paper develops and illustrates a method for empirically designing an income tax system that people will regard as fair. The paper begins with the classical Principles of Tax Justice, viz., as pretax income increases, three quantities should also increase – posttax income, tax amount, and tax rate. GSOEP data on residents’ pretax income and the posttax income they regard as fair are used to estimate a just linear income tax system. Analytic results include a signature standard form of the tax system showing the intertwined fates of poor and rich and the conditions which threaten fairness. Empirical results show that the estimated tax system lowers taxes for a majority of respondents, especially the relatively poorer, and substantially reduces inequality.

Search Channels of Workers and Firms Over the Business Cycle

On the one hand, in expansions it is relatively easier for workers to find jobs, so they rely less strongly on their social networks, which means that hiring through referrals should be less frequent in expansions. On the other hand, firms have difficulties to fill their open positions in expansions and rely more strongly on their social networks, which means that referral hiring may be dominating in expansions. Empirical analysis of the IAB Job Vacancy Survey data of the years from 2000 to 2013 and GSOEP data from 2000 to 2014 show that in the long run there is a positive correlation between the GDP and the proportion of workers hired through their social networks. In order to explain the effect of the productivity change on the search and matching strategies of firms and workers, this paper presents a search and matching model with several search channels. The firm chooses advertisement effort through formal search channels to maximize the asset value of an open vacancy. The workers choose their search intensity through formal channels to maximize the asset value of being unem- ployed. Calibration results of the model show that during expansions formal advertisement is not gainful for the firms because of competition. As a result, the firms advertise less, so the proportion of referral hiring should increase. While when the productivity increases, employment becomes more gainful, so the workers exert more effort in search through formal channels. As a result, the proportion of referral hiring should decrease. Both the estimation and the calibration results indicate that the firm-side effect dominates.

The Influence of Individual Income Ranks on Job Satisfaction: A Dynamic Perspective

We analyze how income ranks influence job satisfaction. Rank is defined as the wage percentile in which the individual is in a given year. We estimate a distributed lag model on GSOEP data in order to analyze the impact of past ranks and of past rank changes on self-reported satisfaction and to assess after how much time the effect of ranks on individual well-being disappears. We find that both ranks and rank mobility are relevant drivers of job satisfaction, but their impact is short-lived.

Prediction based on entrepreneurship-prone personality profiles: sometimes worse than the toss of a coin

The human personality predicts a wide range of activities and occupational choices—from musical sophistication to entrepreneurial careers. However, which method should be applied if information on personality traits is used for prediction and advice? In psychological research, group profiles are widely employed. In this contribution, we examine the performance of profiles using the example of career prediction and advice, involving a comparison of average trait scores of successful entrepreneurs with the traits of potential entrepreneurs. Based on a simple theoretical model estimated with GSOEP data and analyzed with Monte Carlo methods, we show, for the first time, that the choice of the comparison method matters substantially. We reveal that under certain conditions the performance of average profiles is inferior to the tossing of a coin. Alternative methods, such as directly estimating success probabilities, deliver better performance and are more robust.

Prediction Based on Entrepreneurship-Prone Personality Profiles: Sometimes Worse Than the Toss of a Coin

The human personality predicts a wide range of activities and occupational choices—from musical sophistication to entrepreneurial careers. However, which method should be applied if information on personality traits is used for prediction and advice? In psychological research, group profiles are widely employed. In this contribution, we examine the performance of profiles using the example of career prediction and advice, involving a comparison of average trait scores of successful entrepreneurs with the traits of potential entrepreneurs. Based on a simple theoretical model estimated with GSOEP data and analyzed with Monte Carlo methods, we show, for the first time, that the choice of the comparison method matters substantially. We reveal that under certain conditions the performance of average profiles is inferior to the tossing of a coin. Alternative methods, such as directly estimating success probabilities, deliver better performance and are more robust.

Prediction Based on Entrepreneurship-Prone Personality Profiles: Sometimes Worse than the Toss of a Coin

The human personality predicts a wide range of activities and occupational choices—from musical sophistication to entrepreneurial careers. However, which method should be applied if information on personality traits is used for prediction and advice? In psychological research, group profiles are widely employed. In this contribution, we examine the performance of profiles using the example of career prediction and advice, involving a comparison of average trait scores of successful entrepreneurs with the traits of potential entrepreneurs. Based on a simple theoretical model estimated with GSOEP data and analyzed with Monte Carlo methods, we show, for the first time, that the choice of the comparison method matters substantially. We reveal that under certain conditions the performance of aver-age profiles is inferior to the tossing of a coin. Alternative methods, such as directly estimating success probabilities, deliver better performance and are more robust.

Unhappiness and Job Finding

It is puzzling that people feel unhappy when they become unemployed, while simultaneously active labour market policies are needed to bring them back to work. We investigate this using GSOEP data. We find that nearly half of the unemployed do not experience a drop in happiness, which might explain why activation is sometimes needed. Furthermore, even though unhappy unemployed search more actively for a job, it does not speed up their job finding. Apparently, there is no link between unhappiness and job finding rate. Hence there is no contradiction between the unemployed being unhappy and the need for activation policies.

Intergenerational income mobility revisited: Estimation with an income dynamic model with heterogeneous age profile

The traditional method of estimating intergenerational income elasticity by using the average income over a few years for each generation is subject to attenuation bias due to measurement error and lifecycle bias. In this paper, I estimate the intergenerational elasticity using an income dynamic model with intergenerational linkages. The model can explicitly account for sources of biases such as heterogeneous age profile and transitory shocks of changing variance over the lifecycle. The model can be identified through the covariance structure of earnings within individuals and across generations. Based on the models, I simulate the lifetime income of both generations and calculate the implied intergenerational elasticity.Using PSID data from the United States and GSOEP data from Germany, the estimated intergenerational elasticity of fathers and sons is substantially higher than those in the literature. The intergenerational elasticity is as high as 0.66 for the US and 0.48 for Germany.

Labour market integration, occupational uncertainty, and fertility choices in Germany and the UK

Abstract Contrasting the conservative German welfare state with the liberal market economy of the United Kingdom, this paper examines how each welfare regime affects the first-birth decisions of men and women under the conditions of either high labour market integration (full-time work in a permanent position) or occupational uncertainty (part-time work or work with a fixed-term contract). The results, which are based on BHPS and GSOEP data, suggest for Germany that occupational uncertainty hampers transitions to parenthood, but are inconclusive for the UK. Among highly educated women in both Germany and the UK, however, a high degree of labour market integration is found to delay family formation. (ProQuest: ... denotes formulae omitted.) 1. Introduction Family formation is a key turning point in the life course, and for many potential parents today, achieving the financial security necessary to start a family is a difficult and time-consuming process. Recent research has focused on how fertility decisions are shaped by the relationship between social policies, labour market conditions, and the changing gender contract (Oppenheimer 1994, Brewster and Rindfuss 2000, Crompton and Lyonette 2006, McDonald and Meyers 2009). This study extends this research by investigating how individual labour market integration (i.e., obtaining a permanent full-time job that is in line with one's vocational training, and/or acquiring the education or professional record that provides access to such a job) might expedite the realisation of fertility plans by providing the economic resources needed to start a family. The welfare state plays a key role in this process by determining general labour market risks and options. Against this backdrop, couples have to decide whether their family plans require one or both partners to have a stable position in the labour market to compensate for low levels of welfare state support to families (Hobcraftand Kiernan 1995). Furthermore, they must do so in the context of culturally and institutionally embedded gender roles, which in some societies lead to conflicts between the occupational and domestic duties assigned to women. To better understand the role of institutions that structure male and female employment patterns and thereby affect family formation, I compare fertility choices in Germany (East and West) and the United Kingdom. These two countries provide a meaningful basis for comparison because, while they share traditional expectations of female caregivers, the UK has a lower level of welfare state protection and a more deregulated labour market than Germany. Thus, relative to Germany, the institutional features of the UK system tend to encourage female labour market engagement. Although this means that British women face particularly high hurdles in adapting to the competing demands of market and family roles, the total fertility rate in the UK clearly exceeds that of Germany (Figure 1). Against this backdrop, I aim to examine the micro-level mechanisms that explain fertility choices in the context of labour market participation in East and West Germany and the UK. Distinguishing country- and gender-specific effects, my analysis focuses on two aspects of the relationship between labour market integration and fertility decisions: first, I address the question of how the timing of the first birth is affected by the duration of active labour market participation under the assumption of increasing labour market integration over time; and, second, I investigate whether differences in the first- birth risk depend on being firmly established in the labour market, or on being exposed to occupational uncertainties. In other words, I consider the extent to which the fertility decisions of individuals who are strongly integrated into the labour market (defined as having a stable full-time job and/or high income) differ from those of individuals who are poorly integrated (defined as having discontinuous and/or precarious employment patterns). …

Marginal Taxes: A Good or a Bad for Wages?: The Incidence of the Structure of Income and Labor Taxes on Wages

Empirical evidence so far found ambiguous results for the direction of effect of marginal income tax rates on employee remuneration. Based on the GSOEP data from 2002 through 2008 this study analyzes the impact of the marginal tax load on the employee side on the wage rate also allowing average tax rates and employer payroll taxes to play a role. Instrumental variable estimation based on counterfactual tax rates simulated in a highly detailed microsimulation model (STSM) heals the endogeneity problem of the tax variables with regard to wages. Estimations in first differences show that marginal taxes overall have a negative impact on wages. But this effect is not uniform along the wage distribution; while the negative effect of marginal tax rates prevails in the lower part of the distribution, observations beyond the median benefit from higher tax rates at the margin.

Who Benefits from Benefits? Empirical Research on Tangible Incentives

Although a broad field of literature on incentive theory exists, employer-provided tangible goods (hereafter called benefits) have so far been neglected by economic research. A remarkable exception is an empirical study by Oyer (2008). In our study, we test some of his findings by drawing on a German data set. We use two waves of the GSOEP data (2006, 2008) to analyze the occurrence of benefits and their effects on employees' satisfaction. Our results provide evidence for economic as well as psychological explanations. Looking at differences in firms' and employees' characteristics we find that cost efficiency concerns, the purpose to signal good working conditions and the aim to ease employees' effort costs are evident reasons to provide benefits. Furthermore, analyzing the impact of tangible and monetary incentives on satisfaction and employees' feeling of being acknowledged by employers, we find different motivational effects. Our results support the psychological explanation that benefits are evaluated separately from other monetary wage components and are more likely to express employers' concern for their employees and recognition of their performance.

Low-Wage Employment Versus Unemployment: Which One Provides Better Prospects for Women?

This study analyzes state dependence in low-wage employment of western German women using GSOEP data, 2000-2006. We estimate dynamic multinomial logit models with random effects and find that having a low-wage job increases the probability of being low-paid and decreases the chances of being high-paid in the future, in particular for low-paid women working part-time. However, concerning future wage prospects low-paid women are clearly better off than unemployed or inactive women. We argue that for women low-wage jobs can serve as stepping stones out of unemployment and are to be preferred to staying unemployed and waiting for a better job.

Educational Attainment and Returns to Education in Germany

This paper presents evidence on the development of educational attainment and its returns on the labor market in Germany in the time period 1985-2002. Returns to education are estimated using Mincer equations. We analyze micro-census data in addition to GSOEP data, which allows estimating returns to tertiary education separately by subject of degree for the first time for Germany in such detail. The data indicate an educational expansion, especially for women in West Germany, which is coherent with the relatively high returns to this group. One interesting finding is that each gender reaches the highest returns in those fields of study where its shares are relatively high. For women this is in the fields of studies to become teacher, while men lead in law, business and economics and engineering. Additionally, the returns are higher for most degree subjects in West than in East Germany, especially for women.

The difference between wages and wage potentials: Earnings disadvantages of immigrants in Germany

Immigrants in Germany have poor earnings performance relative to natives. Claiming that human-capital endowments determine earnings potentials rather than actual earnings, a stochastic earnings frontier is estimated and used to seek systematic differences between natives and migrants for GSOEP data for the year 2000. While empirical results clearly support the frontier assumption, natives and immigrants are surprisingly about the same with respect to the frontier. Assuming a half-normal distribution of the wage gap, on average, both groups transform a modest 84% share of their potential income into market earnings. This implies wage inequality can be attributed to human-capital differentials alone. The human-capital endowments of immigrants are largely determined by the very low percentage who have college degrees, their slow assimilation and zero-return on imported experience. The paper also tries to explain individual wage gaps, which are significantly decreased in married subjects raising families, but increased in employees in small- or medium-sized relative to larger firms. However, these variables only make minor contributions to the variance.

Nonparametric estimation of the coefficient of overlapping—theory and empirical application

The coefficient of overlapping OVL measures the amount of agreement of two probability distributions. Statistical inference for OVL has been mainly investigated in a parametric framework. Five strongly consistent nonparametric estimators for OVL based on kernel density estimation are suggested. A Monte-Carlo simulation investigates bias and standard deviation of the estimators in finite samples. Results of an empirical application to German labor income data of men and women (based on GSOEP data) are presented. It is shown that there is much more agreement of labor income distributions of men and women in East Germany (new Federal States) than in West Germany (old Federal States).

Up in the Skies? The Relationship between Body Height and Earnings in Germany

This paper analyzes whether taller workers earn more then their shorter counterparts. Using GSOEP data from 1991 to 2002, earnings functions are estimated separately for male and female workers in both West and East German regions. The Hausman-Taylor IV estimator is applied to account for unobservable heterogeneity including also time-invariant indicators. The results do not suggest for an effect of height on the earnings of female workers and male East German workers. However, for the height range between 175cm and 195cm there is an earnings premium associated with stature for male workers from West Germany of about 4% for additional 10cm in height.

Does Economic Uncertainty Affect the Decision to Bear Children? Evidence from East and West Germany

Although economic agents routinely face various types of economic uncertainty, their effects are often unclear and hard to assess, in part due to the absence of suitable measures of uncertainty. Because of the numerous and very substantial institutional changes that people in the transition economies of Central and Eastern Europe experienced during the last two decades, these countries are excellent candidates for examining the effects of uncertainties on various kinds of behavior. During their periods of uncertainty, moreover, these countries have experienced sharply falling fertility rates. Some have argued that these two phenomena are linked but others have remained skeptical in view of the fact that the evidence is largely confined to the macro level. This paper demonstrates the existence of such a link at the micro level using two different types of uncertainty measures based on GSOEP data from Eastern (and for comparison purposes also Western) Germany for the years 1992-2002. The results suggest that employment uncertainty (but not financial uncertainty) was considerably greater in Eastern Germany during its transition than in Western Germany and had a highly nonlinear effect on the probability of a birth in any period. The result is rather robust to differences in specification and suggests that the higher employment uncertainty in East Germany in the transition could have contributed significantly to the sharp fall and unusually low level of its fertility. In view of the results, we argue that an options based theory is perhaps a richer analytical paradigm for a discussion of fertility decisions in a rapidly changing environment than the traditional Beckerian theory.

Up in the Skies? The Relationship Between Body Height and Earnings in Germany

This paper analyzes whether taller workers earn more than their shorter counterparts. Using GSOEP data from 1991 To 2002, earnings functions are estimated for mail and female workers for both West and East German regions. The Hausman-Taylor IV Estimator is applied to account for unobservable heterogeneity including also time-invariant indicators. The results do not imply wage differentials by height for female workers and male East German workers. For the height range up to 195cm, there, however, is a wage premium associated with stature for male workers from West Germany of about 4% for an additional standard deviation increment in height.

Family Tax Splitting: A Microsimulation of its Potential Labour
 Supply and Intra-household Welfare Effects in Germany

This paper assesses the effects that an introduction of the French family splitting mechanism would have on German families' labour supply and intra-household consumption behaviour. We use simulated real world microdata created by means of a 'deterministic' collective labour supply model. The data are generated by a compound procedure of estimation and calibration based on GSOEP data. In a microsimulation the present tax-benefit system with child benefit/allowance is replaced by a tax scheme with family splitting. The resulting changes in labour supply are surprisingly small, even for women. Welfare effects are also modest, but differ for husbands and wives.