Working Paper: CEPR ID: DP8187
Authors: Andrés Rodríguez-Pose; Vassilis Tselios
Abstract: This paper examines whether differences in welfare regimes shape the incentives to work and get educated. Using microeconomic data for more than 100,000 European individuals, the results show that welfare regimes make a difference for wages and education. First, people- and household-based effects (internal returns to education and household wage and education externalities) generate socioeconomic incentives for people to get an education and work, which are stronger in countries with the weakest welfare systems, i.e. those with what is known as ?Residual? welfare regimes (Greece, Italy, Spain and Portugal). Second, place-based effects, and more specifically differences in regional wage per capita and educational endowment and in regional interpersonal income and educational inequality, also influence wages and education in different ways across welfare regimes. Place-based effects have the greatest incidence in the Nordic Social-Democratic welfare systems. These results are robust to the inclusion of a large number of people- and place-based controls.
Keywords: education; employment; European Union; regions; wages; welfare
JEL Codes: H53; H75; I31; I38; J38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| welfare regimes (I38) | individual incentives to work (J33) |
| welfare regimes (I38) | individual incentives to pursue education (I26) |
| weaker welfare systems (I38) | stronger socioeconomic incentives to obtain education (I24) |
| weaker welfare systems (I38) | stronger socioeconomic incentives to engage in labor market (J29) |
| regional wage per capita (J31) | individual outcomes (I14) |
| educational endowment (I22) | individual outcomes (I14) |
| regional interpersonal income inequality (D31) | wages (J31) |
| regional interpersonal income inequality (D31) | education (I29) |