Centrum Analiz Ekonomicznych

CenEA Working Papers in chronological order:

Working Paper 02/16

Distributional consequences of tax and benefit policies in Poland: 2005-2014.                                                                               .



Michał Myck, Mateusz Najsztub


We examine the dynamics of disposable incomes and their specific components in Poland between 2005 and 2014 using data from the Polish Household Budget Surveys. We focus in particular on changes in the distribution of earnings and pensions and examine why at the time of rapid economic growth which Poland experienced at the time income inequality has remained relatively stable. Fiscal reforms implemented during this period are analysed from the point of view of the changing distributional implications of the tax and benefit system. Finally, we decompose changes in inequality of disposable incomes to identify the role of tax and benefit policies and separate it from other factors affecting incomes at the time. We find that 44% of the 0.7pp reduction in the Gini coefficient between 2005-2014 can be associated with tax and benefit reforms.


Working Paper 01/16

Estimating Labour Supply Response to the Introduction of the Family 500+ Programme.                                                                               .



Michał Myck


We use a discrete choice labour supply model (van Soest, 1995; Blundell et al., 2000) to estimate labour supply implications of a large scale reform of financial support for families with children in Poland, the so-called Family 500+ programme. The reform introduced universal regular payments of 500 PLN per month for each second and subsequent child in the family aged 0-17, supplemented with means-tested 500 PLN per month for the first child in low income households. As such, the programme significantly changed the balance of financial incentives to work among parents. We estimate that it will reduce labour supply among families with children by about 240,000 individuals, principally mothers in families with one or two children. The estimates suggest that labour supply effects will be felt most strongly in small towns and villages and will contribute substantially to the reduction of the proportion of couples in which both partners are working.


Working Paper 03/15

How History Matters for Student Performance. Lessons from the Partitions of Poland.                                                                               .



Paweł Bukowski


This paper examines the effect on current student performance of the 19th century Partitions of Poland among Austria, Prussia and Russia. Despite the modern similarities of the three regions, using a regression discontinuity design I show that student test scores are 0.6 standard deviation higher on the Austrian side of the former Austrian-Russian border. This magnitude is comparable to the black vs. white test score gap in the US. On the other hand, I do not find evidence for differences on the Prussian-Russian border. Using a theoretical model and indirect evidence I argue that the Partitions have persisted through their impact on social norms toward local schools. Nevertheless, the persistent effect of Austria is puzzling given the historical similarities of the Austrian and Prussian educational systems. I argue that the differential legacy of Austria and Prussia originates from the Austrian Empire’s policy to promote Polish identity in schools and the Prussian Empire’s efforts to Germanize the Poles through education.


Working Paper 02/15

Making work pay: increasing labour supply of secondary earners in low income families with children in Poland.                                                                               .



Anna Kurowska, Michał Myck, Katharina Wrohlich


In-work support through the tax-benefit system has proved to be an effective way of increasing labour supply of lone mothers and first earners in couples in a number of OECD countries. At the same time these instruments usually create negative employment incentives for secondary earners. This in turn reduces the potential of in-work support to address the joint objectives of higher employment and lower poverty levels. In this paper we examine labour supply implications of a diverse set of possible reforms to the main elements of tax and benefit support of families with children in Poland. We show how an adequate combination of increased generosity of the tax and benefit system with the introduction of a “double earner” premium may result in increased labour supply of first and second earners in couples and concentrate the response in the lower half of the income distribution thus increasing the potential of in-work support to alleviate poverty.


Working Paper 01/15

The effect of public pension wealth on saving and expenditure.                                                                               .



Marta Lachowska, Michał Myck


In order to study whether public pension systems displace private saving, we use the quasi-experimental variation in pension wealth created by Poland’s 1999 pension reform. Using the 1997–2003 Polish Household Budget Surveys, we begin by estimating “difference-in-differences” regressions, where we compare household saving and expenditure across time and between cohorts affected and unaffected by the reform. Next, we estimate the extent of crowd-out by using two-stage least squares. We identify the effect of pension wealth on private saving by using the cohort-by-time variation in pension wealth that is explained by the reform. We find that one additional Polish zloty, or PLN, of pension wealth crowds out about 0.24 PLN in household saving. We also find heterogeneity in responses. For the middle-aged cohorts, we find a large public pension crowd-out of private saving (about 0.54 PLN of private saving for each 1 PLN of public pension wealth), while the crowd-out for younger cohorts equals about 0.30 PLN of private saving per 1 PLN. Finally, we find a close-to-complete crowd-out among highly-educated households.


Working Paper 01/14

Stability of elasticity estimates in the context of significant changes in labour market incentives                                                                              .



Michał Myck


Using unique developments on the Polish labour market between 2005 and 2009 we examine the stability of labour supply elasticities in conditions of rapidly changing fi nancial incentives to work. The estimated elasticities reflect substantial labour supply responsiveness in examined samples of Polish couples with total (net earnings) elasticities ranging from 0.2-0.5 for men and from 0.6-0.7 for women depending on the year of data and method of estimation. The analysis confi rms the importance of accounting for unobserved heterogeneity in the models, although this does not provide for greater stability of elasticity estimates. We use the estimated models to calculate the labour supply eff ect of tax and benefi t reforms implemented between 2005 and 2009 and compare these to actual changes in employment in Poland.


Working Paper 03/13

Poverty and transitions in health.                                                                               .



Maja Adena, Michał Myck


Using a sample of Europeans aged 50+ from twelve countries in the Survey of Health, Ageing and Retirement in Europe (SHARE) we analyse the role of poor material conditions as a determinant of changes in health over a four-year period. We find that poverty defined with respect to relative incomes has no effect on changes in health. However, broader measures of poor material conditions such as subjective poverty or low relative value of wealth significantly increase the probability of transition to poor health among the healthy and reduce the chance of recovery from poor health over the time interval analysed. In addition to this the subjective measure of poverty has a significant effect on mortality, increasing it by 40.3% among men and by 58.3% among those aged 50–64. Material conditions matter for health among older people. We suggest that if monitoring of poverty in old age and corresponding policy targets are to focus on the relevant measures, they should take into account broader definitions of poverty than those based only on relative incomes.


Working Paper 02/13

Financial support for families with children and its trade-offs: balancing redistribution and parental work incentives.



Michał Myck, Anna Kurowska, Michał Kundera


Financial support for families with children implies inherent trade-offs some of which are less obvious than others. In the end these trade-offs determine the effectiveness of policy with respect to the material situation of families and employment of parents.. We analyse several kinds of trade-offs involved using a careful selection of potential changes to the system of financial support for families with children. We focus on: 1) the trade-off between redistribution of income to poorer households and improving work incentives, 2) the trade-off between improving work incentives for better off and poorer households, 3) the trade-off between improving work incentives for first and for second earners in couples. The exercise is conducted on data from Poland, a country characterized by high levels of child poverty, low female employment and one of the lowest fertility rates in Europe. We demonstrate the complexity of potential consequences of family support policy and stress the need for well-defined policy goals and careful analysis ahead of any reform.


Working Paper 01/13

Financial incentives to work in the context of a complex reform package and growing wages: the Polish experience 2005-2011



Michał Myck, Adrian Domitrz, Leszek Morawski, Aneta Semeniuk


We examine the consequences of a tax and benefit reform package on work incentives as implied by changes in tax and replacement rates. For this purpose we focus on policy reforms implemented in Poland between 2005 and 2011 which included a number of significant changes in the tax and benefit system. While marginal and participation tax rates in the majority of analyzed cases fall as a result of the reforms, the conclusions from looking at replacement rates for the population eligible for means tested benefits are generally different. These suggest that despite significant tax giveaways incentives on the labor market weakened as a result of the reform package for families with children and for those eligible to safety net benefits. For the majority of analyzed scenarios work incentives improved over the years despite the negative effect of the reforms only due to significant real wage growth. For a significant number of analyzed cases we find conflicting conclusions on the effect of reforms on financial incentives to work using the PTRs and RRs. Given the different nature of these measures this is not necessarily surprising, but serves as a note of caution on the use of each of them independently, in particular with reference to complex reform packages.


Working Paper 04/12

For some mothers more than others: how children matter for labour market outcomes when both fertility and female employment are low




Krzysztof Karbownik, Michal Myck


We estimate the causal relationship between family size and labour market outcomes for families in low fertility and low female employment regime. Family size is instrumented using twinning and gender composition of the first two children. Among families with at least one child we identify the average causal effect of an additional child on mother’s employment to be -7.1 percentage points. However, we find no effect of additional children on female employment among families with two or more kids. Heterogeneity analysis suggests no causal effects of fertility on female employment among mothers with less than college education and older mothers (born before 1978). Furthermore, we find evidence for the interaction of family size with maternal education and age. An unintuitive feature of our finding is that we identify a positive bias of OLS estimates for highly educated mothers and for mothers born after 1977.


Working Paper 03/12

Family and labor market choices – requirements to guide effective evidence-based policy




Anna Kurowska, Michal Myck, Katharina Wrohlich


Microsimulation methods and models of labor market decisions have attracted a lot of attention as an approach to the assessment of consequences of family related policies in the area of labor market and fertility. We set these models in the context of relevant demographic theories and present them from the point of view of their potential as a tool to guide effective policy making with the aim to reconcile the objectives of increasing female participation and fertility and reducing poverty levels among families with children.


Working Paper 02/12

The determinants of teacher mobility in Sweden




Krzysztof Karbownik


This paper examines the teacher mobility using matched employee-employer panel data from Swedish lower and upper secondary schools. The unique Swedish institutional setup with a growing private sector and individually negotiated wages is ideal to analyze teacher turnover in an environment that economists typically argue for. I find statistically significant and robust negative correlations between mobility and earnings as well as wages. Unlike in the previous research, I do not find robust evidence that share of minorities raise turnover, however, upper secondary and private school teachers are significantly affected. Importantly though, even the discouraged teachers rather change schools than leave teaching. Furthermore, the private sector experiences higher teacher turnover and these institutions have particular problems with retaining science teachers and employing full time faculty.


Working Paper 01/12

Job mobility among high skilled and low skilled teachers in Sweden




Krzysztof Karbownik


This paper examines the teacher mobility using matched employee-employer panel data from Swedish lower and upper secondary schools. The core focus is on the teacher quality and its interaction with Swedish institutional setup, which closely resembles what economists usually argue for. In addition to standard quality measures I use a unique dataset containing the population-wide information on cognitive and non-cognitive assessments of males born 1951 or later. The results do not support the common view that schools, in particular these serving disadvantaged students, experience higher turnover of high quality teachers. In fact, both high cognitive and non-cognitive skills teachers are less likely to change employers. The estimates also suggest that teacher mobility decisions can be influenced through changes in monetary compensations and type of employment. Finally, high skilled teachers do not leave the profession, which suggests that the drop in teacher quality should be ascribed to the quality of new entrants.


Working Paper 03/11

Mommies’ girls get dresses, daddies’ boys get toys. Gender preferences in Poland and their implications.




Krzysztof Karbownik and Michał Myck


We examine the relationship of child gender with family and economic outcomes using a large dataset from the Polish Household Budgets’ Survey (PHBS) for years 2003-2009. Apart from studying the effects of gender on family stability, fertility and mothers’ labor market outcomes, we take advantage of the PHBS’ detailed expenditure module to examine effects of gender on consumption patterns. We find that a first born daughter is significantly less likely to be living with her father compared to a first born son and that the probability of having the second child is negatively correlated with a first born daughter. Using the context of the collective model we provide interpretation of these results from the perspective of individual parental gender preferences. We also examine the potential effects of sample selection bias which may affect the results and may be important for other findings in the literature. Labor supply of mothers and overall child-related consumption is not affected by gender of the first child, but the pattern of expenditure significantly varies between those with first born sons and first born daughters. One possible interpretation of the findings is that Polish fathers have preferences for sons and Polish mothers have preferences for daughters. Expenditure patterns suggest potential early determination of gender roles – mommies’ girls get dresses and daddies’ boys get toys.


Working Paper 02/11

Long shadows of history - persecution in Central Europe and its labor market consequences




Michał Myck and Radim Bohacek


We analyze the extent and effects of job-related persecution under communist regimes in the Czech Republic and Poland using a representative sample of individuals aged 50+ from the Survey of Health, Ageing and Retirement in Europe. Retrospective information collected in the SHARELIFE interview offers a unique chance to relate past and current labor market outcomes to experiences of persecution reflecting the historical developments in Central Europe in the 20th century. Individual level data with details on labor market histories is matched with information on the experiences of state oppression. On-the-job persecution is found to have significant effect on job quality assessment and is strongly related to reporting of distinct periods of stress in both countries. Consequences of on-the-job persecution seem to have been much more severe and longer lasting in the Czech Republic, with significant financial effects of job loss or discrimination. This is explained by the greater degree of state control over the labour market in the former Czechoslovakia compared to Poland and different characteristics of the dissident groups in both countries.


Working Paper 01/11

The effect of health and employment risks on precautionary savings.




Johannes Geyer


This paper extends the idea of using ex-ante risk measures in a model of precautionary savings by explicitly simulating future net-income risks. The uncertainty measure takes into account the interdependency of labour market and health status. The model is estimated for prime age males using the German Socio-Economic Panel Study for years 2001-2007. The empirical analysis is conducted using a measure for savings stocks and savings flows. The latter model allows to control for individual specific effects. We find evidence for precautionary savings in response to the uncertainty measures. The results are robust and stable across specifications. There is evidence for a share of precautionary wealth of about 14 to 17 percent.


Working Paper 02/10

Persecution in Central Europe and its consequences on the lives of SHARE respondents.



Radim Bohacek, Michał Myck


We report information from the SHARELIFE data recalling experiences of persecution and dispossession of SHARE respondents and focus on the relationship of persecution and current outcomes in the three Central European populations. 10% of the Czech and East German respondents and about 6% of those in Poland report being persecuted, and political reasons are most frequently reported to be the main reason for this persecution (respectively 61%, 47% and 40%). Persecution in the Czech Republic had most severe consequences for professional careers of the respondents. The experience of persecution in the Czech Republic has strongest effects on the reported satisfaction with job achievements and career disappointment. The relationship between persecution and health is strongest in Poland, where compared to those not persecuted in the past, the persecuted individuals are from 60-70% more likely to report current poor health, three or more limitations in performing daily activities (ADLs), as well as having experienced long-term illness and a period of disability. Persecuted individuals in Poland are also twice as likely to report having three or more symptoms of poor health.  Effects of persecution on health are also present in the Czech and GDR samples, though in most cases the effects are not statistically significant.
[To be published in: Axel Börsch-Supan, Martina Brandt, Karsten Hank and Mathis Schröder (eds)(2011): "The Individual and the Welfare State. Life Histories in Europe". Springer: Heidelberg.]


Working Paper 01/10

Poorer health - shorter hours? Health and flexibility of hours of work.




Johannes Geyer, Michał Myck


We analyse the role of health in determining the difference between desired and actual hours of work in a sample of German men using the Socio-Economic Panel Data for years 1996-2007. The effects of both self-assessed health and legal disability status are examined. About 60% of employees report working more than they would wish with the mean difference of -3.9 hours/week. We estimate static and dynamic model specifications allowing for auto-regressive nature of the dependent variable and testing for the role of lagged health status. Important differences are found between east and west German Laender. In the west we confirm serial dependence in the disequilibrium and find statistically significant role of general health measures in determining the disequilibrium. Employees in bad health want to work on average by about 0.4 hour/week less according to the static specification, and by about 1 hour/week less if dynamics of health and of the disequilibrium are taken into account. This is respectively 10% and 25% of the mean difference. We find no effects of legal disability status on the disequilibrium which we interpret as a reflection of stronger legal position of disabled employees.


Working Paper 09/09

Altruism in the modern family: private transfers between parents and their biological and non-biological children




Małgorzata Kalbarczyk, Anna Nicińska


It has been recognized for a long time in the literature that there are altruistic relations within a family of parents and their biological children. The dispute on the sources of altruism refers usually to sociobiology and genetic improvement, even though there are also arguments for another mechanism in operation based rather upon social than biological relations. The changes in family formation, tenure and structure that took place over the previous century might have affected signicantly the relations within family. In addition to these processes Europe is facing opportunities and threats coming from ageing which makes mechanisms determining intergenerational interactions especially relevant. For these reasons the hypothesis on kinship altruism's presence within families shall be investigated in more detail. We found evidence over the sample of 50+ population in Europe showing that there is no reason to believe that parents over 49 treat the biological childrenn in a different way than non-biological children as far as the intervivos transfers are concerned. However, children among which there is a non-biological one are less likely to provide financial and non-financial transfers to parents.


Working Paper 08/09

Count your hours: returns to education in Poland




Michał Myck, Anna Nicińska, Leszek Morawski


Combining information from two Polish surveys from 2005 and taking advantage of the Polish microsimulation model (SIMPL) we demonstrate how different the estimates of returns to education can be depending on whether we use net or gross, and monthly or hourly wages, and we examine the role of correcting for employment selection. Annual rates of return to university education for men vary from 6.7% to 9.7% and for women from 8.0% to 13.4%. We show that simple linear estimation performs relatively well for men, while family demographics seem to be the “second best" exclusion restriction in the case of the estimation for women.


Working Paper 07/09

Dynamics of poor health and non-employment




Peter Haan, Michał Myck


While there is little doubt that the probability of poor health increases with age, and that less healthy people face a more difficult situation on the labour market, the precise relationship between facing the risks of health deterioration and labour market instability is not well understood. Using twelve years of data from the German Socio-Economic Panel we study the nature of the relationship between poor health and non-employment on a sample of German men aged 30-59. We propose to model poor health and non-employment as interrelated risks determined within a dynamic structure conditional on a set of individual characteristics. Applying dynamic panel estimation we identify the mechanism through which poor health contributes to the probability of being jobless and vice versa. We find an important role of unobserved heterogeneity and evidence for correlation in the unobservable characteristics determining the two processes. The results also show strong persistence in the dynamics of poor health and non-employment.


Working Paper 06/09

Dynamics of Earnings and Hourly Wages in Germany

Michał Myck, Richard Ochmann, Salmai Qari


There is by now a vast number of studies which document a sharp increase in cross-sectional wage inequality during the 2000s. It is often assumed that this inequality is of a "permanent nature" which in turn is used as an argument calling for government intervention. We examine these claims using a fully balanced panel of full-time employed individuals in Germany from the German Socio-Economic Panel for the years 1994-2006. In line with previous studies, our sample shows sharply rising inequality during the

2000s. Applying covariance structure models, we calculate the fraction of permanent and transitory wage and earnings inequality. From 1994 on, permanent inequality increases continuously, peaks in 2001 and then declines in subsequent years. Interestingly the decline in the permanent fraction of inequality occurs at the time of most rapid increases in cross-sectional inequality. It seems therefore that it is primarily the temporary and not the permanent component which has driven the strong expansion of cross-sectional inequality during the 2000s in Germany.


Working Paper 05/09

‘Klin'-ing up: effects of Polish tax reforms on those in and on those out

Leszek Morawski, Michał Myck

In 2007 and 2008 Polish governments introduced a series of reforms which led to a substantial reduction in the tax “wedge" (in Polish: “klin") on labour. These consisted of reductions in the disability rate of Social Security Contributions (SSCs) and an introduction of an income tax credit for families with children. We show that the SSCs reforms on their own brought much greater reductions in the tax burden compared to a widely discussed 15% “flat tax", despite a very similar simulated cost. When considered together the package of introduced reforms reduced the mean ATR on total labour cost from 41.6% to 35.7%. This compares to the mean ATR of 39.6% which would result from the introduction of the “flat tax". In the analysis we present the effects of the reforms both for the employed and for the non-employed populations. The latter analysis is done in such a way as to account for the entire (simulated) distribution of wages of the non-employed and shows interesting differences between the effects of reforms on employed and non-employed individuals. We argue that to fully appreciate the effect of reductions in labour taxation it is important to bear in mind that one of the reasons for introducing them is to make employment more likely for those who currently do not work, and demonstrate that the introduced package has had a particularly important effect on non-employed second earners. Given the extent of the reductions in the “klin" it is somewhat surprising that so far so little attention has been given to the recent Polish reforms.

Working Paper 04/09

Multi-family households in a labour supply model: a calibration method with application to Poland

Peter Haan, Michał Myck


Models of cooperative and non-cooperative behaviour opened the household ``black box" and allowed for individual treatment of partners in couples. However, labour supply literature has so far largely ignored a broader issue - the distinction of single versus multi-family ("complex") households. We propose a method to account for multi-family household structure by borrowing from recent applications of the collective model to identify the degree of sharing. We assume that each household is characterised by a between-family sharing parameter, which is calibrated on estimated preferences, observed labour market status and other characteristics. We apply the method to Polish labour market data.


Working Paper 03/09

Alternative tax-benefit strategies to support children in Poland


Horacio Levy, Leszek Morawski, Michał Myck


Eurostat data shows that children and elderly are especially at risk of being in poverty. In 2004 the average rates of poverty risk in the European Union for these groups were about 19%. In Poland, the rate was 29% for children and only 7% for the elderly. We examine the role of the tax-benefit system in explaining this situation and analyse how much child poverty figures could change under several reform scenarios. In 2005, families with children were mainly supported by a means-tested family allowance and some supplements. This was extended in 2007 with the introduction of a non-refundable child tax credit. Making use of the European tax-benefit microsimulation model EUROMOD, this paper assesses the consequences of the recent reform in Poland. We examine the outcome in comparison to child policies in three other European systems and show that poverty reduction would have been more pronounced, if child policies were changed along the lines of the system in France or the United Kingdom. The Austrian system - relying primarily on universal benefits - would bring about a similar reduction in the poverty rate but with much greater reduction in the poverty gap. The paper presents detailed distributional analysis under the different systems assuming the cost of "importing" each of them to be the same as that of introducing the 2007 reform.


Working Paper 02/09

Safety net still in transition: labour market incentive effects of extending social support in Poland

Peter Haan, Michał Myck


Many aspects of the economic transition which started in 1989 in Poland are by now complete. However, the route Polish governments have so far taken concerning the system of support for low-income families still implies very different poverty alleviation schemes compared to those found in many developed countries. We examine the Polish system of social assistance in a comparative context with Germany and focus on its implications for financial incentives to work. The paper shows the effect of extending the financial support system for poorest families in Poland on labour market incentives. We demonstrate that assumptions concerning sharing of resources among families within households have significant implications on the resulting financial incentives and importantly change the implied consequences of the reforms. This is the case especially for single-adult families. 74\% of single adults without children, and 53\% of lone parents in Poland live in multi-family households. Given the limited role of the state in providing a means-tested safety net, these multi-family arrangements play an important role as far as alleviating poverty is concerned, but they are also significant for incentives on the labour market.


Working Paper 01/09

As SIMPL as that: Introducing a Tax-Benefit Microsimulation model for Poland

Olivier Bargain, Leszek Morawski, Michał Myck Mieczysław Socha


The Polish tax and benefit system is presented in the context of a recently developed microsimulation model, SIMPL. The model allows simulating direct taxes, social contributions and public benefits in Poland for the years 2003 and 2005. It is based on the Household Budgets Survey data (Badania Budżetów Gospodarstw Domowych) from 2003 and 2005. The document describes details of the Polish tax and benefit system and the simulation assumptions which were necessary in modelling it in SIMPL. We provide information on the quality of the data used in the model and some details of the validation process through various robustness checks. Finally we provide examples of application of the model for analysis of effects of policy reforms.