Kamil Galuscak

The Impact of Capital Measurement Error Correction on Firm-Level Production Function Estimation

Based on a large panel of Czech manufacturing firms, we estimate firm-level production functions in 2003-2007 using the Levinsohn and Petrin (2003) and Wooldridge (2009) approaches, correcting for the measurement error in capital. We show that measurement error plays a significant role in the size of the estimated capital coefficient. The capital coefficient estimate approximately doubles (depending on the particular industry) when we control for capital measurement error. Consequently, while the majority of industries exhibit constant or (in)significantly decreasing returns to scale when the standard methods are used, increasing returns cannot be rejected in some industries when the estimation is corrected for capital measurement error.

Labour Force Participation and Tax-Benefit Systems: A Cross-Country Comparative Perspective

This paper investigates the extent to which cross-country differences in aggregate participation rates can be explained by divergence in tax-benefit systems. We take the example of two countries, the Czech Republic and Hungary, which – despite a lot of similarities – differ markedly in labour force participation rates. We first replicate for Czech household-level data the labour supply estimation for Hungary presented in Benczur et al. (2014) and use the two perfectly comparable estimates to simulate how the aggregate participation rate would change in one country if the other country’s tax and social welfare system were adopted. Our estimation results yield similar labour supply elasticities for both countries, suggesting that individual preferences are essentially identical. The simulation results show that about one-half of the total difference in the participation rates of the 15–74 years old population can be explained by differences in the tax-benefit systems. The highest response is obtained for married women or women of childbearing age. This is related to the more generous maternity benefit system in place in Hungary as compared to the Czech Republic.

Household resilience to adverse macroeconomic shocks: evidence from Czech microdata

Abstract We develop a methodology for identifying financially distressed households and use it for testing the responses to shocks to the unemployment rate, the interest rate and prices of essential expenditure in the Czech Republic. We extend the approach of Johansson and Persson (2006) for Sweden and Albacete and Fessler (2010) for Austria in the literature to allow for full labour market transitions between employment and unemployment, and, due to data availability, to account for heads and spouses within households. This improvement may lead to a higher response of household distress incidence, due to the unemployment rate shock, than in both Sweden and Austria, while the effects due to the interest rate shock are of similar size as in Austria. We illustrate the use of our approach for stress testing households’ ability to pay their debts using macroeconomic scenarios from the CNB’s official forecast and from the CNB’s Financial Stability Report. The results highlight the importance of using micro-level datasets in the analysis of household distress incidence, as the impact of shocks is more pronounced among lower-income households.

Mechanisms of the State Dependence of Wage Setting: Evidence from a Survey of Czech Firms

Drawing on firms’ reactions to the changing macroeconomic conditions prior to and after the global financial crisis of 2008–09, this article presents evidence for the state dependence of wage setting. Further, the article investigates the underlying mechanisms of state dependence by distinguishing between firms’ general characteristics and financial performance and the environment in which firms operate. The results, based on a survey of Czech firms, show that the frequency of wage adjustment is higher for large firms, foreign-owned firms, firms covered by collective agreements, firms in good financial condition, and firms facing positive shocks, while negative demand shocks and strong competition reduce the frequency of wage adjustment.