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BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).

We investigate the effect of Reformed Protestantism, relative to Catholicism, on preferences for leisure, and for redistribution and intervention in the economy. We use a Fuzzy Spatial Regression Discontinuity Design to exploit a historical quasi-experiment in Western Switzerland, where in the sixteenth century a hitherto homogeneous region was split and one part assigned to adopt Protestantism. We find that Reformed Protestantism reduces referenda voting for more leisure by 14, redistribution by 5, and government intervention by 7 percentage points. These preferences translate into higher per capita income as well as greater income inequality.

We identify the effects of the Basel III macroprudential tool Counter-Cyclical Capital Buffer on mortgage lending. Using the first dataset on responses from multiple banks to each household, we find no evidence of explicit rationing. But as the CCyB applied only to mortgages, banks with higher mortgage specialization or lower capital cushions raise prices by an extra eight basis points. Bank level data then show that this allows them to slow their mortgage growth and rebuild capital cushions. While market-wide mortgage growth did not slow down significantly, the composition of mortgage suppliers thus moved to previously less exposed banks.

This paper investigates the impact of the CCB's increased capital requirements on mortgage pricing. We shed light on different bank balance sheet characteristics including capitalization, business model, portfolio and funding structure that might render banks more sensitive to the effects of the CCB. As risk-weighting schemes tied to loan-to-value (LTV) ratios link the riskiness of individual borrowers to the regulatory capital requirements of banks, we also examine whether these threshold LTV ratios amplify the CCB effects. We exploit a comprehensive dataset of a Swiss online mortgage broker, which allows us to separate mortgage demand from mortgage supply. Customers provide detailed information on their financial situation and the real estate property they intend to buy. Then, each mortgage request receives several binding but independent offers by banks and insurance companies. As we observe responses from both banks and insurers, we can also analyze the effect on insurers which do not need to comply with the CCB's capital requirements.Our study yields three core findings. First, capital-constrained banks and banks that are specialized in the mortgage business raise their offered mortgage rates relatively more. Hence, banks do not only charge more on new mortgages after the CCB, but also do specialized banks recover the costs of higher capital requirements for mortgages already on their balance sheets.Indeed, these specialized banks pass higher costs on to new mortgage customers. Second, banks in general charge more on very risk mortgages with critical LTV ratios above respectively 66% and 80%, but these threshold LTVs do not amplify the CCB effects. Risk-weighting schemes put an extra equity levy in terms of equity capital requirements on mortgages with LTV ratios above 3 66% and again with LTV ratios above 80%. One might hence anticipate that banks claim extra compensation for granting these more equity capital-intensive mortgages in general and even more so after the CCB imposes higher capital standards. However, we find that banks price these LTV thresholds, but risk-weighting schemes do not amplify the CCB effect. In this light, we might interpret LTV thresholds as signals for very risky mortgages inducing all lenders to charge a risk premium. Apparently, the existing risk-weighting schemes create only a relatively weak link between LTV ratios and capital requirements. Our third finding suggests that banks and insurers increase their average mortgage rates after the CCB's activation, but insurers raise rates by on average 8.8 bp more than banks. For this reason we infer that in the Swiss mortgage market there has been little "policy leakage" in the sense of CCB-exempt insurers seeking to underbid CCB-subjected banks. By contrast, we find that insurers aim for higher profits rather than seeking to expand their market share. We interpret this as the insurers' attempt to reap additional profits in a low interest rate environment with scarce profitable investment opportunities.Generally speaking, the CCB act...

Abstract:We identify the causal effect of lump-sum severance payments on non-employment duration in Norway by exploiting a discontinuity in eligibility at age 50. We find that a severance payment worth 1.2 months' earnings at the median lowers the fraction re-employed after a year by six percentage points. Data on household wealth enable us to verify that the effect is decreasing in prior wealth, which supports the view that the severance pay effect should be interpreted as evidence of liquidity constraints. Finding liquidity constraints in Norway, despite its equitable wealth distribution and generous welfare state, means they are likely to exist also in other countries.Keywords: Unemployment, Optimal Unemployment Insurance, Liq-uidity Constraints, Mental Accounting, Severance Pay, Regression Dis-continuity Design JEL classification: C41, E21, E24, J65Acknowledgements: Christoph Basten would like to thank Statistics Norway for their hospitality during the work on this project. We are indebted to Luigi Guiso, Andrea Ichino and Erzo Luttmer for helpful guidance, and grateful to seminar audiences at the EUI, Harvard, Statistics Norway, Zurich, IZA, CES-ifo, WISE, the 2010 Christmas Meeting of German Economists Abroad, and the 2011 Congress of the EEA. The usual disclaimer applies. Address SammendragVi estimerer effekten av en lump-sum utbetaling på tiden en arbeidstaker står uten arbeid. En diskontinuitet ved alder 50 i retten til sluttvederlag for arbeidstakere som mister jobben, benyttes til å identifisere den kausale effekten. En utbetaling som svarer til en medianlønnsinntekt på 1,2 måneder, reduserer andelen som er tilbake i jobb etter et år, med seks prosentpoeng. Data over husholdningsformue fra året før arbeidstakeren mister jobben gjør det mulig å bekrefte at effekten avtar med formue. Dette gir støtte til synspunktet om at sluttvederlagseffekten skal tolkes som tegn på at de som mister jobben er likviditetsbeskranket. Når vi finner likviditetsbeskrankninger i Norge, til tross for landets relativt jevne formuesfordeling og sjenerøse velferdsordninger, kan det tyde på at slike beskrankninger også finnes i andre land.

We provide novel evidence on the role of income taxes for housing rents and spatial sorting. Drawing on comprehensive micro‐level data, we estimate the responsiveness of households to tax differentials across municipal boundaries. Correcting for unobservable location characteristics and isolating the residential sorting component, we identify an income tax elasticity of rents of about −0.27 to −0.35. In line with non‐homothetic preferences, we find that the marginal willingness to pay for lower taxes increases with income. Counterfactual calculations show how an homogenisation of taxes across jurisdictions and an increase in variation of taxes affect rents and income stratification across space.

In 2002, Switzerland began to adopt free movement of workers with the European Union. We study the effects of the resulting immigration wave on resident workers. We focus on the level of national skill groups and propose an instrumental variable approach to address the endogeneity of immigration in this setting. Mostly relying on administrative data for the 2002–2011 period, we find that the immigration of foreign workers reduced unemployment of residents, and had limited adverse effects on their wages and employment. One reason for this is that younger residents changed to more demanding jobs as a response to the arrival of immigrants.