SUMMARY This paper investigates the determinants of public‐sector efficiency, in particular the role of fiscal decentralization and fiscal rules. For 23 European countries over the period from 1995 to 2015, we construct a measure of public‐sector performance consisting of nine distinct indices for each area of public policy, such as administration, health education, economic performance, security and infrastructure. We use several efficiency techniques, e.g., free disposal hull and order‐m, and investigate input‐and output‐oriented efficiency in the public sector. We analyse in depth the impact of fiscal decentralization and fiscal rules on public‐sector efficiency. We conclude that, whereas decentralization fosters efficiency, fiscal rules have no effect. Moreover, fiscal rules, when combined with decentralization, may harm efficiency, which is consistent with the ratchet effect.

This paper analyzes the impact of the COVID-19 crisis on household income in Austria, using detailed administrative labor market data, in combination with micro-simulation techniques that enable specific labor market transitions to be modeled. We find that discretionary fiscal policy measures in Austria are key to counteracting the inequality- and poverty-enhancing effect of COVID-19. Additionally, we find that females tend to experience a greater loss in terms of market income. The Austrian tax–benefit system, however, reduces this gender differences. Disposable income has dropped by around 1% for both males and females. By comparison, males profit mainly from short-time work scheme, while females profit especially from other discretionary policy measures, such as the one-off payment for children.

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The aim of this study is to estimate the relationship between the minimum wage and the employment rate of young individuals, taking into account potential nonlinearity. In a cross‐country setup of European countries, we find a significant nonlinear relationship between the minimum wages and employment rate of young individuals. Theoretically, while low minimum wages can indeed be positively associated with employment, after a certain level of the minimum wage, the relationship turns negative. This implies that there is an optimal level of minimum wages that maximizes the employment rate of young individuals. We additionally show that the negative relationship between minimum wages and employment of young workers is stronger if labor markets are otherwise strictly regulated and when workers are relatively unproductive. Using these results, we are able to calculate country‐specific turning points and show that some European countries in our sample might in fact contribute to high unemployment rates among young individuals by setting minimum wages too high. However, in other European countries, especially the Eastern European countries, an increase in minimum wages (up to a certain level) might even lead to higher employment rates of young individuals.