INGO E. ISPHORDING

Publications in refereed journals

Profit Taxation, R&D Spending, and Innovation, joint with Andreas Lichter, Max Löffler, Thu-Van Nguyen, Felix Pöge and Sebastian Siegloch. accepted at American Economic Journal: Economic Policy

We study how profit taxes affect establishments’ R&D activities. Relying on detailed panel data of R&D-active firms in Germany over two decades, we exploit identifying variation induced by more than 10,000 municipal changes in the local business tax rate and federal tax reforms with locally varying effects. Using event study techniques, we find a sizable, negative effect of profit taxes on establishments’ total R&D spending and patents filed. Zooming into the innovation production process, we uncover substantial h eterogeneity in the impact of profit taxation for various R&D input factors, among firm characteristics, and for different types of research projects.

VOX EU Column

Labour Market Shocks and Parental Investments during the Covid-19 Pandemic, joint with Claudia Hupkau, Jenifer Ruiz-Valenzuela and Stephen Machin, Labour Economics, Volume 82, June 2023, 102341, https://doi.org/10.1016/j.labeco.2023.102341

This paper studies spill-over effects of parental labour market shocks at two time points in the Covid-19 crisis: right after its onset in April 2020, and in January 2021. We use rich data from the UK to look at the consequences of immediate and persistent shocks that hit parents' economic livelihoods. These negative labour market shocks have substantially larger impacts when suffered by fathers than by mothers. Children of fathers that suffered the most severe shocks - earnings dropping to zero - are the ones that are consistently impacted. In April 2020, they were 10 percentage points less likely to have received additional paid learning resources, but their fathers were spending about 30 more minutes per day helping them with school work. However, by January 2021, this latter association switches sign, as the negative spill-over onto children's education occurred for those fathers facing more persistent, negative labour market shocks as the crisis progressed. The paper discusses potential mechanisms driving these results, finding a sustained deterioration of household finances and a worsening of father's mental health to be factors at play. 

Schools under Mandatory Testing Can Mitigate the Spread of SARS-CoV-2, joint with Marc Diederichs, Reyn van Ewijk and Nico Pestel, Proceedings of the (PNAS) 119 (26) , July 2022, https://www.pnas.org/doi/10.1073/pnas.2201724119


We use event study models based on staggered summer vacations in Germany to estimate the effect of school re-openings after the summer of 2021 on the spread of SARS-CoV-2. Estimations are based on daily counts of confirmed coronavirus infections across all 401 German counties. A central anti-pandemic measure in German schools included mandatory rapid testing multiple times per week. Our results are consistent with mandatory testing contributing to the containment of the viral spread. We find a short-term increase in infection rates right after summer breaks, indicating the uncovering of otherwise undetected (asymptomatic) cases through the testing. After a period of about two weeks after school re-openings, the growth of case numbers is smaller in states which re-opened schools compared to the control group of states still in summer break. The results show a similar pattern for older age groups as well, arguably as a result of detected clusters through the school testing. This means that under certain conditions open schools can play a role in containing the spread of the virus. Our results suggest that closing schools as a means to reduce infections may have unintended consequences by giving up surveillance and should be considered only as a last resort.

For a German summary see IZA Standpunkt 101  

Media coverage in Welt and Focus

Achievement Rank Affects Performance and Major Choices in College, joint with Benjamin Elsner and Ulf Zoelitz, The Economic Journal, Volume 131, Issue 640, November 2021, Pages 3182–3206, https://doi.org/10.1093/ej/ueab034

This paper studies how a student’s ordinal rank in a peer group affects performance and specialisation choices in university. By exploiting data with repeated random assignment of students to teaching sections, we find that a higher rank increases performance and the probability of choosing related follow-up courses and majors. We document two types of dynamic effects. First, earlier ranks are less important than later ranks. Second, responses to rank changes are asymmetric: improvements in rank raise performance, while decreases in rank have no effect. Rank effects partially operate through students’ expectations about future grades.


School Re-Openings after Summer Breaks in Germany Did Not Increase SARS-CoV-2 Cases, joint with Marc Lipfert and Nico Pestel, Journal of Public Economics, Volume 198, June 2021, 104426, https://doi.org/10.1016/j.jpubeco.2021.104426

This paper studies the effect of the end of school summer breaks on SARS-CoV-2 cases in Germany. We exploit variation in the staggered timing of summer breaks across federal states which allows us to implement an event study design. We base our analysis on official daily counts of confirmed coronavirus infections by age groups across all 401 German counties. We consider an event window of two weeks before and three weeks after the end of summer breaks. Over a large number of specifications, sub-group analyses and robustness checks, we do not find any evidence of a positive effect of school re-openings on case numbers. On the contrary, our preferred specification indicates that the end of summer breaks had a negative effect on the number of new confirmed cases. Three weeks after the end of summer breaks, cases have decreased by 0.55 cases per 100,000 inhabitants or 27 percent of a standard deviation. Our results are not explained by changes in mobility patterns around school re-openings arising from travel returnees. We conclude that school re-openings in Germany under strict hygiene measures combined with quarantine and containment measures have not increased the number of newly confirmed SARS-CoV-2 infections.


Pandemic meets Pollution: Poor Air Quality increases Deaths by COVID-19, joint with Nico Pestel, Journal of Environmental Economics and Management, Volume 108, July 2021, 102448, https://doi.org/10.1016/j.jeem.2021.102448 

We study the impact of short-term exposure to ambient air pollution on the spread and severity of COVID-19 in Germany. We combine data on county-by-day level on confirmed cases and deaths with information on local air quality and weather conditions and exploit short-term variation in the concentration of particulate matter (PM10) and ozone (O3). We apply fixed effects regressions controlling for global time-varying confounding factors and regional time-invariant confounding factors on the county level, as well as potentially confounding weather conditions and the regional stage of the pandemic. We find significant positive effects of PM10 concentration after the onset of the illness on COVID-19 deaths specifically for elderly patients (80+ years): higher levels of air pollution by one standard deviation 3 to 12 days after developing symptoms increase deaths by 30 percent (males) and 35 percent (females) of the mean. In addition, air pollution raises the number of confirmed cases of COVID- 19. The timing of results supports mechanisms of air pollution affecting the severity of already realized infections. Air pollution appears not to affect the probability of infection itself.


Minority Salience and Political Extremism, forthcoming in the American Economic Journal: Applied Economics, joint with Tommaso Colussi and Nico Pestel,  vol. 13, no. 3, July 2021, pp. 237-71, https://doi.org/10.1257/app.20190703 

We investigate how changes in the salience of a minority group affect the majority group’s voting behavior. Specifically, we focus on Muslim communities and their increased salience in daily life during Ramadan. To estimate a causal effect, we exploit exogenous variation in the distance of German federal and state elections to the month of Ramadan over the 1980–2013 period. Our findings reveal an increased polarization of the electorate: vote shares for both right- and left-wing extremist parties increase in municipalities where mosques are located when the election date is closer to Ramadan. We use individual-level survey data to provide evidence on potential mechanisms. During Ramadan respondents perceive the share of foreign-born people living in their country as larger and reveal more negative attitudes towards Muslims. We complement these findings with evidence on increased numbers of violent attacks against Muslim communities shortly after Ramadan. 


Peer Diversity, College Performance and Educational Choices, Labour Economics, Volume 64, June 2020, joint work with Arnaud Chevalier and Elena Lisauskaite

We study the effect of ethno-linguistic classroom composition in college on educational performance, educational choices and post-graduation migration in a setting of quasi-random assignment to undergraduate seminars at a British university. We focus on two core variables: the share of non-English-speaking students and the diversity within the group of non-English-speaking students with respect to their linguistic background. English-speaking students are largely unaffected by the ethno-linguistic classroom composition. Non-English-speaking students benefit from a larger diversity in their performance and increase their interaction with English-speaking students. Educational choices of non-English-speaking students become more similar to choices of English-speaking students in response to more diverse classes. Post-graduation, non-English students who have been assigned to higher shares of non-English students in the compulsory stage are more likely to leave the country. Our results imply that current levels of internationalisation do not impose a threat to native education. Avoiding segregation along ethnic lines is key in providing education for an internationalised studentship.


Rank, Sex, Drugs, and Crime, Journal of Human Resources, Volume 53, Number 2, Spring 2018, pp. 356-381, joint work with Ben Elsner, earlier version as IZA DP # 9478 here

We show that a student’s ordinal ability rank in a high-school cohort is an important determinant of engaging in risky behaviors. Using longitudinal data from representative US high schools, we find a strong negative effect of rank on the likelihood of smoking, drinking, having unprotected sex and engaging in physical fights. We further provide evidence that these results can be explained by sorting into peer groups and differences in career expectations. Students with a higher rank are less likely to be friends with other students who smoke and drink, while they have higher expectations towards their future educational attainment. 



A Big Fish in a Small Pond: Ability Rank and Human Capital Investment, Journal of Labor Economics, Volume 35, Number 3, July 2017, pp. 787–828, joint work with Ben Elsner

We study the impact of a student’s ordinal rank in a high school cohort on educational attainment several years later. To identify a causal effect, we compare multiple cohorts within the same school, exploiting idiosyncratic variation in cohort composition. We find that a student’s ordinal rank significantly affects educational outcomes later in life. Students with a higher rank are significantly more likely to finish high school and to attend college. Exploring potential channels, we find that students with a higher rank have higher expectations about their future career, as well as a higher perceived intelligence. 



Language Barriers and Immigrant Health, Health Economics, Volume 26, Issue 6, June 2017, Pages 765–778, joint work with Andrew Clarke

We study the impact of language deficiency on the health status of childhood migrants to Australia. Our identification strategy relies on a quasi‐experiment comparing immigrants arriving at different ages and from different linguistic origins. In the presence of considerable non‐classical measurement error in self‐reported language proficiency, our results provide lower and upper bounds for a strong negative effect of English deficiency on health of between one half and a full standard deviation in the health score. 


Speaking in Numbers: The Effect of Reading Performance on Math Performance among Immigrants, Economics Letters, Volume 139, February 2016, pp. 52-56, joint work with Marc Piopiunik and Núria Rodríguez-Planas 

This paper is the first to estimate a causal effect of immigrant students’ reading performance on their math performance. To overcome endogeneity issues due to unobserved ability, we apply an IV approach exploiting variation in age-at-arrival and the linguistic distance between origin and destination country languages. Using four PISA waves, we find a strong influence of reading performance on math performance, highlighting the importance of early language support for immigrants for their educational career.


Linguistic barriers in the destination language acquisition of immigrants. Journal of Economic Behavior and Organization, Volume 105, September 2014, Pages 30–50, joint work with Sebastian Otten

There are various degrees of similarity between the languages of different immigrants and the language of their destination country. This linguistic distance is an obstacle to the acquisition of a language, which leads to large differences in the attainments of the language skills necessary for economic and social integration in the destination country. This study aims at quantifying the influence of linguistic distance on the language acquisition of immigrants in the US and in Germany. Drawing from comparative linguistics, we derive a measure of linguistic distance based on the automatic comparison of pronunciations. We compare this measure with three other linguistic and non-linguistic approaches in explaining self-reported measures of language skills. We show that there is a strong initial disadvantage from the linguistic origin for language acquisition, while the effect on the steepness of assimilation patterns is ambiguous in Germany and the US.


Disadvantages of Linguistic Origin - Evidence from Immigrant Literacy Scores, Economics Letters, Vol. 123, pp. 236-239, 2014

This study quantifies the disadvantage in literacy skills that arises from the linguistic distance between their mother tongue and host country language, combining individual cross-country data on literacy scores with unique information on the linguistic distance between languages.



The Costs of Babylon – Linguistic Distance in Applied Economics, Review of International Economics, Vol. 21, Issue 2, pp. 354-369, 2013, joint work with Sebastian Otten

Linguistic distance, i.e. the dissimilarity between languages, is an important factor influencing international economic transactions such as migration or international trade flows by imposing hurdles for second language acquisition and increasing transaction costs. To measure these costs, we suggest using a new measure of linguistic distance. The Levenshtein distance is an easily computed and transparent approach of including linguistic distance into econometric applications. We show its merits in two different applications. First, the effect of linguistic distance in the language acquisition of immigrants is analyzed using data from the 2000 US Census, the German Socio‐Economic Panel, and the National Immigrant Survey of Spain. Across countries, linguistic distance is negatively correlated with reported language skills of immigrants. Second, applying a gravity model to data on international trade flows covering 178 countries and 52 years, it is shown that linguistic distance has a strong negative influence on bilateral trade volumes. 


Returns to Foreign Language Skills of Immigrants in Spain, LABOUR, Vol. 27, Issue 4, pp. 443-461, 2013

This study examines the returns to foreign language skills of immigrants in the Spanish labor market. Measurement error and endogeneity issues are addressed by deriving a set of novel instruments for foreign language proficiency through a measure of linguistic dissimilarity. Using cross‐sectional data from the 2007 National Immigrant Survey of Spain (NISS), returns to language skills are estimated separately for English, German, and French proficiency. Foreign language proficiency produces high returns, which appear to be mediated through the channel of occupational choice. The results are discussed against the background of a severe foreign language skills shortage in the Spanish economy. Immigrants may deal as a supplier of foreign language proficiency in the short run. 

Publications in handbooks/encyclopedias/communication journals

1. What drives the language proficiency of immigrants?,  IZA World of Labor

2. Language and Labor Market success, International Encyclopedia of Social and Behavioral Sciences, 2nd Edition, 2015, pp. 260-265, pre-publication version as IZA DP #8572