nep-eec New Economics Papers
on European Economics
Issue of 2005‒03‒20
thirteen papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. Demographic change, immigration, and the labour market: A European perspective By Juan F. Jimeno
  2. Economic Inequality in Spain: The European Union Household Panel Dataset By Santiago Budría; Javier Díaz-Giménez
  3. Economic Consequences of Widowhood in Europe: Cross-country and Gender Differences By Namkee Ahn
  4. Evolving Federations and Regional Public Deficits: Testing the Bailout Hypothesis in the Spanish Case By Santiago Lago-Peñas
  5. Structural Change in the German Banking System? By Andreas Hackethal; Reinhard H. Schmidt
  6. Improving the SGP: Taxes and Delegation Rather than Fines By Lindbeck, Assar; Niepelt, Dirk
  7. Are Constant Interest Rate Forecasts Modest Interventions? Evidence from an Estimated Open Economy DSGE Model of the Euro Area By Adolfson, Malin; Laséen, Stefan; Lindé, Jesper; Villani, Mattias
  8. Nascent and Infant Entrepreneurs in Germany: Evidence from the Regional Entrepreneurship Monitor (REM) By Wagner, Joachim
  9. A Portrait of Child Poverty in Germany By Corak, Miles; Fertig, Michael; Tamm, Marcus
  10. Wealth and Portfolio Composition By Dimitrios Christelis; Tullio Jappelli; Mario Padula
  11. The Effects of Employment Protection on the Italian Labour Market By Adriana Kugler; Giovanni Pica
  12. Languages in the European Union: The Quest for Equality and its Cost By Jan Fidrmuc; Victor Ginsburgh
  13. Labour productivity, ICT and regions: The revival of Italian “dualism”? By Simona Iammarino; Cecilia Jona-Lasini; Susanna Mantegazza

  1. By: Juan F. Jimeno
    Abstract: After a long period of high unemployment, the EU is about to face a significant change in the demographic structure of its labour force, due to a reduction in fertility rates in the past, and increasing immigration flows. There is a long standing literature of empirical studies aiming at measuring the effects of cohort sizes and of immigration flows on employment and unemployment rates and on the wage profiles of several population groups. And there are some reasons to think that these effects depend on the institutions determining the functioning of the labour market. This paper argues that population ageing may produce a reduction of employment rates in the EU15 over the next two decades, as the share of the older workers in the labour force increase. Then it discusses the reasons why, despite this direct composition effects, there may be another indirect effects of changing composition of the labour supply on population specific employment and unemployment rates. Finally, it uses cross-country data to find how the interaction between the age composition of the labour force and the share of foreign workers in the labour force, on the one hand, and labour market institutions, on the other hand, contribute to explaining international differences in age and gender- specific employment and unemployment rates.
  2. By: Santiago Budría; Javier Díaz-Giménez
    Abstract: This article uses data from the 1998 European Union Household Panel to study economic inequality in Spain. It reports data on the Spanish distributions of income, labor income, and capital income, and on related features of inequality, such as age, employment status, educational attainment, and marital status. It also reports data on the income mobility of Spanish households. We find that income, earnings, and, very especially, capital income are very unequally distributed in Spain.
  3. By: Namkee Ahn
    Abstract: We document in this paper, the economic consequences upon widowhood using both cross- section and panel data from European Community Household Panel. Main conclusions are as what follows. First, there is a large difference across country. The widowed persons in Greece and Portugal have lowest income, less than a half of that of Austrian widowed persons. Cross-country difference decreases somewhat if we consider household income net of housing costs due to higher home- ownership in low income countries. Second, income reduction upon widowhood is in general larger among widows than widowers. The gender difference is largest in Denmark, Spain, Austria and Finland, where widowers enjoy more than 30% higher income than widows. Third, the main culprit of gender difference in income situation of widowed persons is the pension regulation. As many widowed women depend on survivorship pension as their main income source and as the survivorship pension is much lower than old-age pension in most countries, widows suffer much larger income reduction than widowers with widowhood. As current elderly women and those in many coming years lived their working ages in a world where wives and mothers worked at home, raised children and did not work in the market, they will depend mostly on survivorship pension as their main income source. Consequently, their economic situation would not improve in the medium term unless pension regulations change to improve their economic situation
  4. By: Santiago Lago-Peñas
  5. By: Andreas Hackethal; Reinhard H. Schmidt
    Date: 2005–01
  6. By: Lindbeck, Assar (Institute for International Economic Studies, Stockholm University); Niepelt, Dirk (Institute for International Economic Studies, Stockholm University)
    Abstract: We analyze motivations for, and possible alternatives to, the Stability and Growth Pact (SGP). With regard to the former, we identify domestic policy failures and various cross-country spillover effects; with regard to the latter, we contrast an "economic-theory" perspective on optimal corrective measures with the "legalistic" perspective adopted in the SGP.We discuss the advantages of replacing the Pact's rigid rules backed by fines with corrective taxes (as far as spillover effects are concerned) and procedural rules and limited delegation of fiscal powers (as far as domestic policy failures are concerned). This would not only enhance the efficiency of the Pact, but also render it easier to enforce.
    Keywords: Stability and Growth Pact; spillover effects; policy failures; Pigouvian taxes; policy delegation
    JEL: E63 F33 F42 H60
    Date: 2004–12–14
  7. By: Adolfson, Malin (Research Department, Central Bank of Sweden); Laséen, Stefan (Monetary Policy Department, Central Bank of Sweden); Lindé, Jesper (Research Department, Central Bank of Sweden); Villani, Mattias (Research Department, Central Bank of Sweden)
    Abstract: This paper uses an estimated open economy DSGE model to examine if constant interest forecasts one and two years ahead can be regarded as modest policy interventions during the period 1993Q4-2002Q4. An intervention is here defined to be modest if it does not trigger the agents to revise their expectations about the inflation targeting policy. Using univariate modesty statistics, we show that the modesty of the policy interventions depends on the assumptions about the uncertainty in the future shock realizations. In 1998Q4-2002Q4, the two year constant interest rate projections turn out immodest when assuming uncertainty only about monetary policy shocks during the conditioning period. However, allowing non-policy shocks to influence the forecasts makes the interventions more modest, at least one year ahead. Using a multivariate statistic, however, which takes the joint effects of the policy interventions into consideration, we find that the conditional policy shifts all projections beyond what is plausible in the latter part of the sample (1998Q4-2002Q4), and thereby affects the expectations formation of the agents. Consequently, the constant interest rate assumption has arguably led to conditional forecasts at the two year horizon that cannot be considered economically meaningful during this period.
    Keywords: Forecasting; Monetary policy; Open economy DSGE model; Policy interventions; Bayesian inference
    JEL: C11 C53 E47 E52
    Date: 2005–03–01
  8. By: Wagner, Joachim (University of Lueneburg and IZA Bonn)
    Abstract: Based on data from a recent representative survey of the adult population in Germany this paper documents that the patterns of variables influencing nascent and infant entrepreneurship are quite similar and broadly in line with our theoretical priors – both types of entrepreneurship are fostered by the width of experience and a role model in the family, and hindered by risk aversion, while being male is a supporting factor. Results of this study using cross section data are in line with conclusions from longitudinal studies for other countries finding that between one in two and one in three nascent entrepreneurs become infant entrepreneurs, and that observed individual characteristics – with the important exception of former experience as an employee in the industry of the new venture - tend to play a minor role only in differentiating who starts and who gives up.
    Keywords: nascent entrepreneurs, infant entrepreneurs, Germany
    JEL: J23
    Date: 2005–03
  9. By: Corak, Miles (UNICEF Innocenti Research Centre and IZA Bonn); Fertig, Michael (RWI Essen and IZA Bonn); Tamm, Marcus (RWI Essen and Ruhr University of Bochum)
    Abstract: This paper offers a descriptive portrait of income poverty among children in Germany between the early 1980s and 2001, with a focus on developments since unification in 1991. Data from the German Socio-Economic Panel are used to estimate poverty rates, rates of entry to and exit from poverty, and the duration of time spent in and out of poverty. The analysis focuses upon comparisons between East and West Germany, by family structure, and citizenship status. Child poverty rates have drifted upward since 1991, and have been increasing more than the rates for the overall population since the mid-1990s. In part these changes are due to increasing poverty among children from households headed by noncitizens. Children in single parent households are by all measures at considerable risk of living in poverty. There are also substantial differences in the incidence of child poverty and its dynamics between East and West Germany.
    Keywords: poverty dynamics, poverty duration, immigrant households
    JEL: I32 I38 J13
    Date: 2005–03
  10. By: Dimitrios Christelis (University of Salerno and CSEF); Tullio Jappelli (University of Salerno, CSEF and CEPR); Mario Padula (University of Salerno and CSEF)
    Abstract: This paper provides basic statistics on household total wealth, financial assets, and financial assets composition of the elderly as key indicators of the well-being and quality of life of the elderly. Median total wealth varies much less than median financial wealth across countries. As for financial asset ownership, the chapter focuses on bonds, stocks, mutual funds and life-insurance policies and documents the polarization between Nordic and Mediterranean countries. The elderly tend to invest more in stocks and to have a more diversified portfolio in Northern and Central Europe than in the South. The chapter also offers insights about the relation between financial risk exposure and age and the time that the elderly spend managing their financial assets.
    Date: 2005–03–01
  11. By: Adriana Kugler (University of Houston, Universitat Pompeu Fabra, NBER, CEPR and IZA); Giovanni Pica (University of Southampton, University of Salerno and CSEF)
    Abstract: This paper uses the Italian Social Security employer-employee panel to study the effect of a reform that introduced a cost for unjust dismissals only for firms below 15 employees, while leaving firing costs unchanged for bigger firms. We find that the increase in dismissal costs decreased accessions and separations in small relative to big firms, the more so in sectors with higher employment volatility. Moreover, the reform reduced firms’ entry rates while increasing the exit rate. We also find evidence that higher EPL flattened employment policies over the cycle
    Keywords: Costs of Unjust Dismissals, European Unemployment, Firms’ Entry and Exit, Employment Volatility
    JEL: E24 J63 J65
    Date: 2005–03–01
  12. By: Jan Fidrmuc; Victor Ginsburgh
    Abstract: The European Union has recently expanded from 15 to 25 countries. In line with this enlargement, the list of official EU languages has grown from 11 to 20. Currently, the EU extends equal treatment to all member countries’ official languages by providing translations for documents and interpreting services for meetings and sessions of the European Parliament. This, however, is costly, especially when recognizing that many Europeans speak one of the procedural languages of the EU, English, French or German, either as their native language or as a foreign language. We compute disenfranchisement rates that would result from using only the three procedural languages for all EU business, and marginal costs per disenfranchised person associated with providing translations and interpreting into the remaining 17 languages. The marginal costs are shown to vary substantially across the different languages, raising important questions about the economic efficiency of equal treatment for all languages. We argue that an efficient solution would be to decentralize the provision of translations.
    Keywords: Languages, Disenfranchisement, European Union, Cost and benefit analysis
    JEL: D70 O52 Z13
    Date: 2004–07–01
  13. By: Simona Iammarino (SPRU, University of Sussex); Cecilia Jona-Lasini (Italian National Institute of Statistics (ISTAT), Rome, Italy); Susanna Mantegazza (Italian National Institute of Statistics (ISTAT), Rome, Italy)
    Abstract: Among the reasons underlying the slow economic convergence of some regions towards the national and the European Union average, the strong gap in technological endowment and innovation capacity has been indicated as one of the most important factors. The requirements of the current ‘knowledge-based economy’ and the contribution of Information and Communication Technology (ICT) to socio-economic change are very likely to have a significant impact upon regional differentials in the European Union. So far, however, it is rather unclear whether the new paradigm will spur greater socio-economic cohesion or, on the contrary, stronger territorial polarisation. This paper looks at the distribution of ICT-producing small and medium enterprises in Italy, comparing structural variables – in particular spatial and sectoral dimensions - with labour productivity levels. Ultimately, the objective is to shed some light on the role that ICT-producing firms might play with respect to regional gaps in the Italian economy, traditionally characterised by geographical polarisation and imbalances which are among the most striking in the “Europe of regions”. The first result of our analysis (carried out by using experimental micro data) is that a linkage seems to emerge between high labour productivity and the IT industry. This is in line with the insights of the economic theory of technical change, suggesting that IT-producing sectors are those where gains in productivity are by far the most evident. As expected, the geographical location of firms accounts for a good deal when looking at labour productivity levels across sectors, casting some concern on the development perspectives of the Italian regional divide.
    Keywords: regional development, Italy, Information and Communication Technology (ICT), small and medium enterprises, productivity
    JEL: R11 L63
    Date: 2004–11–10

This nep-eec issue is ©2005 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.