|
on European Economics |
|
Issue of 2005‒06‒14
thirty-six papers chosen by Giuseppe Marotta Universita di Modena e Reggio Emilia |
| By: | Camacho, Maximo; Pérez-Quirós, Gabriel; Saiz, Lorena |
| Abstract: | We propose a comprehensive methodology to characterize the business cycle comovements across European economies and some industrialized countries, always trying to ‘let the data speak’. Out of this framework, we propose a novel method to show that there is no ‘Euro economy’ that acts as an attractor to the other economies of the area. We show that the relative comovements across EU economies are prior to the establishment of the Monetary Union. We are able to explain an important proportion of the distances across their business cycles using macro-variables related to the structure of the economy, to the directions of trade, and to the size of the public sector. Finally, we show that the distances across countries that belong to the European Union are smaller than the distances across newcomers. |
| Keywords: | business cycle synchronization; cluster analysis; economic integration; european union enlargement; multidimensional scaling |
| JEL: | C22 E32 F02 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4824&r=eec |
| By: | Demyanyk, Yuliya; Volosovych, Vadym |
| Abstract: | We study the degree of output and consumption asymmetry for the ten new and fifteen original European Union members during the period 1994–2001. We establish basic stylized facts about macroeconomic asymmetry from correlations of GDP and consumption growth rates with corresponding aggregates. In addition, we determine which countries would potentially gain the most from international risk sharing within the European Union employing a utility-based measure suggested by Kalemli-Ozcan, Sørensen and Yosha (2001). We find much higher potential gains for the new members compared to those for original EU-15 countries. In particular, economies with the most volatile and counter-cyclical output growth – Czech Republic, Slovak Republic, and the three Baltic states – might benefit the most. We show that EU enlargement would not reduce the welfare of EU-15 members. If these countries move towards full risk sharing their potential welfare gains after enlargement would be virtually unchanged. |
| Keywords: | asymmetry of GDP; consumption insurance; EU enlargement; risk sharing |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4847&r=eec |
| By: | Angelini, Paolo; Lippi, Francesco |
| Abstract: | The introduction of the euro notes and coins during the first months of 2002 was followed by a lively debate on the alleged inflationary effects of the new currency. In Italy, as in the rest of the euro area, survey-based measures signaled a much sharper rise in inflation than measured by the official price indices, whose quality was called into question. In this paper we gather indirect evidence on the behaviour of prices from the analysis of cash withdrawals from ATM and their determinants. Since these data do not rely on official inflation statistics, they provide an independent check for the latter. We present a simple theoretical model in which the relationship between aggregate ATM withdrawals and aggregate expenditure is not homogenous of degree one in the price level, a prediction which is strongly supported by the data. This feature allows us to test the hypothesis that, after the introduction of the euro notes and coins, consumer prices underwent an increase not recorded by official inflation statistics. We do not find evidence in support of this hypothesis. |
| Keywords: | currency; euro changeover; inflation |
| JEL: | E31 E41 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4950&r=eec |
| By: | Küster, Keith; Wieland, Volker |
| Abstract: | In this paper, we examine the cost of insurance against model uncertainty for the euro area considering four alternative reference models, all of which are used for policy analysis at the ECB. We find that maximal insurance across this model range in terms of a Minimax policy comes at moderate costs in terms of lower expected performance. We extract priors that would rationalize the Minimax policy from a Bayesian perspective. These priors indicate that full insurance is strongly oriented towards the model with highest baseline losses. Furthermore, this policy is not as tolerant towards small perturbations of policy parameters as the Bayesian policy rule. We propose to strike a compromise and use preferences for policy design that allow for intermediate degrees of ambiguity-aversion. These preferences allow the specification of priors but also give extra weight to the worst uncertain outcomes in a given context. |
| Keywords: | euro area; minimax; model uncertainty; monetary policy rules; robustness |
| JEL: | E52 E58 E61 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4956&r=eec |
| By: | Mélitz, Jacques |
| Abstract: | Official adjustments of the budget balance to the cycle merely assume that the only category of government spending that responds automatically to the cycle is unemployment compensation. But estimates show otherwise. Payments for pensions, health, subsistence, invalidity, childcare and subsidies of all sorts to firms respond automatically and significantly to the cycle as well. In addition, it is fairly common to borrow official figures for cyclically adjusted budget balances, divide by potential output, and then use the resulting ratios to study discretionary fiscal policy. But if potential output is not deterministic but subject to supply shocks, then apart from anything else, those ratios are inefficient estimates of the cyclically-independent ratios of budget balances divided by potential output. (A fortiori, they are inefficient estimates of the cyclically adjusted ratios of budget balances to observed output.) Accordingly, the paper provides separate estimates of the impact of the cycle on the levels of budget balances and the ratios of budget balances to output. In addition, it discusses the relation between the two sorts of estimates. When the focus is on ratios of budget balances to output, the cyclical adjustments depend more on inertia in government spending on goods and services than they do on taxes (which are largely proportional to output). But they depend even still more on transfer payments. Besides calling for different series for discretionary fiscal policy if ratios serve, these results also raise questions about the general policy advice to ‘let the automatic stabilizers work’. |
| Keywords: | automatic stabilization; cyclically adjusted budget balances; discretionary fiscal policy |
| JEL: | E00 E60 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4988&r=eec |
| By: | Mody, Ashoka; Sarno, Lucio; Taylor, Mark P |
| Abstract: | A growing literature has examined the importance of credit market imperfections for macroeconomic fluctuations, the so-called financial accelerator. A related literature has provided evidence of international and regional co-movements in macroeconomic fluctuations. We tie together these strands of the literature in that we investigate the importance of both cross-country and country-specific credit cycles in explaining output fluctuations. Using data for four major economies and two world regions from 1973 to 2001, we find that both regional and country-specific components of indicators of credit availability are powerful in explaining output movements. This research provides the first empirical evidence of a cross-country financial accelerator. |
| Keywords: | credit cycle; financial accelerator; international business cycles; Kalman filter |
| JEL: | E32 E51 F36 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5037&r=eec |
| By: | Hughes Hallett, Andrew |
| Abstract: | This paper attempts to reconcile the need for flexibility in fiscal policy, with the need for credibility and consistency in monetary policies. The idea is to generate fewer conflicts between policies but greater discipline within them. We assume an independent central bank and restraints on the use of national fiscal policies. Using a theoretical model, we examine the consequences of assigning leadership to fiscal or monetary policies to exploit the implicit (rule based) coordination available under standard transmission mechanisms, but where priorities and targets differ between policy makers. This works best with fiscal leadership: we introduce a debt rule (with hard or soft targets) to precommit fiscal policies over the longer term, but use monetary independence to guarantee credibility and discipline in the short run stabilization policies. Compared to the uncoordinated solution now operating in Europe, inflation biases are lower and debt repayments higher for no loss in output volatility. That corresponds to the experience of the UK, our benchmark case, whose empirical reaction functions show fiscal leadership. Across ten OECD countries, these gains are estimated to be worth 2%-4% of GDP. |
| Keywords: | debt rule; institutional coordination; soft targets; stackelberg leadership |
| JEL: | E52 E61 F42 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5043&r=eec |
| By: | Zuzana Fungacova |
| Abstract: | In this paper we study the relationship between mass privatization and capital market development in the transition economies. The link is investigated empirically using a panel of data which includes most of the transition countries. Our results confirm the hypothesis that mass privatization exerted a negative influence on capital market functioning in the short and medium term. Results further indicate that in countries with mass privatization, the capital market was established and perceived only as a byproduct of the privatization process and did not serve as a source of capital for the corporate sector. This non-transparent market of thousands of securities caused negative investor sentiment and thus did not contribute to initiating economic growth. |
| Keywords: | Privatization, mass privatization, emerging capital markets, capital market. |
| JEL: | G15 G28 P34 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp256&r=eec |
| By: | Brown, J David; Earle, John S |
| Abstract: | We analyse the impact of privatization on multifactor productivity (MFP) using long panel data for nearly the universe of initially state-owned manufacturing firms in four economies. Controlling for firm and industry-year fixed effects and employing a wide variety of measurement approaches, we estimate that majority privatization raises MFP about 28% in Romania, 22% in Hungary, and 3% in Ukraine, with some variation across specifications, while in Russia it lowers it about 4%. Privatization to foreign rather than domestic investors has a larger impact (about 44%) and is much more consistent across countries. The positive effects emerge within a year in Hungary, Romania, and Ukraine and continue to grow thereafter, but are still ambiguous even after 5 years in Russia. Pre-privatization MFP exceeds that of firms remaining state-owned in all countries, implying that cross-sectional estimates overstate privatization effects. The patterns of the estimated effects cast doubt on a number of explanations for ‘when privatization works’. |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4791&r=eec |
| By: | Bergemann, Annette; Mertens, Antje |
| Abstract: | This Paper studies the evolution of job stability in West Germany. Using data from the German Socio-Economic Panel, we first show that the median elapsed tenure declined for men between 1984 and 1999. Second, estimating proportional Cox hazard models with competing risks and controls for stock sampling, we are able to distinguish the reasons for job separation and different transition states. We show that the decline in the stability of men’s jobs can be attributed partly to an increase in layoffs and partly to an increase in transitions to unemployment. These two developments are not significantly related to each other, however. Some evidence is presented that downsizing of large firms might be responsible for part of the decline in job stability. |
| Keywords: | duration analysis; job stability; labour mobility; layoffs |
| JEL: | C41 J63 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4792&r=eec |
| By: | Belke, Ansgar; Kaas, Leo; Setzer, Ralph |
| Abstract: | According to the traditional 'optimum currency area' approach, the case for adopting a common currency is stronger if the countries are subject to relatively similar output shocks. This Paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal high costs for labour markets. The impact of exchange rate volatility on labour markets in the CEECs is analysed, finding that volatility vis-à-vis the euro significantly lowers employment growth and raises the unemployment rate. Hence, the elimination of exchange rate volatility can be considered equally important for labour markets as a removal of employment protection legislation. |
| Keywords: | Central and Eastern Europe; currency union; euroization; exchange rate variability; job creation |
| JEL: | E42 F36 F42 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4802&r=eec |
| By: | Javorcik, Beata Smarzynska; Spatareanu, Mariana |
| Abstract: | This study takes a new look at the regulatory determinants of foreign direct investment (FDI) by asking whether labour market flexibility affects FDI flows across 19 Western and Eastern European countries. The analysis is based on firm-level data on new investments undertaken during the 1998-2001 period. The study employs a variety of proxies for labour market regulations reflecting the flexibility of individual and collective dismissals, the length of the notice period and the required severance payment along with a comprehensive set of controls for the business climate characteristics. The results suggest that greater flexibility in the host country’s labour market in absolute terms or relative to that in the investor’s home country is associated with larger FDI flows. The findings indicate that as the labour market flexibility in the host country increases from inflexible (e.g. France) to flexible (e.g. United Kingdom), the volume of investment goes up by between 12% and 26%. FDI in services sectors appears to be more sensitive to labour market regulations than investment in manufacturing. |
| Keywords: | firm-level data; foreign direct investment; labour market regulation |
| JEL: | F21 F23 J00 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4839&r=eec |
| By: | Benczúr, Péter; Rátfai, Attila |
| Abstract: | We carry out a detailed analysis of quarterly frequency dynamics in macroeconomic aggregates in twelve countries of Central and Eastern Europe. The facts we document include the variability and persistence in and the co-movement among output, and other major real and nominal variables. We find that consumption is highly volatile and government spending is procyclical. Gross fixed capital formation is highly volatile. Net exports are countercyclical. Imports are procyclical, much more than exports. Exports are most procyclical and persistent in open countries. Labour market variables are all highly volatile. Employment is lagging, and often procyclical. Real wages are dominantly procyclical. Productivity is dominantly procyclical and coincidental. Private credit is procyclical and dominantly lagging the cycle. The CPI is countercyclical, and is weakly leading or coincidental. The cyclicality of inflation is unclear, but its relative volatility is low. Net capital flows are mostly leading and procyclical and exhibit low persistence. Nominal interest rates are in general smooth and persistent. The nominal exchange rate is more persistent than the real one. Overall, we find that fluctuations in CEE countries are larger than in industrial countries, and are of similar size than in other emerging economies. This is particularly true about private consumption. The co-movement of variables, however, shows a large degree of similarity. A notable exception is government spending: unlike in industrial economies, it is rather procyclical in transition economies. The findings also indicate that Croatia and the accession group show broadly similar cyclical behaviour to industrial countries. The most frequent country outliers are Bulgaria, Romania and Russia, especially in labour market, price and exchange rate variables. Excluding these countries from the sample makes many of the observed patterns in cyclical dynamics quite homogenous. |
| Keywords: | business cycle facts; Central and Eastern Europe |
| JEL: | E32 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4846&r=eec |
| By: | Lechner, Michael; Miquel, Ruth; Wunsch, Conny |
| Abstract: | Between 1991 and 1997 West Germany spent on average about 3.6bn euro per year on public sector sponsored training programmes for the unemployed. We base our empirical analysis on a new administrative database that plausibly allows for selectivity correction by microeconometric matching methods. We identify the effects of different types of training programmes over a horizon of more than seven years. Using bias corrected weighted multiple neighbours matching we find that all programmes have negative effects in the short run and positive effects over a horizon of about four years. For substantive training programmes with duration of about two years gains in employment probabilities of more than 10% points appear to be sustainable, but come at the price of large negative lock-in effects. |
| Keywords: | active labour market policy; matching estimation; panel data; programme evaluation |
| JEL: | J68 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4851&r=eec |
| By: | Égert, Balázs; Halpern, László |
| Abstract: | This Paper sets out to analyse the ever-growing literature on equilibrium exchange rates in the new EU member states of Central and Eastern Europe in a quantitative manner using meta-regression analysis. We study the extent to which the estimated real misalignments reported in the literature depend on the underlying theoretical approach (Balassa-Samuelson effect, Behavioural Equilibrium Exchange Rate, Fundamental Equilibrium Exchange Rate) and on other characteristics of the individual studies. We also seek to explore whether we can gain more insight from the literature regarding what determines the size and, perhaps more importantly, the sign of the estimated coefficient of the productivity variable and of two other variables commonly included in real exchange rate determination equations, notably net foreign assets and openness. |
| Keywords: | Balassa-Samuelson effect; equilibrium exchange rate; meta-analysis |
| JEL: | C15 E31 F31 O11 P17 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4869&r=eec |
| By: | Becker, Sascha O.; Ekholm, Karolina; Jäckle, Robert; Muendler, Marc-Andreas |
| Abstract: | Using data on German and Swedish multinational enterprises (MNEs), this paper analyses determinants of international location choice and the degree of substitutability of labour across locations. Countries with highly skilled labour forces strongly attract German but not necessarily Swedish MNEs. In MNEs from either country, affiliate employment tends to substitute for employment at the parent firm. At the margin, substitutability is the strongest with respect to affiliate employment in Western Europe. A 1% larger wage gap between Germany and locations in Central and Eastern Europe (CEE) is associated with 900 fewer jobs at German parents and 5,000 more jobs at affiliates in CEE. A 1% larger wage gap between Sweden and CEE is associated with 140 fewer jobs at Swedish parents and 260 more jobs at affiliates in CEE. |
| Keywords: | labour demand; location choice; multinational enterprises; multinominial choice; translog cost function |
| JEL: | F21 F23 J21 J23 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4887&r=eec |
| By: | Head, Keith; Mayer, Thierry |
| Abstract: | Recent theoretical work on economic geography emphasizes the interplay of transport costs and plant-level increasing returns. In these models, the spatial distribution of demand is a key determinant of economic outcomes. In one strand, it is argued that higher demand gives rise to a more than proportionate increase in production, a result known as the home market effect. Another strand emphasizes the effects of market sizes on factor prices. In this paper we highlight the theoretical connection between these two strands. We use data on 57 European regions to show how wages and employment respond to differentials in what we call real market potential, a discounted sum of demands derived from the theory. |
| Keywords: | gravity equation; home market effects; new economic geography; wage equation |
| JEL: | F12 F15 R11 R12 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4908&r=eec |
| By: | Clark, Andrew E; Postel-Vinay, Fabien |
| Abstract: | We construct indicators of the perception of job security for various types of jobs in 12 European countries using individual data from the European Community Household Panel (ECHP). We then consider the relation between reported job security and OECD summary measures of Employment Protection Legislation (EPL) strictness on one hand, and Unemployment Insurance Benefit (UIB) generosity on the other. We find that, after controlling for selection into job types, workers feel most secure in permanent public sector jobs, least secure in temporary jobs, with permanent private sector jobs occupying an intermediate position. We also find that perceived job security in both permanent private and temporary jobs is positively correlated with UIB generosity, while the relationship with EPL strictness is negative: workers feel less secure in countries where jobs are more protected. These correlations are absent for permanent public jobs, suggesting that such jobs are perceived, by and large, to be insulated from labour market fluctuations. |
| Keywords: | employment protection legislation; perceived job security; unemployment insurance benefits |
| JEL: | I31 J28 J65 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4927&r=eec |
| By: | Goh, Chor-Ching; Javorcik, Beata Smarzynska |
| Abstract: | This study examines the impact of Poland’s trade liberalization 1994-2001 on the industry wage structure. The liberalization was undertaken in preparation for Poland’s accession to the European Union and was more pronounced in industries with larger shares of unskilled labour. Our analysis indicates that a decrease in an industry tariff was associated with higher wages being earned by workers employed in the industry, controlling for worker characteristics and geographic variables. The result is robust to including year and industry fixed effects, controlling for industry-level exports, imports, concentration, stock of foreign direct investment and capital accumulation. The finding is consistent with liberalization increasing competitive pressures, forcing firms to restructure and improve their productivity, which in turn translates into higher profits being shared with workers. It could also be potentially attributed to trade liberalization lowering the costs of imported inputs, which enhances firm profitability. The result holds when skilled workers are excluded from the sample, thus suggesting that reductions in trade barriers benefited the unskilled in terms of an increase in wages. |
| Keywords: | globalization; trade liberalization; transition; wages |
| JEL: | F16 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4929&r=eec |
| By: | Cocco, Joâo Francisco P.D.; Volpin, Paolo |
| Abstract: | This paper studies the governance of defined-benefit pension plans in the United Kingdom. We construct a governance measure, equal to the proportion of trustees of the pension plan who are also executive directors of the sponsoring company. Our findings indicate that pension plans of indebted companies with a higher proportion of insider-trustees: (i) invest a higher proportion of the pension plan assets into equities, (ii) contribute less into the pension plan, and (iii) have a larger dividend payout ratio. This evidence supports an agency view, whereby insider-trustees act in the interest of shareholders of the sponsoring company, and not necessarily pension plan members. |
| Keywords: | corporate governance; defined benefits; insiders; pension plans; pension trustees |
| JEL: | G23 G34 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4932&r=eec |
| By: | Karacaovali, Baybars; Limão, Nuno |
| Abstract: | There has been an explosion in the number of preferential trade agreements (PTAs) in the last decade. PTAs are characterized by liberalization with respect to only a few partners and thus, they can potentially clash with and retard multilateral trade liberalization (MTL). Despite this important concern with PTAs, there is almost no systematic evidence on whether they actually affect MTL or not. We model the effect of PTAs on MTL and show that PTAs slow down MTL unless they have a common external tariff and allow for internal transfers. Next, we use detailed data on product-level tariffs negotiated by the European Union in the last two multilateral trade rounds to structurally estimate our model. We confirm the main prediction – the European Union's PTAs have clashed with its MTL – and find that the effect is quantitatively significant. Moreover, we also confirm several auxiliary predictions of the model and provide new evidence on the political economy determinants of MTL in the European Union. |
| Keywords: | MFN tariff concessions; multilateral trade negotiations; preferential trade agreements |
| JEL: | D78 F13 F14 F15 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4973&r=eec |
| By: | Gagnepain, Philippe; Pereira, Pedro |
| Abstract: | We study the effect of entry on costs and competition in the Portuguese mobile telephony industry. We construct and estimate a model that includes demand, network, and cost equations. The latter accounts for inefficiency and cost reducing effort. We show that failure to account for cost reducing effort leads to biased estimates of competition in the industry. We also find that our estimated price-cost margins are similar to hypothetical Nash margins, if firms are patient, and have optimistic beliefs about the industry growth. Finally, our results suggest that the entry of a third operator in 1998 led to significant cost reductions, and fostered competition. |
| Keywords: | competition; efficiency; empirical analysis; entry; mobile telephony |
| JEL: | L13 L43 L93 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4993&r=eec |
| By: | Cadot, Olivier; Carrere, Céline; de Melo, Jaime; Tumurchudur, Bolorma |
| Abstract: | Building on earlier work by Estevadeordal, we construct a synthetic index (R-index) intending to capture the restrictiveness on market access due to product specific rules of origin (PSRO) that apply at the tariff-line level. The R-index is constructed for rules of origins under NAFTA and under the single list applying to PANEURO, the new regime applying to all EU preferential trade agreements. The R-index highlights how identical PSRO have different impacts across countries, and how the complexity of PSRO varies across sectors. Having controlled for the extent of tariff preference at the tariff-line level, the R-index contributes to account for differences in utilization rates at the tariff line level. The index is then used to assess composition effects across countries subjected to some set of PSRO and to compute estimates of the compliance costs associated with rules of origin under both regimes. |
| Keywords: | costs; NAFTA; PANEURO; rules of origin |
| JEL: | F13 F15 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4998&r=eec |
| By: | Beetsma, Roel; Debrun, Xavier |
| Abstract: | The paper proposes a theoretical analysis illustrating some key policy trade-offs involved in the implementation of a rules-based fiscal framework reminiscent of the Stability and Growth Pact (SGP). The analysis offers some insights on the current debate about the SGP. Specifically, greater ‘procedural’ flexibility in the implementation of existing rules may improve welfare, thus making the Pact more easily acceptable to euro area Member States. Here, procedural flexibility designates the enforcer’s room to apply well-informed judgment on the basis of underlying policies and to set a consolidation path that does not discourage high-quality policy measures. Yet budgetary opaqueness may hinder the qualitative assessment of fiscal policy, possibly destroying the case for flexibility. Also, improved budget monitoring and greater transparency increase the benefits from greater procedural flexibility. Overall, we establish that a fiscal pact based on a simple deficit rule with conditional procedural flexibility can simultaneously contain excessive deficits, lower unproductive spending and increase high-quality outlays. |
| Keywords: | deficits; fiscal rules; procedural flexibility; Stability and Growth Pact; structural reforms |
| JEL: | E62 H60 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5005&r=eec |
| By: | Hatton, Timothy J.; Williamson, Jeffrey G |
| Abstract: | The number of refugees worldwide is now 12 million, up from 3 million in the early 1970s. And the number seeking asylum in the developed world increased tenfold, from about 50,000 per annum to half a million over the same period. Governments and international agencies have grappled with the twin problems of providing adequate humanitarian assistance in the Third World and avoiding floods of unwanted asylum seekers arriving on the doorsteps of the First World. This is an issue that is long on rhetoric, as newspaper reports testify, but surprisingly short on economic analysis. This paper draws on the recent literature, and ongoing research, to address a series of questions that are relevant to the debate. First, we examine the causes of refugee displacements and asylum flows, focusing on the effects of conflict, political upheaval and economic incentives to migrate. Second, we examine the evolution of policies towards asylum seekers and the effects of those policies, particularly in Europe. Finally, we ask whether greater international coordination could produce better outcomes for refugee-receiving countries and for the refugees themselves. |
| Keywords: | asylum seekers; migration policy; refugees |
| JEL: | F22 J10 O15 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5058&r=eec |
| By: | Fidrmuc, Jan |
| Abstract: | In this paper, I analyse the development of inter-regional mobility in the Czech Republic during the transition from central planning to a market economy. I show that while the intensity of migration is low and has even fallen during the transition, regional disparities in unemployment rates and earnings have increased. More importantly, labour mobility has little effect in facilitating labour market adjustment to employment shocks. Using aggregate inter-regional migration data and survey data on past and prospective migration and the willingness to move, I find that economic factosr play little role in explaining migration patterns. There is, nonetheless, some tentative evidence of the greater importance of economic considerations in explaining future migration intentions and the willingness to move. Thus, while at present migration appears more of a social or demographic rather than economic phenomenon, its economic role may strengthen in the future. |
| Keywords: | labour market adjustment; migration; mobility; regional shocks; survey data |
| JEL: | F22 J61 P23 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5069&r=eec |
| By: | Ian Walker (University of Warwick, Institute for Fiscal Studies and IZA Bonn); Yu Zhu (University of Kent and Centre for the Economics of Education) |
| Abstract: | This paper provides findings from the UK Labour Force Surveys from 1996 to 2003 on the financial private returns to a degree - the "college premium". The data covers a decade when the university participation rate doubled - yet we find no significant evidence that the mean return to a degree dropped in response to this large increase in the flow of graduates. However, we do find quite large falls in returns when we compare the cohorts that went to university before and after the recent rapid expansion of HE. The evidence is consistent with the notion that new graduates are a close substitute for recent graduates but poor substitutes for older graduates. There appears to have been a very recent increase in the number of graduates getting "non-graduate" jobs but, conditional on getting a graduate job the returns seem stable. Our results are consistent across almost all degree subjects - the exception being maths and engineering where we find that for men, and especially for women, there is a large increase in the proportion with maths and engineering degrees getting graduate jobs and that, conditional on this, the return is rising. |
| Keywords: | human capital, higher education, college premium |
| JEL: | I20 J30 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1627&r=eec |
| By: | Thomas K. Bauer (RWI Essen, Ruhr University of Bochum, CEPR and IZA Bonn); Mathias Sinning (RWI Essen) |
| Abstract: | This paper examines the relative savings position of migrant households in West Germany, paying particular attention to differences between temporary and permanent migrants. Utilizing household level data from the German Socio-Economic Panel (GSOEP), our findings reveal significant differences in the savings rates between foreign-born and Germanborn individuals. These differences disappear, however, for temporary migrants, if their remittances are taken into account. Fixed effects estimations of the determinants of immigrants’ savings rates reveal that intended return migration does not only affect remittances, but also the savings rate of migrant households in the host country. The results of a decomposition analysis indicate that differences in the savings rate between Germans and foreigners can mainly be attributed to differences in observable characteristics. We do not find strong evidence for an adjustment of the savings rate between immigrants and natives over time, indicating deficits in the long-term integration of permanent migrants in Germany. |
| Keywords: | savings, migration |
| JEL: | F22 E21 C24 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1632&r=eec |
| By: | Anita Wölfl |
| Abstract: | Improving the performance of the services sector is important to enhance aggregate economic growth. This is primarily since the service sector has become the quantitatively most important sector in all OECD economies. The growing role of services is not only the result of a resource re-allocation towards services, as the sector with low productivity growth. It is also related to demand side factors, such as a high income elasticity of demand for some services, demographic developments, the provision of certain services as public goods, and the growing role of services as providers of intermediate inputs. The empirical evidence points to several areas where employment and productivity growth in services is held back. For example, labour-intensive production in many services industries may reduce the potential for productivity growth. Innovation is held back by obstacles that are particularly relevant for services industries. The evidence also shows that the regulatory environment for services in product and labour markets may affect the scope for employment and productivity growth. However, policy should not necessarily look at services separately from manufacturing industries. In contrast, several services industries show characteristics and problems similar to those of manufacturing industries and the blurring of the two sectors is becoming more and more prevalent. Moreover, addressing some of the problems faced by services may also improve the performance of other industries, since services provide key intermediate inputs to such sectors. <P> L'Economie de Service dans les Pays de l'OCDE <P> Il est important d’améliorer les performances du secteur des services pour renforcer la croissance économique globale. Celui-ci est en effet devenu dans tous les pays de l’OCDE le secteur le plus important sur le plan quantitatif. Le rôle croissant des services ne résulte pas seulement d’une réaffectation des ressources en direction de cette branche d’activité, dont la productivité augmente peu. D’autres facteurs entrent en ligne de compte du côté de la demande, comme la forte élasticité revenu de la demande de certains services, l’évolution démographique, la fourniture de certains services à titre de biens publics et le rôle croissant des services en tant que fournisseurs de facteurs de production intermédiaires. Les données empiriques dont on dispose montrent que l’emploi et la productivité progressent peu dans plusieurs domaines. La forte intensité de main d’œuvre de nombreux secteurs de services peut réduire les possibilités de croissance de la productivité. L’innovation est ralentie par des obstacles qui touchent particulièrement les secteurs de services. Les données montrent aussi que le cadre réglementaire qui s’applique aux services sur les marchés des produits et du travail peut influer sur les capacités de croissance de l’emploi et de la productivité. Cependant, les politiques publiques ne doivent pas nécessairement envisager les services séparément des industries manufacturières. Plusieurs secteurs de services présentent en effet des caractéristiques et des problèmes similaires à ceux des industries manufacturières et les limites entre les deux types d’activités s’estompent. En outre, la résolution des problèmes rencontrés dans les secteurs de services pourra améliorer les résultats d’autres industries, auxquelles les services fournissent des facteurs de production intermédiaires essentiels. |
| Date: | 2005–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiwps:wp2005-3&r=eec |
| By: | Gavin C. Reid |
| Abstract: | This paper uses statistical analysis to characterise ‘industry practice’, in terms of concordance of investors concerning appropriate practice. The evidence was gathered by field work methods in 2000-01, and refers to the practices of twenty UK venture capital investors, who accounted for the bulk of funds allocated to high technology investments in the UK. This paper has two parts: general and detailed statistical analysis. 1) In the first part, the main finding is of a coherent (and generally statistically significant picture) of investor conduct towards high-technology companies. Thus it is found that investors assign risk premia and expected values, and use risk classes. They adopt relatively short time horizons, but follow quite sophisticated procedures in investment appraisal. For example, they use sensitivity analysis, cash flow prediction, financial modelling, and decision trees. However, they miss out in some sophisticated areas of technical analysis, including Value at Risk (VaR), and simulation methods (including Monte Carlo methods). 2) The second part of the paper focuses on risk, factors influencing it, and innovation. Its aim is to discover if there is a kind of ‘industry standard’ or consensus about what is most important to investors in the high technology area. Largely, that turned out to be the case. The UK venture capitalists are agreed on what are high-risk and low-risk investments. They also agree on what are the key commercial factors affecting risk. However, when it comes to non-commercial factors, this consensus starts to crumble. Finally, so far as features of innovation are concerned, industry consensus starts to break down entirely. Thus, there do remain important areas in which investor practice is opaque. Therefore, there remains a need for further research into investor practice in the UK. |
| Keywords: | Venture Capital, Risk Management, High-Technology, Fieldwork |
| JEL: | G24 D81 L84 M21 L21 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0206&r=eec |
| By: | Knut R. Wangen (Statistics Norway) |
| Abstract: | The seminal paper by Pissarides and Weber (1989) is one of several previous studies trying to measure the size of the black economy. Pissarides and Weber compared the relationship between food expenditure and income in two groups of workers, self-employed and employees in employment, assuming that employees reported income correctly. For a given level of reported income, the self-employed had a higher food expenditure than employees. Pissarides and Weber concluded that self-employed's actual income was 1.55 times reported income, and that this part of the black economy was about 5.5 percent of GDP in the UK in 1982. Presumably due to a too informal argumentation, Pissarides and Weber's estimators are not entirely correct and alternative estimators have been overlooked. In all, I suggest three different interval estimators for mean under-reporting. The first is obtained by formally solving optimization problems which Pissarides and Weber tried to solve informally. The other two follows from recognizing, and incorporating, parameter restrictions which were not fully appreciated. |
| Keywords: | Self-Employment; Under-Reporting of Income; Household Consumption; Black Economy; Informal Sector. |
| JEL: | D31 E21 H26 H31 J23 O17 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:414&r=eec |
| By: | Davide Consoli (Centre for Research on Innovation & Competition CRIC - University of Manchester) |
| Abstract: | This article investigates the factors that have induced and shaped the process of industry evolution of banking in the United Kingdom and, in particular, the reorganization of the retail payments system. It will look at how the effects of technical progress within a changing regulatory framework have contributed to the flourishing of new consumer services, of increasingly specialized technologies and of new models of business organization. In relation to these issues, the paper develops an interpretative framework based on the rapidly expanding body of literature on technological systems. In so doing it argues also that the organization of the payment system has evolved towards a multilayered and increasingly heterogeneous industry in which competition has been fuelled at different levels by the growing diversity of the ecology of agents involved, as well as by the emerging patterns of interaction across them. |
| JEL: | G21 L10 L23 O31 |
| Date: | 2005–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0506004&r=eec |
| By: | Evens SALIES (GRJM) |
| Abstract: | The opening of the residential UK electricity sector in 1999 motivated several studies of its impact on both the level and structure of retail charges, and on incumbents’ market power. Using regional observations on tariffs offered in January 2004, the present paper supports previous results about the responses of simulated retail charges from actual tariffs to distribution and transmission costs, customers density, the length of low voltage underground circuit, and show new. We investigate whether vertically integrated suppliers have a particular effect on charges ceteris paribus the effect of cost drivers and other suppliers’ specific factors. |
| Keywords: | Pricing structure, Industrial Organization, Electricity Retail |
| JEL: | C1 C2 C3 C4 C5 C8 |
| Date: | 2005–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpem:0506001&r=eec |
| By: | Rosa Capolupo (Dipartimento di Scienze Economiche); Giuseppe Celi (Dipartimento di Scienze Economiche) |
| Abstract: | We present evidence of the relationship between trade-openness and growth in the sample of former communist countries before and after the transition from a central planned economy (CPE) to a market economy by applying standard OLS and panel estimation techniques. The main finding is that during the transition the importance of openness on growth per capita has increased sharply by changing the coefficient from a negative sign to a positive and significant one. The result seems to be robust to (i) estimation methods , (ii) different measures of openness adopted and (iii)consistent with the integration view, which states that a higher degree of trade openness spurred by market incentives and comparative advantages enhances the per capita growth rate of economies. |
| Keywords: | economic growth, transition economies, trade openness |
| JEL: | O47 O42 G30 |
| Date: | 2005–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpge:0506002&r=eec |
| By: | Konstantinos Pouliakas (Centre for European Labour Market Research, University of Aberdeen Business School); Ioannis Theodossiou (Centre for European Labour Market Research, University of Aberdeen Business School) |
| Abstract: | This paper engages in a novel comparison of differences in the perceived quality of high and low-paid jobs across six European labour markets. Utilizing data from six waves (1996-2001) of the European Community Household Panel (ECHP), and after correcting for the selectivity problem that is prevalent in the study of the effect of low pay status on job satisfaction, it is shown that, other things equal, low-paid employees are significantly less satisfied with their jobs compared to those who are high-paid in Greece, Spain, and Finland. In contrast, there appears to be an insignificant difference in the satisfaction of high and low wage workers in the United Kingdom, France and Denmark. The empirical evidence therefore suggests that low-paid jobs in the EU are not universally of low quality, though in some countries low wage workers have experienced the full brunt of both lower paid and bad quality jobs. For these countries policies that centre on the quality of jobs would be of equal importance to those that focus on the level of pay. A homogeneous policy of removing low wage employment through regulation, however, would not necessarily lead to improvement in the welfare of low-paid citizens across all European economies. |
| Keywords: | job quality, job satisfaction, low pay, dual labour markets |
| JEL: | J28 J42 |
| Date: | 2005–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0506002&r=eec |
| By: | Guido M. Bazzani (CNR - Consiglio Nazionale delle Ricerche, Italy); Maurizio Canavari (Alma Mater Studiorum-Università di Bologna); Maurizio Grillenzoni (Alma Mater Studiorum-Università di Bologna); Alessandro Ragazzoni (Alma Mater Studiorum-Università di Bologna) |
| Abstract: | The present paper consists of two main parts. The first one gives a picture of the more recent development of the farmland market in selected EC countries since 1985/86. Two main indicators are used to make relatively comparable the observed trends concerning: i) land mobility, ii) farmland values. The second one tries to evaluate the effects of the CAP reform and the influence of national variables overtime, taking into account the following indicators: i) mobility (on land transfers; on tenancy), ii) income (for agricultural or forest use), iii) farmland values (in the plain; in the hill/mountain areas). Considerations on land market complexity and segmentation are finally included, with justification on the empirical approach adopted in the paper. |
| JEL: | P Q Z |
| Date: | 2005–06–04 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpot:0506002&r=eec |