nep-eec New Economics Papers
on European Economics
Issue of 2005‒07‒25
eleven papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. Aerospace Competitiveness: UK, US and Europe By Derek Braddon; Keith Hartley
  2. The size and performance of public sector activities in Europe By Heinz Handler; Bertrand Koebel; Philipp Reiss; Margit Schratzenstaller
  3. Are Europe's Interest Rates led by FED Announcements? By Andrea Monticini; Giacomo Vaciago
  4. Testing for Asymmetries in the Preferences of the Euro-Area Monetary Policymaker By Alvaro Aguiar; Manuel M. F. Martins
  5. Testing the efficiency of emerging markets: the case of the Baltic States By Virmantas Kvedaras; Olivier Basdevant
  6. Non-linear real exchange rate effects in the UK labour market By Gabriella Legrenzi; Costas Milas
  7. Privatizing Higher Education in Spain By FRANCISCO MARCOS
  9. Sustainability of the Slovenian Pension System: An Analysis with an Overlapping-generations General Equilibrium Model By Miroslav Verbic; Boris Majcen; Renger van Nieuwkoop
  10. The Reform of Local Taxation in the United Kingdom in the Light of The Balance of Funding Review Report. By Fender, John.
  11. The Curse and Blessing of Training the Unemployed in a Changing Economy: The Case of East Germany After Unification By Michael Lechner; Ruth Miquel; Conny Wunsch

  1. By: Derek Braddon (School of Economics, University of the West of England); Keith Hartley (Centre for Defence Economics, University of York)
    Abstract: This paper assesses the UK aerospace industry’s competitiveness. Various statistical indicators are used to measure competitiveness, based on published data at the industry and firm level. The indicators include productivity, output, firm size, development time-scales, labour hoarding, exports and profitability.
    Keywords: Aerospace; industry; competitiveness
    Date: 2005–07
  2. By: Heinz Handler (Austrian Institute of Economic Research); Bertrand Koebel (University of Strasbourg); Philipp Reiss (University of Madgeburg); Margit Schratzenstaller (Austrian Institute of Economic Research)
    Abstract: The obvious difference in the economic performance of countries has led to the question why some countries are so much wealthier than others, and whether the size, the structure, and the organisation of the public sector contribute to cross-country income and growth gaps. Public sector activities may have an effect on overall productivity and growth either directly by the level and changes of productivity within the public sector, or indirectly by triggering off productivity changes in private production. This paper is concerned with the former aspect. It provides an overview of the size and the structure of the public sector in Europe and compares it with the US and Japan. This is related to the more recent empirical literature on public sector performance. After reviewing some of the measurement issues related to public services, the evidence on the size of government and its performance is analysed. The results on industrial countries are not fully conclusive, but seem to attribute more efficiency to smaller rather than to larger governments. Public sector reforms to consolidate the size of government are therefore likely to enhance the sector's own productivity and thereby positively contribute to overall economic performance.
    Keywords: public sector size, performance of public sector
    JEL: D6 D7 H
    Date: 2005–07–19
  3. By: Andrea Monticini (University of Exeter); Giacomo Vaciago (Università Cattolica del Sacro Cuore)
    Abstract: This paper investigates the degree and nature of economic and monetary policy relations among the United States, the Euro area, and Great Britain. Using daily interest rates, we estimate the impact of monetary policy announcements of a Central Bank on its domestic market and in what measure those announcements are able to influence other financial markets. In particular, we analyse the effect of the FED, ECB, and BoE monetary policy announcements on European markets. We find that Europe’s interest rates have a relevant response to FED announcements.
    Keywords: Monetary policy; Term structure of interest rates.
    JEL: E4 E43 E52 F42
    Date: 2005–07–21
  4. By: Alvaro Aguiar (CEMPRE, Faculdade de Economia, Universidade do Porto); Manuel M. F. Martins (CEMPRE, Faculdade de Economia, Universidade do Porto)
    Abstract: This paper tests for asymmetries in the preferences of the Euro-Area monetary policymaker with 1995:I-2004:III data from the last update of the ECB's Area-wide database. Following the relevant literature, we distinguish between three types of asymmetry: precautionary demand for expansions, precautionary demand for price stability and interest rate smoothing asymmetry. Based on the joint GMM estimation of the Euler equation of optimal policy and the AS-AD structure of the macroeconomy, we find evidence of precautionary demand for price stability in the preferences revealed by the monetary policymaker. This type of asymmetry is consistent with the ECB’s definition of price stability and with the priority of credibility-building by a recently created monetary authority.
    Keywords: Central Bank Preferences, Asymmetry, Euro Area, Optimal Control, GMM.
    JEL: E52 E58 C32 C61
    Date: 2005–07
  5. By: Virmantas Kvedaras; Olivier Basdevant
    Abstract: There is little evidence on the efficiency of the early stage of the capital market in transition countries, although market structure developments and the learning process could define the framework for efficient markets. The article tries to find out whether financial markets are efficient in the three Baltic States and if not, whether there are any signs of evolving to the efficient capital market. To answer these questions the analysis combines the methodology for testing the efficiency of capital market using the variance ratio robust to heteroscedasticity with the state-space representation, which enables us to use an efficient filtering technique - the Kalman filter - to get time varying autocorrelations. The official Estonian, Latvian, and Lithuanian stock exchange market indices TALSE, DJRSE, and LITIN comprising the most liquid parts of the stock market in a respective country are analysed. The main conclusion to be drawn from the analysis is that financial markets in the Baltic States are, with some turbulence, approaching weak form of efficiency.
  6. By: Gabriella Legrenzi (Keele University); Costas Milas (Keele University)
    Abstract: Using UK data over the 1973q1-2004q1 period, we find that the dynamics of the real exchange rate, real wages and unemployment vary both with large versus small real exchange rate disequilibria and rising versus falling unemployment regimes. The short-run real exchange rate adjusts only when large disequilibrium deviations occur. We report fast real exchange rate adjustment in periods of falling unemployment. This implies that prices and wages are more flexible when real output is high. When the real exchange rate is highly undervalued, workers respond to an improvement in domestic competitiveness by demanding and getting higher wages. Unemployment is reduced following gains in competitiveness when the real exchange rate is further away from equilibrium.
    Keywords: Real exchange rate; unemployment; Smooth Transition Vector Error Correction Model.
    JEL: E
    Date: 2005–07–18
  7. By: FRANCISCO MARCOS (Instituto de Empresa)
    Abstract: (WP 13/03 Clave pdf)The Spanish university system has witnessed many changes. Initial conditions for competition were laid down in 83, specially through the recognition of legal status to private universities. However, the shortage of students since 98 and the drop on demand for higher education has prompted further reform recently.In 2001 a new act was enacted to force market-like behavior and to privatize some operating conditions of state universities. It´s too early to assess the effectiveness of these changes, but public funding remains mostly unchanged and this is a key issue that would need to be modified in order to provide conditions of authentic competition in the higher education.
    Keywords: Competition, Higher education, Privatization, Public goods, Economics of education
    Date: 2003–10
  8. By: Piero Cipollone (BANK OF ITALY); Corrado Di Maria (Tilburg University); Anita Guelfi (Confindustria)
    Abstract: A long-standing economic tradition maintains that labour supply reacts to market tightness; its sensitivity to job quality has received less attention. If firms hire workers with both temporary and open-end contracts, does participation increase when more permanent jobs are available? We investigate this relationship within a policy evaluation framework; in particular, we examine how labour supply reacted in Italy to a recent subsidy in favour of open-end contracts. This subsidy increased labour force participation by 1.4% in 2001 and 2.1% in 2002. This increase was concentrated on males aged 35-54, with a low or at most a secondary schooling level, and might be due to the choice to leave undegraound economy.
    Keywords: labour supply, program evaluation, temporary contracts, open-end contracts, shadow economy
    JEL: D78 H25 J22 J38
    Date: 2005–06
  9. By: Miroslav Verbic (Institute for Economic Research Ljubljana); Boris Majcen (Institute for Economic Research Ljubljana); Renger van Nieuwkoop (ECOPLAN Berne)
    Abstract: The article presents an analysis of welfare effects in Slovenia, an analysis of macroeconomic effects of the Slovenian pension reform and an analysis of effects of the pension fund deficit on sustainability of Slovenian public finances with a dynamic OLG general equilibrium model. It has been established that while young generations and new generations will lose from the pension reform, even complete implementation of the reform might not be sufficient to compensate unfavourable demographic developments. The level of expected deficit of the PAYG-financed state pension fund seems to be most worrying. Financing the pension system with VAT revenues as an extreme case could result in more sustainable public finances, since GDP and welfare levels ought to increase, yet this might be infeasible to implement politically, given that the generations of voters would have their welfare decreased. In addition, the present pension system is intransparent and tremendously complicated and should primarily be made more comprehensible to the public.
    Keywords: general equilibrium models, macroeconomic effects, OLG-GE, PAYG, pension system, sustainability of public finances, Slovenia, welfare analysis
    JEL: C68 D58 D61 D91 E62 H55
    Date: 2005–07–19
  10. By: Fender, John.
    Abstract: Currently, local authorities in the UK raise only about a quarter of their revenues from taxes under their control. The Balance of Funding Review Report considered whether this proportion should be increased, and if so, how. This paper considers the report and possible reforms. Reasons why the balance of funding is a problem are discussed. However, there are problems with the current system apart from the balance of funding, and to solve some of these a closer link between council tax bills and property values is suggested. Whether a local income tax should be introduced as a supplement to a reformed council tax, and other possible reforms, are also discussed.
    Keywords: Balance of funding, property tax, business rates, local income tax
    Date: 2005–01
  11. By: Michael Lechner (SIAW, University of St. Gallen, CEPR, ZEW, PSI and IZA Bonn); Ruth Miquel (SIAW, University of St. Gallen); Conny Wunsch (SIAW, University of St. Gallen)
    Abstract: We analyse the effects of government-sponsored training for the unemployed conducted during East German transition. For the microeconometric analysis, we use a new, large and informative administrative database that allows us to use matching methods to reduce potential selection bias, to study different types of programmes, and to observe interesting labour market outcomes over 8 years. We find that, generally, all training programmes under investigation increase long-term employment prospects and earnings. However, as an important exception, the longer training programmes are on average not helpful for their male participants. At least part of the explanation for this negative result is that caseworkers severely misjudged the structure of the future demand for skills.
    Keywords: active labour market policy, nonparametric identification, matching estimation, causal effects, programme evaluation, panel data, gender differences
    JEL: J68
    Date: 2005–07

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