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on European Economics |
| By: | Jesús Crespo-Cuaresma; Balázs Égert; Ronald MacDonald |
| Abstract: | This study investigates exchange rate movements in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) and in the Exchange Rate Mechanism II (ERM-II). On the basis of the variant of the target zone model proposed by Bartolini and Prati (1999) and Bessec (2003), we set up a three-regime self-exciting threshold autoregressive model (SETAR) with a non-stationary central band and explicit modelling of the conditional variance. This modelling framework is employed to model daily DM-based and median currency-based bilateral exchange rates of countries participating in the original ERM and also for exchange rates of the Czech Republic, Hungary, Poland and Slovakia from 1999 to 2004. Our results confirm the presence of strong non-linearities and asymmetries in the ERM period, which, however, seem to differ across countries and diminish during the last stage of the run-up to the euro. Important non-linear adjustments are also detected for Denmark in ERM-2 and for our group of four CEE economies. |
| Keywords: | target zone, ERM, non-linearity, SETAR |
| JEL: | F31 G15 O10 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1511&r=eec |
| By: | Canova, Fabio; Favero, Carlo A |
| Abstract: | We examine monetary policy in the euro area from both theoretical and empirical perspectives. We discuss what theory tells us the strategy of Central banks should be and contrasts it with the one employed by the ECB. We review accomplishments (and failures) of monetary policy in the euro area and suggest changes that would increase the correlation between words and actions; streamline the understanding that markets have of the policy process; and anchor expectation formation more strongly. We examine the transmission of monetary policy shocks in the euro area and in some potential member countries and try to infer the likely effects occurring when Turkey joins the EU first and the euro area later. Much of the analysis here warns against having too high expectations of the economic gains that membership to the EU and euro club will produce. |
| Keywords: | communication; EU newcomers; pillars; transmission |
| JEL: | C11 E12 E32 E62 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5101&r=eec |
| By: | Kauppi, Heikki; Widgrén, Mika |
| Abstract: | The EU declares to provide support for the rural and poor regions of its member states. However, recent research shows that past EU budget allocations (in EU-15) can largely be explained by measures of the distribution of voting power in the Council of Ministers deciding on the bulk of EU spending. Yet, empirical analysis also indicates that the needs of the member states play a role in the determination of their receipts from the EU budget. As a rough estimate, power explains 60% of the budget allocation and, when stable coalition structures among member countries are allowed, even 90%. In this paper we use such estimates to predict EU budget shares after the eastern enlargement. We compare incumbent member states' predicted budget receipts before and after eastern enlargement, and examine the impact of different voting rule proposals on predicted budget shares and receipts in EU-25. According to our estimates, eastern enlargement has large effects on the budget receipts of the incumbent member states. Moreover, whether the voting rules are based on the Nice Treaty (NT) or the Constitutional Treaty (CT) makes a difference for most member states. Many member states would be worse off under CT than under NT. In relative terms, Germany would be the biggest winner under CT, because under CT population counts more on power than under NT voting rules. |
| Keywords: | constitutional treaty; EU budget; Treaty of Nice; voting power |
| JEL: | C71 D70 D72 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5134&r=eec |
| By: | Alesina, Alberto F; Glaeser, Edward L; Sacerdote, Bruce |
| Abstract: | Americans average 25.1 working hours per person in working age per week, but the Germans average 18.6 hours. The average American works 46.2 weeks per year, while the French average 40 weeks per year. Why do western Europeans work so much less than Americans? Recent work argues that these differences result from higher European tax rates, but the vast empirical labour supply literature suggests that tax rates can explain only a small amount of the differences in hours between the US and Europe. Another popular view is that these differences are explained by long-standing European ‘culture’, but Europeans worked more than Americans as late as the 1960s. In this paper, we argue that European labour market regulations, advocated by unions in declining European industries who argued ‘work less, work all’ explain the bulk of the difference between the US and Europe. These policies do not seem to have increased employment, but they may have had a more society-wide influence on leisure patterns because of a social multiplier where the returns to leisure increase as more people are taking longer vacations. |
| Keywords: | europe; hours worked; labour unions; taxation |
| JEL: | E00 J30 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5140&r=eec |
| By: | Marc, VANCAUTEREN; Daniel, WEISERBS |
| Abstract: | In this paper, we propose and test several extensions of the standard gravity model. This yields a specification that allows for (i) a more flexible income response; (ii) a competitiveness effect with a general and a specific component; and (iii) an alternative and consistent measure of remoteness. Those extensions were found to be significant factors to explain intra-EU trade. Next, we analyze the effect of EU harmonization of technical regulations on domestic and intra-EU trade. We find, at different levels of aggregation of the manufacturing sector, that harmonization of regulations has contributed to more intra-EU trade but, apparently, did not affect the so called border effect. |
| Date: | 2005–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2005026&r=eec |
| By: | Arnstein Aassve (Institute for Social and Economic Research); Maria Iacovou (Institute for Social and Economic Research); Letizia Mencarini (University of Florence) |
| Abstract: | This paper has two purposes: to review the literature on poverty among young people, and to present descriptive statistics on the extent of youth poverty across Europe. We find that although there is a well-developed literature on poverty among households in general, and on specific subgroups such as children and older people, very little research has focused on poverty among young adults. Using the European Community Household Panel (ECHP) we find that the extent of youth poverty varies greatly across the European Union, being higher in Southern European countries, as well as in the ‘liberal’ regimes of the UK and Ireland. This result is not unexpected, since these are countries where underlying rates of poverty among the general population are high. However, there are also large variations in the extent of youth poverty within countries, between what we might term “younger youth” (aged 16-19) and “older youth” aged (25-29). In the UK, poverty rates among “younger youth” are much higher than among “older youth”, suggesting that poverty among young people is closely associated with child poverty. However, in the Scandinavian ountries, poverty peaks dramatically in the early twenties, indicating that in these countries, poverty is associated with leaving home. |
| Keywords: | europe, poverty, young people |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2005-02&r=eec |
| By: | Anindya Banerjee; Bill Russell |
| Abstract: | This paper considers whether the Euro-area economies have become more competitive since the introduction of the Euro and the implementation of the Lisbon strategy. Using a measure of the markup as a proxy for competition we show that while the markup has varied considerably over the past 25 years and declined recently, most of this variation can be explained by movements in inflation and the business cycle. Consequently, based on our data, we find little evidence of a pro-competitive impact of the introduction of the Euro and implementation of the Lisbon strategy. |
| Keywords: | Inflation, markup, business cycle, competition, Lisbon strategy, Euro |
| JEL: | C22 C32 C52 D40 E31 E32 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2004/32&r=eec |
| By: | Ralf Brueggemann; Helmut Luetkepohl |
| Abstract: | A system of U.S. and euro area short- and long-term interest rates is analyzed. According to the expectations hypothesis of the term structure the interest rate spreads should be stationary and according to the uncovered interest rate parity the difference between the U.S. and euro area longterm interest rates should also be stationary. If all four interest rates are integrated of order one, one would expect to find three linearly independent cointegration relations in the system of four interest rate series. Combining German and European Monetary Union data to obtain the euro area interest rate series we find indeed the theoretically expected three cointegration relations, in contrast to previous studies based on different data sets. |
| Keywords: | Unit Roots, Multiple Frequency I(1) Process, Nonrational Transfer Function, Cointegration, VARMA Process, Information Criteria |
| JEL: | C32 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2005/08&r=eec |
| By: | Martin Hoesli; Jon Lekander |
| Abstract: | The allocation to real estate by institutional investors has increased in recent years and as a result the gap between suggested and actual allocations has narrowed. The increased inflow of capital to the real estate market is suggested to be a function of two factors: An increased focus on absolute return target investments amongst institutional investors and an increased target allocation to real estate. We argue that the increased target allocation is made possible mainly by the development of new investment vehicles, in particular of private real estate funds, but also of the growing integration of economic regions and of other factors such as the development of investment benchmarks. The flows needed for the actual allocation by European institutional investors to match the suggested allocation constitute at least 31% of the real estate equity universe held by owner occupiers. We estimate that seven years would be needed to reach the target allocation, but it is unlikely that sufficient investment opportunities will arise unless the willingness of owner occupiers to outsource their real estate assets increases. |
| Keywords: | real estate allocation; market transparency; private real estate; flows |
| JEL: | R33 G23 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:fam:rpseri:rp149&r=eec |
| By: | Philippe Gaud; Martin HOesli; André Bender |
| Abstract: | Using a sample of over 5,000 European firms, we document the driving factors of capital structure policies in Europe. Controlling for dynamic patterns and national environments, we show how these policies cannot be reduced to a simple trade-off or pecking order model. Both corporate governance and market timing impact upon capital structure. European firms limit themselves to an upper barrier to leverage, but not to a lower one. Debt constrains managers to payout cash, and equity may become cheap during windows of opportunity. Internal financing, when available, is preferred over external financing, but companies limit future excess of slack as it constitutes a potential source of conflict. |
| Keywords: | dynamic capital structure; debt-equity choice; trade-off; agency; pecking order |
| JEL: | G32 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:fam:rpseri:rp152&r=eec |
| By: | Esser, Ingrid (Swedish Institute for Social Research (SOFI)) |
| Abstract: | The combination of greying populations, decreasing fertility rates and a marked trend in falling retirement age is profoundly challenging the sharing of resources and supporting responsibilities between generations in the developed world. Previous studies on earlier exit-trends have focused mainly on supply-side incentives and generally conclude that people will exit given available retirement options. Substantial cross-national variations in exit-ages however remain unexplained. This suggests that also normative factors such as attitudes to work and retirement might be of importance. Through multi-level analyses, this study evaluates how welfare regime generosity, as well as production regime coordination explains cross-national patterns of retirement preferences across twelve Western European countries. Analysis firstly shows how both men and women on average prefer to retire at 58 years, meaning on average approximately 7 or 5.5 years before statutory retirement age in the case of men and women respectively. Contrary to what is expected from previous research on supply-side factors, preferences for relatively later retirement is found within more generous welfare regimens and also within more extensively coordinated production regimes. For women, however, institutional effects do not remain once substantial cross-national differences in women's statutory retirement ages are taken into account. |
| Keywords: | Continued Work; Retirement |
| JEL: | J26 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifswps:2005_009&r=eec |
| By: | Tobias Linzert (European Central Bank and IZA Bonn) |
| Abstract: | This paper analyzes the relationship between unemployment and wage inflation for 10 of the euro area countries. The combination of low wage inflation and high unemployment in Europe is usually attributed to a rise in the natural rate of unemployment. Using a panel data approach, this paper models directly the specific structural determinants of the natural rate of unemployment that may account for a changing pattern in the unemployment inflation tradeoff. Moreover, it analyzes whether the responsiveness of wages crucially depends on the level of inflation and the level of unemployment. This allows to detect possible downward rigidity of wages and grease or sand effects of positive levels of inflation. |
| Keywords: | Phillips Curve, unemployment, panel analysis |
| JEL: | E24 E31 J64 C23 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1699&r=eec |
| By: | Menzie Chinn; Jeffrey Frankel |
| Abstract: | Might the dollar eventually follow the precedent of the pound and cede its status as leading international reserve currency? Unlike ten years ago, there now exists a credible competitor: the euro. This paper econometrically estimates determinants of the shares of major currencies in the reserve holdings of the world’s central banks. Significant factors include: size of the home country, inflation rate (or lagged depreciation trend), exchange rate variability, and size of the relevant home financial center (as measured by the turnover in its foreign exchange market). We have not found that net international debt position is an important determinant. Network externality theories would predict a tipping phenomenon. Indeed we find that the relationship between currency shares and their determinants is nonlinear (which we try to capture with a logistic function, or else with a dummy “leader” variable for the largest country). But changes are felt only with a long lag (we estimate a weight on the preceding year’s currency share around .9). The advent of the euro interrupts the continuity of the historical data set. So we estimate parameters on pre-1999 data, and then use them to forecast the EMU era. The equation correctly predicts a (small) narrowing in the gap between the dollar and euro over the period 1999-2004. Whether the euro might in the future rival or surpass the dollar as the world’s leading international reserve currency appears to depend on two things: (1) do the United Kingdom and enough other EU members join euroland so that it becomes larger than the US economy, and (2) does US macroeconomic policy eventually undermine confidence in the value of the dollar, in the form of inflation and depreciation. What we learn about functional form and parameter values helps us forecast, contingent on these two developments, how quickly the euro might rise to challenge the dollar. Under two important scenarios the remaining EU members, including the UK, join EMU by 2020 or else the recent depreciation trend of the dollar persists into the future the euro may surpass the dollar as leading international reserve currency by 2022. |
| JEL: | F02 F31 F33 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11510&r=eec |
| By: | Paul Van den Noord |
| Abstract: | <P>After the launch of the single currency the euro exchange rate fell and interest rates had converged towards the (low) German level. These shocks have worked out differently for the small and large countries. Housing markets have acted as an important vehicle of transmission of these shocks onto economic activity and inflation. Simulations with a stylised econometric model for the euro area economy, making a distinction between the small and large countries in terms of the estimated parameters, illustrate this mechanism ... </P> <P>Modélisation de la divergence conjoncturelle dans la zone euro : le canal de transmission du logement <P>Après le lancement de la monnaie unique, le taux de change de l’euro avait baissé et les taux d’intérêt avaient convergé vers les taux allemands (qui se situaient à un bas niveau). Ces chocs se sont répercutés de manière différente sur les petites et les grandes économies. Les marchés du logement ont joué un rôle important de canal de transmission de ces chocs, en les répercutant sur l’activité économique et l’inflation. Des simulations effectuées à l’aide d’un modèle économétrique de l’économie de la zone euro, établissant une distinction entre les petites et les grandes économies en termes de paramètres estimés, illustrent ce mécanisme ...</P> |
| Keywords: | Business cycles, Economic and Monetary Union, Union Économique et Monétaire, cycles macroéconomiques |
| JEL: | E32 E52 F42 |
| Date: | 2004–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:400-en&r=eec |
| By: | Christine de la Maisonneuve; Claude Giorno; Peter Hoeller |
| Abstract: | <P>In recent years the euro area has shown less resilience to the negative and largely OECD-wide common shocks than the English-speaking countries, but most of the smaller euro area countries have fared better than the large ones. This paper reviews policy issues that are important in fostering a speedy adjustment to shocks. We argue that the small countries are well placed to adjust swiftly to asymmetric shocks, because they are well integrated with the rest of the area. An activist fiscal policy is not needed and also not powerful enough to smooth the cycle. However, asset bubbles are a cause of concern as their limited weight means that the common monetary policy is more likely to be out of line with their cyclical position. Large countries are less well placed to cope with shocks and sluggish adjustment can be expected. Reforms should focus on raising trade linkages via the completion of the single market, on improving wage and price flexibility and on making their housing markets ...</P> <P>Même monnaie, même cycle ? Rendre plus souple le fonctionnement de l'union monétaire <P>Au cours des dernières années, la zone euro a fait preuve d'une moindre résistance que les pays nglo-saxons aux chocs négatifs qui ont affecté dans une large mesure l'OCDE dans son ensemble; mais la lupart des plus petits pays de la zone ont mieux tirer leur épingle du jeux que les grands. Cet article passe n revue les questions de politique économique qui sont importantes afin de favoriser un ajustement rapide ux chocs. Nous défendons l'idée que les petits pays sont mieux armés pour s'ajuster promptement à des hocs asymétriques du fait de leur bonne intégration avec le reste de la zone. Une politique budgétaire ctiviste n'est pas nécessaire ni suffisamment puissante pour amortir le cycle. Néanmoins, l'apparition de ulles spéculatives est une source de préoccupation dans leur cas en raison de leur poids limité, lequel mplique que la politique monétaire commune est susceptible d'être plus fréquemment incohérente avec eur position cyclique. Les grands pays sont moins bien armés pour ...</P> |
| Keywords: | taxation, fiscalité, fiscal policy, politique budgétaire, Business cycles, cycles économiques, Economic and Monetary Union, Union Économique et Monétaire |
| JEL: | E3 E6 H2 H6 |
| Date: | 2004–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:401-en&r=eec |
| By: | Laurence Boone; Fanny Mikol; Paul Van den Noord |
| Abstract: | <P>This paper investigates the determinants of money demand (M3) in the euro area. It specifically examines the potential impact of financial and housing wealth on money demand. It tests the hypothesis, whether wealth associated with increases in asset prices is used to finance liquidity holdings in a standard portfolio context. Regressing velocity on interest rates and a wealth variable (a composite of residential property and stocks) within an error-correction framework provides evidence of positive wealth effects from financial and housing assets on money demand in the long run, but no significant impact in the short run. Tests suggests that the long-run and dynamic money demand equations are stable and have not been disrupted by the adoption of the euro on 1 January 1999, while the impact of wealth on money demand may have increased ...</P> <P>Les effets de richesse sur la demande de monnaie dans l'union économique et monétaire : une analyse économétrique <P>Cet article étudie les facteurs qui déterminent la demande de monnaie (M3) dans la zone euro. Il examine de manière explicite quels sont les effets de richesse liés aux avoirs mobiliers et immobiliers sur la demande de monnaie. Il teste l'hypothèse selon laquelle, dans un contexte classique de choix de portefeuille, la richesse résultant d'une hausse des prix des actifs est employée pour financer la détention de liquidités. Un modèle à correction d'erreur est mis en oeuvre pour effectuer une régression économétrique de la vitesse de circulation de la monnaie sur les taux d'intérêt et sur une variable composite de richesse (qui agrège immeubles et actions), faisant apparaître des effets de richesse liés aux actifs mobiliers et immobiliers sur la demande de monnaie qui sont significatifs à long terme mais non à court terme. Différents tests suggèrent que les équations de demande de monnaie, tant dynamiques que de long terme, sont stables et n'ont pas été perturbées par l'adoption de ...</P> |
| Keywords: | wealth, richesse, Money demand, inflation, demande de monnaie, inflation |
| JEL: | E41 E52 |
| Date: | 2004–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:411-en&r=eec |
| By: | Boris Cournède; Alexandra Janovskaia; Paul Van den Noord |
| Abstract: | In recent years, inflation in the euro area has failed to decelerate decisively while cyclical slack built up in the economy. Is this phenomenon more than a peculiarity in recent data? Is it related to structural policy settings? Econometric analysis conducted on two decades of quarterly data covering 17 countries yields a yes on both counts. First, inflation is shown to respond significantly more weakly to cyclical slack in the euro area than in countries such as the United Kingdom, the United States or Canada. Secondly, this lack of responsiveness is found to be related in a statistically significant way to more rigid structural policy settings. The results pass a wide range of robustness checks. This Working Paper relates to the 2005 OECD Economic Survey of the euro area (www.oecd.org/eco/surveys/euroarea). <P>Les causes de la persistance de l'inflation dans la zone euro Au cours des dernières années, l’inflation ne s’est pas ralentie de manière sensible au sein de la zone euro alors même que l’écart de production y devenait de plus en plus négatif. Ce phénomène est-il plus profond qu’une bizarrerie des statistiques économiques récentes ? Y a-t-il un lien avec les caractéristiques structurelles de la zone euro ? L’analyse économétrique de deux décennies de données trimestrielles pour dix-sept pays conduit à répondre oui à chacune de ces questions. Premièrement, il apparaît que, pour un même écart de production négatif, l’inflation ralentit moins dans la zone euro que dans des pays comme le Royaume-Uni, les États-Unis ou le Canada. Deuxièmement, il existe un lien statistiquement significatif entre ce manque de réactivité et une plus grande rigidité des politiques structurelles. La robustesse de ces résultats est confirmée par un large éventail de tests. Ce Document de travail se rapporte à l'Etude économique de l'OCDE de la zone euro, 2005 (www.oecd.org/eco/etudes/zoneeuro). |
| Keywords: | monetary policy, Economic and Monetary Union, Union Économique et Monétaire, politique monetaire, inflation, inflation |
| JEL: | E31 E32 E52 E58 |
| Date: | 2005–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:435-en&r=eec |
| By: | Nicola Brandt |
| Abstract: | <P>This study presents evidence on firm entry and exit, growth and survival derived with new data from Eurostat, covering nine European Union member countries. One contribution of the study is an analysis of the role of data quality for studies of firm demographics. Confronting results obtained with the Eurostat data with those of a previous OECD cross-country firm-level data project reveals that different size thresholds and difficulties in distinguishing genuine firm entry and exit from mergers & acquisitions, ownership changes or changes in legal form can have sizeable impacts on results. Cross-country differences in firm entry and exit rates are analysed with a special emphasis on detailed information and communication technology (ICT) related sectors, which has not been possible with previously available cross-country data. After controlling for some basic factors, such as countries’ industry composition, crosscountry differences in entry and exit rates in mature sectors turn out ...</P> <P>Dynamique des entreprises en Europe <P>Cette étude présente, à partir de nouvelles statistiques d’Eurostat qui couvrent neuf pays membres de l’Union européenne, des données sur l’entrée, la sortie, la croissance et la survie des entreprises. Elle comporte notamment une analyse de l’importance que revêt la qualité des données dans les études sur la démographie des entreprises. La confrontation des résultats obtenus à l’aide des données d’Eurostat avec ceux d’un projet précédent de l’OCDE sur des données internationales au niveau de l’entreprise révèle que les différences de seuils de taille ainsi que les difficultés liées à la distinction entre ce qui constitue véritablement des entrées ou sorties d’entreprises d’une part et les fusions et acquisitions d’autre part, les transferts de propriété et la modification de la forme juridique peuvent avoir des effets non négligeables sur les résultats. L’étude analyse les différences internationales en ce qui concerne les taux d’entrée et de sortie des entreprises, en faisant une ...</P> |
| Keywords: | entry, exit, survival, micro data, entrée, sortie, survie, microdonnées |
| JEL: | C81 G33 L11 M13 |
| Date: | 2004–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaaa:2004/1-en&r=eec |
| By: | Brenda Gannon (Economic and Social Research Institute, Dublin); Robert Plasman (DULBEA, Université libre de Bruxelles, Brussels); Ilan Tojerow (DULBEA, Université libre de Bruxelles, Brussels); François Rycx (DULBEA, Université libre de Bruxelles, Brussels) |
| Abstract: | This study analyses the interaction between inter-industry wage differentials and the gender wage gap in six European countries using a unique harmonised matched employer-employee data set, the 1995 European Structure of Earnings Survey. Findings show the existence of significant inter-industry wage differentials in all countries for both sexes. While their structure is quite similar for men and women and across countries, their dispersion is significantly larger in countries with decentralised bargaining. These differentials are significantly and positively correlated with industry profitability. The magnitude of this correlation, however, is lower in countries with centralised and coordinated collective bargaining. Further results show that in all countries more than 80% of the gender wage gaps within industries are statistically significant. Yet, industries having the highest and the lowest gender wage gaps vary substantially across European countries. Finally, results indicate that industry effects explain between 0 and 29% of the overall gender wage gap. |
| Keywords: | gender wage gap, sectors, Europe |
| JEL: | J16 J31 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:dul:wpaper:05-01rs&r=eec |
| By: | Thierry Lallemand (DULBEA, Université libre de Bruxelles, Brussels); Robert Plasman (DULBEA, Université libre de Bruxelles, Brussels); François Rycx (DULBEA, Université libre de Bruxelles, Brussels) |
| Abstract: | This study examines the magnitude and determinants of the establishment-size wage premium in five European countries using a unique harmonised matched employer-employee data set. Findings show the existence of a significant positive wage premium in all countries, even when controlling for labour quality, working conditions, monitoring, sectoral and regional effects, bargaining institutions, job stability, and concentration of skilled workers. In crossnational perspective, results support the existence of an inverse relationship between the size wage gap and the degree of corporatism. Final results indicate that the size wage premium is generally larger in the manufacturing sector and for blue-collar workers. |
| Keywords: | Establishment-size and wages, matched employer-employee data, Europe. |
| JEL: | J31 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:dul:wpaper:05-07rs&r=eec |
| By: | Pierre-Guillaume Méon (DULBEA, Université libre de Bruxelles, Brussels); Laurent Weill (LARGE, Université Robert Schuman, Strasbourg) |
| Abstract: | This paper investigates the motive of geographic risk diversification in the lending activity for bank mergers in the EU on a sample of large banking groups. Geographic diversification should allow banks to reduce their risk. We observe that the loan portfolios of European banks are home-biased. We apply the portfolio approach to explore the risk-return efficiency of the locations of banks’ activities. We also study mergers between pairs of banks. We provide evidence of the sub-optimality of the loan portfolios of European banks in terms of geographic risk diversification, and of the existence of potential gains from inter-country pair mergers. |
| Keywords: | bank mergers, risk diversification, European integration |
| JEL: | F15 G11 G21 G34 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:dul:wpaper:05-08rs&r=eec |
| By: | Helge Bennmarker; Kenneth Carling; Bertil Holmlund |
| Abstract: | In 2001 and 2002, Sweden introduced several unemployment insurance reforms. A major innovation in the first reform was the introduction of a two-tiered benefit structure for some unemployed individuals. This system involved supplementary compensation during the first 20 weeks of unemployment. The 2002 reform retained the two-tiered benefit structure but involved also substantial benefit hikes for spells exceeding 20 weeks. This paper examines how these reforms affected transitions from unemployment to employment. We take advantage of the fact that the reforms had quasi-experimental features where the “treatments” differed considerably among unemployed individuals. We find that the reforms had strikingly different effects on job finding among men and women. The two reforms in conjunction are estimated to have increased the expected duration of unemployment among men but to have decreased the duration of unemployment among women. The overall effect on the duration of unemployment is not statistically different from zero. However, the reforms reduced job finding among males who remained unemployed for more than 20 weeks. |
| Keywords: | unemployment duration, unemployment benefits |
| JEL: | J64 J65 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1460&r=eec |
| By: | M. Hashem Pesaran; L. Vanessa Smith; Ron P. Smith |
| Abstract: | This paper attempts to provide a conceptual framework for the analysis of counterfactual scenarios using macroeconometric models. As an application we consider UK entry to the euro. Entry involves a long-term commitment to restrict UK nominal exchange rates and interest rates to be the same as those of the euro area. We derive conditional probability distributions for the difference between the future realisations of variables of interest (e.g UK and euro area output and prices) subject to UK entry restrictions being fully met over a given period and the alternative realisations without the restrictions. The robustness of the results can be evaluated by also conditioning on variables deemed to be invariant to UK entry, such as oil or US equity prices. Economic interdependence means that such policy evaluation must take account of international linkages and common factors that drive fluctuations across economies. In this paper this is accomplished using the Global VAR recently developed by Dees, di Mauro, Pesaran and Smith (2005). The paper briefly describes the GVAR which has been estimated for 25 countries and the euro area over the period 1979-2003. It reports probability estimates that output will be higher and prices lower in the UK and the euro area as a result of entry. It examines the sensitivity of these results to a variety of assumptions about when and how the UK entered and the observed global shocks and compares them with the effects of Swedish entry. |
| Keywords: | Global VAR (GVAR), counterfactual analysis, UK and Sweden entry to Euro |
| JEL: | C32 C35 E17 F15 F42 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1477&r=eec |
| By: | Rainer Niemann; Corinna Treisch |
| Abstract: | In 2005, Austria modified its group taxation regime and now provides an option for cross-border loss-offset. We analyse the combined impact of Austria's new group taxation and loss-offset limitations on cross-border investment decisions of domestic corporations. Monte Carlo simulations in an inter-temporal setting reveal that the impact on foreign real investment induced by the new group taxation is ambiguous. Whereas marginal investment projects with decreasing cash flows tend to benefit from group taxation, innovative projects with initial losses and increasing cash flows may be discriminated against. Investors should consider domestic income and repatriation policy simultaneously before opting for group taxation. |
| Keywords: | group taxation, investment decisions, Monte Carlo simulations, international taxation, loss-offset rules |
| JEL: | G31 H25 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1506&r=eec |
| By: | Annemiek van VUren; Daniël van Vuuren |
| Abstract: | In this paper, we assess the impact of financial incentives on the inflow in the public Disability Insurance (DI) scheme in the Netherlands. For this matter, the variation in replacement rates over different sectors is exploited to estimate the probability of DI enrolment over a sample of employees from the Dutch Income Panel (1996-2000). On the basis of these administrative data, we find a point estimate of the elasticity of DI enrolment with respect to the DI wealth rate of 2.5. |
| Keywords: | Disability Insurance; financial incentives; moral hazard |
| JEL: | C25 C81 H3 J6 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:45&r=eec |
| By: | Vlachos, Jonas |
| Abstract: | It has been argued that the public sector is an insurance against otherwise uninsurable risks. If that is the case, it is reasonable to expect the public sector to be larger in regions where the private labour-market is risky. Using data from Swedish municipalities, this paper reports that labour-market risk has a substantial impact on public employment. The results for aggregate spending and taxation are, however, much weaker and labor-market risk thus affects the labour intensity of the municipal public sector. |
| Keywords: | labour market risk; panel data; public employment; public sector size |
| JEL: | C23 H11 H40 J45 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5091&r=eec |
| By: | Bauer, Thomas; Sinning, Mathias |
| 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 German-born 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: | migration; savings |
| JEL: | C24 E21 F22 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5102&r=eec |
| By: | Manacorda, Marco; Moretti, Enrico |
| Abstract: | More than 80% of Italian men aged 18-30 live with their parents. We argue that one contributing factor to this remarkably high rate of cohabitation is parents’ tastes for co-residence. In order to investigate the role of parental preferences, we estimate the effect of exogenous changes in parental income on rates of cohabitation in Italy using SHIW micro-data from 1989 to 2000. The key econometric issue is the potential endogeneity of parental income. In order to identify a source of exogenous variation in parental income, we use changes in fathers’ retirement age induced by the 1992 reform of the Italian Social Security system as an instrumental variable for parental income. By raising retirement age, this reform forced some fathers to remain in the labour market longer than they would have otherwise, therefore raising their disposable income. We use a two-sample instrumental variable (TSIV) strategy. Our TSIV estimates indicate that a rise in parents’ income significantly raises the children’s propensity to live at home: a 10% increase in annual parental income results in approximately a 10% rise in the proportion of boys living with their parents. Although we cannot definitely rule out alternative interpretations, these results are consistent with our hypothesis that cohabitation is a normal good for Italian parents. |
| Keywords: | family structure; living arrangements; two-sample IV |
| JEL: | H55 J12 J61 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5116&r=eec |
| By: | Steven A. Sass (Center for Retirement Research at Boston College) |
| Abstract: | The British retirement income system is perhaps more dependent on private programs than any in the industrialized world. The government provides a modest and uniform "Basic Pension" to career workers, and now to carers and the disabled. But as benefits are indexed to prices, not wages, the Basic Pension is projected to replace a steadily declining share of earnings. The government also has a second tier earnings-related plan. But as most workers "contract out," they will rely on employer and/or individual "personal pensions" to maintain pre-retirement living standards. Reform efforts had three objectives: 1) limit public expenditures on the elderly; 2) enlarge and strengthen private plans; and 3) assure an adequate retirement income for all. The reforms succeeded in controlling expenditures. Public programs for the elderly are projected to cost just 5 to 6 percent of GDP for the foreseeable future. Private plans, however, have neither been enlarged nor strengthened. Damaging scandals hit both employer plans and personal pensions in the 1990s, and the response to those scandals has not been especially effective. Employers of late have also been exiting defined benefit pension plans at a rapid rate. The risks, low level of contributions, and generally inadequate financial management of personal pensions also raise serious questions about their ability to maintain living standards in retirement. Initiatives to assure an adequate retirement income transformed both the government's earnings related pension program and means-tested assistance for the elderly. The government transformed its second tier pension into essentially a flat benefit program for lower wage workers that will cushion the erosion of Basic Pension allowances. In its means-tested program, the government also replaced its £-for-£ reduction in benefits with a 40 pence reduction for income above the threshold amount. This change will affect incentives to work and save in different ways for different groups. For those individuals currently receiving means-tested allowances, the less draconian reduction in benefits will improve work and saving incentives. However, expanding the phase-out range for means-tested benefits will make the great majority of elderly British households eligible for such assistance. This newly-eligible group will face a disincentive to work and save, because each additional £ of income will reduce their benefits by 40 pence. Going forward, Britain's retirement income system will increasingly rely on individual accounts and means-tested assistance. The individual accounts are not well funded and carry significant risk. The disincentive to work or save created by the expanded means-tested program across a broad range of households further clouds the system's prospects. As a result, observers generally expect an increase in public expenditures on the elderly and further reforms to the system. |
| Date: | 2004–08–13 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:gib3&r=eec |
| By: | Duvander, Ann-Zofie (Institute for Futures Studies); Ferrarini, Tommy (Stockholm University); Thalberg, Sara (Stockholm University) |
| Abstract: | Sweden was the first country to introduce paid parental leave also to fathers in 1974, and this legislation has since then continuously been reformed in order to bring about a more equal parenthood. This study sets out to discuss the Swedish parental leave system and identify achievements, policy dilemmas and reform alternatives in a European perspective. The structure of parental insurance legislation, with earnings-related benefits and a long leave period, is often seen as a main explanation why Sweden has been able to combine relatively high fertility levels with high female labour force participation rates and low child poverty. In the perspective of changing demographic structures in Europe, with declining fertility levels and a growing number of elderly, the strengthening of dual earner family policies, including parental insurance legislation, may mitigate macro-economic and demographic problems by increasing gender equality and decreasing the work-family conflict. Despite the positive consequences, unresolved questions exist in the present parental leave legislation. The flexibility of the Swedish system, which still has extensive transferable leave rights, has the consequence that the lion’s share of parental leave days is still taken by mothers, among other things making it difficult for women to compete on equal terms with men in the labour market. Consequently, the gender-based division of parental leave may contribute to a preservation of traditional gender roles and inequalities. Another problem in the Swedish system is the work requirement for eligibility that excludes students and others with weak labour market attachment from the earnings-related benefits, possibly inflicting on the postponement of parenthood. Raising the minimum benefit could be one solution to enable childbearing among persons with weak labour market attachment, but this would also affect the economic incentives for paid work, and thus weaken the dual earner model. |
| Keywords: | Parental leave; gender equality; reform challenges |
| JEL: | J13 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifswps:2005_011&r=eec |
| By: | Richard Blundell (Institute for Fiscal Studies and University College London); Mike Brewer (Institute for Fiscal Studies); Marco Francesconi (Institute for Fiscal Studies and ISER, Essex University) |
| Abstract: | This study uses the first twelve waves of the British Household Panel Survey covering the period 1991-2002 to investigate the extent of constraints on desired hours of work within jobs and the degree of flexibility of the labour market for a sample of women. Our main findings are as follows. First, the largest movements in hours worked are observed for workers who change their jobs. Second, about 40 percent of the women in the sample are not putting in the hours they would like. Most of them (mainly full-timers) would like to work fewer hours at the prevailing hourly wage. Again, women who change job experience the greatest hours changes, especially if they are over- or under-employed. Third, there is evidence of hours constraints. The hours movements among quitters are up to 5 hours greater than the movements among stayers. Fourth, we do not detect systematic time trends in the relationship between hours changes and job changes. But there is some evidence that overemployed women find it increasingly more difficult to move towards their desired hours even after changing job. Fifth, the evidence on a flexible labour market is mixed. We find only partial support for the hypothesis that overemployed or underemployed quitters receive compensating wage differentials if the new job does not satisfy their hours preferences, as well as for the hypothesis that quitters get a wage premium when they end up moving to jobs that constraint their desired hours. |
| Keywords: | Job mobility; Hours constraints; Labour supply preferences; Hours-wage trade-off; Part-time employment. |
| JEL: | C23 H31 I38 J12 J13 J22 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:05/12&r=eec |
| By: | Axel Heitmueller (London Business School and IZA Bonn); Kostas Mavromaras (University of Aberdeen and IZA Bonn) |
| Abstract: | German post-unification in the 1990s is a period that was marked by substantial economic change, part of which was East German wages building towards the much higher West German levels. This paper studies the public-private pay gap in the fast changing economic and political environment of the 1990s using panel estimation techniques which control for unobserved individual heterogeneity. It shows that, while the overall pay gap between public and private sector stayed remarkably constant in the West, earnings differences in the East increased threefold in the late 1990s resulting in a substantial wage premium in the public sector. It is suggested that this premium is a result of the politically induced gap between pay and actual productivity. Furthermore, results vary greatly by gender indicating significantly larger female earnings differentials. Several institutional and political arguments are presented to explain this phenomenon. |
| Keywords: | public-private sector pay differential, decomposition, Germany |
| JEL: | J78 J31 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1696&r=eec |
| By: | Béatrice d’Hombres (University of Padova); Giorgio Brunello (University of Padova, CESifo and IZA Bonn) |
| Abstract: | We use data from the European Community Household Panel to investigate the impact of obesity on wages in 9 European countries, ranging from Ireland to Spain. We find that the common impact of obesity on wages is negative and statistically significant, independently of gender. Given the nature of European labor markets, however, we believe that a common impact is overly restrictive. When we allow this impact to vary across countries, we find a negative relationship between the BMI and wages in the countries of the European "olive belt" and a positive relationship in the countries of the "beer belt". We speculate that such difference could be driven by the interaction between the weather, BMI and individual (unobserved) productivity. |
| Keywords: | wages, body mass index, Europe |
| JEL: | I12 J3 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1704&r=eec |
| By: | Ondrej Schneider; Jan Zápal |
| Abstract: | The European Union (EU) accepted ten new member states (NMS) in 2004. These countries, mostly former socialist countries, have had to adjust their economic policies to the EU’s standards. Perhaps most difficult has proven to be fiscal policy whereby NMS must comply with the Stability and Growth Pact (SGP) rules. Indeed, six out of the ten NMS have breached the SGP limits and were put in Excessive Deficit Procedure (EDP). While the SGP is being modified, fiscal policy is set to remain on the agenda for all NMS in years to come. In this paper, we analyze fiscal policy in the NMS, focusing primarily on the time period that immediately preceded their EU accession. We analyse the structure and scale of these countries’ fiscal policy and identify main trends in revenues and expenditures of their public budgets. We then explore dynamics of fiscal policy in the new member states and isolate main factors of the dynamics. Namely, we show how much of the consolidations was due to the fiscal authorities’ effort and how much was caused by external factors. We also show that most NMS governments have run a rather inconsistent fiscal policy and have not consolidated their budgets appropriately by postponing politically difficult consolidation measures. However, we also identify a group of countries characterised by strong reform efforts and responsible fiscal policy-making, supported usually by strong economic growth. In this context, room is given to economic, as well as political economy factors. |
| Keywords: | fiscal policy, new member states, consolidations, Stability and Growth Pact, Excessive Deficit Procedure, growth accounting, probit analysis |
| JEL: | E60 E62 H20 H60 H87 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1486&r=eec |