nep-eec New Economics Papers
on European Economics
Issue of 2005‒10‒29
thirty-six papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. Towards a Monthly Business Cycle Chronology for the Euro Area By Emanuel Mönch; Harald Uhlig
  2. What Drives ECB Monetary Policy? By Clemens J.M. Kool
  3. Bank finance versus bond finance: what explains the differences between US and Europe? By Fiorella De Fiore; Harald Uhlig
  4. Is the American Model Miss World? Choosing between the Anglo-Saxon model and a European-style alternative By Henri L.F. de Groot; Paul J.G. Tang; Richard Nahuis
  5. Is there a trade-off between inflation variability and output-gap variability in the EMU countries? By Philip Arestis; Kostas Mouratidis
  6. Uncovered Interest Rate Parity and the Expectations Hypothesis of the Term Structure: Empirical Results for the U.S. and Europe By Ralf Brüggemann; Helmut Lütkepohl
  7. Corporate Governance Convergence: Evidence From Takeover Regulation Reforms in Europe By Marc Goergen; Marina Martynova; Luc Renneboog
  8. Establishment Size and the Dispersion of Wages: Evidence from European Countries By Thierry Lallemand; François Rycx
  9. Demographic and Education Effects on Unemployment in Europe: Economic Factors and Labour Market Institutions By Federico Biagi; Claudio Lucifora
  10. Selecting Comparables for the Valuation of European Firms By Ingolf Dittmann; Christian Weiner
  11. Entrepreneurial engagement levels in the European Union By Isabel Grilo; Roy Thurik
  12. Legislative Bargaining and Lobbying in the European Union By Hein Roelfsema
  13. Time-varying Beta Risk of Pan-European Industry Portfolios: A Comparison of Alternative Modeling Techniques By Sascha Mergner; Jan Bulla
  14. How Should Europe's ICT Ambitions look like? An Interpretative Review of the Facts By Richard Nahuis; Henry van der Wiel
  15. Are Eastern European Countries Catching Up? Time Series Evidence for Czech Republic, Hungary, and Poland By Ralf Brüggemann; Carsten Trenkler
  16. European Integration, FDI and the Internal Geography of Trade: Evidence from Western European Border Regions By Miren Lafourcade and Elisenda Paluzie
  17. Body Size, Activity, Employment and Wages in Europe: A First Approach By Jaume Garcia Villar; Climent Quintana
  18. National Saving and the Stability and Growth Pact. By Martin Weale
  19. The challenges of classification: emerging VOIP regulation in Europe and the United States By DAVID BACH
  20. Does Labour Productivity Flow Across Industries?: Estimation Robust to Panel Heterogeneity and Cross Sectional Correlation By Joseph Byrne; Michela Vecchi
  21. Increases in Female Labour Force Participation in Europe: Similarities and Differences By Jan Dirk Vlasblom; Joop J. Schippers
  22. The climate change challenge and transitions for radical changes in the European steel industry By Christophe Rynikiewicz
  23. The Different Extent of Privatisation Proceeds in EU Countries: A Preliminary Explanation Using a Public Choice Approach By Ansgar Belke; Frank Baumgärtner; Friedrich Schneider; Ralph Setzer
  24. Modeling the FIBOR/EURIBOR Swap Term Structure: An Empirical Approach By Oliver Blaskowitz; Helmut Herwartz; Gonzalo de Cadenas Santiago
  25. The Feasibility of a Fixed Exchange Rate Regime for New EU-members: Evidence from Real Exchange Rates By Bertrand Candelon; Clemens Kool; Katharina Raabe; Tom van Veen
  26. Twin - Peaks in E.U. Regional Productivity Dynamics: a nonparametric analysis By Georgios Fotopoulos
  27. Means Testing and Retirement Choices in Europe: A Comparison of the British and Danish Systems By James Sefton; Justin van de Ven
  28. Labour Market Dynamics in Germany: Hirings, Separations, and Job-to-Job Transitions over the Business Cycle By Ronald Bachmann
  29. Privatisation, regulation and productivity in the Italian motorway industry By Luigi Benfratello; Alberto Iozzi; Paola Valbonesi
  30. Does Temporary Agency Work Provide a Stepping Stone to Regular Employment? By Michael Kvasnicka
  31. Estimating the Impact of Experience Rating on the Inflow into Disability Insurance in the Netherlands By Pierre Koning
  32. Family business investor byouts: the Italian case By Fabio Buttignon; Marco Vedovato; Paolo Bortoluzzi
  33. The Labour Market Effects of Alma Mater: Evidence from Italy By Giorgio Brunello; Lorenzo Cappellari
  34. Evaluating the German Bank Merger Wave By Michael Koetter
  35. The nature of the relationship between international tourism and international trade: The case of German imports of Spanish wine By Christian Fischer; Luis Alberiko Gil-Alana
  36. The Productivity impact of E-Commerce in the UK, 2001: Evidence from microdata By Ana Rincon-Aznar; Catherine (Kate) Robinson; Michela Vecchi

  1. By: Emanuel Mönch; Harald Uhlig
    Abstract: This paper is an exercise in dating the Euro area business cycle on a monthly basis. Using a quite flexible interpolation routine, we construct several monthly series of Euro area real GDP, and then apply the Bry-Boschan (1971) procedure. To account for the asymmetry in growth regimes and duration across business cycle phases, we propose to extend this method with a combined amplitude/phase-length criterion ruling out expansionary phases that are short and flat. Applying the extended procedure to US and European data, we are able to replicate approximately the dating decisions of the NBER and the CEPR.
    Keywords: business cycle, European business cycle, Euro area, Bry-Boschan, NBER methodology
    JEL: B41 C22 C82 E32 E58
    Date: 2003–01
  2. By: Clemens J.M. Kool
    Abstract: In this paper I have analyzed ECB interest rate setting in the first 5 years of its existence. Contrary to popular belief and continuous ECB statements, the ECB has not acted has as an obsessed inflation fighter. By any measure, output considerations do play a significant role in the ECB's policy rule. If anything, the ECB has been on the loose side, especially since 2001, when taking economic development in the euro area as a whole as the starting point. Actual interest rates have been consistent with German (and to a lesser extent French) preferences, however. It suggests the ECB puts a dominant weight on German economic developments. Small peripheral countries receive too low weight rather than too high. In case the ECB actually focuses on euro area wide developments, its looseness is comparable to that of the Fed. In case ECB policy actually is geared towards Germany's preferences ­ or perhaps the average German-French preferences -- the ECB has been much closer to a standard Taylor-rule interest rate setting than the Fed. In that scenario, the Fed indeed has been much more aggressive in the lowering of its interest rates in the face of adverse economic shocks.
    Date: 2005–03
  3. By: Fiorella De Fiore; Harald Uhlig
    Abstract: We present a dynamic general equilibrium model with agency costs, where heterogeneous firms choose among two alternative instruments of external finance-corporate bonds and bank loans. We characterize the financing choice of firms and the endogenous financial structure of the economy. The calibrated model is used to address questions such as: What explains differences in the financial structure of the US and the euro area? What are the implications of these differences for allocations? We find that a higher share of bank finance in the euro area relative to the US is due to lower availability of public information about firms' credit worthiness and to higher effciency of banks in acquiring this information. We also quantify the effect of differences in the financial structure on per-capita GDP.
    Keywords: Financial structure, agency costs, heterogeneity
    JEL: E20 E44 C68
    Date: 2005–08
  4. By: Henri L.F. de Groot; Paul J.G. Tang; Richard Nahuis
    Abstract: In Lisbon, the European Union has set itself the goal to become the most competitive economy in the world in 2010 without harming social cohesion and the environment. The motivation for introducing this target is the substantially higher GDP per capita of US citizens. The difference in income is mainly a difference in the number of hours worked per employee. In terms of productivity per hour and employment per inhabitant, several European countries score equally well or even better than the United States, while at the same time they outperform the United States with a more equal distribution of income. The European social models are at least as interesting as the US model that is often considered a role model. In an empirical analysis for OECD countries, we aim to unravel `the secret of success'. Our regression results show that income redistribution (through a social security system) does not necessarily lead to lower participation and higher unemployment, provided that countries supplement it with active labour market policies. Especially, spending on employment services like job-search assistance and vocational guidance, seems effective. Furthermore, the results suggest that generous unemployment benefits of short duration contribute to employment without widening the income distribution.
    Keywords: welfare states, income inequality, unemployment, productivity, participation, labour market policies
    JEL: E24 H5 J21
    Date: 2004–10
  5. By: Philip Arestis; Kostas Mouratidis
    Abstract: This paper examines the performance of monetary policy in eleven EMU countries for the whole period of the EMS. This is based on the trade-off between inflation variability and output-gap variability. To this end, we examine whether the introduction of an implicit inflation targeting by the EMU member countries after the Maastricht Treaty, changed the trade-off between inflation variability and output-gap variability. We employ a stochastic volatility model for two sub-periods of the EMS (i.e. before and after the Maastricht Treaty). We find that the trade-off varies amongst EMU countries. The implication of these findings is that there are asymmetries in the euro area, due to different economic structures among the member countries of the EMU.
    Date: 2004–05
  6. By: Ralf Brüggemann; Helmut Lütkepohl
    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: Expectations hypothesis of the term structure, uncovered interest rate parity, unit roots, cointegration analysis
    JEL: C32
    Date: 2005–04
  7. By: Marc Goergen; Marina Martynova; Luc Renneboog
    Abstract: This paper contributes to the research on corporate governance by predicting the effects of European takeover regulation. In particular, we investigate whether the recent reforms of takeover regulation in Europe are leading to a harmonization of the national legislations. With the help of 150 corporate governance lawyers from 30 European countries, we collected the main changes in takeover regulation. We assess whether a process of convergence towards the Anglo-(American) corporate governance system has been started and we find that this is the case. We make predictions as to the consequences of the reforms for the ownership and control. However, we find that, while in some countries the adoption of a unified takeover code may result in dispersed ownership, in others it may further consolidate the blockholder-based system.
    Keywords: takeover regulation, mergers and acquisitions, corporate governance, ownership and control, governance regulation, convergence.
    JEL: G3 G34 G38 K2 K22 K40 G32
    Date: 2005–03
  8. By: Thierry Lallemand (Université Libre de Bruxelles, Department of Applied Economics (DULBEA, Brussels) and Centre de Comptabilité, Planning et Contrôle, Brussels); François Rycx (DULBEA, Université Libre de Bruxelles, Department of Applied Economics (DULBEA, Brussels), and Institute for the Study of Labor (IZA, Bonn).)
    Abstract: This paper investigates how the distribution of wages differs between small and large establishments in four European countries. Findings show that within-establishment wage dispersion rises with size because large employers have a more diverse workforce. They also suggest that screening and monitoring costs imply a lower sensitivity of wages to ability in larger establishments. Smaller establishments are found to rely more on incentive-based pay mechanisms, particularly in countries with a low trade union coverage rate. Further results indicate that between-establishment wage dispersion decreases with employer size because smaller establishments are technologically more diversified and therefore exhibit greater diversity in average workforce skills.
    Keywords: Wage structure, establishment size, decomposition of wages, Europe.
    JEL: J21 J31
    Date: 2005–10
  9. By: Federico Biagi (Università di Padova and SDA Bocconi); Claudio Lucifora (Università Cattolica, FEEM, CEPR and IZA Bonn)
    Abstract: We analyse the effects of demographic and education changes on unemployment rates in Europe. Using a panel of European countries for the 1980-2000 period - disaggregated by cohort, gender and education -, we empirically test the economic effects of two stylised facts that have occurred in recent decades: the "baby bust" and the "education boom". We find that structural shifts in the population age structure play an important role and that a lot of variation is also attributable to educational changes, the latter usually neglected in aggregate studies. Results show that demographic and education shocks are qualitatively different for young (adult) workers as well as for more (less) educated people. While adult workers and more educated individuals, in general, experience lower unemployment rates, changes in the population age structure appear to be positively related to young workers’ unemployment rates while they have no effect on adults. Conversely changes in the skill structure ("education boom"), even when controlling for skill-biased technological change, reduce the unemployment of the more educated. Labour market institutions also influence unemployment rates in different ways. Unemployment benefits are found to have a positive impact on unemployment, while bargaining coordination and employment protection reduce it.
    Keywords: unemployment, demographic, education, labour market institutions
    JEL: E24 J31 J51 J65
    Date: 2005–10
  10. By: Ingolf Dittmann; Christian Weiner
    Abstract: This paper investigates which comparables selection method generates the most precise forecasts when valuing European companies with the enterprise value to EBIT multiple. We also consider the USA as a reference point. It turns out that selecting comparable companies with similar return on assets clearly outperforms selections according to industry membership or total assets. Moreover, we investigate whether comparables should be selected from the same country, from the same region, or from all OECD members. For most European countries, choosing comparables from the 15 European Union member states yields the best forecasts. In contrast, for the UK and the US, comparables should be chosen from the same country only.
    Keywords: comparables, selection method, valuing companies, forecasts, EBIT, industry membership, ROA
    JEL: G19 M41
    Date: 2005–02
  11. By: Isabel Grilo; Roy Thurik
    Abstract: A multinomial logit model and survey data from the 25 EU member states and the US are used to establish the effect of demographic and other variables on various entrepreneurial engagement levels. These engagement levels range from "never thought about starting a business" to "thinking about it", "taking steps for starting up", "having a young business", "having an older business" and "no longer being an entrepreneur". Data of the 2004 Entrepreneurship Flash Eurobarometer survey containing over 13,500 ob-servations is used. Other than demographic variables such as gender, age, education level and whether par-ents are self-employed, the set of explanatory variables used includes country specific effects, measures of risk tolerance, internal and external locus of control and four perceptions of 'obstacles'. The 'obstacle' vari-ables include the perception by respondents of administrative complexities, of availability of financial sup-port, of accessibility of information for start-up and whether the current economic climate is favorable. Among the four perception variables only administrative complexities displays an unambiguous obstacle profile in that its presence has a significant negative impact on higher entrepreneurial engagement levels. Country effects suggest a clear underperformance of Europe relative to the US in less mature entrepreneu-rial phases.
    Keywords: determinants of entrepreneurship, nascent entrepreneurship, multinomial logit, barriers to entry, Europe
    JEL: M13 H10 J23 R12
    Date: 2005–10
  12. By: Hein Roelfsema
    Abstract: This paper analyzes the effects of legislative bargaining in the EU on public goods provision and lobbying. We argue that delegation to a single policy maker at the centralized level -which we call supranational policy making- increases lobbying expenditures. When policy in the center is formulated by a committee consisting of national representatives -intergovernmental decision making- centralization causes lobbying expenditures fall, for centralization makes national policy makers more responsive to demands from domestic lobbies. In the extensions we consider the effects of enlargement on lobbying and analyze endogenous lobby formation.
    Keywords: Centralization, Fiscal Federalism, Legislative Bargaining, Lobbying, the European Union
    JEL: D72 D78 F36 H41
    Date: 2004–07
  13. By: Sascha Mergner (AMB Generali Asset Managers); Jan Bulla (Georg-August-University, Goettingen)
    Abstract: This paper investigates the time-varying behavior of systematic risk for eighteen pan-European sectors. Using weekly data over the period 1987- 2005, four different modeling techniques in addition to the standard constant coefficient model are employed: a bivariate t-GARCH(1,1) model, two Kalman filter based approaches, a bivariate stochastic volatility model estimated via the efficient Monte Carlo likelihood technique as well as two Markov switching models. A comparison of the different models' ex-ante forecast performances indicates that the random walk process in connection with the Kalman filter is the preferred model to describe and forecast the time-varying behavior of sector betas in a European context. Remarkably, the Markov switching models yield a worse out-of-sample performance than standard OLS.
    Keywords: Markov switching; Kalman filter; stochastic volatility; efficient Monte Carlo likelihood; bivariate t-GARCH; European industry portfolios; time-varying beta risk
    JEL: C22 C32 G10 G12 G15
    Date: 2005–10–26
  14. By: Richard Nahuis; Henry van der Wiel
    Abstract: In this Discussion Paper we analyse how Europe's ICT ambition can be translated into a policy agenda. To achieve this, we provide a quantitative overview of the importance of ICT and the relative position of Europe versus the US. Next we provide a discussion of potential explanations for the differences in ICT use and production. We find that Europe's position with respect to ICT use and production is not only worse compared to that of the US. In some areas Europe is ahead of the US, whereas in others Europe lags on an aggregate level. Our main conclusion is that Europe should not aim at creating an ICT-production cluster but it should aim at removing barriers to ICT use. The reasons are as follows. It is not a sensible strategy to specialise in industries where one has a comparative disadvantage. Moreover, the largest benefit from ICT is in its use not in its production. JEL classification: H89, D2, E61
    JEL: H89 D2 E61
    Date: 2005–04
  15. By: Ralf Brüggemann; Carsten Trenkler
    Abstract: The catching up process in Czech Republic, Hungary, and Poland is analyzed by investigating the integration properties of log-differences in per-capita GDP versus the EU15 and a Mediterranean country group. We account for structural changes by using unit root tests that allow for two endogenous breaks in the level and the trend. We find that Czech Republic and Hungary are stochastically converging towards the Mediterranean group, while only Czech Republic is stochastically converging towards EU15. Remaining per capita GDP differences are only reduced by deterministic trends. Extrapolating these trends we find that catching up will take about 20 years.
    Keywords: Stochastic convergence, Catching up, Unit root tests, EU accession
    JEL: C32 E24
    Date: 2005–03
  16. By: Miren Lafourcade and Elisenda Paluzie (Universitat de Barcelona)
    Abstract: In this paper we use a gravity model to study the trade performance of French and Spanish border regions relatively to non-border regions, over the past two decades. We find that, controlling for their size, proximity and location characteristics, border regions trade on average between 62% and 193% more with their neighbouring country than other regions, and twice as much if they are endowed with good cross border transport infrastructures. Despite European integration, however, this trade outperformance has fallen for the most peripheral regions within the EU. We show that this trend was linked in part to a shift in the propensity of foreign investors to move their affiliates from the regions near their home market to the regions bordering the EU core.
    Keywords: Trade, Gravity, Border Regions, European Integration, Foreign Direct Investment
    JEL: F15 F23 R12 R58
    Date: 2005
  17. By: Jaume Garcia Villar; Climent Quintana
    Abstract: In this article we present the first empirical analysis on the associations between body size, activity, employment and wages for several European countries. The main advantage of the present work with respect to the previous literature is offered by the comparability of the data and its large geographical coverage. According to our results, for Spanish women, being obese is associated with both a 9% lower wage and probability of being employed, while for Swedish and Danish, obesity is associated with a 12% lower probability of being employed, and a 10% lower wage respectively. In Belgium, obesity is associated with a 19% lower probability of being employed for men. These robust estimates are strongly informative and may be used as a simple statistical rule of thumb to decide the countries in which lab and field experiments should be run.
    Keywords: Obesity, wages, activity, employment
    JEL: J3 I1
    Date: 2005–08
  18. By: Martin Weale
    Abstract: Many of the arguments used to justify the Stability and Growth Pact’s concern with budget deficits in fact relate to levels of national saving. Countries with large budget deficits tend to have low levels of national saving but some countries such as the UK have low levels of national saving for structural reasons associated with the private sector. A good case can be made that budgetary targets should be tighter for countries with structurally low saving than for countries with savings levels adequate to allow wealth to grow in line with income.
    Date: 2004–05
  19. By: DAVID BACH (Instituto de Empresa)
    Abstract: Internet telephony (VOIP) has the potential to transform the world of voice communications more profoundly than anything since the invention of the telephone itself. As telecommunications incumbents and a range of new entrants begin rolling out commercial VOIP services, policymakers around the world are grappling with the regulatory implications. In the United States and the European Union, the two largest potential VOIP markets, efforts are underway to fit VOIP into existing regulatory frameworks. This process of "regulatory classification" is by no means a purely administrative act. A lot is at stake and different interest groups have therefore mobilized to shape the respective outcomes.
    Date: 2005–04
  20. By: Joseph Byrne; Michela Vecchi
    Abstract: We consider labour productivity convergence between the US and the UK and France, using industry level data. We find evidence of panel heterogeneity, cross sectional correlation and weak evidence of productivity convergence at the industry level.
    Date: 2005–05
  21. By: Jan Dirk Vlasblom; Joop J. Schippers
    Abstract: Low educational levels and the effect of children are recognized as the most important factor for low female participation rates. Over the last decades, female labour supply in Europe has shown a large increase. This may be the result of changes in the level of education or fertility. It is also possible that it is due to changes in behaviour, as influenced by the social and institutional context. Our results show that increases in participation rates cannot be explained by changes in either educational level or the number and timing of children. Female labour supply increases for all educational levels and for both women with and without children. In other words, it is mainly changes in behaviour driving the increase in participation rates over the last decades.
    Keywords: female labour supply
    JEL: J22
    Date: 2004–03
  22. By: Christophe Rynikiewicz (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Cet article vise à identifier les transitions technologiques en cours dans la sidérurgie européenne. Les limites actuelles du système socio-technique centré autour du haut-fourneau, impliquent en effet des changements dans les modes production, de distribution et de consommation d'acier. L'agenda évolue de la recherche de process plus propre (« cleaner production ») vers des innovations de système. Les technologies radicales ULCOS (Ultra Low CO2 Steelmaking) doivent répondre à la modification de l'environnement de sélection mais leur adoption et diffusion dépendra fortement du niveau de la contrainte « carbone » et des fondamentaux identifiés par l'économie industrielle et l'approche évolutionniste.<br />Les experts du secteur ont aussi identifié le besoin d'un agenda de recherche dédié aux modes de consommation de matériaux à long terme. L'évolution du contenu en matériaux et énergie des infrastructures, produits et services (mobilité, logement, chauffage, éclairage…) est fortement susceptible d'évoluer, en particulier dans le cadre de contraintes « carbone » fortes. L'approche « PSS » ou « product-service-system » dans le transport et la construction peut devenir une opportunité pour la sidérurgie du 21eme siècle.
    Keywords: changement climatique;eco-efficacité;industrie sidérurgique;innovation
    Date: 2005–10–20
  23. By: Ansgar Belke; Frank Baumgärtner; Friedrich Schneider; Ralph Setzer
    Date: 2005
  24. By: Oliver Blaskowitz; Helmut Herwartz; Gonzalo de Cadenas Santiago
    Abstract: In this study we forecast the term structure of FIBOR/EURIBOR swap rates by means of recursive vector autoregressive (VAR) models. In advance, a principal components analysis (PCA) is adopted to reduce the dimensionality of the term structure. To evaluate ex–ante forecasting performance for particular short, medium and long term rates and for the level, slope and curvature of the swap term structure, we rely on measures of both statistical and economic performance. Whereas the statistical performance is investigated by means of the Henrikkson–Merton statistic, the economic performance is assessed in terms of cash flows implied by alternative trading strategies. Arguing in favor of local homogeneity of term structure dynamics, we propose a data driven, adaptive model selection strategy to ’predict the best forecasting model’ out of a set of 100 alternative implementations of the PCA/VAR model. This approach is shown to outperform forecasting schemes relying on global homogeneity of the term structure.
    Keywords: Principal components, Factor Analysis, Ex–ante forecasting, EURIBOR swap rates, Term structure, Trading strategies
    JEL: C32 C53 E43 G29
    Date: 2005–04
  25. By: Bertrand Candelon; Clemens Kool; Katharina Raabe; Tom van Veen
    Abstract: In this paper, we estimate fundamental bilateral real exchange rates for a group of eight accession countries using a panel-cointegration approach for the period 19932003. We document a significant positive link between productivity levels and the corresponding real exchange rate levels. Future rises in productivity cannot be excluded on the basis of either our own analysis or the literature as a whole. Consequently, inflation pressure and real exchange rate appreciation in the accession countries probably remain a fact of life in the near future. The extent to which this is a problem for a fixed nominal exchange rate regime is hard to determine. Price dynamics in the accession countries are still quite flexible to accommodate substantial real exchange rate movements even when the nominal exchange rate is rather fixed; moreover, that price adjustment is mostly an internal process for the accession countries. Overall we conclude that a fixed exchange rate regime for each of the accession countries would be feasible in itself, despite possible future real exchange rate appreciations due to either the BalassaSamuelson effect or demand shifts. We find current misalignments to be small, robust and generally in line with the literature. This implies current exchange rate levels provide a reasonable indication of the level at which a parity exchange rate could be set.
    Keywords: real exchange rate, misalignments, Balassa-Samuelson, panel cointegration
    Date: 2005–03
  26. By: Georgios Fotopoulos
    Abstract: Working within the 'distributional approach', this research offers evidence, based on empirical density estimates and modality tests, of past polarization in regional labour productivity in EU-15. Most importantly, it provides evidence on the related ergodic density which suggests that this polarization may persist in the future. This past and probably future polarization is primarily related to the service sector of the regional economies and not to manufacturing industries sector.
    Keywords: regional labour productivity, EU, distributional analysis, nonparametric methods, stochastic processes
    JEL: D39 O18 C14
    Date: 2005–10
  27. By: James Sefton; Justin van de Ven
    Abstract: We develop a simulation model of household behaviour in which both the consumption/saving and labour/leisure choices are endogenous. This model is used to explore the effects of the UK and Danish state tax and benefit systems on the labour supply of old and older workers.We find that, in broad terms, differences in labour force participation can be accounted for by differences in benefit structures. Furthermore, our simulations suggest that the UK system is preferred by young people while the Danish arrangement - which imposes a larger tax burden and provides larger welfare benefits - is chosen by old and older people. Notably, older people are in the majority in the simulated population. The Danish system does not promote notably greater equality over the life-time, but it does underpin a higher level of consumption for old and older people.
    Date: 2005–04
  28. By: Ronald Bachmann
    Abstract: In this paper, we provide a comprehensive overview of labour market dynamics in Western Germany by looking at gross worker flows. To do so, we use a subsample of the registry data collected by the German social security system, the IAB employment sample, for the time period 1975-2001. The latter provides daily information on 2% of the German workforce covered by social security legislation. Using these data, we are able to exactly calculate the number of transitions between the different labour market states, and between different employers over time. We first provide an overview of the cross-section and time series properties of these flows. We then study the cyclical features of gross worker flows, accessions, and separations. We find that separations are relatively flat over the cycle, while accessions are markedly procyclical, and that the increased flow into unemployment in a recession is mainly due to reduced hirings, and hence lower job-to-job transitions, rather than increased match separations. Our findings have important implications both for the way we view recessions and for the role of the labour market as a propagation mechanism for productivity shocks.
    Keywords: worker flows, accessions, separations, business cycle, job-to-job, employer-to-employer
    JEL: J63 J64 J21 E24
    Date: 2005–09
  29. By: Luigi Benfratello (University of Torino and Ceris-CNR); Alberto Iozzi (University of Rome "Tor Vergata" and University of Leicester); Paola Valbonesi (University of Padua)
    Abstract: The Italian highway industry has undergone an institutional and regulatory reform through the last decade, characterised by changes in ownership and a new price cap framework. To assess the effect of the reforms on firms’ performance, we use information on all the 20 Italian concessionaires over the 1992-2003 period and 1) estimate the technical progress in the industry, thereby providing a reference value for the X factor in the price cap formula; 2) assess the relative productivity of private vs. public concessionaires; 3) evaluate whether price cap regulation has induced firms to use resources efficiently, 4) determine the possible effect of the inclusion of the quality index in the price cap formula. We find that the introduction of a price cap regime does not increase firms’ productivity whereas a sharp increase in maintenance costs is recorded, arguably due to the quality indicator in the price cap formula. Furthermore, firms appear to have gained from the privatisation process and from a technical progress occurred in the period. We also find high density economies and a steady and large increase in traffic. Overall, these results suggest that the X factor has been set too conservatively in past years which in turn explains the high profits recorded by franchisees under price cap regulation.
    Keywords: Price Cap Regulation, Motorways
    JEL: L51 L92
    Date: 2005–05
  30. By: Michael Kvasnicka
    Abstract: Based on administrative data from the federal employment office in Germany, we apply matching techniques to estimate the stepping-stone function of temporary agency work for the unemployed, i.e. its short-run and long-run effects on their future employment prospects. Our results show that unemployed workers who take up a job in the temporary work agency (TWA) industry are on average more likely than unemployed workers not joining TWA work to be in agency employment in the four year period these workers are tracked after entering TWA work. However, we find no discernable effects on the probabilities of being either in regular employment or registered unemployment. Our findings therefore do not lend support to the stepping-stone function of temporary agency work.
    Keywords: Temporary work agencies, stepping stone, evaluation, matching
    JEL: C14 C41 J41 J64
    Date: 2005–05
  31. By: Pierre Koning
    Abstract: This paper examines the effects of experience rating on the inflow into disability insurance (DI) in the Netherlands, using unique longitudinal administrative data from the social benefit administration. We follow a difference-in-differences approach to identify the impact of changes in DI premiums. Due to unawareness of the experience rating system, employers seem to have been triggered to increase preventative activities, once they have experienced increases in DI premium. We find this impact to be substantial, amounting to a 15% reduction of the DI inflow.
    Keywords: experience rating, disability insurance, panel data
    JEL: H22 I12 C23
    Date: 2005–02
  32. By: Fabio Buttignon (University of Padua); Marco Vedovato (University of Venice); Paolo Bortoluzzi (University of Venice)
    Abstract: Family business succession is often viewed by academics and practitioners as a critical step in the life of a firm: it can affect a variety of matters, ranging from its competitive potential and its hierarchy to its own capability to survive. This is particularly true in Italy, where firms are by and large small or medium, with no direct access to the capital market, and where many entrepreneurs who actively took part in the industrial development of the second half of the 20th century are now giving up their jobs. In this paper we try to understand whether Private Equity can be an effective answer to this emerging issue or not. To this end, at this first stage of the research, we focused on those Italian deals where the Private Equity investor was heavily involved (meaning that it acquired at least a majority stake in the target family firm) and we examined the effect of the deal performances of firms (comparing the performance two years before and three years after the deal). The sample includes 21 of the 44 family business investor buyouts (FBIBO) carried out in Italy during the 1990s. The results are ambivalent. Some of the identified variables (such as Turnover, EBITDA, ...) are not statistically significant, meaning that performance trends before and after the deal cannot be tracked back to the role of the Private Equity investor. Case study analysis thus becomes more relevant. In the attempt to identify some pattern of behaviour, we clustered the firms according to their trends in Turnover and EBITDA margin (both adjusted by industry). This categorization gave some interesting results. Generally, PE intervention causes a discontinuity in the life of a firm, generating a shift in performance trends: from bad to good and vice versa. This result wasn’t expected, considering that target firms belonged mainly to mature business and that existing management was kept in place. Almost a third of the analyzed firms achieved very good performances after the PE investment, while another third displayed some signs of failure. In the middle, some mixed situations emerged, where growth was reached at the expense of profitability or where profitability was increased as growth diminished.
    Date: 2005–03
  33. By: Giorgio Brunello; Lorenzo Cappellari
    Abstract: We use data from a nationally representative survey of Italian graduates to study whether Alma Mater matters for employment and earnings three years after graduation. We find that the attended college does matter, and that college related differences are substantial both among and within regions of the country. However, these differences are not large enough to trigger substantial mobility flows from poorly performing to better performing institutions. There is also evidence that going to a private university pays off at least in the early part of a career: the employment weighted college wage gains from going to a private college are close to 18 percent. Only part of this gain can be explained by the fact that private universities have lower pupil - teacher ratios than public institutions. household behavior.
    Keywords: college education, Italy
    JEL: J24 J1
    Date: 2005–04
  34. By: Michael Koetter
    Abstract: German banks experienced a merger wave throughout the 1990's. However, the success of bank mergers remains a continuous matter of debate. In this paper we suggest a taxonomy as how to evaluate post-merger performance on the basis of cost efficiency (CE). We categorise mergers a success that fulfill simultaneously two criteria. First, merged institutes must exhibit CE levels above the average of non-merging banks. Second, banks must exhibit CE changes between merger and evaluation year above efficiency changes of non-merging banks. We employ this taxonomy to characterise (successful) mergers in terms of various key-performance and structural indicators and investigate the implications for four prominent policy issues particular to German banking. Our main conclusions are threefold. First, roughly every second merger is a success. Second, the margin of success is narrow, as the CE difference amounts to approximately 1 percentage point. Third, it takes around seven years after a transaction until maximum mean CE differentials materialise.
    Keywords: Bank mergers, cost efficiency.
    Date: 2005–03
  35. By: Christian Fischer; Luis Alberiko Gil-Alana (School of Economics and Business Administration, University of Navarra)
    Abstract: This paper deals with the relationship between international trade and tourism. In particular, we focus on the effect that German tourism to Spain has on German imports of Spanish wine. Due to the different stochastic properties of the series under analysis, which display different orders of integration, we use a methodology based on long memory regression models, where tourism is supposed to be exogenous. The results show that at the aggregate level, tourism has an effect on wine imports that lasts between two and nine months. Disaggregating the imports across the different types of wine it is observed that only for red wines from Navarra, Penedús and Valdepeñas, and to a certain extent for sparkling wine, tourism produces an effect on its future demand. From a policy-making perspective our results imply that the impact of tourism on the host economy is not only direct and short-term but also oblique and delayed, thus reinforcing the case for tourism as a means for economic development.
    JEL: F14 C22 Q13 L83
    Date: 2005–10
  36. By: Ana Rincon-Aznar; Catherine (Kate) Robinson; Michela Vecchi
    Abstract: This paper considers the impact of e-commerce on establishment level productivity for all sectors of the economy, using data from the UK E-commerce survey. E-Commerce represents the operational application of technology in the production process and may be regarded as an innovation driven change in workplace practice.Using a production function approach to measuring productivity, we find that OLS estimation fails to adequately account for the selectivity bias amongst enterprises that use e-commerce. Using a treatment effect estimator, we find that both e-buying and e-selling have significant and positive impacts on productivity.
    Date: 2005–05

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