nep-eec New Economics Papers
on European Economics
Issue of 2006‒01‒29
twenty papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. Catching up or getting stuck? Europe's troubles to exploit ICT's productivity potential By van Ark, Bart; Inklaar, Robert
  2. Active Ageing and the European Labour Market: Synthesis Report By Hannu Piekkola
  3. Rent-Seeking Competition from State Coffers: A Calibrated DSGE Model of the Euro Area By Konstantinos Angelopoulos; Apostolis Philippopoulos; Vanghelis Vassilatos
  4. The Factor Intensity of Accession and EU15 Countries´ Comparative Advantage in the Internal Market By Ville Kaitila
  5. The European Commission - Appointment, Preferences and Institutional Relations By Napel, Stefan; Widgrén, Mika
  6. Oil Shocks and the Business Cycle in Europe By Baltasar Manzano; Carlos de Miguel; José Mª Martín Moreno
  7. Taxation in Europe: towards more competition or more co-ordination By Henri Sterdiyniak
  8. Unit labour costs, productivity and international competitiveness By Ark, Bart van; Stuivenwold, Edwin; Ypma, Gerard
  9. Labour Force Behavior of Elderly Two Adult Households: Evidence from EU-countries By Matthias Deschryvere
  10. Productivity and participation: an international comparison By McGuckin, Robert; Ark, Bart van
  11. Revealed Comparative Advantage in the Internal Market By Mika Widgrén
  12. Price Differentials in Monetary Unions: The Role of Fiscal Shocks By Fabio Canova; Evi Pappa
  13. A New International Division of Labour in Europe: Outsourcing and Offshoring to Eastern Europe By Marin, Dalia
  14. Integration and Conditional Convergence in the Enlarged EU Area By Ville Kaitila
  15. Economic Effects of Free Trade between the EU and Russia By Pekka Sulamaa; Mika Widgrén
  16. Impact de l’appréciation de l’euro sur le secteur du tourisme By Guillaume Chevillon; Xavier Timbeau
  17. The Finnish Pension Reform of 2005 By Jukka Lassila; Tarmo Valkonen
  18. Retirement in the UK By Sarah Smith; James Banks
  19. Les 140 points de PIB oubliés de la comptabilité nationale française By Thomas Melonio; Xavier Timbeau
  20. Determinants of Internationalisation through Strategic Alliances - Insights Based on New Data on Large Finnish Firms By Christopher Palmberg; Mika Pajarinen

  1. By: van Ark, Bart; Inklaar, Robert (Groningen University)
    Abstract: In this paper we extend our previous analysis of the comparative productivity performance of Europe and the U.S. to 2004, thereby covering the latest full business cycle. Our main finding is that the slower contribution of ICT to productivity growth in the EU compared to the U.S. has persisted into the early part of the 21st century. The growth differential even increased since 2000, as the U.S. shows strong labour productivity advances in market services. This may be related to a more productive use of ICT in the U.S.. However, at industry level we find no support for significant TFP (total factor productivity) spillovers from ICT investment, neither in the U.S. nor in European countries. In the 1980s we even find that ICT investment and TFP growth are negatively related, with at best normal returns in the 1970s and 1990s. We speculate that this U-shaped pattern is driven by ?hard savings? from ICT investment that first lead to earning normal returns, followed by a period of experimentation during which ICT and TFP growth are negatively related. Ultimately, ?soft savings? lead to productivity gains from ICT in line with the marginal cost of ICT. We argue that the realization of productivity effects from soft savings is highly dependent on the competitive process that stimulates complementary innovations and weeds out inefficient users of ICT technology. Europe risks getting stuck in an environment where the productivity gains from soft savings from ICT remain unrealized.
    Date: 2006
  2. By: Hannu Piekkola
    JEL: J26 J14 J22 J11
    Date: 2004–05–05
  3. By: Konstantinos Angelopoulos; Apostolis Philippopoulos; Vanghelis Vassilatos
    Abstract: This paper incorporates an uncoordinated struggle for extra fiscal favors into an otherwise standard Dynamic Stochastic General Equilibrium model. This reflects the popular belief that interest groups compete for privileged transfers and tax treatment at the expense of the general public interest, and so the aggregate economy stagnates. The model is calibrated to the euro area over the period 1980-2003. Our results show that rent-seeking competition can contribute to explaining the European macroeconomic experience. We also get quantitative evidence of the fraction of collected tax revenues grabbed by rent seekers.
    Keywords: rent seeking, fiscal policy, real business cycles
    JEL: E32 E62 H23
    Date: 2006
  4. By: Ville Kaitila
    Keywords: EU, Eastern enlargement, comparative advantage, factor intensity
    Date: 2004–08–26
  5. By: Napel, Stefan; Widgrén, Mika
    Abstract: The paper analyses the appointment of the European Commission as a strategic game between members of the EU's Council of Ministers and the European Parliament. The focal equilibrium results in Commissioners that duplicate policy preferences of national Council representatives. Different internal decision rules still prevent the Commission from being a Council clone in aggregate. Rather, it is predicted that Commission policies are on average more in accord with the aggregate position of the Parliament than the Council. A data set covering 66 dossiers with 162 controversial EU legislative proposals passed between 1999 and 2002 is investigated to test this. In fact, the Council is significantly more conservative than Parliament and Commission; the latter two are significantly closer to each other than Council and Commission.
    Keywords: collective choice; European Commission; European integration; power
    JEL: C70 D71 H77
    Date: 2006–01
  6. By: Baltasar Manzano; Carlos de Miguel; José Mª Martín Moreno
    Abstract: This paper analyzes the effects of oil price shocks on the business cycle of the EU-15 countries using a standard dynamic general equilibrium model for a small open economy in which oil is included as an imported productive input. The results show that oil shocks can account for a significant percentage of GDP fluctuations in many of those countries. Furthermore, we show that the increases in the relative price of oil had a negative effect on welfare, particularly in southern European countries, which are historically associated with a lax monetary policy during oil crisis.
  7. By: Henri Sterdiyniak (Observatoire Français des Conjonctures Économiques)
    Date: 2005
  8. By: Ark, Bart van; Stuivenwold, Edwin; Ypma, Gerard (Groningen University)
    Abstract: This paper provides international comparisons of relative levels of unit labour costs (ULC) for several OECD countries relative to the United States. The estimates are based on the Total Economy Database and the 60-Industry Database of the Groningen Growth and Development Centre (GGDC), and are also included in the Key Indicators of the Labour Market of the International Labour Office (ILO). The paper discusses the concept of relative ULC measures in comparison to other measures of competitiveness. It presents the main results for manufacturing and total economy measures of ULC, and makes two digressions, firstly by also presenting results for some major manufacturing sectors for a few large European countries and the U.S. and, secondly, by showing some comparable results for developing countries. An important observation from this paper is that relative productivity levels tend to move more or less in tandem with relative labour cost levels so that unit labour cost levels are closer between countries than labour cost levels per se. However, unit labour cost levels are certainly not identical between countries, as there are important deviations due to short term movements in relative prices (related to fluctuation in the nominal exchange rate) and differences in industrial structure. Whereas some of the differences cancel out at the aggregate level, differences in industry and product composition are quite important at a more detailed level.
    Date: 2005
  9. By: Matthias Deschryvere
    Date: 2004–09–30
  10. By: McGuckin, Robert; Ark, Bart van (Groningen University)
    Abstract: The purpose of this project is to increase our knowledge about trade-offs between productivity and labour market participation across the OECD, and more specifically in the European Union. The inquiry is focused around the question whether there is a trade-off between labour participation and productivity and, if so, how big it is and how long does it last. In particular, through a series of panel regressions we isolate the structural or long-term relationships, as well as identify how long the ?longterm? is. We also investigate the extent to which the trade-offs can be associated with particular types of workers (in terms of age or gender). Our main findings are, firstly, that the negative productivity response elasticity to a 1% rise in participation (measured as the employment rate) is less than 0.3 and peters out in less than 5 years. Secondly, increased participation is the key factor related to this productivity growth tradeoff. We find little effect of hours per worker on productivity. Thirdly, female participation has the strongest negative impact on productivity growth, but it is associated with specific age and/or cohort effects that are likely to diminish in the longer run. Finally, we investigate simple scenarios to look at the effect of increases in participation on productivity and per capita income, showing the large potential for income gains without much loss in productivity.
    Date: 2005
  11. By: Mika Widgrén
    Keywords: comparative advantage, factor intensity, globalisation
    Date: 2005–08–17
  12. By: Fabio Canova; Evi Pappa
    Abstract: We study the effect of regional expenditure and revenue shocks on price differentials for 47 US states and 9 EU countries. We identify shocks using sign restrictions on the dynamics of deficits and output and construct two estimates for structural price differentials dynamics which optimally weight the information contained in the data for all units. Fiscal shocks explain between 14 and 23 percent of the variability of price differentials both in the US and in the EU. On average, expansionary fiscal disturbances produce positive price differential responses while distortionary balance budget shocks produce negative price differential responses. In a number of units, price differential responses to expansionary fiscal shocks are negative. Spillovers and labor supply effects partially explain this pattern while geographical, political, and economic indicators do not.
    Keywords: Price differentials, Fiscal policy, Monetary unions, Bayesian methods
    JEL: E3 E5 H7
    Date: 2005–06
  13. By: Marin, Dalia
    Abstract: Europe is reorganizing its international value chain. I document these changes in Europe’s international organization of production with new survey data of Austrian and German firms investing in Eastern Europe. I show estimates of the share of intra-firm trade between Austria and Germany on the one hand and Eastern Europe on the other. Furthermore, I present empirical evidence of the drivers of the new division of labour in Europe. I find among other things that falling trade costs and falling corruption levels as well as improvements in the contracting environment in Eastern Europe are affecting the level of intra-firm imports from Eastern Europe. They are also favouring outsourcing over offshoring. Low organizational costs of hierarchies and large costs of hold-up (when there are no alternative investors in Old Europe or no alternative suppliers in Eastern Europe) are favouring offshoring over outsourcing. Tax holidays granted by host countries in Eastern Europe also mildly affect the organizational choice.
    Keywords: comparative advantage in Eastern Europe; contract enforcement; empirical test of the theory of the firm; intra-firm trade; the empirics of global sourcing
    JEL: D23 D51 F11 L14 O11
    Date: 2006–01
  14. By: Ville Kaitila
    Keywords: EU, enlargement, economic integration, economic growth, conditional convergence
    Date: 2004–10–07
  15. By: Pekka Sulamaa; Mika Widgrén
    Keywords: EU, Russia, free trade, integration
    JEL: F15 F17
    Date: 2005–03–30
  16. By: Guillaume Chevillon (Observatoire Français des Conjonctures Économiques); Xavier Timbeau (Observatoire Français des Conjonctures Économiques)
    Date: 2005
  17. By: Jukka Lassila; Tarmo Valkonen
    Abstract: A major reform in the Finnish private-sector earnings-related pension system came into effect on January 1st, 2005. It was negotiated in 2001 – 2002 between the central organisations of employers and trade unions and representatives of the central government. This paper describes the reform and analyses its effects on selected macroeconomic variables, on the pension system and on the position of different birth cohorts and different educational groups. The reform appears to be successful in many respects. It simplifies the private-sector pension system and makes it a model that other pension systems in Finland will converge to. The reform rewards postponing retirement. It curbs the increase in contribution rate without endangering the adequacy of replacement rates. The increase in labour supply will have beneficial welfare effects. The new system also responds rather well to uncertain future demographics. Despite this apparent success of the reform there remains a serious doubt of its adequacy, as contribution rates are still expected to rise by several percentage points.
    Keywords: pension reform, population ageing, stochastic population simulations
    JEL: H55 J11
    Date: 2006–01–20
  18. By: Sarah Smith; James Banks
    Abstract: Like other OECD countries, the UK experienced more than two decades of declining labour market activity among older men in the 1970s, 1980s and early 1990s. A number of measures to reverse this trend that are currently under discussion, or have already been introduced, include, an increase in the state pension age, abolition of mandatory early retirement ages, tighter eligibility for disability benefits, and in-work benefits and training incentives for those aged 50+. This paper considers the nature and timing of retirement in the UK today and makes an assessment of the likely effect of these measures and likely future trends in retirement.
    Keywords: Retirement, pensions.
    JEL: J26
    Date: 2006–01
  19. By: Thomas Melonio (Agence Française du Développement); Xavier Timbeau (Observatoire Français des Conjonctures Économiques)
    Date: 2006
  20. By: Christopher Palmberg; Mika Pajarinen
    Keywords: internationalisation, large Finnish firms, uncertainty, strategic alliances
    Date: 2005–01–28

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