nep-eec New Economics Papers
on European Economics
Issue of 2006‒03‒05
twenty-two papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. Multiple breaks in lending rate pass-through A cross country study for the euro area By Gianluca Di Lorenzo; Giuseppe Marotta
  2. Testing for Asymmetries in the Preferences of the Euro-Area Monetary Policymaker By Manuel M F Martins; Alvaro Aguiar
  3. Do ECB's statements steer short-term and long-term interest rates in the euro zone? By Marie Musard-Gies
  4. Volatility, spillover Effects and Correlations in US and Major European Markets By Christos Savva; Denise R Osborn; Len Gill
  5. Inflation Differentials and Different Labor Market Institutions in the EMU By Ester Faia; Alessia Campolmi
  6. Electricity Internal Market in the European Union: What to do next? By Jean-Michel Glanchant; François Lévêque
  7. NATGAS: a model of the European natural gas market By Machiel Mulder; Gijsbert Zwart
  8. Efficiency of European Banking - Inequality and Integration By Marina Tomova
  9. Non-discretionary and automatic fiscal policy in the EU and the OECD By Jacques Mélitz
  10. Dynamics of Equity Markets Integration in Europe: Evidence of Change with Events and over Time By Cal Muckley; Raj Aggarwal; Brian Lucey
  11. Labour Mobility of Academic Inventors. Career Decision and Knowledge Transfer By Gustavo A. Crespi; Aldo Geuna; Lionel J. J. Nesta
  12. Mean Reversion in Equity Prices: the G-7 Evidence By John Hatgioannides; Spiros Mesomeris
  13. Capital Account Liberalization, Capital Flow Patterns, and Policy Responses in the EU's New Member States By Zsófia Árvai
  14. The Feasibility of a Fixed Exchange Rate Regime for New EU-members Evidence from Real Exchange Rates By Clemens J M Kool; Tom Van Veen; Bertrand Chandelon; Katharina Raabe
  15. Wealth Effects in Europe: A Tale of Two Countries (Italy and the United Kingdom) By Sònia Muñoz
  16. Early Retirement Behaviour in the Netherlands: Evidence from a Policy Reform By Rob Euwals; Daniel J. van Vuuren; Ronald P. Wolthoff
  17. The impact of corporate governance practices on R&D intensities of firms: An econometric study on French largest companies By Stéphane Lhuillery
  18. Balancing Health Care Quality and Cost Containment: The Case of Norway By Alexandra Bibbee; Flavio Padrini
  19. Households' Response to Wealth Changes: Do Gains or Losses make a Difference? By Robert Paul Berben; Kerstin Bernoth; Mauro Mastrogiacomo
  20. Is there an urban wage premium in Italy? By Sabrina Di Addario; Eleonora Patacchini
  21. Job Security and Work Absence: Evidence from a Natural Experiment By Lindbeck, Assar; Palme, Mårten; Persson, Mats
  22. Intergenerational Mobility, Human Capital Transmission and the Earnings of Second-Generation Immigrants in Sweden By Hammarstedt , Mats; Palme, Mårten

  1. By: Gianluca Di Lorenzo; Giuseppe Marotta
    Abstract: A new approach to search for structural breaks in the retail lending rA new approach is proposed for searching multiple unknown breaks, possibly associated with EMU, in the short term business lending rate pass-through. Multiple breaks are detected in five out of nine countries of the euro area. The last break occurs much before the start of EMU for France, several months after that event for Austria, Italy and Germany. Long run pass-throughs decrease (except for France) sizably below one (except for the Netherlands); heterogeneity in the monetary transmission increases across countries. These results raise doubts on claims of a more effective monetary policy under EMU.
    Keywords: Interest rates; Monetary policy; Economic and Monetary Union; Cointegration analysis; Structural breaks
    JEL: E43 E52 E58 F36
    Date: 2006–02
  2. By: Manuel M F Martins (Universidade do Porto); Alvaro Aguiar (Universidade do Porto)
    Date: 2005–09–03
  3. By: Marie Musard-Gies (University of Orleans)
    Date: 2005–09–03
  4. By: Christos Savva (University of Manchester); Denise R Osborn (University of Manchester); Len Gill (University of Manchester)
    Date: 2005–09–03
  5. By: Ester Faia (Department of Economics); Alessia Campolmi (Department of Economics)
    Date: 2005–09–03
  6. By: Jean-Michel Glanchant; François Lévêque
    Abstract: Like in the US, the EU “internal electricity market” remains unfinished and its construction can stall, fracturing into “national blocks” separated by permanent “border effects”. This is exactly what this paper seeks to avoid in the expected life of the current European Commission (2005-2009). It identifies the critical factors: national and EU market designs, industry structure and competition policy, deeper regional cooperation between TSOs and Regulators. It suggests 8 priority actions and 12 secondary improvements to sustain the dynamics of the construction of an EU set of open r egional markets with limited “border effects”, and explains the rationale for these recommendations.
    Keywords: European Policy, European Electricity Market, Electricity Market Design, Electricity Regulation
    JEL: L51 L52 L94 Q48
    Date: 2006–03
  7. By: Machiel Mulder; Gijsbert Zwart
    Abstract: The NATural GAS model is an integrated model of the European wholesale gas market providing long-run projections of supply, transport, storage and consumption patterns in the model region, aggregated in 5-year periods, distinguishing two seasons (winter and summer). Model results include levels of investment in the various branches, output and consumption, depletion of reserves and price levels. The NATGAS model computes long-term effects of policy measures on future gas production and gas prices in Europe. NATGAS is an equilibrium model describing behaviour of gas producers, investors in infrastructure (pipeline, LNG capacity, as well as storage), traders and consumers. NATGAS covers the main European demand regions, including the United Kingdom, Germany, the Netherlands and Italy. Moreover, it covers the main origins of supply on the European market, such as Russia, Norway, Algeria, the Netherlands, the United Kingdom and LNG. In this memorandum, we first discuss the theoretical background as well as the model specifications. Afterwards, we describe the data we used, present some results and assess validity by computing sensitivities and comparing with current developments.
    Keywords: gas market modelling; European gas market; equilibrium model; natural resources
    JEL: C3 C5 Q3 Q4
    Date: 2006–02
  8. By: Marina Tomova (University of National and World Economy)
    Date: 2005–09–03
  9. By: Jacques Mélitz (University of Strathclyde)
    Date: 2005–09–03
  10. By: Cal Muckley (University of Dublin Trinity College); Raj Aggarwal (Kent State University); Brian Lucey (University of Dublin Trinity College)
    Date: 2005–09–03
  11. By: Gustavo A. Crespi (SPRU, University of Sussex); Aldo Geuna (SPRU, University of Sussex); Lionel J. J. Nesta (Observatoire Francais des Conjonctures Economiques (OFCE))
    Abstract: This paper focuses on university inventors mobility in the EU countries. It is the first quantitative assessment of this phenomenon and is the basis for a set of econometric models that try to explain how different factors affect the mobility of academics and their choices: to stay, to move to the private sector, to move to a different public research organisation (including another university). Mobility away from academia is a significant phenomenon, at least for the sub-sample of university researchers that hold patents from the European Patent Office. Among other results, the econometric models provide some evidence that the more valuable the patent the higher the probability of a move to a company. We found that the younger researchers (with less experience and less seniority) are more likely to move, and tend to move soon after the application or the granting of a patent . Also, the more cumulative (or incremental) the knowledge, the higher the probability of moving to a company. Finally, in all models developed scientific and technological output and scientific quality seem not to have any impact (neither positive nor negative) on the mobility of academic inventors. These results are interpreted in the framework that combines aspects of career mobility and technology transfer.
    Keywords: university patenting, labour mobility, technology transfer, tacit knowledge, European universities
    JEL: O3 I28 J6
    Date: 2006–02–27
  12. By: John Hatgioannides (Cass Business School London); Spiros Mesomeris
    Date: 2005–09–03
  13. By: Zsófia Árvai
    Keywords: Capital flows , European Union , Capital account liberalization ,
    Date: 2005–11–30
  14. By: Clemens J M Kool (University of Utrecht); Tom Van Veen (University of Maastricht); Bertrand Chandelon (University of Maastricht); Katharina Raabe (University of Maastricht)
    Date: 2005–09–03
  15. By: Sònia Muñoz
    Keywords: Income distribution , Italy , United Kingdom , Financial assets , Asset ratio , Capital markets , Economic models ,
    Date: 2006–02–06
  16. By: Rob Euwals (CPB, The Hague, IZA, CEPR); Daniel J. van Vuuren (CPB, and Vrije Universiteit Amsterdam); Ronald P. Wolthoff (Vrije Universiteit Amsterdam)
    Abstract: In the early 1990s, the Dutch social partners agreed upon transforming the generous and actuarially unfair PAYG early retirement schemes into less generous and actuarially fair capital funded schemes. The starting dates of the transitional arrangements varied by industry sector. In this study, we exploit the variation in starting dates to estimate the causal impact of the policy reform on early retirement behaviour. We use a large administrative dataset, the Dutch Income Panel 1989-2000, to estimate hazard rate models for early retirement. We conclude that the policy reform induced workers to postpone early retirement. In particular, both the price effect (reducing implicit taxes) and the wealth effect (reducing early retirement wealth) are shown to have a positive impact on the early retirement age. Yet, we show that model specifications including the most commonly used financial incentive measures are open to further improvements, given that these are outperformed by a simple specification with dummy variables.
    Keywords: early retirement; intertemporal choice; duration analysis
    JEL: C41 D91 J26
    Date: 2006–02–21
  17. By: Stéphane Lhuillery (Chaire en Economie et Management de l'Innovation, Ecole Polytechnique Fédérale de Lausanne)
    Abstract: Surveyed empirical studies on the influence of corporate governance on innovation tend to focus on specific dimensions of shareholders or boards. Their findings are mixed and inconclusive. We thus present a very recent number of papers that depart from board or shareholders’ characteristics, to focus on governance practices. Our empirical contribution uses a set of ratings given by experts and focuses on corporate governance practices with a sample of 6623 firms belonging to 110 large French groups. The relation between governance practices and R&D intensity, implementing different indexes and methods in order to improve the robustness of our results, is investigated in cross-section. We find that firms with governance practices that are shaped in order to defend shareholders’ rights are more R&D intensive. The highest the shareholder is taken into consideration by managers, the highest the R&D intensity will be. A second result suggests more surprisingly that the effect is non linear: whether the firms take care of their shareholders seriously or moderately has no differentiated impact on R&D expenditure. However, firms with fewer democratic practices are more likely to be less R&D intensive. This paper also investigates so called deficiencies in shareholder protection in Continental European systems compared to Anglo-Saxon systems. A significant difference in R&D intensity is found between French group listed only in France and French groups listed in New-York or London. The last result suggests that the impact of national systems of corporate governance on R&D and innovation may be strong; reinforcing the impact on R&D of the different applied governance practices. Further investigations show, however, that it is very difficult to identify what the best governance practices are, regarding the R&D expenditures. Provisions implemented at the board level are however found positively related to R&D intensity. Finally, our results also suggest that sample selection matters in this kind of empirical literature.
    Keywords: Corporate governance, R&D, innovation, provisions
    JEL: O31 O32 G31 G32
    Date: 2006–01
  18. By: Alexandra Bibbee; Flavio Padrini
    Abstract: In recent years, a series of wide-ranging reforms designed to make greater use of market mechanisms has succeeded in eliminating shortages, raising efficiency and improving citizen satisfaction. Nevertheless, spending accelerated after the reforms, and per capita spending on health is now one of the highest in the OECD. Centralisation of hospital ownership may have increased political influence, encouraging spending that cannot be justified on cost-benefit grounds. Co-payments by patients are modest, and the background of swelling oil wealth may have sapped willingness to control costs. Diagnosis related group (DRG) procedures are arguably too well-remunerated in some areas, leading to supply-driven interventions, while their absence in others (e.g. psychiatry) may have resulted in sub-optimal supply. Generalist doctors have a gatekeeper role, but are said to over-refer patients to hospitals. Although cost controlling mechanisms exist in Norway, they are too often sidestepped by pressure by citizens on politicians to approve new drugs and treatments. Thus, future health reforms in Norway should concentrate on value for money. This paper relates to the 2005 OECD Economic Survey of Norway ( <P>Trouver l'équilibre entre qualité des soins et maîtrise des coûts Ces dernières années, une série de réformes de grande ampleur visant à davantage utiliser les mécanismes de marché ont permis d'éliminer les files d'attentes, d'accroître l'efficacité du système de santé et d'améliorer la satisfaction des citoyens. Néanmoins, les dépenses ont accéléré, conduisant la Norvège à un des niveaux les plus élevés des pays de l'OCDE en terme de dépenses de santé par habitant. Le transfert de la propriété des hôpitaux aux administrations centrales a peut-être permis de laisser la place aux pressions politiques et encouragé les dépenses qui ne peuvent se justifier du strict point de vue de l'efficacité économique. La participation financière des patients est peu élevée et l'accroissement de la richesse pétrolière a sans nul doute nui à la volonté de maîtriser les coûts. Le système des groupes homogènes de malades aboutit probablement à des rémunérations excessives dans certains domaines, entraînant des interventions induites par l'offre, alors que l'absence de groupes de ce type dans d'autres domaines (comme la psychiatrie) a donné lieu à une offre insuffisante. Les généralistes jouent un rôle de filtrage, mais auraient tendance à trop orienter les malades vers les hôpitaux. Bien que des mécanismes de contrôle des coûts existent en Norvège, ceux-ci sont trop souvent court-circuités, les citoyens exerçant des pressions sur les élus pour approuver de nouveaux médicaments et traitements. Ainsi, les futures réformes du système de santé en Norvège devraient davantage se concentrer sur les aspects efficacité - coûts. Ce document de travail se rapporte à l'Etude économique de la Norvège 2005 (
    Keywords: Norway, Norvège, long-term care, health care reforms, réforme des systèmes de santé, activity based financing, financement par activité, primary care, specialised care, soins spécialisés, hospital, secteur hospitalier, pharmaceuticals, secteur pharmaceutique, health care human resources, soins de ville
    JEL: I10 I11 I18
    Date: 2006–02–17
  19. By: Robert Paul Berben; Kerstin Bernoth; Mauro Mastrogiacomo
    Abstract: We estimate the excess impact of financial asset capital losses relative to gains on household active savings and durable goods consumption in the Netherlands. The sample period covers both the stock market boom during the 90’s, and the bear period afterwards. The results suggest that households react more to capital losses than to capital gains. Failing to take into account this asymmetry may seriously bias the estimates of the marginal propensity to consume out of wealth.
    Keywords: Household savings; wealth effect; capital gains
    JEL: D12 E21
    Date: 2006–02
  20. By: Sabrina Di Addario (Bank of Italy, Economic Research Department); Eleonora Patacchini (University of Rome La Sapienza)
    Abstract: We analyze empirically the impact of urban agglomeration on Italian wages. Using micro-data from the Bank of Italy's Survey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employees distributed in 242 randomly drawn local labor markets (30 percent of the total), we test whether the structure of wages varies with urban scale. We find that every additional 100 employees per square kilometer (100,000 inhabitants) in the local labor market raises earnings by 0.4-0.6 percent (0.1 percent) and that employees working in large cities earn, on average, 2-3 percent higher wages than those in the rest of the economy. The application of spatial data analysis techniques enables us to state that this effect is present only in the large cities surrounded by low-populated areas. We also find that urbanization does not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providing a premium to managers, worker supervisors, and office workers.
    Keywords: Wage Differentials, Urbanization, Agglomeration Externalities, Population Clustering, Spatial Autocorrelation
    JEL: R12 J31
    Date: 2006–01
  21. By: Lindbeck, Assar (Institute for International Economic Studies, Stockholm University); Palme, Mårten (Dept. of Economics, Stockholm University); Persson, Mats (Institute for International Economic Studies, Stockholm University)
    Abstract: We analyze the consequences for sickness absence of a selective softening of job security legislation for small firms in Sweden in 2001. According to our differences-in-difference estimates, aggregate absence in these firms fell by 0.2-0.3 days per year. This aggregate net figure hides important effects on different groups of employees. Workers remaining in the reform firms after the reform reduced their absence by about one day. People with a high absence record tended to leave reform firms, but these firms also became less reluctant to hire people with a record of high absence.
    Keywords: Seniority rules; sick pay insurance; firing costs; moral hazard
    JEL: H53 I38 J22 J50 M51
    Date: 2006–02–24
  22. By: Hammarstedt , Mats (Department of Economics, Växjö University); Palme, Mårten (Dept. of Economics, Stockholm University)
    Abstract: We compare the intergenerational earnings mobility of immigrants with natives in Sweden. We find an overall convergence in average earnings between immigrants and natives. This convergence hides a divergence in average earnings between groups of immigrants with different ethnic origins. We find that, on average, immigrants have a lower intergenerational earnings mobility, also (on average) within groups with similar ethnic backgrounds. Immigrants with a relatively low intergenerational earnings mobility increased their average earnings more in the second generation, thereby supporting the idea that low intergenerational earnings mobility can be interpreted as a high degree of intergenerational transmission of human capital.
    Keywords: intergenerational income mobility; intergenerational earnings correlation; Becker-Tomes model; ethnic capital
    JEL: J15 J24 J61 J62
    Date: 2006–02–24

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