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on European Economics |
| By: | Marta Gómez-Puig (Universitat de Barcelona) |
| Abstract: | With European Monetary Union (EMU), there was an increase in the adjusted spreads (corrected from the foreign exchange risk) of euro participating countries' sovereign securities over Germany and a decrease in those of non-euro countries. The objective of this paper is to study the reasons for this result, and in particular, whether the change in the price assigned by markets was due to domestic factors such as credit risk and/or market liquidity, or to international risk factors. The empirical evidence suggests that market size scale economies have increased since EMU for all European markets, so the effect of the various risk factors, even though it differs between euro and non-euro countries, is always dependent on the size of the market. |
| Keywords: | Monetary integration, sovereign securities markets, international and domestic credit risk, and market liquidity. |
| JEL: | E44 F36 G15 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:bar:bedcje:2006147&r=eec |
| By: | Fourçans, André (ESSEC Business School); Vranceanu, Radu (ESSEC Business School) |
| Abstract: | This paper analyses the European Central Bank (ECB) monetary policy over the period 1999-2005, both from a qualitative and a quantitative perspective, and compares it with the Federal Reserve Bank. The qualitative approach builds on information conveyed by various speeches of the central bank officers, mainly the President of the ECB, Jean-Claude Trichet. The quantitative analysis provides several estimates of what could have been the ECB and Fed interest rate rules. It also develops a VAR model of both the Euro zone and the US economy so as to analyze dynamic effects of an interest rate shock. Both the qualitative and quantitative analyses point to the difficult task of the ECB, which must build credibility while managing monetary policy under major uncertainty about the structure of the new Euro area. They also suggest that, apart from the ECB’s credibility building, differences between the observed behaviour of the ECB and the Fed over the time period under investigation should be accounted for by differences in the economic outlook of the two areas, rather than in the goals of the central bankers. |
| Keywords: | ECB and Fed; Euro area; Monetary policy; Taylor rule; VAR |
| JEL: | E52 E58 F01 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:essewp:dr-06004&r=eec |
| By: | Gavin Cameron; Nicholas Fawcett |
| Abstract: | Turning Europe into a leading `global knowledge-based` economy has become something of an obsession for policy-makers in the EU. From the integrated guidelines of the Lisbon Agenda to the July 2005 announcement of a new scientific European Research Council, considerable effort has been directed towards selling a vision of Europe as a high-skilled, high-technology economy. However, this focus on the `New` economy mistakes the EU`s strengths, weaknesses and their causes. In reality, an improvement in its growth and employment prospects may lie with the decidedly unglamorous economics of labour market reforms and with the parts of the `Old` economy, which still comprises the main engine of growth. Innovation and the knowledge base are important, but these should not dominate the thoughts of policy-makers at the expense of other, equally important, factors. Systematic reform of the budet, progress on trade reform, along with a better investment climate, offer the opportunity to reallocate resources on the basis of the EU`s great strength: its skilled and competent people. |
| Keywords: | Productivity, Growth, Labour Markets, Europe, Reform, Lisbon Agenda |
| JEL: | J6 O47 O52 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:249&r=eec |
| By: | George Gelauff; Herman Stolwijk; Paul Veenendaal |
| Abstract: | The budget of the European Union raises much commotion. Many member states anxiously guard their net payment positions: don't they pay too much for the EU compared to what they receive from the EU? Yet, from an economic perspective the subsidiarity principle is much more important: should the funds be allocated by the Union or by the individual member states? From that angle, a number of fundamental reforms of European agricultural policy and structural actions (support to lagging regions) suggest themselves. These reform options may roughly halve the EU budget. In addition they happen to bring the net payment positions of member states closer together. |
| Keywords: | EU-budget; economic integration; subsidiarity; common agricultural policy; structural actions; tariff incidence |
| JEL: | F4 H7 C67 Q18 R58 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:docmnt:101&r=eec |
| By: | Claudia Olivetti (Department of Economics, Boston University); Barbara Petrongolo (London School of Economics CEP, CEPR and IZA) |
| Abstract: | There is substantial international variation in gender pay gaps, from 25-30% in the US and the UK, to 10-20% in a number of central and northern EU countries, down to an average of 10% in southern EU. We argue that non-random selection of women into work across countries may explain part of such variation. This ides is supported by the observed variation in employment gaps, from 10% in the US, UK and Scandinavian countries, to 15-25% in northern and central EU, up to 30-40% in southern EU and Ireland. If women who are employed tend to have relatively high-wage characteristics, low female employment rates may become consistent with low gender wage gaps simply because low-wage women would not feature in the observed wage distribution. We explore this idea across the US and EU countries estimating gender gaps in potential wages. In order to do this, we recover information on wages for those not in work in a given year by simply making assumptions on the position of the imputed wage observations with respect to the median, not on the actual level. Imputation is based on wage observations from nearest available waves in the sample and/or observable characteristics of the nonemployed. We estimate median wage gaps on the resulting imputed wage distributions. Our estimates for 1999 deliver higher median wage gaps on imputed rather than actual wage distributions for most countries in the sample, meaning that, as one would have expected, women tend on average to be more positively selected into work than men. However, this di¤erence is tiny or virtually zero in the US and northern and central EU countries (except Ireland), and becomes sizeable in Ireland, France and southern EU, all countries in which gender employment gaps are high. In particular, in Spain, Portugal and Greece the median wage gap on the imputed wage distribution reaches 20 log points, a closely comparable level to that of the UK and other central and northern EU countries. |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:bos:wpaper:wp2005-008&r=eec |
| By: | Eggert, Wolfgang; Haufler, Andreas |
| Abstract: | This paper reviews the recent theoretical literature that analyses the European Union's policy to eliminate preferential corporate tax regimes and the proposal to introduce a consolidated EU tax base with formula apportionment for the taxation of multinational firms. Since neither proposal includes a harmonisation of corporate tax rates, a core issue is how tax competition between member states will be affected by these partial coordination measures. The conclusions from our review are supportive of the EU's ban on preferential tax regimes, but the economic incentive effects of a switch to formula apportionment are found to be ambiguous. |
| JEL: | H87 F23 H25 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:902&r=eec |
| By: | Henk Kox |
| Abstract: | CPB's contribution to the EU's 2005 Competitiveness Report includes Worldscan simulations for several aspects of the EU’s Lisbon Agenda. One of the simulations concerns the macroeconomic consequences of lowering the administrative burdens for companies throughout the EU. This paper provides data that describe the baseline situation of administrative burdens for companies in the EU member states.<BR> This research note defines the concept of administrative burden for companies, using the concept of a standard information event caused by mandatory information requirements. A systematic comparison is made for most of the present EU countries. Different procedures for quantifying and aggregating the costs of the administrative burden are presented. |
| JEL: | F15 F23 L5 O52 G38 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:memodm:136&r=eec |
| By: | Jochen Kluve (RWI Essen and IZA Bonn) |
| Abstract: | Measures of Active Labor Market Policy are widely used in European countries, but despite many econometric evaluation studies no conclusive cross-country evidence exists regarding "what program works for what target group under what (economic and institutional) circumstances?". This paper results from an extensive research project for the European Commission aimed at answering that question using a meta-analytical framework. The empirical results are surprisingly clear-cut: Rather than contextual factors such as labor market institutions or the business cycle, it is almost exclusively the program type that matters for program effectiveness. While direct employment programs in the public sector appear detrimental, wage subsidies and "Services and Sanctions" can be effective in increasing participants' employment probability. |
| Keywords: | Active Labor Market Policy, program evaluation, meta analysis |
| JEL: | J00 J68 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2018&r=eec |
| By: | Wolfgang Franz (ZEW and University of Mannheim); Friedhelm Pfeiffer (ZEW, University of Mannheim and IZA Bonn) |
| Abstract: | This study investigates institutional and economic reasons for downward wage rigidity regarding three occupational skill groups. Based on a survey of 801 firms in Germany and an econometric analysis, we find strong support for explanations based on the effects of labour union contracts and efficiency wages that differ between skill groups. Survey respondents indicate that labour union contracts and implicit contracts are important reasons for wage rigidity for the (less) skilled. Specific human capital and negative signals for new hires are causes of the stickiness of wages for the highly skilled. Compared with US evidence, German firms seem to attach more importance to labour union contracts and specific human capital. |
| Keywords: | wage rigidity, labour union contracts, efficiency wage theory, implicit contract theory, regulation of labour |
| JEL: | J41 J51 K31 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2017&r=eec |
| By: | Libertad González (Universitat Pompeu Fabra and IZA Bonn); Tarja K. Viitanen (University of Sheffield) |
| Abstract: | This paper analyzes a panel of 18 European countries spanning from 1950 to 2003 to examine the extent to which the legal reforms leading to "easier divorce" that took place during the second half of the 20th century have contributed to the increase in divorce rates across Europe. We use a quasi-experimental set-up and exploit the different timing of the reforms in divorce laws across countries. We account for unobserved country-specific factors by introducing country fixed effects, and we include country-specific trends to control for timevarying factors at the country level that may be correlated with divorce rates and divorce laws, such as changing social norms or slow moving demographic trends. We find that the different reforms that "made divorce easier" were followed by significant increases in divorce rates. The effect of no-fault legislation was strong and permanent, while unilateral reforms only had a temporary effect on divorce rates. Overall, we estimate that the legal reforms account for about 20 percent of the increase in divorce rates in Europe between 1960 and 2002. |
| Keywords: | divorce rates, legislation |
| JEL: | J12 J18 K3 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2023&r=eec |
| By: | Dirk Schoenmaker; Charles Goodhart |
| Abstract: | No abstract availableDownload Paper |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:fmg:fmgsps:sp164&r=eec |
| By: | Carolina Fugazza (Center for Research on Pensions and Welfare Policies); Massimo Guidolin (Federal Reserve Bank of St. Louis); Giovanna Nicodano (Department of Economics, University of Turin and Center for Research on Pensions and Welfare Policies, Turin) |
| Abstract: | We calculate optimal portfolio choices for a long-horizon, risk-averse European investor who diversifies among stocks, bonds, real estate, and cash, when excess asset returns are predictable. Simulations are performed for scenarios involving different risk aversion levels, horizons, and statistical models capturing predictability in risk premia. Importantly, under one of the scenarios, the investor takes into account the parameter uncertainty implied by the use of estimated coefficients to characterize predictability. We find that real estate ought to play a significant role in optimal portfolio choices, with weights between 10 and 30% in most cases. Under plausible assumptions, the welfare costs of either ignoring predictability or restricting portfolio choices to financial assets only are found to be in the order of at least 100 basis points per year. These results are robust to changes in the benchmarks and in the statistical framework. |
| Keywords: | Optimal asset allocation, real estate, predictability, parameter uncertainty |
| JEL: | G11 L85 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:40&r=eec |
| By: | Christina Elschner; Robert Schwager |
| Abstract: | A model is presented for simulating the tax burden on highly skilled manpower. The effective average tax rate, defined as the relative wedge between employment costs and disposable income, is computed. Income and payroll taxes and social security contributions not yielding an equivalent benefit are taken into account. The compensation package consists of cash payments and old-age provision. To integrate retirement benefits and their tax treatment, an intertemporal approach is used. The results indicate a wide dispersion of tax rates across Europe and the US. Slovakia, Switzerland and the US tax highly skilled manpower low. Scandinavian countries, Belgium and Slovenia turn out to be high tax countries. |
| Keywords: | income tax, highly skilled labour, effective tax burden, pensions |
| JEL: | H24 H21 H55 |
| Date: | 2006–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:got:cegedp:50&r=eec |
| By: | David G. Blanchflower (Dartmouth College, NBER and IZA Bonn) |
| Abstract: | This paper examines changes in unionization that have occurred over the last decade or so using individual level micro data on twenty seven of the thirty OECD countries, with particular emphasis on Canada, the United Kingdom and the United States. Micro-data is also used to model union membership in a further eleven non-OECD countries. Union density is found to be negatively correlated with level of education in the private sector and positively correlated in the public sector. The probability of being a union member is found to follow an inverted U-shaped pattern in age, maximizing in Canada, the USA and the UK in the mid to late 40s. This inverted U-shaped pattern is repeated in a further thirty countries (Australia; Austria; Bangladesh; Belgium; Bulgaria; Chile; Czech Republic; Denmark; Germany; Estonia; Finland; France; Greece; Hungary; Ireland; Israel; Japan; Luxembourg; Mexico; Netherlands; New Zealand; Norway; Poland; Portugal; Russia; Slovak Republic; Slovenia; Spain; Sweden and Switzerland). I consider the question of why this inverted U-shape in age exists across countries with diverse industrial relations systems including early retirement and cohort effects. |
| Keywords: | unions membership, OECD, non-OECD |
| JEL: | J3 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2016&r=eec |
| By: | Christophe Van Nieuwenhuyze (National Bank of Belgium, Research Department) |
| Abstract: | This paper aims to extract the common variation in a data set of 509 conjunctural series as an indication of the Belgian business cycle. The data set contains information on business and consumer surveys of Belgium and its neighbouring countries, macroeconomic variables and some worldwide watched indicators such as the ISM and the OECD confidence indicators. The statistical framework used is the One-sided Generalised Dynamic Factor Model developed by Forni, Hallin, Lippi and Reichlin (2005). The model splits the series in a common component, driven by the business cycle, and an idiosyncratic component. Well-known indicators such as the EC economic sentiment indicator for Belgium and the NBB overall synthetic curve contain a high amount of business cycle information. Furthermore, the richness of the model allows to determine the cyclical properties of the series and to forecast GDP growth all within the same unified setting. We classify the common component of the variables into leading, lagging and coincident with respect to the common component of quarter-on-quarter GDP growth. 22% of the variables are found to be leading. Amongst the most leading variables we find asset prices and international confidence indicators such as the ISM and some OECD indicators. In general, national business confidence surveys are found to coincide with Belgian GDP, while they lead euro area GDP and its confidence indicators. Consumer confidence seems to lag. Although the model captures the dynamic common variation contained in the data set, forecasts based on that information are insufficient to deliver a good proxy for GDP growth as a result of a nonnegligible idiosyncratic part in GDP's variance. Lastly, we explore the dependence of the model's results on the data set and show through a data reduction process that the idiosyncratic part of GDP's quarter-on-quarter growth can be dramatically reduced. However, this does not improve the forecasts. |
| Keywords: | Dynamic factor model, business cycle, leading indicators, forecasting, data reduction. |
| JEL: | C33 C43 E32 E37 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:200603-2&r=eec |
| By: | Nabanita Datta Gupta (Danish National Institute of Social Research and IZA Bonn); Nina Smith (Aarhus School of Business and IZA Bonn); Mette Verner (Aarhus School of Business) |
| Abstract: | The Nordic countries have remarkably high participation rates of mothers and a moderate decrease of fertility rates compared to other western countries. This has been attributed to the fact that the welfare state model and, especially, the family friendly policies chosen in the Nordic countries are unique. The availability of generous parental leave schemes including high compensation rates makes it possible for mothers to take a considerable time out of work in connection with childbirths and to return to their previous jobs afterwards, thanks to the high provision of public daycare. In this paper we evaluate family-friendly policies in the ‘Nordic model’ with respect to the two modes of child care i.e. either parental care facilitated by maternal and parental leave schemes or non-parental publicly provided care. Our questions for discussion are: Is there a ‘Nordic model’, and is it worth the cost if effects on child development and welfare are included? Is there a trade-off between family-friendly policies and family welfare, and are there serious negative boomerang effects of familyfriendly policies on women’s position in the labor market? Is the ‘Nordic model’ a model to aspire to? |
| Keywords: | family friendly policies, labour supply, gender wage gap, fertility, public expenditures |
| JEL: | J1 J2 D1 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2014&r=eec |
| By: | CPB |
| Abstract: | This document describes Athena, CPB's multi-sector model of the Dutch economy and illustrates the mechanisms of the model by presenting a number of applications. The model is used for policy analyses that require a sectoral dimension and for the construction of long-run scenarios. Athena is a dynamic, annual model with a strong focus on the long-run. <P> Roughly, the model can be described as follows. The production structure has been the focus of the recent research efforts resulting in the current version of the model. The theoretical foundation of the model assumes optimising behaviour of firms in 18 industries. On the labour market, the negotiation process for wages follows a right-to-manage approach. On the demand side, most consumers behave as in life-cycle theory, but some consumers are liquidity constrained. In the last block, the public sector (government, social security and pensions), some aspects are endogenised as the model is primarily aimed at long run structural analyses. <P> The applications of the model include CPB's latest long term scenarios for the Dutch economy, the analysis of a set of policy measures concerning lower corporate tax rates and the effects of five standard simulations. |
| Keywords: | multi-sector model; production structure; scenarios; policy simulations |
| JEL: | C51 C53 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:docmnt:105&r=eec |
| By: | Denis Fougère (CNRS, CREST-INSEE, CEPR and IZA Bonn); Francis Kramarz (CREST-INSEE, CEPR and IZA Bonn); Julien Pouget (CREST-INSEE and IZA Bonn) |
| Abstract: | In this paper we examine the influence of unemployment on property crimes and on violent crimes in France for the period 1990 to 2000. This analysis is the first extensive study for this country. We construct a regional-level data set (for the 95 départements of metropolitan France) with measures of crimes as reported to the Ministry of Interior. To assess social conditions prevailing in the département in that year, we construct measures of the unemployment rate as well as other social, economic and demographic variables using multiple waves of the French Labor Survey. We estimate a classic Becker type model in which unemployment is a measure of how potential criminals fare in the legitimate job market. First, our estimates show that in the cross-section dimension, crime and unemployment are positively associated. Second, we find that increases in youth unemployment induce increases in crime. Using the predicted industrial structure to instrument unemployment, we show that this effect is causal for burglaries, thefts, and drug offences. To combat crime, it appears thus that all strategies designed to combat youth unemployment should be examined. |
| Keywords: | crime, youth unemployment |
| JEL: | J19 K42 J64 J65 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2009&r=eec |