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on European Economics |
| By: | Paolo Angelini (Bank of Italy, Economic Research Department); Francesco Lippi (Bank of Italy, Economic Research Department) |
| Abstract: | The introduction of the euro notes and coins in the first two months of 2002 was followed by a lively debate on the alleged inflationary effects of the new currency. In Italy, as in the rest of the euro area, survey-based measures signaled a much sharper rise in inflation than measured by the official price indices, whose quality was called into question. In this paper we gather indirect evidence on the behavior of prices from the analysis of cash withdrawals from ATM and their determinants. Since these data do not rely on official inflation statistics, they provide an independent check for the latter. We present a model in which the relationship between aggregate ATM withdrawals and aggregate expenditure is not homogenous of degree one in the price level, a prediction which is strongly supported by the data. This feature allows us to test the hypothesis that, after the introduction of the euro notes and coins, consumer prices underwent an increase not recorded by official inflation statistics. We do not find evidence in support of this hypothesis. |
| Keywords: | banknotes, currency, euro, inflation. |
| JEL: | E41 E31 E51 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_581_06&r=eec |
| By: | Thierry Warin; Kenneth Donahue |
| Abstract: | The existing literature on political budget cycles looks at the temptation for incumbent governments to run a greater deficit before an election by considering the characteristics of the incumbent. We propose here to look at the signals the incumbent receives from the voters. For this purpose, we consider the votes from the previous national elections and see whether they may influence the incumbent government to run a sound fiscal policy or an expansionary fiscal policy. However, since 1993 Europe has been equipped with two fiscal rules: a deficit and a debt ceiling. In this context, can we find evidence of a “political budget cycle” before 1993, and did the fiscal rules prevent the existence of a “political budget cycle” afterwards? To address these questions, we use a cross-sectional time series analysis of European countries from 1979 to 2005. |
| Keywords: | Stability and Growth Pact, Political Business Cycle, Political budget Cycle, Partisan Theory |
| JEL: | E6 F4 P43 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:mdl:mdlpap:0606&r=eec |
| By: | Justina A.V. Fischer; Alfonso Sousa-Poza |
| Abstract: | Low fertility rates combined with increases in early retirement pose a serious challenge to the sustainability of social security systems in most industrialized countries. Therefore, it is important for policy makers to understand the determinants of early retirement and especially the role that institutional factors play in the retirement decision. However, analyzing such factors ideally requires international microdata, which have in the past been largely unavailable. To fill this void, this paper investigates early retirement determinants across several European countries using the rich 2005 SHARE (Survey of Health, Aging and Retirement in Europe) microdataset, which produces more precise estimates of the effects of institutional and economic factors like pension systems, unemployment, and employment protection legislation. The analysis shows that pension systems offering generous early retirement options encourage early departure from the labor market. In addition, pension wealth accrual rate exerts a greater influence on early retirement decisions than does the average replacement rate, while stricter employment protection legislation has no significant impact. |
| JEL: | J26 J21 H55 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2006:2006-08&r=eec |
| By: | Alessandro STERLACCHINI (Universita' Politecnica delle Marche, Dipartimento di Management ed Organizzazione Aziendale) |
| Abstract: | This paper examines how the recent economic performance - jointly measured by the level and growth rate of per capita GDP - of 151 developed European regions has been affected by their innovation and knowledge base. A regression analysis is carried out by using as a main explanatory variable a composite indicator extracted from a comprehensive set of innovation and education variables. The above relationship is controlled for structural characteristics and allowed to vary across EU countries. The results point to a highly significant economic impact of innovation and knowledge which, however, is not homogeneous among countries and regions. |
| Keywords: | innovation and knowledge, regional economic performance |
| JEL: | O18 O33 R11 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wpaper:260&r=eec |
| By: | Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Alcoholic beverages are taxed at very different rates across the European Union, which implies extensive cross-border shopping. Therefore, there is an ongoing debate about harmonization of alcohol taxes among countries. Sweden, with a tradition of high alcohol taxes due to public health arguments, has the highest alcohol taxes in the EU. But, because of this, the occurrence and possible problems caused by cross-border shopping are also extensive. Using a questionnaire survey I analyze the attitudes of Swedes’ to alcohol taxation and find that these two sides of the coin are important determinants. Many respondents want to decrease the alcohol tax, while some even want to increase it. Those most reluctant to a tax cut are those who regard increased alcohol consumption as a worrying problem and those living in areas where many adults are treated for alcohol related diseases. However, those who support the EU membership are more likely to support a tax cut to harmonize the Swedish tax with those in other EU countries. Those who live in regions where privately imported alcohol is substantial are also more positive toward a tax cut. <p> |
| Keywords: | taxation; cross-border shopping; tax harmonization; attitudes |
| JEL: | F15 H20 |
| Date: | 2006–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0207&r=eec |
| By: | Stefano Magrini (Department of Economics, University Of Venice Cà Foscari); Paul Cheshire (Department of Geography and Environment, London School of Economics) |
| Abstract: | This paper investigates growth differences in the urban system of the EU12 over the last decades of the 20th Century. Models in which growth of real GDP p.c. and rates of population growth are the dependent variables are compared. This suggests that it makes sense to model GDP growth in a European context. The analysis supports the conclusion that systems of urban governance are significantly related to economic growth, as is the distribution of highly skilled human capital and R&D activity. In addition, evidence is found supporting the conclusion that integration shocks in the EU favour core areas but when all else is controlled for peripheral regions experienced a systematic positive growth differential. Careful testing for spatial dependence reveals that national borders are significant barriers to adjustment but we can resolve such problems by including a set of variables designed to reflect spatial economic adjustment mechanisms where cities are densely packed so their economies interact. Models of population growth show some similar results but interesting and revealing differences. Strong evidence is found that there are substantial national border effects impeding the emergence of a full spatial equilibrium across the EU’s urban system. Better climate is the single most significant variable but only when expressed relative to the national (not EU) mean. As with economic growth, there are significant national border effects in patterns of spatial dependence. Concentrations of human capital and R&D, however are if anything negatively associated with attracting population – a finding which parallels the finding that a better climate relative to the national mean is associated with slower rather than faster growth of real GDP per capita. |
| Keywords: | growth; cities; local public goods; human capital; convergence; territorial competition |
| JEL: | H41 H73 O18 R11 R50 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:24_06&r=eec |
| By: | Andreas Ammermueller; Jörn-Steffen Pishcke |
| Abstract: | We estimate peer effects for fourth graders in six European countries. The identification relies on variation across classes within schools. We argue that classes within primary schools are formed roughly randomly with respect to family background. Similar to previous studies, we find sizeable estimates of peer effects in standard OLS specifications. The size of the estimate is much reduced within schools. This could be explained either by selection into schools or by measurement error in the peer background variable. When we correct for measurement error we find within school estimates close to the original OLS estimates. Our results suggest that the peer effect is modestly large, measurement error is important in our survey data, and selection plays little role in biasing peer effects estimates. We find no significant evidence of non-linear peer effects. |
| JEL: | I21 J24 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12180&r=eec |
| By: | Lena Jacobi (RWI Essen); Jochen Kluve (RWI Essen and IZA Bonn) |
| Abstract: | Having faced high unemployment rates for more than a decade, the German government implemented a comprehensive set of labour market reforms during the period 2003-2005. This paper describes the economic and institutional context of the German labour market before and after these so-called Hartz reforms. Focussing on active policy measures, we delineate the rationale for reform and its main principles. As results of programme evaluation studies post-reform have become available just now, we give a first assessment of the effectiveness of key elements of German ALMP before and after the Hartz reforms. The evidence indicates that the re-organisation of public employment services was mainly successful, with the exception of the outsourcing of services. Re-designing training programmes seems to have improved their effectiveness, while job creation schemes continue to be detrimental for participants' employment prospects. Wage subsidies and startup subsidies show significantly positive effects. On balance, therefore, the reform seems to be moving the German labour market in the right direction. |
| Keywords: | Active Labour Market Policy, labour market reform, programme evaluation |
| JEL: | J0 J68 J88 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2100&r=eec |
| By: | cipollone piero (Bank of Italy , research department); Anita Guelfi (confindustria, research department) |
| Abstract: | Since the mid-1980s fixed-term contracts have been used in many European countries to reduce firing costs. As this strategy may have led to segmented labour markets, recent policy interventions have enhanced permanent jobs by cutting their labour costs. Efficient design of these policies requires knowledge of the costs associated with employment protection legislation. In this paper we evaluate these costs by measuring firms’ willingness to trade fixed-term for open-ended contracts in exchange for a cut in the labour cost of permanent jobs. Our results are based on a panel of Italian firms in the engineering sector whose labour costs were reduced by a tax credit granted to firms hiring workers on open-ended rather than fixed-term contracts. The trade-off is identified by comparing how the composition of recruitment by type of contract changed for firms that received the tax credit and those that did not. Potential distortions due to self-selection into the programme, firm-specific timevarying shocks or mechanical correlation induced by the selection rule into the programme, are accounted for by estimating the spurious effect of the tax credit in the years when it was not in force. Estimation is carried out in both a parametric and non-parametric setting that uses p-score to control for different probabilities of receiving the tax credit. We found that firms value the possibility of hiring one per cent new workers on a fixed-term contract as much as a cut in the labour cost of an open-ended worker in the range of 1.3-2.8 per cent. This result helps to explain recent employment growth in Italy, where the share of fixed-term contracts among new hires grew from 34 to 42 per cent between 1995 and 2003. Using our most conservative results, we evaluate that the labour cost reduction associated with this expansion amounted to anything between 10.4 and 22.4 per cent. Given the elasticity of employment to wages, the advent of flexibility in the Italian labour market can account for a large share, between 37 and 80 per cent, of employment growth in the private sector. |
| Keywords: | tax credit, open-end contracts, fixed-term contracts, firing costs |
| JEL: | D78 H25 J23 J38 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_583_06&r=eec |
| By: | Jakob Roland Munch (University of Copenhagen, CEBR and EPRU); Michael Rosholm (University of Aarhus and IZA Bonn); Michael Svarer (University of Aarhus) |
| Abstract: | We investigate the impact of home ownership on individual job mobility and wages in Denmark. We find that home ownership has a negative impact on job-to-job mobility both in terms of transition into new local jobs and new jobs outside the local labour market. In addition, there is a clear negative effect of home ownership on the unemployment risk and a positive impact on wages. These results are robust to different strategies for correcting for the possible endogeneity of the home owner variable. |
| Keywords: | home ownership, job mobility, duration model |
| JEL: | J6 R2 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2110&r=eec |
| By: | Marco CUCCULELLI (Universita' Politecnica delle Marche, Dipartimento di Management ed Organizzazione Aziendale); Giacinto MICUCCI (Banca d'Italia - Ancona) |
| Abstract: | Despite the pervasive presence of family business worldwide, especially among small and medium sized companies, nearly all past studies on family founder succession have focused on large, public companies. We evaluate the issue of the inherited firm control on performance in an economic setting with a large presence of small- and medium-sized private firms run as family businesses. Our paper contributes to the existing literature in three ways.;The first concerns the sample characteristics. By focusing on the transfer of business in private SMEs, our study helps to fill a gap in the existing literature that is largely concerned with public companies listed in official market. We set up a unique dataset by matching two different data sources: firstly, a cross-sectional survey dataset collected directly from more than 3,500 companies by means of a questionnaire and, secondly, a company account dataset drawn from Cerved. We merge survey data with balance sheet data in order to perform the econometric analysis. The article's second contribution is related to the effect on performance caused by the transfer of business within the family. Our major results show i) a founder effect in the Italian manufacturing industry and ii) a large drop in the post-succession performance in family-run businesses. Finally, we provide new evidence on the relationship between pre-succession firm (and industry) characteristics and past succession performance.;By using a performance-based control group matching method to control for the effect of a pure mean reverting process in firm performance, we show that the observed large drop in the post-succession company performance is attributable to good performing companies, especially when operating in highly competitive industries. |
| Keywords: | SMEs governance, entrepreneurship, inherited control, matching control group, mean revision |
| JEL: | G32 G34 M13 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wpaper:258&r=eec |
| By: | Diana Marina Del COlle, (Bank of Italy,Research Department, Turin Branch); Paolo Finaldi Russo (Bank of Italy, Economic Research Department, Rome); Andrea Generale (Bank of Italy, Economic Research Department, Rome) |
| Abstract: | The analysis of the determinants and the effects on firm performance of venture capital finance for a sample of Italian enterprises indicates that small, young and more innovative firms are more likely to be financed by a venture capitalist. Our results confirm that venture capital can help reduce financial constraints for firms that are more difficult for external investors to evaluate. We also show that larger firms resort to venture capitalists when their indebtedness with banks is high and we find evidence that venture capital financing is more frequent after periods of high growth and investment, a result that points to the advisory role of the venture capitalist. A novel result emerges; venture capital also finances firms with multiple banking relationships. In the presence of multiple lending, banks could have greater difficulty monitoring firms with asymmetric information; moreover, if firms default, banks are likely to have a weaker bargaining position. In these cases, the amount of bank credit is probably near its limit and firms need to resort to venture capital, a contract that reduces the amount of guarantees needed to access external finance. |
| Keywords: | Venture capital, Private equity |
| JEL: | G24 G32 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_584_06&r=eec |
| By: | Elisabeth Müller (Centre for European Economic Research (ZEW), Department of Industrial Economics and International Management, L7, 1, 68161 Mannheim, Germany. mueller@zew.de); Volker Zimmermann (KfW Bankengruppe, Palmengartenstraße 5-9, 60325 Frankfurt/Main, Germany. Volker.Zimmermann@kfw.de) |
| Abstract: | This paper analyzes the importance of equity finance for the R&D activity of small and medium-sized enterprises. We use information on almost 6000 German SMEs from a company survey. Using the intensity of banking competition at the district level as instrument to control for endogeneity, we find that a higher equity ratio is conducive to more R&D for young but not for old companies. Equity may be a constraining factor for young companies which have to rely on the original equity investment of their owners since they have not yet accumulated retained earnings and can relay less on outside financing. The positive influence is found for R&D intensity but not for the decision whether to perform R&D. Equity financing is therefore especially important for the most innovative, young companies. |
| Keywords: | R&D activity, equity finance, small and medium-sized enterprises |
| JEL: | G32 O32 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:111&r=eec |
| By: | Hakan Berument; M. Eray Yücel; Zübeyir Kilinç |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:bil:bilpap:0506&r=eec |
| By: | Ng, Francis; Kaminski, Bartlomiej |
| Abstract: | This is an empirical paper seeking to identify the mode of Turkey ' s integration into global markets in general, and pan-European markets in particular, as revealed in its trade performance. The analysis provides empirical support to the following observations. First, thanks to steady expansion of trade in goods and services since the mid-1980s, Turkey has become highly integrated into the world economy. Second, Turkey ' s export performance in 1996-2004 in EU markets bears strong similarities to the aggregate performance of new EU members from Central Europe (EU-8). Similarities include dynamics, similar factors responsible for the increased presence in EU markets, factor content, and the role of " producer-driven " network trade. Turkey, together with Hungary, the Czech Republic, the Slovak Republic, Slovenia, Estonia, and Poland, stands as one of the top performers in " producer-driven " network trade indicating participation in a new global division of labor based on production fragmentation. The available evidence suggests an economic success story in the making. Export expansion owes a lot to improved policy environment and domestic liberalization. It is rather telling that the recent expansion has coincided with the implementation of most of the provisions of the EU-Turkey Customs Union Agreement, the completion of the removal of tariffs on trade in industrial products among pan-European parties to the Pan European Cumulation of Origin Agreement, and improved macroeconomic stability after the 2001 crisis. |
| Keywords: | Trade Policy,Economic Theory & Research,Free Trade,Transport Economics Policy & Planning,Trade Law |
| Date: | 2006–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3908&r=eec |
| By: | Evzen Kocenda; Ali M. Kutan; M. Taner Yigit |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:bil:bilpap:0501&r=eec |