nep-eec New Economics Papers
on European Economics
Issue of 2006‒05‒20
nineteen papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. Financial integration, GDP correlation and the endogeneity of optimum currency areas By Stefano Schiavo
  2. Interaction of Fiscal Policies on the Euro Area: How Much Pressure on the ECB? By Luca Onorante
  3. An Assessment of Telecommunications Regulation Performance in the European Union By Antonio Afonso; Carla Scaglioni
  4. Social Europe and Experimentalist Governance: Towards a New Constitutional Compromise? By Zeitlin, Jonathan
  5. An explanation of the positive correlation between fertility and female employment across Western European countries By Tomas Kögel
  6. Why There is a Democratic Deficit in the EU: A Response to Majone and Moravcsik By Follesdal, Andreas; Hix, Simon
  7. European Urban Growth: now for some problems of spaceless and weightless econometrics By Stefano Magrini; Paul Cheshire
  8. Economic Integration and Similarity in Trade Structures By Lucia Tajoli; Lucia De Benedictis
  9. Female Labor Market Transitions in Europe By Lutz C. Kaiser
  10. Measuring and Explaining Management Practices Across Firms and Countries By Nick Bloom; John Van Reenen
  11. Religion, religiousness and fertility in the U.S. and in Europe By Tomas Frejka; Charles F. Westoff
  12. Cognitive Abilities and Portfolio Choice By Dimitrios Christelis; Tullio Jappelli; Mario Padula
  13. What Shapes Attitudes Toward Paying Taxes? Evidence from Multicultural European Countries By Benno Torgler; Friedrich Schneider
  14. Myths and Maths: Macroeconomic Effects of Fiscal Adjustments in Hungary By Ágnes Horváth; Zoltán M. Jakab; Gábor P. Kiss; Balázs Párkányi
  15. Home Ownership, Job Duration, and Wages By Jakob Roland Munch; Michael Rosholm; Michael Rosholm
  16. The patterns and determinants of price setting in the Belgian industry By David Cornille; Maarten Dossche
  17. Estimating the effects of personal income tax on labour supply in Italy By D. Tondani
  18. Exploring the effects of integrated benefit systems and active labour market policies: Evidence from Jobcentre Plus in the UK By Eleni Karagiannaki
  19. R&D lab location. Evidence from the French case By Corinne Autant-Bernard

  1. By: Stefano Schiavo (University of Trento)
    Abstract: The paper analyzes the relationship between trade, financial integration and business cycle synchronization in the euro area. The introduction of the euro has had a noticeable impact on European financial markets: we find evidence that capital markets integration exerts a positive effect on output correlation. This in turn has two major implications. First, it corroborates the hypothesis of the endogeneity of optimum currency areas, whereby after joining a monetary union countries fit better standard OCA criteria; second, it provides European policymakers with yet another reason to purse financial integration in the euro area (and in prospective members as well).
    Keywords: business cycle; EMU; endogeneity; integration; optimum currency areas;
    JEL: E32 E44 F36
    Date: 2005–09
  2. By: Luca Onorante
    Abstract: Since the Helsinki European Council of December 1999, a process of increased coordination of fiscal policies in the area of the Euro seems to be on its way. In this paper I examine this process from the point of view of the independence of the European Central Bank (ECB). The interaction of the governments and the ECB is addressed in a game theoretical framework. First, the conditions under which the national governments are able to put pressure on the ECB are made explicit. Then the main question is addressed: would a greater fiscal coordination reduce or increase the capacity of the monetary authority of targeting long run inflation? Formal and informal, discretional (positive) and rule-based (negative) coordination and their interactions are examined as possible solutions of the game. I conclude that the main point is not how much fiscal coordination is there, but the form it takes. It turns out that a mix of informal political coordination and binding rules is the one that best preserves the independence of the ECB. For negative coordination, it is shown that a simple change in the definition of "excessive deficit" can at the same time allow more stabilization of output after a shock and a better control of inflation by the ECB.
    Keywords: European Montary Union, European Central Bank, game theory, fiscal policy, monetary policy, policy coordination
    JEL: C7 E0 E3 E6 H5
    Date: 2006
  3. By: Antonio Afonso; Carla Scaglioni
    Abstract: We assess the performance of National Regulatory Authorities across 16 EU countries regarding economic regulation in telecommunications sector, by constructing a so-called Composite Regulatory Performance Indicator for regulatory aspects such as effectiveness of the national regulatory system, effectiveness of the dispute settlement body, general market access conditions and application of remedies in markets for narrowband voice, mobile, broadband and business services. This composite indicator is the output measure used in the DEA non-parametric approach. The computation of efficiency scores allows to rank the NRAs and to detect some room for improvement in terms of efficiency gains for each national authority.
    Keywords: technical efficiency; DEA; telecommunications; regulated industries; National Regulatory Authorities; European Union.
    JEL: C14 L51 L96 O52
  4. By: Zeitlin, Jonathan
    Abstract: This paper examines the normative, empirical, and constitutional debates surrounding the use of the Open Method of Coordination (OMC) in European social policy. The OMC is an experimentalist approach to European Union governance, based on benchmarking national progress towards European objectives and organized mutual learning. Its potential benefits include reconciling the pursuit of common European concerns with respect for legitimate national diversity, and encouraging cross-national learning through comparison of different approaches to similar problems across the EU's 25 Member States. The paper responds to three critical questions concerning the OMC’s legitimacy (its relation to subsidiarity, the ‘Community Method’, and democracy), before going on to assess the findings of recent empirical research on its effectiveness in terms of policy change, governance, and mutual learning. I argue that both the democratic legitimacy and the practical effectiveness of existing OMC processes could be improved by reflexively applying to its own procedures key elements of the method itself, such as benchmarking, peer review, monitoring, and iterative redesign. The paper concludes by reviewing the debate over the incorporation of the OMC into the new Constitution, and considering its implications for the future of experimentalist governance in the EU.
    Keywords: open coordination; social policy; governance; legitimacy; subsidiarity; democracy; participation; policy learning; European Convention; Constitution for Europe
    Date: 2005–05–30
  5. By: Tomas Kögel (Dept of Economics univ. of Loughborough)
    Abstract: Recent literature shows the puzzling result of a positive and significant cross-country correlation between the total fertility rate and the female labour force participation rate across Western European countries. The present paper shows that this cross-country correlation becomes negative and significant, once one corrects the total fertility rate for a distortion, caused by an increasing age of childbearing, and controls in cross-country regressions for purchased child care use and female long-term unemployment. This result survives an empirical analysis in which the female labour force participation rate is treated as an endogenous variable.
    Keywords: Total fertility rate; female labour force participation rate; purchased child care; female unemployment.
    JEL: J10 J11 J13
    Date: 2006–04
  6. By: Follesdal, Andreas; Hix, Simon
    Abstract: In a series of recent papers, Giandomenico Majone and Andrew Moravcsik have ‘raised the bar’ in the debate over the so-called ‘democratic deficit’ in the European Union. These two influential scholars both contend that much of the existing analysis is flawed and that the EU is as democratic as it could, and even should, be. We accept many of Moravcsik’s and Majone’s arguments. However, we disagree about one key element: that a democratic polity requires contestation for political leadership and argument over the direction of the policy agenda. This aspect, which is ultimately the difference between a democracy and an enlightened form of authoritarianism, is an essential element of even the ‘thinnest’ theories of democracy, yet is conspicuously weak in the EU.
    Keywords: democracy; European elections; legitimacy; non-majoritarian institutions; normative political theory; political parties; public opinion; Constitution for Europe; agenda-setting
    Date: 2005–03–14
  7. 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 for a data set relating to Functional Urban Regions comparing the results of ‘artisanal’ methods of model selection with those obtained using general to specific model selection with PcGets. The artisanal approach tests hypotheses relating to the role of human capital, EU integration and fragmentation of urban government. The paper also explores issues of spatial dependence and mechanisms of spatial interaction. Using PcGets as suggested by Hendry and Krolzig (2004) to optimise model selection we find that while PcGets provides a powerful tool for model selection when applied to cross sectional data, caution is necessary to ensure that variables relating to spatial adjustment processes are included and spatial dependence is avoided. More generally, not only do the results provide consistent estimates of parameters but they also support relevant theoretical insights. Finally careful testing for spatial dependence reveals that national borders are still significant barriers to adjustment within the EU.
    Keywords: Growth, Cities, Spatial Dependence, Local Public Goods, Human Capital; EU Integration
    JEL: H41 H73 O18 R11 R50
    Date: 2006
  8. By: Lucia Tajoli (Politecnico di Milano); Lucia De Benedictis (Università di Macerata)
    Abstract: In this paper we look at the similarity of trade structures in an integrating area. In particular, we analyse the export flows toward the EU market of four of the so-called “accession countries" of Central and Eastern Europe by comparing them to those of the pre-2004 members of the European Union (EU15). From a methodological point of view, we evaluate the appropriateness of different classes of similarity indices - correlation indices and distance metrics - opting for the use of the Bray-Curtis semi-metric to assess changes in the trade similarity. We examine its evolution over time - from 1989 to 2001 - considering both self-similarity (how the export composition of a CEEC has changed with respect to the beginning of the transition process) and EU-similarity (if and how the export composition of a CEEC has changed with respect to the EU15 export composition). Finally, we use EU-similarity matrices to test if the dynamics of sectoral distribution of total exports of Poland, Hungary, Romania, and Bulgaria to the EU is related to the role acquired by processed trade in the 1990s. Using a nonparametric Mantel test we give evidence that: (1) processed trade is crucial in explaining changes in the overall structure of exports of transition countries, and (2) that greater economic integration in terms of trade flows and processing trade does not always lead to greater export similarity between the CEECs and the EU15 member States.
    Keywords: EU, CEECs, Transition, Similarity, Nonparametrics
    JEL: F3 F42
    Date: 2006–04
  9. By: Lutz C. Kaiser (IZA Bonn, DIW Berlin and EPAG)
    Abstract: Using micro panel data, labor market transitions are analyzed for the EU-member states by cumulative year-by-year transition probabilities. As female (non-)employment patterns changed more dramatically than male employment in past decades, the analyses mainly refer to female labor supply. In search for important determinants of these transitions, six EUcountries with different labor market-regimes are selected as examples (Denmark, Germany, Netherlands, Portugal, Ireland, UK). Within these countries, women’s determinants of labor market transitions are compared by means of pooled multinominal logit-regressions. The outcomes hint at both, the importance of socio-economic determinants, like the life cycle or human capital, but also address gender related differences in the paths of labor market transitions. Clearly, the observed cross-national differences are driven by specific national institutional settings. Among others, one of the most crucial features is the day-care infrastructure concerning children, which either fosters or restricts a sustainable risk management between family and work in the respective countries.
    Keywords: labor supply, labor market transitions, socio-economic determinants, institutional settings, risk management, cross-national comparison
    JEL: J21 J22 J78
    Date: 2006–05
  10. By: Nick Bloom; John Van Reenen
    Abstract: We use an innovative survey tool to collect management practice data from 732 medium sized manufacturing firms in the US, France, Germany and the UK. These measures of managerial practice are strongly associated with firm-level productivity, profitability, Tobin’s Q, sales growth and survival rates. Management practices also display significant cross-country differences with US firms on average better managed than European firms, and significant within-country differences with a long tail of extremely badly managed firms. We find that poor management practices are more prevalent when (a) product market competition is weak and/or when (b) family-owned firms pass management control down to the eldest sons (primo geniture). European firms report lower levels of competition, while French and British firms also report substantially higher levels of primo geniture due to the influence of Norman legal origin and generous estate duty for family firms. We calculate that product market competition and family firms account for about half of the long tail of badly managed firms and up to two thirds of the American advantage over Europe in management practices.
    JEL: L2 M2 O32 O33
    Date: 2006–05
  11. By: Tomas Frejka (Max Planck Institute for Demographic Research, Rostock, Germany); Charles F. Westoff
    Abstract: -
    Keywords: Europe, United States, fertility, religion
    JEL: J1 Z0
    Date: 2006–05
  12. By: Dimitrios Christelis (University of Salerno and CSEF); Tullio Jappelli (University of Salerno, CSEF and CEPR); Mario Padula (University of Salerno and CSEF)
    Abstract: We study the relation between cognitive ability and the decision to invest in stocks using the recent Survey of Health, Ageing and Retirement in Europe (SHARE). The survey has detailed data on wealth and portfolio composition of individuals aged 50+ in 11 European countries and three indicators of cognitive abilities: mathematical, verbal fluency, and recall skills. We find that the propensity to invest in stocks is strongly associated with cognitive abilities, for both direct stock market participation and indirect participation through mutual funds and investment accounts. We also find that stockholding increases with social interactions, intention to leave a bequest, and is negatively associated with health status.
    Date: 2006–05–01
  13. By: Benno Torgler (Yale University and CREMA); Friedrich Schneider (University of Linz, CREMA and IZA Bonn)
    Abstract: Considerable evidence suggests that enforcement efforts cannot fully explain the high degree of tax compliance. To resolve this puzzle of tax compliance several researchers have argued that citizens’ attitudes toward paying taxes defined as tax morale helps to explain the high degree of tax compliance. However, most studies have treated tax morale as a black box without discussing which factors shape it. Additionally, the tax compliance literature provides little empirical research that investigates attitudes toward paying taxes in Europe. Thus, this paper is unique in its examination of citizen tax morale within three multicultural European countries, Switzerland, Belgium and Spain, a choice that allows far more detailed examination of the impact of culture and institutions using datasets from the World Values Survey and the European Values Survey.
    Keywords: tax morale, tax compliance, tax evasion, culture
    JEL: H26 H73
    Date: 2006–05
  14. By: Ágnes Horváth (Magyar Nemzeti Bank); Zoltán M. Jakab (Magyar Nemzeti Bank); Gábor P. Kiss (Magyar Nemzeti Bank); Balázs Párkányi (Magyar Nemzeti Bank)
    Abstract: In this paper we investigate the possible effects of fiscal tightening in Hungary from two perspectives. First, simulations in an estimated neo-Keynesian model are used to characterise the effects of different scenarios for fiscal consolidations. We show that the composition of fiscal shocks is important for both the economic outcome and monetary policy. These simulations suggest a modest output cost of fiscal consolidation. Then we take a closer look at the non-Keynesian effects and their relevance for Hungary in a qualitative way. In our review of non-Keynesian channels of fiscal adjustments we conclude that expansionary effects are likely to become evident only in the medium or long run, rather than immediately after measures are taken.
    Keywords: Keynesian, non-Keynesian effects, expansionary fiscal adjustment, Monetary policy reactions, Model simulations.
    JEL: E17 E52 E61 E62 E63 E65 H30
    Date: 2006
  15. By: Jakob Roland Munch (Department of Economics, University of Copenhagen); Michael Rosholm (Department of Economics, University of Aarhus); Michael Rosholm (Department of Economics, 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
  16. By: David Cornille (National Bank of Belgium, Research Department); Maarten Dossche (National Bank of Belgium, Research Department; Ghent University, Study Hive for Economic Research and Public Policy Analysis (SHERPPA))
    Abstract: This paper documents the patterns and determinants of price setting in the Belgian industry. We analyse the micro data underlying the Producer Price Index (PPI) over the period from February 2001 to January 2005. On average only one out of four prices changes in a typical month, whereas the absolute size of a price change amounts to 6 p.c. The frequencies of price adjustment are particularly heterogeneous across sectors, which is determined by heterogeneity in the market and cost structure. We find no signs of downward nominal rigidity. A joint analysis of sizes and frequencies of price adjustment across time shows that price setting is characterised by both time and state-dependent pricing. About 38 p.c. of the exported goods are affected by pricing-to-market.
    Keywords: producer price setting, nominal price rigidity, pricing-to-market, time-dependent pricing, state-dependent pricing, staggering
    JEL: D40 E31
    Date: 2006–05
  17. By: D. Tondani
    Abstract: In this paper we attempt to estimate labour supply elasticities for four categories of Italian workers: married men, married women, unmarried men, unmarried women. We use microdata provided by the Bank of Italy 2002 survey adopting a piecewise linear labour supply functional form. Sample selection and tobit technique have been used. Wage elasticities are calculated from the results of the labour supply estimation. Hours of work are found to be positively related to after tax labour income and negatively related to virtual income. Female labour supply is more sensitive than that of males to an increase in net wage.
    Keywords: Labour supply, Personal income taxation, Italy
    JEL: C24 J22
    Date: 2006
  18. By: Eleni Karagiannaki
    Abstract: In April 2002 Jobcentre Plus started to operate in the UK bringing together the service of the Benefits Agency and the Employment Service. Offering a fully integrated benefit claiming and work placement/job-seeking service for people of working age this new organisation aims to strengthen the link between welfare and work. Due to the magnitude of the associated organisational change, the national roll-out of the new organisation is being implemented gradually over a transitional period ending in 2006. During this transitional period some local offices are fully integrated while others functions remain split between pre-existing Benefits Agency and Employment Service offices. In this paper we examine how changes in the level of integration (measured as the percentage of offices within districts offering the integrated Jobcentre Plus service) within districts over time affected performance with respect to job entry, benefit service and customer service delivery. Our analysis suggests that Jobcentre Plus has a clear positive effect on job entry outcomes for all client groups, a negative effect on business delivery while it has neither a positive nor a negative effect on customer service outcomes.
    Keywords: Jobcentre Plus, welfare-to-work, non-jobseekers, policy evaluation
    JEL: I38
    Date: 2006–02
  19. By: Corinne Autant-Bernard (CREUSET (EA 3724) - Centre de Recherche Economique de l'Université de Saint Etienne - [Université Jean Monnet - Saint-Etienne])
    Abstract: The purpose of this paper is to empirically investigate how regional advantages and firms characteristics influence the location of R&D. Looking at 2024 decisions of R&D lab location in France, we implement an extended conditional logit with spatially lagged explanatory variables to evaluate the importance of each factor and to test the spatial dimension of knowledge spillovers. The results indicate that large market size, large amount of ideas, and low level of competition in the target region increases the probability of setting up R&D labs while the diffusion of knowledge across regions induces a significant spatial dependence
    Keywords: Economic geography; Location choice; Knowledge spillovers; Spatial dependence; géographie économique; externalités de connaissance; choix de localisation; dépendance spatiale
    Date: 2006–04–21

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