nep-eec New Economics Papers
on European Economics
Issue of 2006‒10‒14
thirteen papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. Corporate Tax Competition and Coordination in the European Union: What do we know? Where do we stand? By Nicodeme, Gaetan
  2. A Basic Income for Europe's Children? By Levy H; Lietz C; Sutherland H
  3. The anchoring of European inflation expectations By Jan Marc Berk; Gerbert Hebbink
  4. Differences in Job Dissatisfaction Across Europe By Cheti Nicoletti
  5. Benchmarking Efficiency of Telecommunication Industries in the US and Major European Countries : A Stochastic Possibility Frontiers Approach By Georg Erber
  6. Expected Money Growth, Markov Trends and the Instability of Money Demand in the Euro Area By Sylvia Kaufmann; Peter Kugler
  7. 06-06 “European Chemical Policy and the United States: The Impacts of REACH” By Frank Ackerman, Elizabeth Stanton, and Rachel Massey
  8. An Age Perspective on Economic Well-Being and Social Protection in Nine OECD Countries By Immervoll H; Mantovani D; Orsini K; Sutherland H
  9. Schooling and the distribution of wages in the european private and public sectors By Budria, Santiago
  10. Using Taylor Rules to Assess the Relative Activism of the European Central Bank, the Bank of England and the Federal Reserve Board By David Cobham
  11. The impact of competition on productive efficiency in European railways By Gertjan Driessen; Mark Lijesen; Machiel Mulder
  12. Which price index for Eurozone Index-Linked Bonds? By Arnold, Ivo
  13. AQM-06: The Macroeconomic Model of the OeNB By Martin Schneider; Markus Leibrecht

  1. By: Nicodeme, Gaetan
    Abstract: This paper reviews the rationales and facts about corporate tax coordination in Europe. Although statutory tax rates have dramatically declined, revenues collected from corporate taxation are fairly stable and there is so far no evidence of a race-to-the-bottom. The ambiguous results from economic tax theory and the institutional setting have constrained strong EU policy action in the area of tax competition. Yet, there are welfare gains to be expected from tax coordination. Following its 2001 Communication, the European Commission is currently working with Member States on the definition of a common consolidated corporate tax base for European Companies.
    Keywords: European Union; corporate taxation; tax competition; tax coordination.
    JEL: H73 H25 H87
    Date: 2006–06
  2. By: Levy H (Institute for Social & Economic Research); Lietz C; Sutherland H (Institute for Social & Economic Research)
    Abstract: This paper explores the prospects for a guaranteed income for every child in the European Union and its potential effects on child poverty, taking as one starting point the ideas set out in Atkinson (2005). It examines the extent to which existing levels of financial support for children through national taxes and benefits fall short of a series of illustrative minimum levels of income corresponding to proportions of median income. It estimates the cost of bringing the amount of support up to these levels for all children as well as the corresponding impacts on income poverty among EU children. From this the cost in each country of providing basic incomes for children is estimated such that potential EU child poverty reduction targets are met. This cost could be met at national level or, alternatively, at EU level and we investigate the effect of financing the guaranteed child income using a European flat tax (Atkinson, 1995). The analysis uses EUROMOD, the European tax-benefit microsimulation model and illustrates the implications of the choices that must be made when designing such a scheme for the extent of redistribution between countries and towards children.
    Keywords: Children, European Union, Microsimulation
    JEL: H23 I32 I38
    Date: 2006–09
  3. By: Jan Marc Berk; Gerbert Hebbink
    Abstract: This paper analyses the usefulness of direct measures of consumers’ perceptions and expectations of inflation for monetary policy and investigates the degree to which these variables are anchored. We inter alia seek to xplore whether there is a difference in reaction of consumers in countries with more credible central banks and those from countries with less credible central banks. We moreover investigate whether the introduction of euro coins and banknotes in 2002, that can be interpreted as a structural shock, has significantly affected the inflation rate as perceived by consumers. We find that European inflation expectations are relatively robust to sudden changes in inflation or monetary policy surprises, regardless of the credibility of the central bank. The introduction of the euro, however, significantly affected the inflation perception of European consumers.
    Keywords: Inflation expectations; Monetary policy; Survey data
    JEL: C31 C32 E58
    Date: 2006–10
  4. By: Cheti Nicoletti (Institute for Social and Economic Research)
    Abstract: The aim of this paper is to analyze the determinants of job dissatisfaction in a European cross-country comparison perspective. In particular we would like to understand if differences in the reported job dissatisfaction between European countries reflect a rescaling of the dissatisfaction measures or, also, a different impact of the job dissatisfaction determinants. To this aim we estimate dissatisfaction models separately by country using fixed effects logit models. We test the equality of the model coefficients across countries by extending the test proposed by Allison (1999) for simple logit and probit models.
    Date: 2006–08
  5. By: Georg Erber
    Abstract: The impact of ICT on the efficiency of different national telecommunication industries of the US, Germany, France, the UK and the Netherlands is analysed by using a stochastic production possibility frontier approach. The relative inefficiencies of these industries measured as distances to the general production possibility frontier are estimated by a multi-country panel maximum-likelihood-estimation. By determining the technology efficiency effect frontiers for each single country one obtains a measure for the evolution of relative inefficiencies over time for each country's industry. Looking at these different patterns a common characteristic shape of stylised J-curves is revealed. This can be interpreted as J-curves of adoption of innovations in different national telecommunication industries. Since the troughs of these J-curves occur in different years for different countries a phase delay in adoption of innovations occurs differing from country to country. The time period covered by the data include a time when the deregulation of the telecommunication industries in these countries took place and the rapid diffusion of two key innovations - the Internet and mobile communications - changed the technological and organisational foundations everywhere. The results show that even if the US telecommunication industry led in this wave of major innovations as a first mover in comparison to the others and diminished by this their relative efficiency disadvantage opposite the European countries the EU countries still maintain a comparative efficiency advantage inherited from the early 1980's. In particular after their delayed adoption of the recent innovations like deregulation and Internet began there during the late 1990's the rapid catch up of the US telecommunication industry relative to the European industries has stalled. However, overall the inefficiency differences between national telecommunication industries have decreased in the long-run. Differences in the capability to establish and maintain a competitive and innovative national industry, however, still prevail between these countries even if they have become less pronounced as before.
    Keywords: Benchmarking, Production Possibility Frontiers, Efficiency/Inefficiency Measurement, J-Curve of Adoption of Innovations, Convergence
    JEL: L96 O33 O47 O57
    Date: 2006
  6. By: Sylvia Kaufmann (Oesterreichische Nationalbank, Economic Studies Division); Peter Kugler (University of Basel, WWZ, Petersgraben 51, CH-4003 Basel)
    Abstract: This paper analyzes the recently documented instability of money demand in the euro area in the framework of a Markov switching trend model. First, we consider a standard flexible price model with stable money demand, rational expectations, and an exogenous income-money ratio which follows a Markov trend. This framework, which implies an influence of expected future money on prices, leads to a cointegrating relationship between (log) prices and the (log of the) money-income ratio with a switching intercept term. Of course, this likely leads to a rejection of cointegration by standard tests and to the erroneous conclusion of an unstable money demand. Second, a more general model allowing for endogeneity and more general dynamics is estimated with Bayesian methods for euro area data from 1975-2003. This exercise provides support for our model and a stable demand for M3 in the euro area.
    Keywords: Bayesian cointegration analysis, Markov trend, Markov chain Monte Carlo, money demand.
    JEL: C11 C32 E41
    Date: 2006–09–15
  7. By: Frank Ackerman, Elizabeth Stanton, and Rachel Massey
    Abstract: The European Union is moving toward adoption of its new Registration, Evaluation and Authorization of Chemicals (REACH) policy, an innovative system of chemicals regulation that will provide crucial information on the safety profile of chemicals used in industry. Chemicals produced elsewhere, such as in the United States, and exported to Europe will have to meet the same standards as chemicals produced within the European Union. What is at stake for the U.S. is substantial: we estimate that chemical exports to Europe that are subject to REACH amount to about $14 billion per year, and are directly and indirectly responsible for 54,000 jobs. Revenues and employment of this magnitude dwarf the costs of compliance with REACH, which will amount to no more than $14 million per year. Even if, as the U.S. chemicals industry has argued, REACH is a needless mistake, it will be far more profitable to pay the modest compliance costs than to lose access to the enormous European market.
  8. By: Immervoll H; Mantovani D; Orsini K; Sutherland H (Institute for Social & Economic Research)
    Abstract: This paper quantifies the economic well-being of different age groups and the extent of their reliance on incomes from public and private sources. The aim is to establish how social benefits, and the taxes needed to finance them, affect income levels and disparities across different age groups. Results are compared across nine OECD countries (Finland, France, Germany, Italy, Luxembourg, Norway, Sweden, United Kingdom and United States) using household microdata and microsimulation models to illustrate the influence of market income patterns, household structures and social protection measures on the income distribution among and between different age groups. We use information from the late 1990s to establish a "distributional baseline" that refers to an early phase of the projected increase in dependency ratios and also pre-dates some of the major reforms that are introduced to address these. Results even for this period show that social protection was already largely "old-age" protection, with those aged 65 and over typically receiving almost three times the (net) cash transfers of the average person. In most countries, the incidence of low incomes was nevertheless higher among old-age individuals than for the population as a whole. We argue, however, that the crosscountry evidence suggests some scope for re-balancing social protection spending without necessarily compromising distributional objectives.
    Keywords: inequality; poverty; social protection; ageing; demographics; microsimulation
    JEL: C81 D31 H22 H55
    Date: 2006–09
  9. By: Budria, Santiago
    Abstract: International research has shown that schooling enhances within-groups wage dispersion. This assessment is typically based on private sector data and, up to date, the inequality implications of schooling have not been documented for the public sector. This paper uses recent data from eight European countries to explicitly take into account differences between the private and public sectors. Using quantile regression, the paper describes the effects of schooling on the location and shape of the conditional wage distribution in each sector. While the average impact of schooling on wages is similar across sectors, the impact of schooling on within-groups dispersion is found to be substantially larger in the private sector than in the public sector. This finding warns that the effects of the European educational expansion on overall within-groups dispersion may be lower than previously thought.
    Keywords: Returns to schooling; Quantile regression; Within-groups wage inequality
    JEL: I21 D31
    Date: 2006–09
  10. By: David Cobham
    Abstract: This paper attempts to assess the relative activism of these three central banks, with reference to the debate on interest rate smoothing. It investigates smoothing in terms of the pattern of interest rate changes, and estimates a series of Taylor-type policy rules for each bank, using quarterly and monthly data, with ‘backward’ and ‘forward’-looking arguments, and with and without lagged dependent variables. It also examines the effect of introducing an auto-correlated error term. There is some (non-robust) evidence that the FRB is more activist, but it also seems to be more smooth; the ECB seems to adjust faster but less strongly in the long run; and the BoE’s behaviour is more difficult to identify. However, these standard policy rules are out of kilter with central banks’ own descriptions of what they do, while the long lags involved raise questions about the relevance of the Taylor principle as conventionally applied. It is therefore suggested that researchers should pay more attention to the institutional context of central banks’ behaviour, in order to produce better estimates of their policy rules which would in turn shed more light on the issues of activism and smoothing.
    Keywords: Monetary policy, activism, interest rate smoothing, central banks.
    JEL: E43 E52
    Date: 2006–09
  11. By: Gertjan Driessen; Mark Lijesen; Machiel Mulder
    Abstract: This paper empirically explores the relationship between competition design and productive efficiency in the railway industry. We use Data Envelopment Analysis (DEA) to construct efficiency scores, and explain these scores, using variables reflecting institutional factors and competition design. Our results suggest that competitive tendering improves productive efficiency, which is in line with economic intuition as well as with expectations on the design of competition. We also find that free entry lowers productive efficiency. A possible explanation for this result is that free entry may disable railway operators to reap economies of density. Our final result is that more autonomy of management lowers productive efficiency. Most of the incumbent railway companies are state owned and do not face any competitive pressure. As a consequence, increased independence without sufficient competition and adequate regulation may deteriorate incentives for productive efficiency.
    Keywords: Rail transport; Efficiency; competition design
    JEL: D24 H42 L22 L25 L33 L92
    Date: 2006–09
  12. By: Arnold, Ivo (Nyenrode Business Universiteit)
    Abstract: Index-linked bonds (ILBs) constitute a small but growing segment of the eurozone bond market. Issuers of index-linked bonds face a choice between linking to either a eurozone or a national price index. This paper examines this choice both theoretically and empirically and ends up with the following conclusions. First, ILBs linked to eurozone inflation are much less useful for diversification purposes than nationally indexed ILBs. This is hard to square with the intended use of these bonds. Second, ILBs linked to national price indices are imperfect hedges for national inflation. The latter finding is counterintuitive and arises because of monetary union.
    Keywords: Index-linked bonds; inflation; EMU
    Date: 2006
  13. By: Martin Schneider (Oesterreichische Nationalbank, Economic Studies Division); Markus Leibrecht (WU Wien)
    Abstract: This paper gives an overview of the current version of the quarterly macroeconomic model of the Oesterreichische Nationalbank for Austria. The model is a small to medium size macroeconomic model. It is in the tradition of the neoclassical synthesis and is therefore in line with most models used by euro system central banks. The model has been extended in several ways compared with the previous version. The most important changes concern the use of oil and import competitor’s prices in the supply block, a more detailed treatment of government receipts, the use of tax rates as policy instruments as well as a dynamic import demand indicator. In the empirical part, the paper presents some simulation results to show the impact of tax increases on the Austrian economy and the reaction of the model to five standard macroeconomic shocks: Increases of the value added tax, the personal income tax and the corporate income tax by the same amount have different effects on the Austrian economy. The reaction of the model to macroeconomic shocks is characterized by a high demand multiplier and a low negative impact of price competitiveness on exports.
    Keywords: Macroeconometric Model, AUstria
    JEL: C3 C5 E1 E2
    Date: 2006–09–18

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