nep-eec New Economics Papers
on European Economics
Issue of 2006‒12‒09
25 papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. The Maastricht Inflation Criterion: How Unpleasant is Purgatory? By Jaromir Hurnik; Aleš Bulir
  2. The Cost Factor in Patent Systems By Francois, Didier; van Pottelsberghe, Bruno
  3. Fiscal Implications of Demographic Uncertainty: Comparisons across the European Union By Martin Weale
  4. Residential Mobility and Housing Adjustment of Older Households in Europe By Konstantinos Tatsiramos
  5. Labour Market Regulation in the EU-15: Causes and Consequences - A Survey By W. Stanley Siebert
  6. The Future of Key Actors in the European Research Area By Madeleine Akrich; Riel Miller
  7. Welfare Effects of the Euro Cash Changeover By Christoph Wunder; Johannes Schwarze; Gerhard Krug; Bodo Herzog
  8. Europeans and services of general interest: where is the best quality perceived? By Paola Annoni
  9. Housework and gender inequality across Europe By Voicu, Malina; Voicu, Bogdan; Strapcova, Katarina
  10. The Social Assimilation of Immigrants By Domenico de Palo; Riccardo Faini; Alessandra Venturini
  11. Business Cycle Moderation - Good Policies or Good Luck: Evidence and Explanations for the Euro Area By M.S.Rafiq
  12. What shapes attitudes toward paying taxes? Evidence from multicultural european countries By Friedrich G. Schneider; Benno Torgler
  13. What Are Their Words Worth? Political Plans And Economic Pains Of Fiscal Consolidations In New EU Member States By Ondřej Schneider; Jan Zápal
  14. Exchange Rates in the New EU Accession Countries: What Have We Learned from the Forerunners? By Katerina Smídková; Aleš Bulir
  15. Entry rates and the risks of misalignment in the EU8 By Tatiana Fic; Ray Barrell; Dawn Holland
  16. The Determinants of Motherhood and Work Status: A Survey By Daniela Del Boca; Marilena Locatelli
  17. Determinants of banks' engagement in loan securitization By Christina E. Bannier; Dennis N. Hänsel
  18. Does Labour Productivity Flow Across Industries?: Estimation Robust to Panel Heterogeneity and Cross Sectional Correlation By Ali Al-Eyd; Ray Barrell; Dawn Holland
  19. Analysis of the socio-economic impact of the tobacco CMO reform on italian tobacco sector By F. Arfini; M. Donati; D. Menozzi
  20. The Aggregate Labour Market Effects of the Swedish Knowledge Lift Program By Albrecht, James; van den Berg, Gerard J; Vroman, Susan
  21. Poles Apart? EU Enlargement and the Labour Market Outcomes of Immigrants in the UK By Stephen Drinkwater; John Eade; Michal Garapich
  22. Intergenerational Conflict, Partisan Politics, and Public Higher Education Spending: Evidence from the German States By Ulrich Oberndorfer; Viktor Steiner
  23. Italy’s decline: getting the facts right By F. Daveri; C. Jona-Lasinio
  24. Options for Fiscal Consolidation in the United Kingdom By Keiko Honjo; Dennis P. J. Botman
  25. A Comparison of National Saving Rates in the UK, US and Italy By Tatiana Kirsanova; James Sefton

  1. By: Jaromir Hurnik; Aleš Bulir
    Abstract: The Maastricht inflation criterion, designed in the early 1990s to bring "high-inflation" EU countries in line with "low-inflation" countries prior to the introduction of the euro, poses challenges for both new EU member countries and the European Central Bank. While the criterion has positively influenced the public stance toward low inflation, it has biased the choice of the disinflation strategy toward short-run, fiat measures-rather than adopting structural reforms with longer-term benefits-with unpleasant consequences for the efficiency of the eurozone transmission mechanism. The criterion is also unnecessarily tight for new member countries as it mainly reflects cyclical developments.
    Date: 2006–06–27
  2. By: Francois, Didier; van Pottelsberghe, Bruno
    Abstract: The objective of this paper is to assess whether and to what extent the cost of patenting affects the demand for patents. The empirical analysis, which focuses on the patent systems of the USA, Japan, and Europe during the year 2003, leads to the following methodological and empirical observations: i) after the grant, the translation, validation and transaction costs induced by an effective protection in several European countries witness a highly fragmented and very expensive European market for intellectual property; ii) for a proper international comparison, the size of the market and the average number of claims must be accounted for; iii) when the cost per claim per capita (the 3C-index) is considered, a negative linear relationship appears between the cost of patenting and the number of claims that are filed; iv) for a patent designating 13 European countries, the 3C-index is about 10 (2) times higher than in the US (Japanese) system (for process and translation costs up to the grant); v) The European market being more than twice as large as the US market in terms of inhabitants, the 3C-index suggests that there would be a clear justification for higher nominal examination fees at the EPO, that would ensure a rigorous granting process.
    Keywords: cost elasticity; cost per claim per capita; patent systems; patents
    JEL: O34 P14 P51
    Date: 2006–11
  3. By: Martin Weale
    Abstract: We assess the implications of demographic uncertainty for the budgetary position in Belgium, Denmark, Finland, Germany, the Netherlands, Spain and the United Kingdom. We evaluate the frequency distribution of the increase in taxes needed to deliver fiscal solvency.
    Date: 2006–03
  4. By: Konstantinos Tatsiramos (IZA Bonn)
    Abstract: This paper investigates the determinants of residential mobility of older households (above 50 years old) and the adjustment of housing for those who move employing individual data from the European Community Household Panel. Although homeowners are less likely to move compared to renters, an increase in mobility rates is observed for older age homeowners. Moreover, having an outstanding home loan, retirement, the death of a spouse, and excessive housing costs, are significantly associated with a move in central and northern European countries, but not in the south. Analyzing the transitions from the current tenure choice after a move takes place, based on a competing risk hazard model, an increasing transition out of the current residence for old-age homeowners is found, indicating some dissaving later in life. The direction of the transitions is mostly from ownership to renting. However, especially in countries in central and northern Europe, transitions from ownership to ownership are also observed, which are associated with a reduction in the home size.
    Keywords: residential mobility, ageing, housing tenure choice, competing risk hazard
    JEL: J14 R21 R23
    Date: 2006–11
  5. By: W. Stanley Siebert (University of Birmingham and IZA Bonn)
    Abstract: Why should floors be set under wages and working conditions by labour market regulations? This paper finds that efficiency arguments are questionable, because of the disemployment effects of strict regulation. Regulation is better explained in terms of the choices of the employed semi- and unskilled worker group. This group contains the median voter, who rationally desires strict regulation to divert rent from other groups such as the skilled workers and the unemployed. Legal origin may also be important: some countries have fallen under the influence of the interventionist French (or German) legal tradition. Given a predisposition to intervene, these countries begin with some degree of labour regulation, which then creates its own constituency of rent protectors and rent growers.
    Keywords: labour market regulation, European Union, median voter, legal origin, minimum wages, working conditions floors, wage inequality, job opportunity inequality, long-term unemployment
    JEL: J38 J41 J58 J68 J83 K31
    Date: 2006–11
  6. By: Madeleine Akrich (CSI - Centre de sociologie de l'innovation - [CNRS : UMR7120] - [Ecole Nationale Supérieure des Mines de Paris]); Riel Miller (DTI - Danish Technology Institute - [Ministry of Science, Technology and Innovation])
    Abstract: This text is a draft version of the synthesis report based on the work of the High Level Expert Group on the Future of <br />Research Actors (RA) in the European Research Area (ERA). This group was set up by the Technology Foresight Group, DG Research, European Commision. Many of the conclusions of this synthesis report are fully consistent with the directions of <br />current research policies. The work of the group highlights the importance of <br />efforts, already well underway, to reinforce the functioning of the ERA as an integrated base <br />that overcomes a wide range of geographic, institutional and disciplinary barriers to the both <br />the competition and sharing of knowledge. Knitting together the different European research <br />actors into a more transparent and diversified whole would seem to be one of the best ways <br />to create a stronger platform for knowledge creation and diffusion. A less anticipated <br />conclusion, and less part of the existing consensus, is that simply pursuing the ambition of <br />multiplying the number of effective research platforms in Europe may miss a key part of <br />tomorrow's research agenda. The in-depth expert papers on the eight different research <br />actors of the ERA, the insights arising from the synthesis developed in this paper, and the <br />analytical results of a rare scenario pooling exercise, all point very clearly to the risk that <br />current policies are excessively technology centric and may miss crucial emerging attributes <br />of research and research actors in the knowledge society. Thus, over and above the value- <br />added for assessing the direction and implementation of current approaches to improving the <br />production and use of research in Europe, this report recommends new policies aimed at <br />accelerating the development of emergent forms and sources of research. The policy <br />message is that Europe must move beyond industrial-era challenges to embrace those of the <br />knowledge society. <br />Further opening, expanding and integrating the European Research Area requires: <br />1) Policies that put into practice expanded criteria for designing and funding research <br />programmes for the European Research Area to include user-centred technological, <br />organisational and social innovation. <br />2) Policies that initiate experiments that validate (quality/trust/transparency) new forms and <br />producers (including individual independent researchers) of knowledge. <br />3) Policies, both budgetary and regulatory, that create and facilitate both new collaborative <br />environments for research, including user-centred research, and new governance <br />processes.<br />4) Policies to enhance the capacity of policy makers (including at the regional level) to <br />recognise and facilitate new forms of research and particularly new approaches to the <br />governance of research processes. <br />5) Policies to abolish national borders for researchers and for students both within Europe <br />and outside Europe. <br />6) Policies to strengthen the autonomy of universities, including areas so far strictly <br />controlled by most governments such as a university's strategic profile and selection of <br />specialisations. <br />7) Further research is required regarding the relationship between the changing nature of <br />research and intellectual property rights (IPR). <br />8) Further research is required regarding the functional division of labour amongst different <br />research actors in the context of the emerging “open innovation model”. <br />9) Further research is required in order to describe and analyse the contribution of civil <br />society to research and innovation. <br />10) Further research is required on how to establish trust in highly complex and diversified <br />knowledge societies. <br />11) Further research is required to define and measure new forms of innovation, particularly <br />with respect to the innovation related research occurring in the service sector, SMEs and <br />the community (social innovation) that point towards new models of innovation.
    Date: 2006–11–27
  7. By: Christoph Wunder; Johannes Schwarze; Gerhard Krug; Bodo Herzog
    Abstract: Using merged data from the British Household Panel Survey (BHPS) and the German Socio-Economic Panel (SOEP), this paper applies a parametric difference-in-differences approach to assess the real effects of the introduction of the Euro on subjective well-being. A complementary nonparametric approach is also used to analyze the impact of difficulties with the new currency on well-being. The results indicate a severe loss in well-being associated with the introduction of the new currency, with the predicted probability that a person is contented with his/her household income diminishing by 9.7 percentage points. We calculate a compensating income variation of approximately one-third. That is, an increase in postgovernment household income of more than 30% is needed to compensate for the rather drastic decline in well-being. The reasons for the negative impact are threefold. First, perceived inflation overestimates the real increase in prices resulting in suboptimal consumption decisions. Second, money illusion causes a false assessment of the budget constraint. Third, individuals have to bear the costs from the conversion and the adjustment to the new currency. Moreover, it is thought that losses are smaller when financial ability is higher. However, the impact of difficulties in using and converting the new currency is rather small, and the initial problems were overcome within one year of the introduction of euro cash.
    Keywords: Subjective well-being, euro cash changeover, perceived inflation, difference-indifferences
    JEL: E31 I31
    Date: 2006
  8. By: Paola Annoni (Dep. of Economics, Business and Statistics - University of Milan)
    Abstract: This paper aims to classify eighteen European regions on the basis of various criteria which reflect the overall performance of services of general interest, as perceived by consumers. The analysis is based on the Eurobarometer survey carried out in 2002, at the request of the European Commission, which collects citizens opinion about various political and social issues. The focus of the analysis is on public level of satisfaction about access easiness, cost, quality, information received and contracts of different services, such as telephone services, power (gas and electricity) providers, water and postal utilities, urban and rail transports. The final goal is the comparison of the overall erceived performance of public utility service providers among countries. The paper agrees with recent recommendations of performing multiple ranking, keeping indicators separated, in spite of conventional solutions based on composite indicators. To obtain a country ranking on services, satisfaction indicators are set up for each country and different innovative data-analysis methods are applied: a partial order methodology, based on Hasse diagrams and two dimensionality reduction techniques, POSAC method and Nonlinear PCA, particularly suitable to handle data of categorical type. As it frequently occurs, each method has its own advantages which are here explored and compared. Such evaluation has the aim of detecting prospective weak points within European areas. Results could be jointly used, mutatis mutandis, with typical Eurobarometer reports carried out regularly at request of the European Commission - Directorate of General Health and Consumer Protection, such as those specifically focused on services of general interest.
    Keywords: european services quality, multiple ranking, Hasse diagram, POSAC, Non-linear PCA,
    Date: 2006–07–26
  9. By: Voicu, Malina (The Research Institute for Quality of Life (Romanian Academy of Science), Bucharest); Voicu, Bogdan (The Research Institute for Quality of Life (Romanian Academy of Science), Bucharest); Strapcova, Katarina (The Institute of Sociology, Slovak Academy of Science)
    Abstract: The paper focuses on the factors influencing sharing of the domestic work in the European countries. Many of the previous studies have offered the individual level explanations, taking into account only the individual characteristic when predicting the spouses’ contribution to the chores. Using multilevel regression models, we try to combine the individual level factors with the country’s level ones in order to draw the explanatory model for the gendered sharing of housework within the couples, across the European societies. The analysis provides support for most theories that we have tested: the resource theory, the dependency/ bargaining hypothesis are confirmed: in a couple, when one of the partners has more resources or a better status, the other spouse uses relatively more hours for the housework. On the other hand, religious and gender values play an important role: the more secular and more oriented towards gender-equality a couple is in thinking, the more equally the partners share their housework. However, on average, all over the world, women use more hours for housework than men do. The country level indicators seems to be less important, but the more affluent societies, the post-communist ones, the ones where women are more present in the public life, the less materialist ones, and those where Catholicism is not the dominant religion determine a more equalitarian sharing of the housework.
    Keywords: gender inequality; housework ; gender regimes ; Europe ; ESS
    Date: 2006–11
  10. By: Domenico de Palo (University of Rome Tor Vergata); Riccardo Faini (University of Rome Tor Vergata, CEPR and IZA Bonn); Alessandra Venturini (University of Turin, CHILD, FIERI and IZA Bonn)
    Abstract: Policy makers in migrant-receiving countries must often strike a delicate balance between economic needs, that would dictate a substantial increase in the number of foreign workers, and political and electoral imperatives, that typically result in highly restrictive immigration policies. Promoting integration of migrants into the host country would go a long way in alleviating the trade off between economic and political considerations. While there is a large literature on the economic assimilation of immigrants, somewhat less attention has been devoted to other " and equally crucial " dimensions of migrants’ integration, namely the process of social assimilation. The aim of this paper is to take a close look at migrants’ social integration into the host country. We rely on the European Community Household panel (ECHP), which devotes a full module to the role and relevance of social relations for both migrants and natives. An innovative feature of this analysis is that it relies on migrants perceptions about their integration rather than " as is typically the case in most opinion surveys " on natives attitudes toward migrants. The main results of the paper can be summarized as follows. First, migrants " particularly from non EU origins - are at a disadvantage in the fields of social relations. Even after controlling for their individual characteristics, such as age, education, family size, and employment status, they tend to socialize less than natives. Second, migrants tend to converge, albeit quite slowly, to the standard of natives. This finding highlights the risks of short term migration, where migrants tend to be constantly marginalized. Third, education has a significant impact on the type of social activities that individuals undertake. More educated people tend to relate somewhat less with their close neighbourhood, but quite intensively with the broader community. The implication for policy makers concerned about the creation of ethnic enclaves is to promote education among immigrants’ community.
    Keywords: immigration, assimilation, social relationships
    JEL: F22 J15
    Date: 2006–11
  11. By: M.S.Rafiq (Dept of Economics, Loughborough University, United Kingdom)
    Abstract: Economic fluctuations in most of the industrialised world have for over the past 30 years been characterised by declining volatility. This decline has also been a trait witnessed for output fluctuations in the Euro Area. This paper has two objectives. The first is to provide a comprehensive characterisation of the decline in volatility using a large number of Euro area economic time series and a variety of methods designed to describe the time-varying time series processes. The second objective is to provide new evidence on the quantitative importance of various explanations for this ‘great moderation’. This paper focuses on the central elements in the literature contending why real output growth has stabilised. Such factors include shifts in the structure of the economy, improved policies, and a ‘good luck’ factor. Further, this paper goes on to investigate whether cross-country linkages in growth have shifted, perhaps in a way that can help rationalise the stabilisation in output. Taken together, the moderation in volatility is attributable to a combination of improved policy (around 5 - 30 percent) and identifiable forms of good luck that manifest themselves as smaller reduced-form forecast errors (40 percent).
    Keywords: Output Volatility, Monetary Policy, International shocks.
    JEL: E32 E60
    Date: 2006–11
  12. By: Friedrich G. Schneider (Department of Economics, Johannes Kepler University Linz, Austria); Benno Torgler (Whitney and Betty MacMillan Center for International and Area Studies, Yale University)
    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.
    Date: 2006–07
  13. By: Ondřej Schneider (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jan Zápal (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; London School of Economics and Political Science)
    Abstract: In this paper, we track behaviour of fiscal authorities of the ten new EU member states (NSM) in the period which immediately preceded their EU accession. We first present basic stylized facts about public budgets of those countries. The paper then analyses reasons which led to periods of fiscal consolidations in NMS. Secondly, we also present evidence from Pre-Accession Economic and Convergence programmes of NMSs concerning planed steps of fiscal authorities and try to contrast them with reality. Throughout the paper, we identify two different groups of countries which significantly differ in their fiscal behaviour. On the one side is group of Baltic countries displaying strong reform effort and responsible fiscal policy usually supported by strong economic growth. On the second extreme, we identify fiscally irresponsible central European countries and two Mediterranean islands displaying lax fiscal policies and little political will to implement costly reforms. Somewhere between stand Slovenia and Slovakia, first without strong reform performance yet with budget deficit in compliance with Stability and Growth Pact and later for its recent reform efforts. Our key finding concerning behaviour of fiscally irresponsible group of countries is that their current problems with high budget deficits originate in their lax approach and inability to implement politically costly expenditure cuts which is apparent from their revision of budget plans and endeavour to shift envisioned deficit reduction into the future. Yet, this strategy has led those countries to uncomfortable position vis-a-vis European fiscal rules.
    Keywords: fiscal policy; new member states; consolidations; Stability and Growth Pact; Excessive Deficit Procedure; Convergence Programmes banking
    Date: 2006–06
  14. By: Katerina Smídková; Aleš Bulir
    Abstract: Estimation and simulation of sustainable real exchange rates in some of the new EU accession countries point to potential difficulties in sustaining the ERM2 regime if entered too soon and with weak policies. According to the estimates, the Czech, Hungarian, and Polish currencies were overvalued in 2003. Simulations, conditional on large-model macroeconomic projections, suggest that under current policies those currencies would be unlikely to stay within the ERM2 stability corridor during 2004-10. In-sample simulations for Greece, Portugal, and Spain indicate both a much smaller misalignment of national currencies prior to ERM2, and a more stable path of real exchange rates over the medium term than can be expected for the new accession countries.
    Keywords: Exchange rates , European Union , Real effective exchange rates , Foreign investment ,
    Date: 2005–02–22
  15. By: Tatiana Fic; Ray Barrell; Dawn Holland
    Abstract: New member states will join the EMU in the coming years. Setting the central parity has been and will be a challenging task, as there is a considerable amount of uncertainty, both from a theoretical and an empirical perspective, surrounding the determination of the optimal exchange rate. In effect, the probability of misalignment of the entry rate can be a non-zero one. Given the possible - if not inevitable - misspecification of the equilibrium rate it is thus advisable to focus on the effects of a misalignment of the entry rate for the economy, as it has implications for countries’ both real and nominal convergence. An overvalued exchange rate would have an adverse impact on a country’s competitiveness and its growth, while an undervalued currency would contribute to an overheating of the economy and an excessive inflation. The objective of this paper is to better understand the role of the entry rates for short run inflation and GDP developments and their implications for the inflation criterion and the real convergence process. Having estimated equilibrium exchange rates for eight out of ten countries that entered the EU in May 2004 - Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Slovenia and Slovakia - we conduct simulations showing what their adjustments to equilibrium would be if their entry rates deviated from the optimal ones.
    Date: 2006–09
  16. By: Daniela Del Boca (University of Turin, CHILD and IZA Bonn); Marilena Locatelli (University of Turin, CHILD)
    Abstract: In this paper we present important empirical evidence regarding recent trends in women’s participation and fertility in European countries, and provide several interpretations of the differences across countries. Several recent analyses have considered labour supply and fertility as a joint decision and have explicitly taken into account the endogeneity of fertility in labour market participation decisions of women. We survey microeconomic analyses that explore the impact of social policies on the joint decisions of labor market participation and fertility. The results of most analyses indicate that social policies, taking into account several variables (family background, the allocation of time within the household, religion and culture), have a very relevant role in explaining different degrees of incompatibility between employment and child rearing across different countries. The incompatibilities between motherhood and careers find reconciliation in policies that enhance employment flexibility and diminish the potential opportunity costs of children.
    Keywords: labor market decisions, fertility, child care, family policies
    JEL: J2 C3 D1 H31
    Date: 2006–10
  17. By: Christina E. Bannier; Dennis N. Hänsel
    Abstract: This paper provides new insights into the nature of loan securitization. We analyze the use of collateralized loan obligation (CLO) transactions by European banks from 1997 to 2004 and try to identify the influence that various firm-specific and macroeconomic factors may have on an institution's securitization decision. We find that not only regulatory capital arbitrage under Basel I has been driving the market. Rather, our results suggest that loan securitization is an optimal funding tool for banks with high risk and low liquidity. It may also have been used by commercial banks to indirectly access investment-bank activities and the associated gains.
    Keywords: Securitization, credit risk transfer, collateralized loan obligations
    JEL: G21
    Date: 2006–10
  18. By: Ali Al-Eyd; Ray Barrell; Dawn Holland
    Abstract: In this paper we report the results of a series of internal and external shocks on the Euro Area, using the National Institute’s Global Econometric Model, NiGEM. The differences in impacts across countries are discussed, stressing the role of openness to the rest of the world, the nature of investment finance, the importance of wealth in different economies, and the impact of liquidity constrained consumers on the transmission mechanism. The link between financial market integration and channels of policy transmission is closely studied.
    Date: 2006–04
  19. By: F. Arfini; M. Donati; D. Menozzi
    Abstract: The Tobacco CMO (Common Market Organization) is involved in a intense debate between the European tobacco industry and those who are against to a crop whose transformed product is dangerous to the health. European institutions have shown a strong interest in this complex issue introducing two Reforms (1992 and 1998) and one revision in 2004. This paper aims to analyse and investigate the socio-economic impact of the tobacco CMO Reform of 2004 in Italy, across the scenarios proposed by the EC Commission (2004), both on the tobacco production and processing sector. The considered socio-economic indicators are harvested surfaces, farm income and overall employment, while the sample of farms used in this research belong to the FADN–Italy sample.
    Keywords: Tobacco CMO, CAP reform, decoupling, Positive Mathematical Programming
    JEL: Q11 Q12 Q18 J21
    Date: 2005
  20. By: Albrecht, James; van den Berg, Gerard J; Vroman, Susan
    Abstract: The Swedish adult education program known as the Knowledge Lift (1997--2002) was unprecedented in its size and scope, aiming to raise the skill level of large numbers of low-skill workers. This paper evaluates the potential effects of this program on aggregate labour market outcomes. This is done by calibrating an equilibrium search model with heterogeneous worker skills using pre-program data and then forecasting the program impacts. We compare the forecasts to observed aggregate labour market outcomes after termination of the program.
    Keywords: calibration; job search; program evaluation; returns to education; Swedish labour market; unemployment; wages
    JEL: C31 D83 J21 J24 J31 J64
    Date: 2006–11
  21. By: Stephen Drinkwater (University of Surrey and IZA Bonn); John Eade (University of Surrey); Michal Garapich (University of Surrey)
    Abstract: The UK was one of only three countries to allow migrants from accession countries to enter their labour markets more or less without restriction following EU enlargement in May 2004. Therefore, it is important to establish the characteristics and labour market performance of migrants from these countries who have subsequently entered the UK. We principally analyse Labour Force Survey data to compare the labour market outcomes of recent migrants from Poland and other accession countries to those of earlier migrant cohorts from these countries as well as to those of other recent migrants to the UK. We find that the majority of post-enlargement migrants from accession countries have found employment in low paying jobs, despite some (especially Poles) having relatively high levels of education. It follows that recent Polish migrants typically have lower returns to their education than other recent arrivals. Migrants from the new entrants who arrived immediately prior to enlargement possess similar characteristics and labour market outcomes, apart from having a higher propensity to be self-employed. These results are discussed in the context of policy changes, migration strategies, assimilation effects and possible impacts on the sending countries.
    Keywords: migration, EU enlargement, labour market outcomes
    JEL: J61 F22
    Date: 2006–10
  22. By: Ulrich Oberndorfer (ZEW Mannheim); Viktor Steiner (Free University Berlin, DIW Berlin and IZA Bonn)
    Abstract: We analyze potential effects of demographic change and political constellations on higher education spending. In our panel analysis of west German states (Laender) for the period 1985 to 2002 we find empirical evidence for the hypothesis of a negative relationship between demographic aging and spending on public higher education. In contrast to the hypothesis of the classical partisan theory that implies higher public expenditures under leftist parties, we find that governments under conservative parties or a coalition between social democrats and conservatives spend more on public higher education than governments run by the social-democratic party alone.
    Keywords: demographic change, public higher education spending, partisan politics
    JEL: H52 H72 I22
    Date: 2006–11
  23. By: F. Daveri; C. Jona-Lasinio
    Abstract: The Italian economy is often said to be on a declining path. In this paper, we document that: (i) Italy’s current decline is a labor productivity problem (ii) the labor productivity slowdown stems from declining productivity growth in all industries but utilities (with manufacturing contributing for about one half of the reduction) and diminished interindustry reallocation of workers from agriculture to market services; (iii) the labor productivity slowdown has been mostly driven by declining TFP, with roughly unchanged capital deepening. The only mild decline of capital deepening is due to the rise in the value added share of capital that counteracted declining capital accumulation.
    Keywords: Productivity growth, Productivity slowdown, TFP, decline, Italy
    JEL: O3 O4 O5
    Date: 2006
  24. By: Keiko Honjo; Dennis P. J. Botman
    Abstract: This paper examines the macroeconomic effects of different timing and composition of fiscal adjustment in the United Kingdom using the IMF’s Global Fiscal Model. Early consolidation dampens aggregate demand in the short term, but increases output in the long term as smaller primary surpluses are needed as a result of lower interest payments. Reducing government transfers or current government spending provides larger gains than increasing taxes, in particular compared to raising corporate or personal income taxes. We show that these conclusions are robust under alternative behavioral assumptions and parameterizations. A reduction in global saving would make early consolidation more urgent from both cyclical and long-term perspectives. Finally, we show that tax reform aimed at increasing incentives to save could provide support to fiscal consolidation measures.
    Date: 2006–04–12
  25. By: Tatiana Kirsanova; James Sefton
    Abstract: We develop the approach of Gokhale, Kotlikoff & Sabelhaus (1996), based on the lifecycle model of savings, to decompose the differences in the national saving rates between the UK, US and Italy. Our work suggests that the US saving rate is lower principally because Americans on average retire later. In contrast, the Italian saving rate is higher predominantly because Italians are credit constrained, particularly when young. We also found that demography and the different tax and benefit systems are able to explain little of the cross-sectional differences in saving rates. The study accounts for the possible importance of intergenerational private transfers in determining saving rates.
    Date: 2006–07

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