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on European Economics |
| By: | Ullrich, Katrin |
| Abstract: | The discussion about country-specific influence on the interest rate decisions of the European Central Bank does not cease. To investigate the possibility of regional influence on the determination of the policy rate, we estimate Taylor-type reaction functions for the period from 1999 to 2005 and include country-specific variables of the euro zone member states. We do not find convincing evidence that country-specific economic developments influence the decisions of the ECB Governing Council. However, the maximum inflation rate and the minimum economic sentiment of the euro area seem to have an effect on the decisions. |
| Keywords: | Taylor rule, ECB, monetary policy |
| JEL: | E52 E58 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:5442&r=eec |
| By: | Ricardo Mestre (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper contributes to the old theme of testing for rationality of inflation expectations in surveys, using two very different surveys in parallel. Focusing on the euro area and using two well-known surveys that include questions on inflation expectations, the Consensus Forecast survey and the European Commission Household survey, a battery of tests is applied to inflation forecasts. Tests are based on a preliminary discussion of the meaning of Rational Expectations in the macroeconomic literature, and how this maps into specific econometric tests. Tests used are both standard ones already reported in the literature and less standard ones of potential interest within the framework discussed. Tests focus on in-sample properties of the forecasts, both in static and dynamic settings, and in out-of sample tests to explore the performance of the forecasts in a simulated out-of-sample setting. As a general conclusion, both surveys are found to contain potentially useful information. Although the Consensus Forecasts survey is the best one in terms of quality of the forecasts, rationality in the European Commission Household survey, once measurement issues are taken into account, cannot be ruled out. JEL Classification:C40; C42; C50; C53; E37. |
| Keywords: | Rational expectations; tests of rationality; inflation forecasting. |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20070721&r=eec |
| By: | Enzo Weber |
| Abstract: | This paper investigates the capital market relations between Euroland and the USA from 1990 until 2006. Formally based on the uncovered interest rate parity (UIP), backward recursive estimations establish a long-run equilibrium between European and US government bond yields. Since the mid-1990s though, cointegration can only be achieved additionally considering the exchange rate. The reason proves a stochastic trend common to the European interest and the exchange rate, consistently explained by central bank reactions and unfinished learning processes on the role of the euro. Furthermore, the US capital market dominance is strongly reduced, leading to transatlantic interdependence at eye level. |
| Keywords: | Capital Market, UIP, Euro Area, United States. |
| JEL: | E44 F31 C32 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2007-014&r=eec |
| By: | Christoffer Kok Sørensen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Jung-Duk Lichtenberger (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | Despite the remarkable economic and financial convergence over the last ten years in the euro area, mortgage interest rates still differ across countries. This note presents some stylised facts on the heterogeneity of mortgage interest rates across euro area countries on the basis of the Eurosystem’s harmonised MFI interest rate statistics. We also attempt to provide some insights into the reasons behind these cross-country differences using the methodology recently proposed by Affinito and Farabullini (2006). We differ from Affinito and Farabullini (2006) in that we focus on one particular banking market: the market for mortgage loans. This allows us to identify more clearly the role of specific structural features characterising that market in explaining mortgage rate dispersion. More specifically, we investigate the extent to which various mortgage loan demand and supply determinants help explaining the observed dispersion. It turns out that some of the heterogeneity can be explained by these factors, in particular those that relate to the supply side. However, a substantial part of the dispersion remains unexplained suggesting that much of the heterogeneity also reflects country-specific institutional differences that are likely to be caused by differences in the regulatory and fiscal framework of the mortgage markets. In order to test this, we extend our analysis to also include institutional factors and indeed find that crosscountry differences in enforcement procedures, tax subsidies and loan-to-value ratios influence the level of mortgage rates. JEL Classification: C23; E4; F36; G21; N24. |
| Keywords: | Mortgage markets; bank interest rates; euro area countries; financial integration; panel econometrics. |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20070733&r=eec |
| By: | Erwan Gautier (Banque de France, 39, rue Croix-des-Petits-Champs, F-75049 Paris Cedex 01.); Ignacio Hernando (Banco de España, Alcalá 50, E-28014 Madrid, España.); Philip Vermeulen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Daniel Dias (Banco de Portugal, 148, rua do Comerico, 1150 Lisbon, Portugal.); Maarten Dossche (National Bank of Belgium, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.); Roberto Sabbatini (Banca dÍtalia – Research Department, Via Nazionale 91, 00184 Roma, Italy.); Harald Stahl (Deutsche Bundesbank, Economics Department, Wilhelm-Epstein-Strasse 14, D-60431 Frankfurt am Main, Germany.) |
| Abstract: | This paper documents producer price setting in 6 countries of the euro area: Germany, France, Italy, Spain, Belgium and Portugal. It collects evidence from available studies on each of those countries and also provides new evidence. These studies use monthly producer price data. The following five stylised facts emerge consistently across countries. First, producer prices change infrequently: each month around 21% of prices change. Second, there is substantial cross-sector heterogeneity in the frequency of price changes: prices change very often in the energy sector, less often in food and intermediate goods and least often in non-durable nonfood and durable goods. Third, countries have a similar ranking of industries in terms of frequency of price changes. Fourth, there is no evidence of downward nominal rigidity: price changes are for about 45% decreases and 55% increases. Fifth, price changes are sizeable compared to the inflation rate. The paper also examines the factors driving producer price changes. It finds that costs structure, competition, seasonality, inflation and attractive pricing all play a role in driving producer price changes. In addition producer prices tend to be more flexible than consumer prices. JEL Classification: E31, D40, C25 |
| Keywords: | Price-setting, producer prices |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20070727&r=eec |
| By: | Magnus Andersson (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper examines bond and stock market volatility reactions in the euro area and the US following their respective economies’ monetary policy decisions, over a uniform sample period (April 1999 to May 2006). For this purpose, intraday data on the US and euro area bond and stock markets are used. A strong upsurge in intraday volatility at the time of the release of the monetary policy decisions by the two central banks is found, which is more pronounced for the US financial markets following Fed monetary policy decisions. Part of the increase in intraday volatility in the two economies surrounding monetary policy decisions can be explained by both news of the level of monetary policy and revisions in the expected future monetary policy path. The observed strong discrepancy between asset price reactions in the US and in the euro area following monetary policy decisions still remains a puzzle, although some tentative explanations are provided in the paper. JEL Classification: E52; E58; G14. |
| Keywords: | Monetary policy; intraday data. |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20070726&r=eec |
| By: | Massimo Del Gatto; Giordano Mion; Gianmarco I.P. Ottaviano |
| Abstract: | In models with heterogeneous rms trade integration has a positive impact on aggregate productivity through the selection of the best rms as import competition drives the least productive ones out of the market. To quantify the impact of rm selection on productivity, we calibrate and validate a multi-country multi-sector model with monopolistic competition and variable markups using rm-level data and aggregate trade gures on a panel of 11 EU countries. Simulating the model, we nd that EU trade has a sizeable impact on aggregate productivity. For instance, in 2000 the introduction of prohibitive trade barriers would have caused an average productivity loss of roughly 13 per cent, whereas a reduction of intra-EU trade costs by 5 per cent would have generated a productivity gain of roughly 2 per cent. Productivity losses and gains, however, vary a lot across countries and sectors depending on market accessibility and trade costs, which maps into di¤erential responses of average markups, prices, quantities and pro ts. We show that our results are robust to alternative distance and productivity measures. |
| Keywords: | European integration, rm-level data, rm selection, gains from trade, total factor |
| JEL: | F12 R13 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:200703&r=eec |
| By: | Höpner, Martin,; Armin Schäfer |
| Abstract: | Abstract In the past, economic integration in Europe was largely compatible with the persistence of different national varieties of capitalism. While product market integration intensified competition, member states could build on and foster their respective comparative advantage. To date, this no longer unequivocally holds true. We contend that a new, ‘Post-Ricardian’ phase of European integration has emerged in which the Commission’s and the ECJ’s attempts to further economic integration systematically challenge the institutions of organized capitalism. This quest for liberalization has reached a point at which its output legitimacy is increasingly uncertain. As a result, the de-politicization of EU decisions proves increasingly unsuccessful. In addition, liberalization measures rely on a very generous interpretations of the ‘four freedoms’ that exceeds the amount of liberalization the member states agreed upon in the European treaties and, therefore, lacks input legitimacy. We show this by discussing recent struggles over the Services Directive, the Takeover Directive, and company law. In the current phase of European integration, the Commission’s and the ECJ’s liberalization attempts either transform the institutional foundations on which some of the member states’ economic systems rely or they create political resistance to an extent that calls into question the European project. The case studies reveal evidence for both of these possibilities.. |
| Keywords: | corporate governance; negative integration; regulatory competition; free movement; economic integration; liberalization; European Commission; political economy |
| Date: | 2007–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:erp:mpifgx:p0077&r=eec |
| By: | Filippo Altissimo (Brevan Howard, Almack House, 28 King Street, London, SW1Y 6XA, UK.); Benoît Mojon (Federal Reserve Bank of Chicago, 230 S La Salle St., Chicago, IL 60604, USA.); Paolo Zaffaroni (Tanaka Business School, Imperial College London, South Kensington campus, London SW7 2AZ, UK.) |
| Abstract: | An aggregation exercise is proposed that aims at investigating whether the fast average adjustment of the disaggregate inflation series of the euro area CPI translates into the slow adjustment of euro area aggregate inflation. We first estimate a dynamic factor model for 404 inflation sub-indices of the euro area CPI. This allows to decompose the dynamics of inflation sub-indices in two parts: one due to a common "macroeconomic" shock and one due to sector specific "idiosyncratic" shocks. Although "idiosyncratic" shocks dominate the variance of sectoral prices, one common factor, which accounts for 30 per cent of the overall variance of the 404 disaggregate in.ation series, is the main driver of aggregate dynamics. In addition, the heterogenous propagation of this common shock across sectoral inflation rates, and in particular its slow propagation to inflation rates of services, generates the persistence of aggregate in.ation. We conclude that the aggregation process explains a fair amount of aggregate in.ation persistence. JEL Classification: E31; E32. |
| Keywords: | Inflation dynamics; aggregation and persistence; euro area. |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20070729&r=eec |
| By: | Matteo Ciccarelli (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Carlo Altavilla (University of Naples "Parthenope", Via Medina 40, 80133 Naples, Italy.) |
| Abstract: | This paper explores the role that inflation forecasts play in the uncertainty surrounding the estimated effects of alternative monetary rules on unemployment dynamics in the euro area and the US. We use the inflation forecasts of 8 competing models in a standard Bayesian VAR to analyse the size and the timing of these effects, as well as to quantify the uncertainty relative to the different inflation models under two rules. The results suggest that model uncertainty can be a serious issue and strengthen the case for a policy strategy that takes into account several sources of information. We find that combining inflation forecasts from many models not only yields more accurate forecasts than those of any specific model, but also reduces the uncertainty associated with the real effects of policy decisions. These results are in line with the model-combination approach that central banks already follow when conceiving their strategy. JEL Classification: C53; E24; E37. |
| Keywords: | Inflation forecasts; unemployment; model uncertainty. |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20070725&r=eec |
| By: | Carlo Rosa; Giovanni Verga |
| Abstract: | This paper examines the effect of European Central Bank communication on the pricediscovery process in the Euribor futures market using a new tick-by-tick dataset. First, weshow that two pieces of news systematically hit financial markets on Governing Councilmeeting days: the ECB policy rate decision and the explanation of its monetary policy stance.Second, we find that the unexpected component of ECB explanations has a significant andsizeable impact on futures prices. This indicates that the ECB has already acquired somecredibility: financial markets seem to believe that it does what it says it will do. Finally, ourresults suggest that the Euribor futures market is semi-strong form informational efficient. |
| Keywords: | market efficiency, central bank communication, news shock, tickby-tick Euriborfutures data, event-study analysis. |
| JEL: | E52 E58 G14 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0764&r=eec |
| By: | Guenter W. Beck (Frankfurt University and CFS); Volker Wieland (Frankfurt University, CFS and CEPR) |
| Abstract: | The European Central Bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision. In this paper, we explore possible justifications. The case against including money in the central bank’s interest rate rule is based on a standard model of the monetary transmission process that underlies many contributions to research on monetary policy in the last two decades. Of course, if one allows for a direct effect of money on output or inflation as in the empirical “two-pillar” Phillips curves estimated in some recent contributions, it would be optimal to include a measure of (long-run) money growth in the rule. In this paper, we develop a justification for including money in the interest rate rule by allowing for imperfect knowledge regarding unobservables such as potential output and equilibrium interest rates. We formulate a novel characterization of ECB-style monetary cross-checking and show that it can generate substantial stabilization benefits in the event of persistent policy misperceptions regarding potential output. Such misperceptions cause a bias in policy setting. We find that cross-checking and changing interest rates in response to sustained deviations of long-run money growth helps the central bank to overcome this bias. Our argument in favor of ECB-style cross-checking does not require direct effects of money on output or inflation. |
| Keywords: | Monetary Policy, Quantity Theory, Phillips Curve, European Central Bank Policy Under Uncertainty |
| JEL: | E32 E41 E43 E52 E58 |
| Date: | 2007–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:cfs:cfswop:wp200717&r=eec |
| By: | Ljungqvist, Lars; Sargent, Thomas J |
| Abstract: | Adding generous government supplied benefits to Prescott's (2002) model with employment lotteries and private consumption insurance causes employment to implode and prevents the model from matching outcomes observed in Europe. To understand the role of a 'not-so-well-known aggregation theory' that Prescott uses to rationalize the high labour supply elasticity that underlies his finding that higher taxes on labour have depressed Europe relative to the US, this paper compares aggregate outcomes for economies with two arrangements for coping with indivisible labour: (1) employment lotteries plus complete consumption insurance, and (2) individual consumption smoothing via borrowing and lending at a risk-free interest rate. The two arrangements support equivalent outcomes when human capital is not present; when it is present, allocations differ because households' reliance on personal savings in the incomplete markets model constrains the 'career choices' that are implicit in their human capital acquisition plans relative to those that can be supported by lotteries and consumption insurance in the complete markets model. Nevertheless, the responses of aggregate outcomes to changes in tax rates are quantitatively similar across the two market structures. Thus, under both aggregation theories, the high disutility that Prescott assigns to labour is an impediment to explaining European non-employment and benefits levels. Moreover, while the identities of the non-employed under Prescott's tax hypothesis differ between the two aggregation theories, they all seem counterfactual. |
| Keywords: | aggregation theories; employment lotteries; human capital; indivisible labour; labour supply elasticity; labour taxation; social and private insurance |
| JEL: | E24 E62 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6196&r=eec |
| By: | Angel Asensio (CEPN - Centre d'économie de l'Université de Paris Nord - [CNRS : UMR7115] - [Université Paris-Nord - Paris XIII]) |
| Abstract: | Extending Asensio's closed-economy framework (2005a,b) to a monetary union, we show that the<br />principles of governance which emanate from the so called "New Consensus in Macroeconomics"<br />(NCM), and therefore have been designed for presumed stationary regimes, may cause severe<br />dysfunctions, such as depressive macroeconomic policies and unemployment traps, in non-ergodic<br />regimes. The Keynesian approach, on the other hand, pleads in favour of important changes in the<br />current governance of the eurozone. First, since the European Central Bank can not repress distributive<br />inflationary pressures without having non-temporary depressive effects on aggregate demand and<br />employment, authorities should recognize that the best way for controlling this type of inflation rests<br />on a consensual distribution of income. Second, authorities should abandon any "optimal rule"<br />designed in order to stabilize the economy near to an imaginary "natural" trend. Keynesian uncertainty<br />rather suggests a gradual and pragmatic approach to macroeconomic policy. From this perspective, we<br />show that the European Monetary Union could take advantage of the complementarity between the<br />common monetary policy and the national budgetary and fiscal instruments. |
| Keywords: | Monetary policy, Fiscal policy, Monetary union, Macroeconomic governance,<br />Post-Keynesian |
| Date: | 2007–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00139025_v1&r=eec |
| By: | Javier Andrés; J. David López-Salido; Edward Nelson |
| Abstract: | We examine the role of money, allowing for three competing environments: the New Keynesian model with separable utility and static money demand; a non-separable utility variant with habit formation; and a version with adjustment costs for holding real balances. The last two variants imply forward-looking behavior of real money balances, as it is optimal for agents to allow their forecast of future interest rates to affect current portfolio decisions. We distinguish between these specifications by conducting a structural econometric analysis for the U.S. and the euro area. FIML estimates confirm the forward-looking character of money demand. Using these estimates we find that, in response to preference and technology shocks, real money balances are valuable in anticipating future variations in the natural interest rate. |
| Keywords: | Money ; Interest rates |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2007-005&r=eec |
| By: | Ioannis Cholezas (University of Peloponnese); Panos Tsakloglou (Athens University of Economics and Business and IZA) |
| Abstract: | The paper provides an analysis of the level, the structure and the patterns of inter-temporal change in hourly earnings inequality in Europe. For the purposes of static inequality decomposition analysis, the data of the ECHP are employed. Considerable cross-country differences are observed across the EU regarding both the level and the structure of earnings inequality. In most countries, of the four factors examined (education, age, sex and sector of employment), education and, to a lesser extent, age are found to be most closely associated with inequality. For the purposes of inequality trend decomposition analysis national data sets for eight European countries are utilised. The results show that in most countries the main factor behind the observed changes in earnings inequality was changes in inequality -within groups- irrespective of the partitioning criterion used, while the effect of changes in group mean earnings was negligible. Finally, changes in the composition of wage and salary earners regarding the four aforementioned factors (education, age, sex and sector of employment) had a relatively large, but not uniform across countries, effect only in a few countries and mainly when the partitioning factor is education. |
| Keywords: | earnings inequality, Europe |
| JEL: | J31 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2636&r=eec |
| By: | Janine Leschke (European Trade Union Institute ,ETUI-REHS) |
| Abstract: | This paper addresses the question to what extent social protection systems in different European countries do succeed in coping with the risks arising from non-standard forms of employment. Focusing on the examples of part-time and temporary employment, the paper will examine ex-clusionary transitions and the access to unemployment insurance benefits of workers concerned by these forms of employment. The European Community Household Panel Data (ECHP) will be used. The general hypothesis is that the adaptability of unemployment insurance systems varies between welfare regimes. Therefore, four countries will be compared: Denmark, Ger-many, Spain and the United Kingdom. |
| Keywords: | part-time employment, temporary employment, unemployment insurance, comparative analysis |
| JEL: | C23 C41 I38 J16 J65 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:dul:wpaper:07-05rs&r=eec |
| By: | Antonio Menezes (University of the Azores and CEEAplA); Dario Sciulli (University of the Azores and CEEAplA); José Cabral Vieira (University of the Azores, CEEAplA and IZA) |
| Abstract: | This paper investigates the effects of labour market institutions on wage persistence among young European workers at the beginning of their careers. We use ECHP data from 1995 to 2001 for 13 EU countries and estimate a three-level random intercept probit model that allows for unobserved heterogeneity both at the individual and country level. Overall, we find that labour market institutions explain wage persistence. In particular, we find that a high level of employment protection legislation and a high level of bargaining centralization increase wage persistence. |
| Keywords: | wage persistence, labour market institutions, unobserved heterogeneity |
| JEL: | J31 C23 J5 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2627&r=eec |
| By: | Tarja K. Viitanen (University of Sheffield and IZA) |
| Abstract: | Government expenditure on formal residential care and home-help services for the elderly significantly reduces 45-59 year old women’s informal care-giving affecting both the extensive and the intensive margin. Allowing for country fixed-effects and country-specific trends and correcting for attrition, the estimates - based on the European Community Household Panel - imply that a 1000 Euro increase in the government expenditure on formal residential care and home-help services for the elderly decreases the probability of informal care-giving outside of the caregiver’s household by 6 percentage points. Formal care substitutes for informal care that is undertaken outside of the carer’s own household, but does not substitute for intergenerational household formation. A simulation exercise shows that an increase in government formal care expenditure is a cost-effective way of increasing the labour force participation rates. |
| Keywords: | informal care, formal care, ECHP, attrition bias |
| JEL: | J14 J2 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2648&r=eec |
| By: | Narula, Rajneesh (University of Reading Business School); Santangelo, Grazia D. (Facoltà di Scienze Politiche, Università degli Studi di Catania) |
| Abstract: | This paper shows empirically that in an intra-industry oligopolistic scenario the location of a firm's innovative activities plays an important role in determining its partner selection in R&D alliances. Such a role is mainly attributed to a strategic use of R&D alliances as a means to limit knowledge flows and protect competences, rather than to promote knowledge flows. By drawing on a novel dataset matching alliances and patent data for the European ICT industry, the econometric analysis shows that partners' prior co-location (at both national and sub-national regional level), previous ties and technological overlap matter in the choice of partner, while common nationality has a negative impact on alliance formation. |
| Keywords: | alliances, strategy, efficiency, R&D location |
| JEL: | D23 F23 O18 O32 R3 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2007008&r=eec |
| By: | Yuliya Demyanyk; Vadym Volosovych |
| Keywords: | International finance ; European Union countries |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlsp:2007-01&r=eec |
| By: | Floro Ernesto Caroleo (University of Naples Parthenope); Francesco Pastore (Seconda Università di Napoli and IZA) |
| Abstract: | This paper provides a critical overview and a detailed research agenda for scholars interested in regional studies with a special focus on old and new European Union member states. The focus is on the microeconomic foundations of structural change and its spatially asymmetric impact on labour markets. Structural change has been long neglected, but the availability of new data and the specific nature of economic transition in new member states has brought again this issue to the fore, suggesting that it might provide an explanation also of several typical features of regional imbalances in old member states. The literature provides theoretical reasoning and empirical evidence to confirm this. |
| Keywords: | regional unemployment, structural change, labour turnover, optimal speed of transition, EU enlargement |
| JEL: | J6 P2 R1 R23 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2620&r=eec |
| By: | Buti, Marco; Röger, Werner; Turrini, Alessandro Antonio |
| Abstract: | While according to the so-called “Brussels-Frankfurt consensus” sound fiscal policies and structural reforms support each other, it is often claimed that the EU fiscal framework, by reducing the budgetary room of manoeuvre and the political capital of governments, may deter reforms. The aim of this paper is to explore which factors determine the relation between fiscal discipline and reforms. By means of a simple model we show that, depending on the time horizon of the government, structural reforms may either be complement or substitute with fiscal discipline. If governments are forward-looking, substitution is more likely; if governments are short-sighted, reforms and fiscal discipline may become complement. We provide empirical evidence supporting this argument. In a sample of EU-15 countries over the past three decades, the introduction of the Maastricht constraints at the beginning of the 1990s does not seem to have affected the probability of labour market reforms on average, but had a positive and significant impact on countries with governments facing elections in the current or forthcoming year (which are hence assumed to behave myopically). Our results suggest that if governments are short-sighted, then the expectation that relaxing fiscal constraints may help to boost structural reforms may be ill-founded. |
| Keywords: | Economic effects of deficits; Stability and Growth Pact; structural reforms |
| JEL: | E62 H50 H55 H62 J58 L50 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6204&r=eec |
| By: | Werner Eichhorst (IZA) |
| Abstract: | Germany and France are both Continental European welfare states with severe labor market problems such as low employment and high and persistent unemployment which can be explained by labor market institutions that inhibit labor market adaptability. This paper analyzes recent reforms in core areas such as active and passive labor market policies, employment protection and the funding of social policies through taxes and social security contributions in both countries. It shows if and to what extent more favourable conditions for employment growth could be created. The paper identifies the limits of partial reforms in terms of the creation of more efficient labor market institutions although these reforms are highly plausible in politico-economic terms. However, the cumulative effect of sequences of marginal changes leads to a gradual medium-term transformation of both Continental European labor markets. |
| Keywords: | Germany, France, labor market institutions, institutional changes, political economy |
| JEL: | J58 J68 J48 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2675&r=eec |
| By: | Bachmann, Ronald; Burda, Michael C |
| Abstract: | The secular rise of European unemployment since the 1960s is hard to explain without reference to structural change. This is especially true in Germany, where industrial employment has declined by more than 30% and service sector employment has more than doubled over the past three decades. Using individual transition data on West German workers, we document a marked increase in structural change and turbulence, in particular since 1990. Net employment changes resulted partly from an increase in gross flows, but also from an increase in the net transition "yield" at any given gross worker turnover. In growing sectors, net structural change was driven by accessions from nonparticipation rather than unemployment; contracting sectors reduced their net employment primarily via lower accessions from nonparticipation. While gross turnover is cyclically sensitive and strongly procyclical, net reallocation is countercyclical, meaning that recessions are associated with increased intensity of sectoral reallocation. Beyond this cyclical component, German reunification and Eastern enlargement appear to have contributed significantly to this accelerated pace of structural change. |
| Keywords: | gross worker flows; sectoral and occupational mobility; turbulence |
| JEL: | J62 J63 J64 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6226&r=eec |
| By: | Thomas Liebig |
| Abstract: | The labour market integration of immigrants has been a key issue both in the public debate and on the government agenda in Denmark, triggered by unfavourable employment outcomes of immigrants – the gaps in employment rates of immigrants compared to the native-born are among the highest in the OECD – and a rapid rise of the immigrant population during the past twenty years. Prior to the 1980s, immigration to Denmark was a very marginal phenomenon. Despite the rapid growth since then, with less than 7% immigrants in the population, Denmark still has one of the smallest immigrant populations in Western Europe... <BR>Suscitée par les médiocres résultats des immigrés au regard de l’emploi (au Danemark, l’écart entre leur taux d’emploi et celui des autochtones compte parmi les plus importants de la zone OCDE) et par l’accroissement rapide de cette population au cours des vingt dernières années, l’intégration des immigrés sur le marché du travail est une question clé qui fait débat dans l’opinion publique et que le gouvernement a inscrite dans son programme. Avant les années 80, l’immigration dans ce pays était un phénomène très marginal. Pourtant, en dépit de la progression rapide de cette population depuis lors, les immigrés représentent moins de 7 % de la population totale. Ainsi, le Danemark compte encore l’une des populations immigrées les plus faibles d’Europe occidentale... |
| JEL: | J15 J21 J61 J62 J7 J8 |
| Date: | 2007–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:50-en&r=eec |
| By: | Daniele, Vittorio |
| Abstract: | In Italy, as in other European Countries, FDI inflows show an high degree of spatial concentration. For instance, in the period 2000-05, the all eight Northern Italian regions received about the 75% of total FDI inflows; on the contrary, the all eight Southern ones, included in the Mezzogiorno area, attracted less than the 1% of FDI inflows in Italy. What are the causes of a such high degree of territorial concentration of FDI? Why the attractiveness of the Mezzogiorno area is so low? Several empirical studies show as the main determinants of FDI in the Italian regions concern with the market potential dimension. At the regional level, other factors, as the presence of “marshallian” agglomeration economies, and the previous localization of foreign enterprises, seem to play an important role in the attraction of FDI. The Mezzogiorno regions benefited of some localization factors that could potentially incentive the localization of foreign investments. In the Mezzogiorno, there are financial grants for investments provided by European, National and Regional funds; the labour cost is, on average, lower than in the North; not congested industrial areas are available. Nevertheless, these factors seem not able to provide some competitive advantages to these regions. Objective of this paper is to examine the impact of some “competitive disadvantages” of the Mezzogiorno. In particular, the analysis focuses on the role of organized crime and infrastructural endowment. The main interpretative hypothesis is based on the idea that a lack in some fundamental public goods – such as legality and public infrastructures – can substantially reduce the effect of policies for promoting and supporting FDI. The empirical analysis – based on OLS e WLS regressions – show as the presence of organized crime has a strong negative effect on FDI inflows in Italian provinces. The inclusions of the provinces in the Objective 1 of the EU has a weak negative effect; the infrastructural endowment influences positively – but not significantly – FDI. |
| Keywords: | FDI; Italy; Italian Mezzogiorno; Organized crime; Regional Competitiveness |
| JEL: | R38 F23 R30 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:2438&r=eec |
| By: | Georges Lemaître |
| Abstract: | The current situation regarding the integration of immigrants in the labour market in Sweden is the consequence of a number of factors and developments. The past fifteen years have seen a higher share of humanitarian migration in Sweden than in the past. This is a form of migration for which labour market integration appears to be slower than for other forms of migration in all countries. At the same time there has been a growing diversification of migration away from “Western” countries to those with a greater cultural distance... <BR>S’agissant de l’insertion des immigrés sur le marché du travail suédois, il semblerait que la situation actuelle résulte d’un ensemble de facteurs et de développements. Les quinze dernières années ont vu une part plus importante de l’immigration humanitaire que par le passé. C’est une forme de migration pour laquelle l’intégration sur le marché du travail des personnes concernées est plus lente que pour les autres formes de migration. En même temps, il y a eu une augmentation de l’immigration en provenance de pays non « occidentaux » et partageant des cultures plus éloignées... |
| JEL: | J15 J21 J61 J62 J68 J7 J8 |
| Date: | 2007–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:48-en&r=eec |
| By: | Andreas Ammermueller (ZEW Mannheim); Claudio Lucifora (Catholic University of Milan and IZA); Federica Origo (University of Bergamo); Thomas Zwick (ZEW Mannheim) |
| Abstract: | This paper investigates the functioning of regional labour markets in Italy and Germany for different employee groups. In the light of high and persistent differences in unemployment and wage rates between the North and South of Italy and the West and East of Germany, we first derive theoretical hypotheses on group specific correlations between regional unemployment and individual wages. Using micro data on hourly wages properly matched to local unemployment rates, we specify and empirically test different wage equations. On the basis of our results, we find no evidence for the existence of a "wage curve" in Italy. In the case of Germany, results are quite sensitive to the model specification and the employee group considered. In both countries, the reaction of wages to local unemployment varies significantly along the wage distribution, being more sensitive around the median quantiles. We conclude that there is no uniform wage curve and call for a differentiated analysis for various groups, taking into account the respective institutional setting. |
| Keywords: | wage curve, local labour markets, quantile regressions |
| JEL: | J3 J6 R1 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2674&r=eec |
| By: | Riccardo DiCecio; Edward Nelson |
| Abstract: | We estimate the dynamic stochastic general equilibrium model of Christiano, Eichenbaum, and Evans (2005) on United Kingdom data. Our estimates suggest that price stickiness is a more important source of nominal rigidity in the U.K. than wage stickiness. Our estimates of parameters governing investment behavior are only well behaved when post-1979 observations are included, which reflects government policies until the late 1970s that obstructed the influence of market forces on investment. |
| Keywords: | Equilibrium (Economics) - Mathematical models ; Economic policy - Great Britain |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2007-006&r=eec |