nep-eec New Economics Papers
on European Economics
Issue of 2007‒04‒14
twenty-two papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The Impact of the European Union Fiscal Rules on Economic Growth By Vítor Castro
  2. The ECB survey of professional forecasters (SPF) – A review after eight years’ experience By Carlos Bowles; Roberta Friz; Veronique Genre; Geoff Kenny; Aidan Meyler; Tuomas Rautanen
  3. Globalisation and euro area trade: Interactions and challenges By Ursel Baumann; Filippo di Mauro
  4. Corporate Tax Policy, Entrepreneurship and Incorporation in the EU By Ruud A. de Mooij; Gaëtan Nicodème
  5. Quantitative quality indicators for statistics – an application to euro area balance of payment statistics By Violetta Damia; Carmen Picón Aguilar
  6. Understanding price developments and consumer price indices in south-eastern Europe By Sabine Herrmann; Eva Katalin Polgar
  7. Informal and Formal Care among Single-living Elderly in Europe By K. Bolin; B. Lindgren; P. Lundborg
  8. Violence in European schools : victimization and consequences By Ammermüller, Andreas
  9. Wage share variations in France and Germany since 1970: what does really matter? By Nicolas Canry; Arnaud Lechevalier
  10. Service Offshoring: A Challenge for Employment? Evidence from Germany By Deborah Schöller
  11. Benefit-Entitlement Effects and the Duration of Unemployment: An Ex-Ante Evaluation of Recent Labour Market Reforms in Germany By Hendrik Schmitz; Viktor Steiner
  12. Still searching for the wage curve : evidence from Germany and Italy By Ammermueller, Andreas; Lucifora, Claudio; Origo, Federica; Zwick, Thomas
  13. Real Wage Cyclicality in Germany and the UK: New Results Using Panel Data By Fei Peng; W. Stanley Siebert
  14. Determinants of Occupational Pension Provision in Germany By Kathrin Dummann
  15. The German social long-term care insurance - structure and reform options By Arntz, Melanie; Sacchetto, Ralf; Spermann, Alexander; Steffes, Susanne; Widmaier, Sarah
  16. Exit from short-term contract. A french empirical analysis, 1990-2002 By Mohamed Ben Halima
  17. Wage Mobility and Dynamics in Italy in the 90's By Bruno Contini; Roberto Leombruni; Lia Pacelli; Claudia Villosio
  18. The Labour Market Position of Turkish Immigrants in Germany and the Netherlands: Reason for Migration, Naturalisation and Language Proficiency By Rob Euwals; Jaco Dagevos; Mérove Gijsberts; Hans Roodenburg
  19. Modelling Vulnerability in the UK By Sanghamitra Bandyopadhyay; Frank Cowell
  20. Accuracy and properties of German business cycle forecasts By Osterloh, Steffen
  21. Educational expansion and its heterogeneous returns for wage workers By Gebel, Michael; Pfeiffer, Friedhelm
  22. The use of permanent contracts across Spanish regions: Do regional wage subsidies work? By Yolanda Rebollo Sanz; Jose Ignacio García Pérez

  1. By: Vítor Castro (Universidade de Coimbra and NIPE)
    Abstract: This study intends to provide an empirical answer to the question of whether Maastricht and SGP fiscal rules have affected growth of European Union countries. A growth equation augment with fiscal variables and controlling for the period in which fiscal rules were implemented in Europe is estimated over a panel of 15 EU countries (and 8 OECD countries) for the period 1970-2005 with the purpose of answering this question. The equation is estimated using both a dynamic fixed effects estimator and a recently developed pooled mean group estimator. GMM estimators are also used in a robustness analysis. Empirical results show that growth of real GDP per capita in the EU was not negatively affected in the period after Maastricht. This is the case when the recent performance of EU countries is compared both with their past performance and with the performance of other developed countries. Results even show that growth is slightly higher in the period in which the fulfilment of the 3% criteria for the deficit started to be officially assessed. Therefore, this study concludes that the institutional changes that occurred in Europe after 1992, especially the implementation of Maastricht and Stability and Growth Pact fiscal rules, should not be blamed for being harmful to growth in Europe.
    Keywords: European Union, Economic Growth, Fiscal rules, Pooled mean group estimator
    JEL: E62 H6 O47
    Date: 2007
  2. By: Carlos Bowles (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Roberta Friz; Veronique Genre (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Geoff Kenny (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Aidan Meyler (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Tuomas Rautanen
    Abstract: Eight years have passed since the European Central Bank (ECB) launched its Survey of Professional Forecasters (SPF). The SPF asks a panel of approximately 75 forecasters located in the European Union (EU) for their short- to longer-term expectations for macroeconomic variables such as euro area inflation, growth and unemployment. This paper provides an initial assessment of the information content of this survey. First, we consider shorter-term (i.e., one- and two-year ahead rolling horizon) forecasts. The analysis suggests that, over the sample period, in common with other private and institutional forecasters, the SPF systematically under-forecast inflation but that there is less evidence of such systematic errors for GDP and unemployment forecasts. However, these findings, which generally hold regardless of whether one considers the aggregate SPF panel or individual responses, should be interpreted with caution given the relatively short sample period available for the analysis. Second, we consider SPF respondents’ assessment of forecast uncertainty using information from heir probability distributions. The results suggest that, particularly at the individual level, SPF respondents do not seem to fully capture the overall level of macroeconomic uncertainty. Moreover, even at the aggregate level, a more sophisticated evaluation of the SPF density forecasts using the probability integral transform largely confirms this assessment. Lastly, we consider longer-term macroeconomic expectations from the SPF, where, as expectations cannot yet be assessed against so few actual realisations, we provide a mainly qualitative assessment. With regard to inflation, the study suggests that the ECB has been successful at anchoring longterm expectations at rates consistent with its primary objective to ensure price stability over the medium term. Long-term GDP expectations – which should provide an indication of the private sector’s assessment of potential growth – have declined over the sample period and the balance of risks reported by respondents has generally been skewed to the downside.
    Date: 2007–04
  3. By: Ursel Baumann; Filippo di Mauro (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: As a major player in world trade, the euro area is strongly influenced by globalisation, but is far from being a passive spectator. The paper analyses how the euro area’s trade specialization has changed in response to stronger international competition and the emergence of new global players, evaluating results and possible challenges ahead. The message remains mixed. On the positive side, the export specialisation of the euro area is increasing in some mediumhigh or high-tech sectors where productivity growth is strong and demand robust, such as pharmaceuticals, also by a more intensive recourse to importing intermediate goods from low-cost countries. On the other hand, in comparison to other industrialised economies, the euro area has been somewhat slower in moving towards research-intensive goods and away from labour-intensive sectors. While this could reflect data classification issues, it may also be a sign of structural rigidities in the euro area, which hinder adjustment processes.
    Date: 2007–03
  4. By: Ruud A. de Mooij (Erasmus Universiteit Rotterdam); Gaëtan Nicodème (European Commission, and Solvay Business School (ULB))
    Abstract: In Europe, declining corporate tax rates have come along with rising tax-to-GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. We exploit a panel of European data on firm births and legal form of business to analyze income shifting via increased entrepreneurship and incorporation. The results suggest that lower corporate taxes exert an ambiguous effect on entrepreneurship. The effect on incorporation is significant and large. It implies that the revenue effects of lower corporate tax rates – possibly induced by tax competition -- partly show up in lower personal tax revenues rather than lower corporate tax revenues. Simulations suggest that between 10% and 17% of corporate tax revenue can be attributed to income shifting. Income shifting is found to have raised the corporate tax-to-GDP ratio by some 0.2%-points since the early 1990s.
    Keywords: Corporate tax; Personal tax; Entrepreneurship; Incorporation; Income shifting
    JEL: H25 L26
    Date: 2007–03–22
  5. By: Violetta Damia (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Carmen Picón Aguilar (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: Quality is a subjective notion and encompasses all aspects of how well a product meets users’ needs. It is inherently a multi-faceted concept that cannot be easily defined; any chosen definition is likely to change over time as new aspects gain importance following the evolving users’ needs. The purpose of this paper is threefold; (1) to present a number of quantitative quality indicators, (2) to apply them to measure the quality of balance of payments (b.o.p.) data at the euro area level, and (3) to identify various aspects of data quality that may be enhanced, together with their interrelations with other quality dimensions. The indicators used are compatible with the IMF Data Quality Assessment Framework (DQAF), as defined for b.o.p. statistics, focusing mainly on revisions and consistency. The results obtained from such quantitative indicators may help compilers to set priorities in order to improve the quality of the euro area data still further in dimensions such as accuracy, reliability and serviceability. Additionally, this assessment may help users to understand better the quality of the data, to anticipate the possible size and direction of the forthcoming revisions, and to evaluate the impact of using different datasets in their analysis.
    Date: 2006–11
  6. By: Sabine Herrmann (Deutsche Bundesbank, Wilhelm-Epstein-Strasse 14, 60431 Frankfurt am Main, Germany.); Eva Katalin Polgar (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: The primary goal of monetary policy in most economies of the world is to achieve and maintain price stability. This paper evaluates price developments and consumer price indices in south-eastern European countries, i.e. countries that have either recently joined the EU or are candidate or potential candidate countries. It is motivated by the fact that, in transition countries, inflation has generally been higher and more volatile than in advanced economies. The analysis reveals that the subindex housing/energy appears to be the main driving force behind overall inflation in the region. In most of the countries under review, administered prices prove to be an important factor in consumer price developments, with their weights increasing over time. Inflation volatility in south-eastern Europe is significantly higher than in the euro area. While this is partly due to a higher level of inflation, it also reflects a more pronounced share for the most volatile sub-indices as well as the marked impact of administered prices on the overall price index, a phenomenon which has also been seen in the central and eastern European countries. While in most south-eastern European countries no HICP has been calculated yet, there is little evidence suggesting that the future use of the HICP will result in a systematic change in inflation patterns in the respective countries. However, as deviations have been observed in a few countries for certain periods, without further information on the structure of the respective national CPI and the HICP such differences cannot be fully excluded. JEL Classification: E21, O52, O57, P22.
    Keywords: South-eastern Europe, inflation developments, inflation volatility, consumer price indices, HICP, administered prices.
    Date: 2007–03
  7. By: K. Bolin (Lund University Centre for Health Economics, Lund, Sweden); B. Lindgren (Lund University Centre for Health Economics, Lund, Sweden); P. Lundborg (Lund University Centre for Health Economics, Lund, Sweden, Vrije Universiteit Amsterdam, and NETSPAR)
    Abstract: The aims of this study were (1) to analyse whether informal care, provided by children or grandchildren to their elderly parents, and formal care are substitutes or complements, and (2) whether this relationship differs across Europe. The analyses were based on the newly developed SHARE (Survey of Health, Age, and Retirement in Europe) database. We found (1) that informal- and formal home care are substitutes, while informal care is a complement to doctor- and hospital visits, and (2) that these relationships in some cases differ according to a north-south gradient.
    JEL: I11 I12 J22
    Date: 2007–03–22
  8. By: Ammermüller, Andreas
    Abstract: Violence at schools is a well-known problem in many societies. This paper assesses the degree of school violence in 11 European countries and analyzes the determinants of being a victim and its effect on student performance. The study draws on the international TIMSS 2003 and the British longitudinal NCDS data. The level of school violence is high in most countries but seems not to increase over time. Besides gender, social and migration background and the appearance of students determine being bullied, hurt or stolen from by fellow students. Being a victim has a small but significantly negative impact on contemporary and later student performance and the level of educational attainment and thereby affects earnings. It is hence an important peer effect that should not be omitted in the estimation of educational production functions.
    Keywords: School violence, bullying, human capital, TIMSS, NCDS
    JEL: I21 J24 Z13
    Date: 2007
  9. By: Nicolas Canry (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I]); Arnaud Lechevalier (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: This paper refers to a few recent studies, which have focused on methodological issues related to the estimation of the wage share variations, to compare the evolutions in France and former West Germany since 1970. It is shown that the usual method overestimates the long run drop of wage share in both countries but that the magnitude and thus the contribution of different biases are quite different in France and Germany. However no bias can explain the sharp drop of wage share in Germany since 2001, which has to be analysed within the framework of the euro area.
    Keywords: Income distribution, Wage share, International comparison
    Date: 2007–04–06
  10. By: Deborah Schöller
    Abstract: Besides material offshoring, economists have started to analyze the impact of service offshoring on domestic employment. Services are of particular interest since their significance has grown not only in terms of quantity, but also of qualitative understanding. One decade ago, most services were considered non-tradable, but the appearance of new information and communication technologies has contributed to overcoming geographical distance. The introduction of the paper aims at giving an appropriate definition of service offshoring also taking into account the different motives behind offshoring. The theoretical part gives a brief literature overview of the predicted effects of offshoring on domestic employment. The empirical part first compares import data of computing and information as well as other business services and states that service offshoring is more relevant in Germany than in most other countries. Secondly, German service offshoring intensities are calculated on a sectoral basis using input-output data. This measurement represents the proportion of imported service inputs used in home production. Germany’s average service offshoring intensity more than doubled from 1991 to 2002. Besides this, indications for a possible negative correlation between German service offshoring and manufacturing employment are given. Thirdly, the impact of service offshoring on German domestic manufacturing employment is estimated at a sectoral level. The author refers to the labor demand specification of Hamermesh using sectoral wages, output and other input prices as exogenous variables. The estimation results indicate that service offshoring was negatively related to manufacturing employment in Germany between 1991 and 2000.
    Keywords: Service Offshoring, Employment, Globalization
    JEL: F1 F2
    Date: 2007–04–10
  11. By: Hendrik Schmitz (Ruhr Graduate School in Economics, Essen); Viktor Steiner (Free University Berlin, DIW Berlin and IZA)
    Abstract: We analyse benefit-entitlement effects and the likely impact of the recent reform of the unemployment compensation system on the duration of unemployment in Germany on the basis of a flexible discrete-time hazard rate model estimated on pre-reform data from the German Socioeconomic Panel (SOEP). We find (i) relatively strong benefit-entitlement effects for the unemployed who are eligible to means-tested unemployment assistance after the exhaustion of unemployment benefit, but not for those without such entitlement; (ii) nonmonotonic benefit-entitlement effects on hazard rates with pronounced spikes around the month of benefit-exhaustion, and (iii) relatively small marginal effects of the amount of unemployment compensation on the duration of unemployment. Our simulation results show that the recent labour market reform is unlikely to have a major impact on the average duration of unemployment in the population as a whole, but will significantly reduce the level of long-term unemployment among older workers.
    Keywords: unemployment duration, unemployment insurance, benefit-entitlement effects, German labour market reforms, ex-ante evaluation, hazard rate model
    JEL: J64 J65 H31
    Date: 2007–03
  12. By: Ammermueller, Andreas; Lucifora, Claudio; Origo, Federica; Zwick, Thomas
    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
  13. By: Fei Peng (University of Birmingham Business School); W. Stanley Siebert (University of Birmingham Business School and IZA)
    Abstract: This paper compares the cyclical behaviour of male real wages in Germany and the UK using the German Socio-Economic Panel 1984-2002 and the British Household Panel Survey 1991-2004. We distinguish between job stayers (remaining in the same job), and within- and between-company job movers. Stayers are the large majority in both countries. Using changes in the unemployment rate as the cyclical measure, we find real wages of stayers in the private sector in West Germany - but not East Germany - to be procyclical, and quite sensitive to unemployment, comparable to the US and the UK. We find cyclicality in the public sector in neither country. Thus real wage flexibility is similar in the two countries, apart from East Germany, despite apparent differences in wage-setting institutions.
    Keywords: real wage cyclicality, job stayers, Germany, United Kingdom, GSOEP, BHPS
    JEL: E32 J31 K31
    Date: 2007–03
  14. By: Kathrin Dummann (University of Rostock)
    Abstract: Demographic change causes an undersupply of financial old age benefits within the statutory pay-as-you-go pension system in Germany. Therefore, the provision of occupational as well as private pensions has to be enhanced. However, there seems to be an undersupply of occupational pension provision particularly in small and medium sized enterprises (SMEs). Using survey data of the German Socio-Economic Panel (GSOEP) and the German SAVE survey, the present paper studies econometrically the determinants of occupational pension provision in Germany. It shows that occupational pensions depend not only on supply-side factors such as firm size and industry, but also on demand-side factors such as individual socio- demographic attributes and people's savings motives.
    Keywords: Occupational Pensions, Retirement Provision, Demographic Change, SMEs
    JEL: C25 G23 J14
    Date: 2007
  15. By: Arntz, Melanie; Sacchetto, Ralf; Spermann, Alexander; Steffes, Susanne; Widmaier, Sarah
    Abstract: Regarding social needs in Germany long-term care is an important issue due to an ageing population. Shrinking social networks are leading to a greater need for a public long-term care system. In 1995 the social long-term care insurance was introduced in Germany which is similar in nature to the other social insurances, such as the health care or pension insurance. Long-term care insurance funds are generally linked to health insurance funds. The benefits are financed by virtue of an income-based system where all employees covered by the social security system and their employers have to pay equal contributions on a pay-as-you-go basis. In case of long-term care needs a frail person is assigned to one of three care levels according to his/her severity of need. Benefit recipients living in private households can choose between three kinds of transfers: in-kind transfers, lump-sum transfers and combined transfers whereas the amount of in-kind transfers is higher than the lump-sum transfers in all care levels. Benefit recipients living in nursing homes receive the highest amount of transfers. In recent years some drawbacks of the social long-term care insurance structure turned out to be in need of reform: While health insurance is a fully comprehensive system, long-term care insurance only provides limited cover. Therefore, insurance funds have an incentive to shift some services from health care to long-term care insurance. For instance, there is a low incentive to provide rehabilitation measures in order to lower the care level. Additionally, there is no free competition on the long-term care market because care packages included in the in-kind transfers are negotiated (with respect to services and prices) between insurance funds and professional care providers. Finally, the financial situation of the German social long-term care insurance is tight. While in the first years after introduction the net results of revenues and expenditures were positive they have been negative since 1999 which is due to an increasing number of benefit recipients. Therefore, we discuss several reform options which have been proposed in order to overcome the financial and structural problems. Suggestions for the income side include the introduction of fixed premiums, a fully funded system, a private insurance, or a citizens’ insurance. The main problem here is to finance the transition from one system to another system. Some proposals are discussed here. The introduction of individual budgets is the most popular option for the outcome side. A social experiment is under way in order to evaluate the impact of so-called matching transfers.
    JEL: I10 I12 I18
    Date: 2006
  16. By: Mohamed Ben Halima (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines])
    Abstract: This paper tests the determinants of the transition out of short-term contracts by means of competing risk form of the semi-parametric Cox proportional hazard model. We use three labour market states distinguishing between exit into long-term contract, another short-term contract, and unemployment. For each type of exit, we define a separate hazard function that we'll call a type-specific hazard. The estimates are carried out from a dataset recording individual labour market histories, the French Labour Force Survey (LFS) collected by the<br />French National Statistical Institute (INSEE). The competing risk model is estimated for all the individual as well as separately for men and women. Our results show that, for men and women, the conditional probability of exiting STC into LTC decreases after 12th months. Moreover, staying in the same firm after a STC increases the chances of getting stable jobs in the future.
    Keywords: Short-Term Contracts ; Duration model ; Competing risk hazard model
    Date: 2007–04–04
  17. By: Bruno Contini; Roberto Leombruni; Lia Pacelli; Claudia Villosio
    Abstract: Inspite of the centralized nature of wage bargaining in Italy, we find some evidence suggesting the existence of firm-wage policies. Firstly, the ratio of the between-firm wage variability relative to total wage variability is sizeable, and not very dissimilar from that reported for other countries. Secondly, the tide raising all boats is quite suggestive: not only do individual wages throughout the whole distribution increase as average firm wages increases, but the spread increases too. Firm wage policy matters in shaping not only the wage level distribution but also the wage change distribution. The within-firm s.d. of wage change is almost as high as that of individual wage change, and much higher than between-firm variability of average change in wages. Worker-based statistics, on the other side, show that relative changes in individual wages follow the business cycle, although different parts of the distribution react in a different way to it, the upper tail having a higher responsiveness. Both facts are at odds with the often reported rigidity of Italian wages. Indeed, the detected flexibility is mainly driven by movers and short tenure workers. The cross-country comparison suggests that the relatively high degree of wage compression in Italy could be associated with higher entry and exit rates.
    JEL: J21 J3 J5
    Date: 2007–04
  18. By: Rob Euwals (CPB, The Hague, Netspar and IZA); Jaco Dagevos (SCP, The Hague); Mérove Gijsberts (SCP, The Hague); Hans Roodenburg (CPB, The Hague)
    Abstract: On the basis of the German Socio-Economic Panel 2002 and the Dutch Social Position and Use of Provision Survey 2002, we investigate the importance of characteristics related to immigration for the labour market position of Turkish immigrants. We use regression techniques to correct for composition effects in employment rates, tenured job rates and job prestige scores (ISEI). First, we find that educational attainment and language proficiency have a higher return in the Netherlands than in Germany. Second, we find that second generation immigrants have improved their labour market position relative to the first generation of labour migrants and their partners. The improvement is largely due to an improvement in educational attainment and language proficiency. Third, for the Netherlands we find a positive relation between naturalisation and labour market position, while for Germany we find a negative relation with tenured employment. The contrasting results on tenured employment may be explained partly by differences in immigration rules. In Germany economic self-reliance is more important than in the Netherlands, and this may lead to a stronger incentive to naturalise for workers with a temporary contract.
    Keywords: immigration, labour market, naturalisation, language proficiency
    JEL: C25 F22 J15 J61
    Date: 2007–03
  19. By: Sanghamitra Bandyopadhyay; Frank Cowell
    Abstract: In this paper we examine the concept of "vulnerability" (Townsend 1994) within the context of income mobility of the poor. We test for the dynamics of vulnerable households in the UK using Waves 1 - 12 of the British Household Panel Survey and find that, of three different types of risks that we test for, household-specific shocks and economy-wide aggregate shocks have the greatest impact on consumption, in comparison to shocks to the income stream. Quantile-specific estimates reveal specific quantiles, particularly those around the poverty line which are most susceptible to be vulnerable to shocks to the income stream. The estimates are found to be robust to household composition and year-specific shocks.
    Keywords: Income Variability, Vulnerability, Income Dynamics, BHPS
    JEL: D1 D31 I32
    Date: 2007
  20. By: Osterloh, Steffen
    Abstract: In this paper the accuracy of a wide range of German business cycle forecasters is assessed for the past 10 years. For this purpose, a data set is used comprising forecasts published on a monthly basis by Consensus Economics. The application of several descriptive as well as statistical measures reveals that the accuracy of the 2-years forecasts is low relative to a simple naïve forecast. This observation can mainly be explained by a systematic overestimation of the growth rates by the forecasters. Moreover, the lack of accuracy can also be explained partly by insufficient information efficiency as well as imitation behaviour. Finally, it is shown that notwithstanding the common errors which affected the accuracy of all forecasters mainly because of their systematic overestimation, they differ significantly in their forecast accuracy.
    Keywords: business cycle forecasting, forecast evaluation, Consensus forecasts
    JEL: C52 E32 E37
    Date: 2006
  21. By: Gebel, Michael; Pfeiffer, Friedhelm
    Abstract: The paper examines the evolution of returns to education in the West German labour market over the last two decades. During this period, graduates from the period of educational expansion in the sixties and seventies entered the labour market and an upgrading of the skill structure took place. In order to tackle the issues of endogeneity of schooling and its heterogeneous returns we apply two estimation methods: Wooldridge’s (2004) approach that relies on conditional mean independence and Garen’s (1984) control function approach that requires an exclusion restriction. For the population of workers from the GSOEP, we find that both approaches produce estimates of average returns to education that decrease until the late 1990s and increase significantly afterwards. In the observation period, the gender gap in returns to education seems to vanish. Furthermore, we find that the so called “baby boomer” cohort has the lowest average return to education in young ages. However, this effect disappears when they become older.
    Keywords: Educational expansion, correlated random coefficient model, heterogeneous returns to education, conditional mean independence
    JEL: J21 J24 J31
    Date: 2007
  22. By: Yolanda Rebollo Sanz (Department of Economics, Universidad Pablo de Olavide); Jose Ignacio García Pérez (Department of Economics, Universidad Pablo de Olavide)
    Abstract: This paper evaluates the effect of regional wage subsidies to foster permanent employment for a sample of temporary and unemployed Spanish workers. We study the transition into permanent employment using a new dataset based on administrative Social Security registers named “La Muestra Continua de Vidas Laborales”, which is used for the first time to carry out policy evaluation exercises in the Spanish labor market. This dataset offers important advantages with respect to the Labour Force Survey, given it offers the complete labor history of the worker. Moreover, since we have individual, regional and time variation in our policy measure, we can apply a difference-in-differences estimator to identify the average treatment effect of this policy. Though, these regional policies have been implemented for almost ten years, as far as we know, this is the first attempt to evaluate them. Our main results are that, in average terms, this policy has positive but small effects on the transition rate into permanent employment either from a temporary contract or from unemployment. The incidence of these subsidies, however, is larger when the worker is in a temporary contract. It is also larger for young females while for old male workers do not have any effect. Measured at the average wage subsidy (5100 Euros) the total change in the entrance probability from a temporary to a permanent contract is around 26% for young women, 24% for middle age ones and 22% for middle age men, the most benefited workers. Nevertheless, since the transition rates to permanent contracts at the same firm are pretty low these relative changes hardly generate a change in the transition probability from a temporary to a permanent contract at the same firm. For instance, in the case of young women the estimated transition probability growths from 0.064% to 0.075% while for middle age men it changes from 0.039% to 0.041%.
    Keywords: Difference-in-Differences, Evaluation Analysis, Wage Subsidies, Competing Riks
    JEL: J38 J68
    Date: 2007–04

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