nep-eec New Economics Papers
on European Economics
Issue of 2007‒04‒28
29 papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Inflation Differentials and Business Cycle Fluctuations in the European Monetary Union By Christian Proaño Acosta
  2. The sustainability of euro area debt: a re-assessment By Peter Wierts
  3. What Does Europe Pay for Clean Energy? – Review of Macroeconomic Simulation Studies By Dannenberg, Astrid; Mennel, Tim; Moslener, Ulf
  4. How do social capital and government support affect innovation and growth? Evidence from the EU regional support programmes By Akcomak, Semih; Ter Weel, Bas
  5. Rivals or partners? : Evidence from Europe's international private equity deals By Tykvová, Tereza; Schertler, Andrea
  6. Regional Labour Mobility in the European Union: Adjustment Mechanism or Disturbance? By Paul Cavelaars; Jeroen Hessel
  7. Understanding Attitudes to Immigration: The Migration and Minority module of the first European Social Survey By David Card; Christian Dustmann; Ian Preston
  8. Assessing the Gap between Observed and Perceived Inflation in the Euro Area : Is the Credibility of the HICP at Stake ? By Luc Aucremanne; Marianne Collin; Thomas Stragier
  9. Lessons from the ECB experience: Frankfurt still matters! By Zeno Rotondi; Giacomo Vaciago
  10. No Man is an Island, the Inter-personal Determinants of Regional Well-Being in Europe By Aslam, A.; Corrado, L.
  11. Labor Market Status and Transitions During the Pre-Retirement Years: Learning from International Differences By Arie Kapteyn; James P. Smith; Arthur van Soest; James Banks
  12. Your Next of Kin or your Own Career? Caring and Working among the 50+ of Europe By K. Bolin; B. Lindgren; P. Lundborg
  13. Hub Premium, Airport Dominance and Market Power in the European Airline Industry. By Claudio A. Piga; Enrico Bachis
  14. A time varying coefficient model for panel data: Foreign Direct Investment in European OECD countries. By Petr Mariel; Susan Orbe; Carlos Rodríguez
  15. Testing the Purchasing Power Parity: Evidence from the New EU Countries By Minoas Koukouritakis
  16. Determinants of growth in the central and eastern European EU member states - a production function approach. By Olga Arratibel; Frigyes Ferdinand Heinz; Reiner Martin; Marcin Przybyla; Lucasz Rawdanowicz; Roberta Serafini; Tina Zumer
  17. A forewarning indicator system for financial crises: the case of six Central and Eastern European countries By Irène Andreou; Gilles Dufrénot; Alain Sand-Zantman; Aleksandra Zdzienicka-Durand
  18. Nonmonetary Determinants of Inflation in Romania: A Decomposition By Felix Hammermann
  19. Distribution and growth in France and Germany - single equation estimations and model simulations based on the Bhaduri/Marglin-model By Eckhard Hein; Lena Vogel
  20. Employment, Wage Structure, and the Economic Cycle: Differences between Immigrants and Natives in Germany and the UK By Christian Dustmann; Albrecht Glitz; Thorsten Vogel
  21. Foreign banks’ attraction to the financial centre Frankfurt – a ‘u’-shaped relationship By Michael H. Grote
  22. The Prohibition of the Proposed Springer-ProSiebenSat.1-Merger: How much Economics in German Merger Control? By Oilver Budzinski; Katharina Wacker
  23. The Interaction between Mortgage Financing and Housing Prices in Greece By Sophocles N. Brissimis; Thomas Vlassopoulos
  24. And Then There Were Four... How Many (and Which) Measures of Active Labour Market Policy Do We Still Need? By Eichhorst, Werner; Zimmermann, Klaus F
  25. Declining Export Prices due to Increased Competition from NIC - Evidence from Germany and the CEEC By Sebastian Gundel
  26. Subsidiary’s Embeddedness of Italian SMEs in Central and Eastern European Countries (CEECs)° By Luciano Fratocchi; Alberto Onetti; Alessia Pisoni
  27. The Worsening of Wage Expectations in Italy: a Study Based on Administrative data By Elena Giarda
  28. The Resurrection of the Italian Wage Curve By Francesco Devicienti; Agata Maida; Lia Pacelli
  29. Immigrants in the British Labour Market By Christian Dustmann; Francesca Fabbri

  1. By: Christian Proaño Acosta (IMK at the Hans Boeckler Foundation, University of Bielefeld)
    Abstract: The high degree of persistence in the national inflation differentials of the majority of EMU Member States observed since the introduction of the euro has raised serious concerns among researchers and policy-makers alike. In this paper the main theoretical arguments which explain the existence of such inflation differentials within a monetary union are reviewed and, by means of econometric methods, their dynamic behaviour prior and after the introduction of the euro is analyzed. Furthermore, the empirical evidence for different degrees of correlation between the country-specific business cycles fluctuations and the arise of national inflation differentials with respect to the euro area average are investigated through single-equation GMM and panel TSLS estimations.
    Keywords: Inflation differentials, convergence and stationary tests, GMM es- timation, Phillips Curve
    JEL: C23 C33 E31 E32
    Date: 2007–03
  2. By: Peter Wierts
    Abstract: This paper re-assesses findings of the literature that the systematic debt stabilising response in fiscal policy has been sufficiently strong for keeping debt ratios on a sustainable path in Euro area countries. In doing so, it adjusts the standard approach to the specific context of Economic and Monetary Union. Results show that before 1993 policy responses towards net and gross debt are comparable. After 1993, the reaction to net debt weakens while policies react more strongly to the build-up of gross debt according to the definition of the EU fiscal rules. This suggests that financial assets have increasingly been used for managing gross debt ratios while improving net worth has received less priority.
    Keywords: debt; sustainability; EMU; stock flow adjustment
    JEL: E62 H62 H63
    Date: 2007–04
  3. By: Dannenberg, Astrid; Mennel, Tim; Moslener, Ulf
    Abstract: This paper analyses the macroeconomic costs of environmental regulation in European energy markets on the basis of existing macroeconomic simulation studies. The analysis comprises the European emssion trading scheme, energy taxes, measures in the transport sector, and the promotion of renewable energy sources. We find that these instruments affect the European economy, in particular the energy intensive industries and the industries that produce internationally tradeable goods. From a macroeconomic point of view, however, the costs of environmental regulation appear to be modest. The underlying environmental targets and the efficient design of regulation are key determinants for the cost burden.
    Keywords: Environmental regulation, energy market, macroeconomic costs
    JEL: Q21 Q28 Q41 Q43 Q48
    Date: 2007
  4. By: Akcomak, Semih (UNU-MERIT); Ter Weel, Bas (UNU-MERIT)
    Abstract: This research investigates the role of social capital and government intervention in explaining the differences of innovation output and economic growth for regions of the European Union from 1990-2002. Using several measures of social capital and innovation, and the European Union’s Objective 1, 2 and 5b figures for EU regional support, the estimates suggest that EU funding is not significantly contributing to economic outcomes, while social capital is. Investigation of a possible complementary relationship between social capital and government support reveals that regions with higher levels of social capital are more likely to effectively gain from EU regional support programmes. This result implies that aside from the benefits associated with the direct effect of social capital on economic outcomes, social capital appears to be a critical prerequisite for the effective implementation of government programmes. From a policy perspective, it appears to be important to stimulate education to foster human capital formation. When combined, human capital and social capital are likely to yield stronger effects for effective policies which increase economic outcomes.
    Keywords: Social capital, Innovation, Economic growth, European Union, Structural funds
    JEL: O1 O3 O52 Z13
    Date: 2007
  5. By: Tykvová, Tereza; Schertler, Andrea
    Abstract: Cross-border private equity deals have increased substantially in recent years. This study looks at the issue of how European investors view their local counterparts in the portfolio companies’ home countries. If they regard them as rivals, they will target countries that lack a private equity industry. If they view them as (potential) partners, however, they will prefer investing in countries with a mature private equity industry. We test these two contradictory hypotheses by using a unique cross-border country dataset on international investments of European private equity investors. We find that European investors predominantly invest in countries with more mature private equity industries. The presence of local private equity investors also determines how European investors exploit differences in growth rates between the target country and their home country : European private equity investors respond more strongly to given growth differentials if investments can be syndicated with an experienced local investor. In our reading, these findings are in line with the partnership hypothesis.
    Keywords: Private Equity, Internationalization, Transnational Syndication
    JEL: F21 G24
    Date: 2006
  6. By: Paul Cavelaars; Jeroen Hessel
    Abstract: We analyse the role of labour mobility as a mechanism for regional adjustment in Europe. We find that only a small share of migration can be explained by economic differences. Moreover, despite European integration and structural reforms, the role of labour migration in regional adjustment has not increased since the late 1980s. We conclude that regional migration in Europe currently acts as a source of disturbances rather than an adjustment mechanism.
    Keywords: labour mobility.
    JEL: F2 J60 R1
    Date: 2007–04
  7. By: David Card (Department of Economics, University of California, Berkeley and Centre for Research and Analysis of Migration (CReAM)); Christian Dustmann (Department of Economics and Centre for Research and Analysis of Migration (CReAM), University College London); Ian Preston (Department of Economics and Centre for Research and Analysis of Migration (CReAM), University College London)
    Abstract: Immigration control is an issue that figures prominently in public policy discussions and election campaigns throughout Europe. Although immigration may have positive effects on economic efficiency and growth in the receiving economy, it is often the negative aspects -or perceived negative aspects - of immigration that attract the most attention. In this paper, we use the immigration module of the European Social Survey (ESS), which we developed in collaboration with the ESS survey team, to investigate public opinions about immigration, and the various dimensions of economic, public and private life that individuals feel are affected by immigration. We show that that there is substantial variation in the strength of anti-immigrant opinion across European countries, and that attitudes toward immigration also vary systematically with characteristics such as age, education, and urban/rural location. We propose possible interpretations of some of these regularities.
    Keywords: Migration, Survey, Attitudes
    Date: 2005–06
  8. By: Luc Aucremanne (National Bank of Belgium, Research Department); Marianne Collin (National Bank of Belgium, Research Department); Thomas Stragier (National Bank of Belgium, Research Department)
    Abstract: We find strong econometric support for a break in the relationship between perceived and HICP inflation in the euro area, triggered by the introduction of euro notes and coins in January 2002. The break is fairly homogeneous across individuals with different socio-economic characteristics. We found no support for the thesis according to which perceptions are systematically formed by frequently purchased products. A similar break is found when national CPIs instead of HICPs are used as benchmarks. The role of the non-inclusion of owner-occupied housing in the HICP was negligible. Therefore the credibility of the HICP per se is not at stake.
    Keywords: inflation, perceived inflation, panel unit roots tests
    JEL: C22 C23 D12 E31
    Date: 2007–04
  9. By: Zeno Rotondi; Giacomo Vaciago (DISCE, Università Cattolica; DISCE, Università Cattolica)
    Abstract: This paper compares the European Central Bank’s conduct of monetary policy (1999-2005) with that of the Bundesbank (after the German Unification: 1990-1998) in order to test the hypothesis of an ECB with “Bundesbank’s preferences” put forward in the theoretical literature (Alesina and Grilli 1993, Fatum 2006). Econometric tests and simulations based on monetary policy reaction functions show that the continuation of the former Bundesbank regime is supported by the data. Given this empirical evidence we discuss the lessons for future Monetary Unions stemming from the ECB experience.
    Keywords: EMU, Monetary Policy, Reaction Function, Taylor rule, ECB, Bundesbank
    JEL: E52 E58
    Date: 2007–03
  10. By: Aslam, A.; Corrado, L.
    Abstract: There is a strong need to complement the analysis of social well-being at the European regional level to supplement existing, predominantly economic analysis. This work extends the measurement of well-being across the EU-15 regions in several ways. First, we assess the determinants of well-being using a multilevel modelling approach using data at the national, regional and individual levels. Second, we have extended the model to account for the effects of social interactions within each group, as well as intrinsic socio-demographic indicators and higher-level exogenous contextual factors. Empirical findings support the idea that well-being is strongly dependent both on these general forms of social interactions and on more specific individual characteristics. We find that there is some evidence of greater regional effects relative to national effect.
    Keywords: Multilevel Modelling, Regional Well-Being, Social Interactions, Social Distance.
    JEL: R1 I31 O18 D31 D6
    Date: 2007–04
  11. By: Arie Kapteyn (RAND); James P. Smith (RAND); Arthur van Soest (RAND); James Banks (University College London)
    Abstract: Many western industrialized countries face strong budgetary pressures due to the aging of the baby boom generations and the general trends toward earlier ages of retirement. The commonality of these problems has the advantage of offering an empirical laboratory for the testing of programmatic incentives on labor force participation and retirement decisions that would not be possible in a single country where programs typically only change very slowly. One can gauge the effect of policies by analyzing the differences in the prevalence of unemployment, early retirement or work disability across countries. We use the American PSID and the European Community Household Panel (ECHP) to explain differences in prevalence and dynamics of self-reported work disability and labor force status. To that end we specify a two-equations dynamic panel data model describing the dynamics of labor force status and self-reported work disability. We find that transitions between work and non-work are more frequent in the US than in the 13 European countries we analyze. For self-reported work disability we don’t observe similar differences in transition rates between disability states, although overall Americans are less likely to report work disabilities. The difference in outflow out of work between the US and Europe appears to be smaller than the difference in inflow into work. When we apply the US parameters of the flow from non-work to work , the net result is that Europeans tend to work more.
    Date: 2007–01
  12. 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: An increasing demand for both formal and informal care is likely to result from the ongoing demographic transition at the same time as there is a further move away from the traditional domestic division of labour. Public policy-making that aims at increasing the supply of informal care necessitates knowledge about the relative importance of various incentives for individual care providers. This paper takes as a point of departure that the willingness to supply informal care is partly explained by the extent to which it adversely affects labour market outcomes and analyses the effect on labour market outcomes of providing informal care to one’s elderly parent(-s) among the 50+ of Europe. Data from SHARE (Survey of Health, Ageing, and Retirement in Europe) was used to examine the association between, on the one hand, hours of informal care provided and, on the other, (1) the probability of employment, (2) hours worked, and (3) wages, respectively. The results suggest that giving informal care to one’s elderly parents is associated with significant costs in terms of foregone labour market opportunities and that these adverse effects vary between countries. The negative effect on the employment probability and the number of hours worked, respectively, of informal-care provision was found to be stronger in central Europe than in southern Europe, while the wage rate was found to be less negatively affected in the central European countries.
    Keywords: Informal care; Labour-market outcomes; Endogeneity; Europe; SHARE
    Date: 2007–03–22
  13. By: Claudio A. Piga (Dept of Economics, Loughborough University); Enrico Bachis (Business School, Nottingham University)
    Abstract: Using evidence from an original dataset of more than 12 million fares, this study sheds light on two issues relating to the pricing behaviour of the main European airlines: 1) the extent to which an airline’s dominant position at the origin airport, at the route and the city-pair level affects the airlines’ market power; 2) whether fares follow a monotonic time path consistent with the pursuing of an inter-temporal price discrimination strategy. Our estimates reveal that enjoying a dominant position within a route is conducive to higher fares, possibly because of the limited size of many “natural monopoly” routes that facilitate the incumbent’s engagement in a limit pricing strategy. On the contrary, a larger share within a city-pair does not seem to facilitate the exercise of market power, thereby suggesting the existence of a large degree of substitutability between the routes in a city-pair.
    Keywords: on-line pricing; price discrimination; dispersion; yield management.
    JEL: L11 L13 L93
    Date: 2007–04
  14. By: Petr Mariel (UPV/EHU, Facultad de Ciencias Económicas y Empresariales); Susan Orbe (UPV/EHU, Facultad de Ciencias Económicas y Empresariales); Carlos Rodríguez (UPV/EHU, Facultad de Ciencias Económicas y Empresariales)
    Abstract: The present article reexamines some of the issues regarding the Knowledge-Capital Model that encompasses both horizontal and vertical Foreign Direct Investment described in detail in the literature. The empirical support for this model is however a mixture. This article proposes a new way of estimating coefficients by allowing them to vary over time. The estimation results obtained using data from fourteen European countries for the period from 1982 to 2004 confirm that these coefficients cannot be considered constant over time and that the vertical component of the Knowledge-Capital Model is relevant even in the context of European countries with relatively similar endowments.
    Keywords: Foreign Direct Investment, Time-varying coefficients
    JEL: C14 F21
    Date: 2007–04–23
  15. By: Minoas Koukouritakis (Department of Economics, University of Crete, Greece)
    Abstract: This paper examines the validity of the purchasing power parity between each of the twelve new EU countries vis-à-vis the Eurozone. Using the Johansen cointegration methodology for a period that begins from the mid-1990s and allowing for a structural break for the countries that joined the EU on May 2004, it is found that there is a long-run equilibrium relationship among the nominal exchange rate, the domestic prices and the foreign prices, for all the new EU countries. The evidence also suggests that the PPP vector enters the cointegration space for Bulgaria, Cyprus, Romania and Slovenia, which means that only for these countries the long-run PPP vis-à-vis the Eurozone is verified. For the rest of the new EU countries the long-run PPP is violated, may due to the fact that the currencies of these countries have been pegged to the euro and cannot reflect the inflation differences vis-à-vis the Eurozone.
    Keywords: Purchasing Power Parity, EU Enlargement, Cointegration, Structural Break, Symmetry and Proportionality.
    JEL: F15 F42
    Date: 2007–04–17
  16. By: Olga Arratibel (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Frigyes Ferdinand Heinz (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Reiner Martin (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Marcin Przybyla (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Lucasz Rawdanowicz (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Roberta Serafini (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Tina Zumer (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: Overall, the prospects for a continued and reasonably fast real convergence process between the EU8 countries and the euro area are good. However, the continuation of the rapid progress made by many EU8 countries in the past cannot be taken for granted. In fact, in order to ensure that fast economic growth in the EU8 countries remains sustainable, it is crucial for these economies to take appropriate policy action. First it is important to recall that sound macroeconomic policies including credible monetary policy and appropriate fiscal policy are essential to ensure the appropriate framework conditions for further growth and convergence. Second, they need to address structural labour market problems, in particular by reducing regional and skill mismatches. Third, they must make further efforts to improve the business environment, in order to ensure that the capital accumulation process continues and R&D investments increase. Many of the above-mentioned facets of growth-enhancing policy will also help to ensure a continued inflow of foreign direct investment (FDI), which in turn is expected to help accelerate the convergence process.
    Date: 2007–04
  17. By: Irène Andreou (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); Gilles Dufrénot (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - [Université de la Méditerranée - Aix-Marseille II][Université de droit, d'économie et des sciences - Aix-Marseille III] - [Ecole des Hautes Etudes en Sciences Sociales]); Alain Sand-Zantman (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); Aleksandra Zdzienicka-Durand (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines])
    Abstract: We propose a measure of the probability of crises associated with an aggregate indicator, where the percentage of false alarms and the proportion of missed signals can be combined to give an appreciation of the vulnerability of an economy. In this perspective, the important issue is not only to determine whether a system produces true predictions of a crisis, but also whether there are forewarning signs of a forthcoming crisis prior to its actual occurrence. To this end, we adopt the approach initiated by Kaminsky, Lizondo and Reinhart (1998), analyzing each indicator and calculating each threshold separately. We depart from this approach in that each country is also analyzed separately, permitting the creation of a more “custom-made” early warning system for each one.
    Keywords: composite indicator ; currency crisis ; early warning system
    Date: 2007–04–19
  18. By: Felix Hammermann
    Abstract: Why is inflation, 15 years after transition started, still considerably higher in Romania than in the eight EU member states (EU-8) that joined in May 2004? Panel estimation based on ten central and eastern European countries allows us to decompose the inflation differential between Romania and the EU-8. The decomposition suggests that neither the revenue, nor the balance of payments, nor the financial stability motive are driving inflation; rather structural differences are at play. The employment motive, together with indicators reflecting the prolonged structural change, explain most of the inflation gap vis-à-vis the EU-8.
    Keywords: inflation, panel data, transition economics
    JEL: E58
    Date: 2007–03
  19. By: Eckhard Hein (IMK at the Hans Boeckler Foundation); Lena Vogel (University of Hamburg (Student))
    Abstract: The authors analyse the relationship between functional income distribution and economic growth in France and Germany from 1960 until 2005. The analysis is based on a demand-driven distribution and growth model for an open economy inspired by Bhaduri/Marglin (1990), which allows for profit- or wage-led growth. First, the authors apply a single equation approach, estimating the effects of redistribution on the demand aggregates and summing up these effects in order to obtain the total effect of redistribution on GDP growth. Since interactions between the demand aggregates are omitted from this approach, the authors also apply a simulation approach taking into account these interactions. In the single equations approach the authors find that growth in France and in Germany was wage-led. This qualitative result is confirmed by the simulation approach, but the quantitative effects differ somewhat. Whereas in the single equation approach the wage-led nature of the demand regime in Germany seems to be more pronounced than in France, in the simulation approach the effects in the two countries seem to converge.
    Keywords: Distribution, growth, demand-led accumulation regimes
    JEL: E12 E21 E22 E23 E25
    Date: 2007–03
  20. By: Christian Dustmann (Centre for Research and Analysis of Migration, Department of Economics, University College London); Albrecht Glitz (Centre for Research and Analysis of Migration, Department of Economics, University College London); Thorsten Vogel (Humboldt Universität zu Berlin and Centre for Research and Analysis of Migration.)
    Abstract: Differences in the cyclical pattern of employment and wages of immigrants relative to natives have largely gone unnoticed in the migration literature. In this paper we show that immigrants and natives react differently to the economic cycle. Based on over two decades of micro data, our investigation is for two of the largest immigrant receiving countries in Europe which at the same time are characterised by different immigrant populations as well as different economic cycles, Germany and the UK. Understanding the magnitude, nature and possible causes of differences in responses is relevant for assessing the economic performance of immigrant communities over time. We show that there are substantial differences in cyclical responses between immigrants and natives. Our analysis illustrates the magnitude of these differences, while distinguishing between different groups of immigrants. Differences in responses may be due to differences in the skill distribution between immigrant groups and natives, or differences in demand for immigrants and natives of the same skills due to differential allocation of immigrants and natives across industries and regions. We demonstrate that substantial differences in cyclical patterns remain, even within narrowly defined groups. Finally, we estimate a more structural factor type model that, using regional variation in economic conditions, separates responses to economic shocks from a secular trend and allows us to obtain a summary measure for these differences within education groups.
    Keywords: Immigration, Wage Structure, Business Cycle
    JEL: E32 F22 J31
    Date: 2006–09
  21. By: Michael H. Grote
    Abstract: This paper traces the location of foreign banks in Germany from 1949 to 2006. As suggested by new economic geography models we find a ‘u’-shaped concentration of foreign banks in Germany. Only after a competition between several cities, Frankfurt has emerged as the pre-eminent financial centre, triggered by the ‘historical event’ of setting up the German central bank in Frankfurt. After a strong increase, Frankfurt’s share in the location of foreign banks in Germany decreases slowly but significantly since the mid 1980’s. We conclude that there will be a lesser role in Europe for secondtier financial centres in the future.
    JEL: R11 N94
    Date: 2007–04
  22. By: Oilver Budzinski (Faculty of Business Administration and Economics, Philipps Universitaet Marburg); Katharina Wacker
    Abstract: We review the Bundeskartellamt (Federal Cartel Office Germany) decision on the proposed merger between Springer and ProSiebenSat.1 from an economic point of view. In doing so, it is not our goal to analyse whether the controversial decision by the Bundeskartellamt has been correct or flawed from a legal point of view. Instead, we analyse whether the economic reasoning in the decision document reflects state-of-the-art economic theory on conglomerate mergers. Regarding such types of mergers, anticompetitive effects either do not occur regularly or are more often than not overcompensated by efficiency gains, so that a standard welfare perspective demands reluctance concerning antitrust interventions. This is particularly true if two-sided markets, like media markets, are involved. However, anticompetitive conglomerate mergers are not impossible, in particular in neighbouring markets where there is some relationship between the products of the merging companies. In line with the more-economic approach in European merger control, a particular thorough line of argumentation, backed with particularly convincing economic evidence, is necessary to justify a prohibition of a conglomerate merger from an economic point of view. Against this background, we do not find the reasoning of the Bundeskartellamt entirely convincing and sufficiently strong to justify a prohibition of the proposed combination from an economic perspective. The reasons are that (i) the Bundeskartellamt fails to continuously consider consumer and customer welfare as the relevant standards, (ii) positive efficiency and welfare effects of cross-media strategies are neglected, (iii) in contrast, the competition agency sometimes appears to view profitability of post-merger strategy options to be per se anticompetitive (efficiency offence), (iv) the incontestability of the relevant markets is not sufficiently substantiated, (v) inconsistencies occur regarding the symmetry of the TV advertising market duopoly versus the unique role of the BILD-Zeitung and (vi) the employment of modern economic instruments appears to be underdeveloped. Thus, we conclude that the Bundeskartellamt has not embraced the European more-economic approach in the analysed decision. However, one can discuss whether economic effects are overcompensated in this case by concerns about a reduction in diversity of opinion and threats to free speech. Similar to the Bundeskartellamt, we do not consider these concerns in our analysis.
    Keywords: merger control, media markets, more-economic approach, conglomerate mergers, cross-promotion
    JEL: L82 L40 K21
    Date: 2007
  23. By: Sophocles N. Brissimis (Bank of Greece and University of Piraeus); Thomas Vlassopoulos (European Central Bank)
    Abstract: Although the close empirical relationship between the evolution of mortgage lending and housing prices is well established in the literature, the direction of causation is less clear from a theoretical standpoint. We apply multivariate cointegration techniques in order to address this issue empirically for the Greek economy. Our results, based on a cointegration relationship that we identify as a mortgage loan demand equation, indicate that housing prices do not adjust to disequilibria in the market for housing loans. This suggests that in the long run the causation does not run from mortgage lending to housing prices. In the short run we find evidence of a contemporaneous bi-directional dependence.
    Keywords: Housing loans; Housing prices; Multivariate cointegration
    JEL: G21 R21 C32
    Date: 2007–03
  24. By: Eichhorst, Werner; Zimmermann, Klaus F
    Abstract: Through the Hartz reforms, German active labour market policy was fundamentally restructured and has since been systematically evaluated. This paper reviews the recent evaluation findings and draws some conclusions for the future setup of active labour market policies in Germany. It argues in favour of a reduced range of active labour market policy schemes focusing on programs with proven positive effects (that are wage subsidies, training, start-up grants and placement vouchers) and calls for a systematic evaluation of all instruments not scrutinized so far.
    Keywords: active labour market policy; evaluation; Germany
    JEL: D61 H43 J68
    Date: 2007–04
  25. By: Sebastian Gundel
    Abstract: In this paper the export demand and supply of German manufacturing industry is estimated for the period 1993:1 through 2005:4. The Johansen (1991, 1994) procedure is applied to estimate the long-run relationship in a VECM. Special attention is pointed on the development of the German export price being exposed to the competitive environment of fast growing countries like Hungary, the Czech Republic and Poland. Since they offer similar high-technology products on international export markets and are gaining market share Germanys export price suffers downward pressure.
    Keywords: Manufactured Exports, New Competition, Cointegration, VECM
    JEL: C32 F10 F14
    Date: 2007–04–23
  26. By: Luciano Fratocchi (Department of Mechanical Thermal and Managerial Engineering - University of L’Aquila - Italy); Alberto Onetti (Department of Economics, University of Insubria, Italy); Alessia Pisoni (Department of Economics, University of Insubria, Italy)
    Abstract: This paper is focused on relationships which involves the subsidiary both, at an internal (mainly with the headquarter) and at an external level (with economic actors at a local level, i.e. customers and suppliers). In so doing, corporate and external embeddedness (Andersson and Forsgren, 1996) are investigated under a network based approach. To reach this aim, the level of autonomy and control perceived by the subsidiary and the range of value chain activities managed at local level are used as proxy of the degree of corporate embeddedness. At the same time, the number, frequency, and type of relations activated with local supplier and customers and the number and types of cooperation agreements with local enterprises are used to investigate external embeddedness. The attention is focused on Italian SMEs internationalized in the Central and Eastern European Countries (CEECs). With this respect, the sample is composed by firms that widely differ in terms of location, size, year of subsidiary establishment, and industry. The main evidence resulting from the analysis is that in the CEECs – and particularly in the more developed countries within the Region (such as Poland) – is emerging a phenomenon we define “re-localization”. By this term we describe a rising number of firms that is progressively transferring in these countries a wider range of activities, including the more value added ones. The delocalization of less value added activities (typically high-labour intensive and not complex manufacturing) was generally considered the main strategic aim for companies in the CEECs. Our data, on the contrary, seems to demonstrate that such a delocalization do not represent the ultimate result of the internationalization process, but only a step of a wider process. A process aimed at transferring abroad the whole value chain activities in order to serve the local market. Therefore, the internationalization of most of the analysed firms is market-oriented, i.e. aimed at looking for a new market, able to replace the Italian one
    Date: 2007–03
  27. By: Elena Giarda
    Abstract: This paper builds on existing studies on the relationship between individual wages, age and experience, and provides new evidence on the determinants of wages in Italy. Using a large panel of individual administrative data, it shows that wage to age profiles for different cohorts of workers are not stable over time: although younger generations of Italian workers are benefiting from higher starting wages than older generations, they face the prospect of lower growth of future earnings. It also confirms the existence of a significant supply effect: the bigger the cohort relative to the active population, the smaller the cohort’s gain in terms of wage levels. Finally, it captures the dependence of individual wages on aggregate labour market conditions: individual wages are shown to be negatively related to the rate of unemployment and positively related to the union wage index.
    JEL: J31
    Date: 2007
  28. By: Francesco Devicienti; Agata Maida; Lia Pacelli
    Abstract: We show that the Italian wage curve, inexistent in the eighties and early nineties, has re-emerged after the 1993 Income Policy Agreements, owing to the greater role granted to flexible and locally bargained top-up wage components.
    Keywords: wage curve, top-up components, panel data, institutional reforms, Italy.
    JEL: J30 J60
    Date: 2006
  29. By: Christian Dustmann (Department of Economics and Centre for Research and Analysis of Migration (CReAM), University College London); Francesca Fabbri (Munich Graduate School of Economics and Centre for Research and Analysis of Migration (CReAM))
    Abstract: The main objective of this paper is to provide a comprehensive description of the economic outcomes and performance of Britain’s immigrant communities today and over the last two decades. We distinguish between males and females and, where possible and meaningful, between immigrants of different origin. Our comparison group are white British born individuals. Our data source is the British Labour Force Survey (LFS). We first provide descriptive information on the composition of immigrants in Britain, and how this has changed over time, their socio-economic characteristics, their industry allocation, and their labour market outcomes. We then investigate various labour market performance indicators (labour force participation, employment, wages, and self-employment) for immigrants of different origin, and compare them to British-born whites of same age, origin, and other background characteristics. We find that over the last 20 years, Britain’s immigrant population has changed in origin composition, and has dramatically improved in skill composition - not dissimilar from the trend in the British born population. We find substantial differences in economic outcomes between white and ethnic minority immigrants. Within these groups, immigrants of different origin differ considerably with respect to their education and age structure, their regional distribution, and sector choice. In general, white immigrants are more successful in Britain, although there are differences between groups of different origin. The investigation shows that immigrants from some ethnic minority groups, and in particular females, are particularly disadvantaged, with Pakistanis and Bangladeshis at the lower end of this scale.
    Keywords: International Migration, Economic Performance
    JEL: J15
    Date: 2005–10

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