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on European Economics |
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Issue of 2007‒05‒19
eighteen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Andrea Brandolini (Bank of Italy, Economic Research Department) |
| Abstract: | Greater social cohesion is an explicit goal of the European Union. Progress is monitored considering the performance in each member country on the basis of national indicators; EU-wide estimates of inequality and poverty play no role. Yet this is a basic information to evaluate the progress of the Union toward grater social cohesion. This paper examines the methodological requirements of this evaluative exercise, and provides the first estimates of inequality and poverty in the enlarged European Union as if it was a single country. |
| Keywords: | income distribution, inequality, poverty, Euro area, European Union |
| JEL: | D31 C80 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_623_07&r=eec |
| By: | Ales Bulir; Jaromir Hurnik |
| Abstract: | The Maastricht inflation criterion, designed in the early 1990s to bring “high-inflation†EU countries into line with “low-inflation†countries prior to the introduction of the euro, poses challenges for both new EU member countries and the European Central Bank. While the criterion has positively influenced the public stance toward low inflation, it has biased the choice of the disinflation strategy toward short-run, fiat measures—rather than adopting structural reforms with longer-term benefits—with unpleasant consequences for the efficiency of the eurozone transmission mechanism. The criterion is also unnecessarily tight for new member countries, as it mainly reflects cyclical developments. |
| Keywords: | ERM2, Maastricht inflation criterion, new EU member countries. |
| JEL: | E31 E32 E42 F33 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2006/8&r=eec |
| By: | Valentova, Marie (CEPS/INSTEAD); Krizova, Iva (Masaryk University Brno); Katrnak, Tomas (Masaryk University Brno) |
| Abstract: | The main aims of this article are to conduct a cross-national comparison of levels of occupational gender segregation and to examine the relation between the level of occupational gender segregation and gender segregation in education (both vertical and horizontal). The analyses include 18 European countries covered by the European Social Survey (ESS) conducted in 2004. The comparison pays a special attention to the position of the Czech Republic and differences and similarities between the EU-15 countries and the new EU member states, i.e. post-socialist countries. |
| Keywords: | gender segregation; occupational segregation ; cross-national segregatio |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:irs:iriswp:2007-04&r=eec |
| By: | Chinn, Menzie; Frankel, Jeffrey |
| Abstract: | We find that real interest rates paid on government debt depend significantly upon current and expected future levels of debt, in Europe as in the US. But this result only emerges when we condition on foreign interest rates, illustrating financial international integration. The previously strong effect of debt on US interest rates has been diluted by the addition of 2004-2006 data to the sample, perhaps reflecting the effect of massive purchases of US securities by foreign central banks. Another finding is that the asymmetry in the effect of US interest rates on European interest rates has not disappeared with the coming of European Economic and Monetary Union in 1999, as one might have thought. |
| Keywords: | interest rates, inflation, debt, financial integration |
| JEL: | E43 E58 F41 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:5525&r=eec |
| By: | Ondrej Schneider |
| Abstract: | This paper analyses the European budget and the net position of the ten new member states. We argue that the EU budget should be reconsidered, as the Union has expanded to 25 member states and has become more heterogeneous. We demonstrate how the ten new members fared with respect to the budgetary plans outlined in the budget proposal approved at the 2002 summit at Copenhagen. We show that, in 2004, the new member states failed to qualify for the whole planned budget within the agricultural policy and the structural funds. On the other hand, they qualified for more than planned from a set of internal policy programmes and also from compensation transfers. We discuss the financial outlook for 2007–2013 and its recent developments. We argue that for the EU budget to support economic growth, the priorities must be re-oriented towards potentially productive spending programmes, and spending on oldfashioned programmes, such as the Common Agricultural Policy, should be scaled down or possibly re-nationalised. We show, however, that it is exactly these programmes that remained unchanged in the final negotiations for the 2007–2013 perspective. A simple economic growth model illustrates that the current EU budget setting is, at best, neutral with respect to the EUwide long-term growth potential and may actually hamper growth in the majority of the EU countries if the distortionary nature of taxation is taken into account. |
| Keywords: | Budget, European Union, growth. |
| JEL: | E6 H77 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:rpnrpn:2006/01&r=eec |
| By: | Glachant, J.M.; Saguan, M. |
| Abstract: | The so-called “electricity wholesale market” is, in fact, a sequence of several markets. The chain is closed with a provision for “balancing,” in which energy from all wholesale markets is balanced under the authority of the Transmission Grid Manager (TSO in Europe, ISO in the United States). In selecting the market design, engineers in the European Union have traditionally preferred the technical role of balancing mechanisms as “security mechanisms.” They favour using penalties to restrict the use of balancing energy by market actors. While our paper in no way disputes the importance of grid security, nor the competency of engineers to elaborate the technical rules, we wish to attract attention to the real economic consequences of alternative balancing designs. We propose a numerical simulation in the framework of a two-stage equilibrium model. This simulation allows us to compare the economic properties of designs currently existing within the European Union and to measure their fallout. It reveals that balancing designs, which are typically presented as simple variants on technical security, are in actuality alternative institutional frameworks having at least four potential economic consequences: a distortion of the forward price; an asymmetric shift in the participants’ profits; an increase in the System Operator’s revenues; and inefficiencies. |
| Keywords: | Electricity Forward Market, Balancing Mechanism, Risk Aversion, Penalty, Institutional Frame, Market Design. |
| JEL: | D8 D23 L51 L94 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0724&r=eec |
| By: | Simon J. Evenett |
| Abstract: | In recent years the bipolar multilateral trading system of the post-war years has given way to a multipolar alternative. Although many specifics have yet to be determined, some contours of this new trade policy landscape are coming into focus and in this short essay I examine their implications for the European Union's external commercial policy. Particular attention is given to both the state of business-government relations and the propensity to liberalise under the auspices of reciprocal trade agreements by Brazil, India, and China; the potential new poles of the world trading system. I consider the likely consequences of these developments, plus factors internal to both the European Union and the United States, for the possible content of future multilateral trade initiatives. |
| Keywords: | WTO, European Union, regional trade agreements, BRICs |
| JEL: | F13 F15 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2007:2007-15&r=eec |
| By: | Valentova, Marie (CEPS/INSTEAD) |
| Abstract: | The main aims of the paper are to analyse and compare attitudes of inhabitants of eleven European countries toward the state family policy arrangements in the light of people’s attitudes regarding family and marriage, and division of labour between men and women; and to identify which countries cluster together regarding such attitudes. In particular we test whether respondents’ attitudes toward the above phenomena differ significantly between EU-15 countries and new member states. The analysis is based on the data coming from two international surveys: International policy acceptance study 2000-2003 (IPPAS) and International social survey program 2002 (ISSP). |
| Keywords: | attitudes; family policy ; family ; gender division of labour |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:irs:iriswp:2007-05&r=eec |
| By: | Evans, Kevin (Cardiff Business School); Speight, Alan |
| Abstract: | Investigation of the dynamic, short-run response of exchange rate returns to the information surprise of macroeconomic announcements reveals that US macroeconomic news generates far more dramatic responses in exchange rate returns and returns volatility than news on the macroeconomic performance of other countries. Eurozone, German, French and Japanese news have very little impact. However, some UK announcements are important for the EUR-GBP rate. The reaction of exchange rate returns to news is very quick and occurs within the first five minutes of the release with very little reaction in the following fifteen minutes, thus enabling us to characterise such reactions as conditional mean return jumps. These jumps show that exchange rates are strongly linked to fundamentals in the five-minute intervals immediately following the data release. Interestingly, despite causing large responses in returns volatility, the large jumps in returns following interest rate decisions do not appear to be correlated with the informational innovation surrounding their announcement. |
| Keywords: | Intraday volatility; macroeconomic announcements; exchange rates |
| JEL: | G12 E44 E32 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:accfin:2006/4&r=eec |
| By: | Alena Bicakova; Jiri Slacalek; Michal Slavik |
| Abstract: | We investigate the fiscal implications of the changes in personal income tax implemented in the Czech Republic in January 2006. In addition to evaluating the direct effect of this tax reform, our analysis takes into account its employment effect on the government budget due to individuals entering or leaving employment. We first estimate the probability of working (labor supply) as a function of the effective net wage and then simulate the impact of the changes in paid taxes and received benefits on employment. We find that a 10 percent rise in the net wage increases the probability of working by 0.55 and 0.18 percentage points for women and men respectively. These estimates suggest that the employment effect is unlikely to substantially alleviate the fall in net budget revenues. We predict that, for the sub-population of prime age employees, net government revenues decline by roughly 8 billion Czech korunas (CZK) as a consequence of the implemented income tax cuts. The employment effect counteracts the decline by only CZK 0.4 billion. The stimulating effect of the tax reform on employment is reduced by the current benefit system: the incentive to work due to the higher after-tax wage is partially offset by the fall in social benefits once people start working. |
| Keywords: | Fiscal effects, labor supply, personal income tax, tax reforms. |
| JEL: | E62 J31 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2006/7&r=eec |
| By: | Simon J. Evenett |
| Abstract: | The European Union is the world's largest trader, a fact that on the face of it ought to convert into considerable clout in international commercial negotiations. Yet, since the World Trade Organization's (WTO's) creation in 1995, it is difficult to point to a string of successes for the European Commission's (EC's) often beleaguered trade negotiators. Even the enthusiasm associated with the launch of the Doha Round in 2001 has dissipated as these negotiations have repeatedly stalled, with many questioning what can feasibly be accomplished at the WTO in the near to medium term. A 2006 EC decision to abandon its moratorium on negotiating new free trade agreements seems more of a stop-gap measure to maintain some negotiating momentum than a systematic strategy to leverage European clout. Worse, it carries the risk of seriously undermining the multilateral trading system if EC negotiations with Korea tempt Japan, and in turn possibly even the United States, to eventually seek preferential access to the European Union's markets. With so little to show for the last 10 years and the future of the multilateral trading system decidedly uncertain, a fundamental rethink of the ends and means of European trade policy is in order. That rethink needs to take account of the following realities: a shift away from a bipolar towards a multi-polar WTO; recognition of the fact that the principal liberalising accomplishment to date of the multilateral trading system has been the freeing of manufactured goods trade between industrialised countries and that many other potential reforms have either stalled or proved, on implementation, to be highly controversial; substantial opposition among many prominent groups in the leading trading powers to further trade reform (even in countries experiencing fast economic growth or export growth); and a greater emphasis on signing bilateral and regional free trade agreements (whose liberalising intent and impact is often highly circumscribed). Once the superficial attractions associated with the scramble for preferential market access in Asia fade, European trade policymakers ought to confront these realities. At a minimum, the search will then be on for a modus vivendi with the new trading powers. This will require thought to be given to the likely future offensive and defensive commercial interests of all concerned, bearing in mind the differences in level of development and overseas corporate exposure and organisation. The ultimate goal should be to identify the potential basis for future multilateral trade accords. Properly conceived, future European trade strategy could contribute significantly to the renewal of one of the most successful post-war international economic institutions. |
| Keywords: | European Union, commercial policy, trade policy, WTO |
| JEL: | F13 F15 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2007:2007-14&r=eec |
| By: | Roger Bjørnstad and Eilev S. Jansen (Statistics Norway) |
| Abstract: | Norway adopted a flexible inflation target in March 2001 following a long period with exchange rate targeting in various forms. The regime shift reverses the causal ordering between changes in the nominal exchange rate and changes in the interest rate. When the central bank targets the exchange rate, interest rates are rarely changed independently of foreign interest rates and only to counteract large movements in the exchange rate after interventions have failed to stabilise the exchange rate. With inflation targeting the interest rate is used to stabilise the domestic economy and has a strong impact on the exchange rate. The long run (steady state) relationship between the interest rate and the exchange rate is on the other hand not altered by the change in monetary policy regime. This means that the fundamental equilibrating mechanism - that is the PPP condition augmented with a risk premium - remains the same across regimes. |
| Keywords: | monetary policy regime shift; NOK/euro exchange rate; role of interest rates; equilibrium real exchange rate; purchasing power parity; uncovered interest parity |
| JEL: | C51 C52 C53 E42 F31 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:501&r=eec |
| By: | Heppke-Falk, Kirsten H.; Wolff, Guntram B. |
| Abstract: | We identify investor moral hazard in the German fiscal federation. Our identification strategy is based on a variable, which was used by the German Federal Constitutional Court as an indicator to determine eligibility of two German states (Länder) to a bail-out, the interest payments-to-revenue ratio. While risk premia measured in the German sub-national bond market react significantly to the relative debt level of a state (Land), we also find that a larger interest payments-to-revenue ratio counter-intuitively lowers risk premia significantly. Furthermore, with increasing values the risk premia decrease more strongly. This is evidence of investor moral hazard, because a larger indicator value increases the likelihood of receiving a bail-out payment. Quantitatively, the effects are, however, quite small. Our findings are robust to a variety of sample changes. In addition, we provide a case study of the recent Federal Constitutional Court ruling on the Land Berlin, which had filed for additional federal funds. The negative response of the court did not lead to a change in financial markets’ bail-out expectations. In sum, our results indicate significant investor moral hazard in the sub-national German bond market. |
| Keywords: | moral hazard, bail-out, sovereign bond spreads, fiscal federalism, Germany |
| JEL: | E62 F34 G14 G15 H6 H7 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp1:5561&r=eec |
| By: | Joëlle Noailly; Richard Nahuis |
| Abstract: | The 1999 Dutch Notary Act has initiated an ambitious deregulation process in the market for notary services in the Netherlands. We evaluate the impact of this liberalisation policy on (i) the level of competition in the profession and (ii) the quality of services. We compare the level of competition before and after the liberalisation using two different indicators, namely a relativeprofit indicator and a variation of the Bresnahan-Reiss indicator. Using the relative profit indicator, we find that the level of competition has increased after 1999. We find, however, no significant difference between the level of competition in 1996 and in 2002. This is particularly clear when we measure competition taking the local market as the relevant market for notary services. The results on the national market are more mixed and there is some evidence that competition in 2002 is higher than in 1996. Using the Bresnahan-Reiss indicator, we find that entry does affect conduct in the notary market, but again that the level of competition in the local market for notary services in 2003 does not significantly differ from the 1995 level. We also examine whether competition affects the quality of notary services. We use both subjective and objective measures for quality of notary services. We find that subjective quality - the perceived level of service by clients - is, if anything, negatively affected by competition. Using objective quality, i.e. quality that is not observable to clients, we find that in 2003 competition leads to a deterioration of quality, as the quality of monopoly notaries outperforms the quality of oligopoly notaries. This was not the case in 1995. Confronting our empirical findings with qualitative insights, we present options for policy. |
| Keywords: | Notary; Competition; Quality; Legal Service |
| JEL: | L11 L15 L69 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:docmnt:94&r=eec |
| By: | Alfredo Martín-Oliver (Banco de España); Vicente Salas-Fumás (Banco de España; Universidad de Zaragoza); Jesús Saurina (Banco de España) |
| Abstract: | This paper contains estimates of physical and intangible (information technology, advertising and training) capital stock, together with capital, labor and externally provided input services, of Spanish commercial and saving banks in the period 1983 to 2003. Capital stocks are valued at replacement costs and assets’ services flows are computed using estimates of the risk-adjusted user cost of capital. Replacement costs of assets are substantially higher than book values and economic estimates of costs of input services allow for more accurate measures of efficiency and productivity of banks. |
| Keywords: | Spanish banks, intangible assets, cost of capital services |
| JEL: | G21 G31 M41 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:0711&r=eec |
| By: | Boegenhold, Dieter; Fachinger, Uwe |
| Abstract: | The paper deals with margins of entrepreneurship where small business owners are almost working on their own having no or just a few employees and where one can find also people working with low returns and having firms without stability or prosperous dynamics. However, even the area of entrepreneurship at the margins seems to be a wide field. It highlights not only the broad margins of entrepreneurship but also the fluent boarders between entrepreneurship and the informal sector on the one side and the system of the labour market on the other. New firms – even those which are very successful at a later point of career – are almost created in an experimental period of testing market and product ideas in which business founders are still employed or registered as unemployed people. The practical starting-point of an entrepreneurial existence falls into a fluent continuum of different activities being closely connected to spheres of dependent work as employees or periods of seeking a new job during unemployment. With growing solo self-employment a new social phenomenon in the structure of the labour market and the division of occupations has emerged in which different social developments are overlapping each other. The question for the landscape of solo self-employment and related driving forces of their emergence is of crucial research interest: Must they be regarded primarily as a result of pushes by labour market deficiencies or are they a response to new life-styles and working demands which act as pulling factors into self-employment? In other words, does solo self-employment serve as a valve of a pressing labour market or must it be regarded more positively as a new option of the classic division of labour by which an increasing number of people find new self-reliant and also stable jobs? The idea of the paper is to discuss this particular issue of margins of entrepreneurship not only within the conventional scope of entrepreneurship discussion but within an integrated framework which combines entrepreneurship analysis with labour market research and studies on social stratification and social mobility. The paper will not come about with definite last answers but hopes to contribute to that debate by presenting better information. |
| Keywords: | Self-employment; entrepreneurship; labour market; empirical analysis |
| JEL: | J23 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3186&r=eec |
| By: | Stefano Costa (ISAE - Rome.); Giovanni Ferri (University of Bari.) |
| Abstract: | Using a new firm-level database, we address micro determinants and employment consequences of international production outsourcing (INPOU). Regarding the former, we confirm that INPOU in Italy mostly counters emerging economies. threats to traditional manufactured goods: INPOU disproportionately targets developing countries and intensifies in sectors with stiffest Chinese competition. Concerning employment consequences, we concur with previous literature that INPOU firms. domestic employment performances are no worse than at matching no-INPOU firms. However, given Italy.s industrial structure (small-sized networked enterprises), INPOU might negatively affect subcontracting firms. Our evidence that employment performances worsen in the productive segments with strongest INPOU supports our conjecture. |
| Keywords: | international outsourcing, multinational firms |
| JEL: | F23 D21 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:bai:series:wp0016&r=eec |
| By: | Abdelaziz Rouabah |
| Abstract: | Cet article a pour objectif d?élaborer, dans une première phase, un indice trimestriel de vulnérabilité financière du secteur bancaire luxembourgeois, permettant ainsi de compléter la batterie d?indicateurs mis en place au sein de la banque centrale pour appréhender la solidité de ce secteur. Dans une seconde étape, le lien entre l?indice construit et l?environnement macroéconomique est exploré à travers une spécification linéaire. Enfin, un modèle est adopté pour la prévision de l?évolution de cet indice.L?approche que nous adoptons pour la construction de cet indice s?inscrit fondamentalement dans la lignée des travaux de Hanschel et Monnin (2005) et Illing et Liu (2006). L?élaboration de cet indice est basée sur un large éventail de variables bilantaires et macrofinancières. Et plusieurs méthodes furent adoptées pour sa construction. Il s?agit de l?indice standard établi avec des pondérations à variance égale, de celui construit selon les percentilles de la fonction de distribution cumulative des variables initiales et enfin, de l?indice élaboré à partir de l?application de la méthode de la composante principale aux données de notre échantillon. Les résultats obtenus révèlent une nette progression de l?indice de vulnérabilité du secteur bancaire luxembourgeois durant la crise financière russe (1998) et au cours de la période 2001-2003. Cette dernière période est caractérisée à la fois par la chute des indices boursiers en 2001-2003 et par l?émergence de la crise financière en Turquie et en Argentine. Quant à la baisse très nette de cet indice durant la période 2003-2006, elle signifie que l?environnement et le comportement du secteur bancaire luxembourgeois en matière de risque furent propices à la stabilité financière.Les résultats prévisionnels obtenus selon notre modèle semblent être en faveur d?une évolution contenue de cet indice. En tenant compte de l?incertitude qui entoure la prévision, la frontière de l?intervalle de confiance reste inférieure aux niveaux historiques les plus élevés observés en 2002 et en 2003. Ceci revient à affirmer qu?en l?absence d?un choc conjoncturel exceptionnel ou d?événements sévères d?ordre systémique, la vulnérabilité du secteur bancaire luxembourgeois demeure faible. |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:bcl:bclwop:cahier_etude_24&r=eec |