nep-eec New Economics Papers
on European Economics
Issue of 2007‒06‒30
twenty-one papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The yield spread and GDP growth - Time Varying Leading Properties and the Role of Monetary Policy By Hogrefe, Jens
  2. Linkages Between Performance and Institutions in the Primary and Secondary Education Sector By Douglas Sutherland; Robert Price
  3. Coordination des Politiques Budgétaires dans une Union Monétaire Hétérogène: Modélisation et Application à l'UEM By Christophe Schalck
  4. Self-Employment and Parenthood: Exploring the Impact of Partners, Children and Gender By Ruta Aidis; Cecile Wetzels
  5. Household Divisoin of Labor, Partnerships and Children: Evidence from Europe By Jose Ignacio Gimenez; Jose Alberto Molina; Almudena Sevilla Sanz
  6. Absence of generalised employment instability in the French and British labour markets By Aline Valette
  7. Shifting the Bias: How to Disentangle Creative Adoption from Radical Innovation. Empirical Evidence from Italy and the US By Antonelli Cristiano; Quatraro Francesco
  8. How fertility and union stability interact in shaping new family patterns in Italy and Spain By Lucia Coppola; Mariachiara Di Cesare
  9. Technological Platforms and the Governance of Knowledge: Evidence from Italy and the UK By Consoli Davide; Patrucco Pier Paolo
  10. The Macroeconomic Effects of Migration from the New European Union Member States to the United Kingdom By Dora M. Iakova
  11. Arbeitskosten Oesterreichs im internationalen Vergleich By Peter Hohlfeld
  12. Productivity and Trade Orientation in UK Manufacturing By Marian Rizov; Patrick Paul Walsh
  13. The Relationship among innovative Output, Productivity, and Profitability. A test comparing USPTO and EPO data By Enrico Santarelli; Francesca Lotti
  14. Apprenticeship Training in Germany – Investment or Productivity Driven? By Thomas Zwick
  15. Norwegian Innovation and Industrial Structure: Insiders and Outsiders? By Tommy Clausen; Svein Olav Nås; Bart Verspagen
  16. KIMOD 1.0 Documentation of NIER´s Dynamic Macroeconomic General Equilibrium Model of the Swedish Economy By Bergvall, Anders; Forsfält, Tomas; Hjelm, Göran; Nilsson, Jonny; Vartiainen, Juhana
  17. Monetary Policy and Swedish Unemployment Fluctuations By Alexius, Annika; Holmlund, Bertil
  18. Long-Run Inflation-Unemployment Dynamics: The Spanish Phillips Curve and Economic Policy By Marika Karanassou; Hector Sala; Dennis Snower
  19. The Effect of Outplacement on Unemployment Duration in Spain By F. Alfonso Arellano
  20. How to Increase R&D in Transition Economies? Evidence from Slovenia By Polona Domadenik; Janez Prasnikar; Jan Svejnar
  21. The Potential of Regional Integration Agreements (RIAs) in Enhancing the Credibility of Reform: The Case of the Syrian-European Association Agreement By Anja Zorob

  1. By: Hogrefe, Jens
    Abstract: The yield spread is a well documented leading indicator of GDP growth. Estrella (2005) proposes a model to explain this relationship. Within the model, the leading properties of the yield spread are determined by the monetary policy. Accordingly, changes of the leading properties that have been reported in many studies should correspond to changes of the monetary policy. This paper analyzes whether and what form of time variation of the leading properties can be found in four major industrialized countries (France, Germany, the UK and the US). The results are connected with time varying behavior of the monetary policy by modeling a joint state dependency of the leading properties and the reaction parameters of the monetary policy. Time variation of the leading properties seem to exist in all countries under consideration. For the US and Germany they are best modeled as a structural break while France and the UK exhibit recurring phases. Evidence for a link between the time variations of the monetary policy and the leading properties can be found. However, a clear determination of the leading properties by the monetary policy cannot be confirmed.
    Keywords: leading indicator, yield spread, GDP growth, monetary policy, Markov-Switching
    JEL: C32 E37 E43 E52
    Date: 2007
  2. By: Douglas Sutherland; Robert Price
    Abstract: The efficiency of schools diverges dramatically across countries in the OECD and can also vary markedly within countries. These differences in levels of efficiency can be traced to policy and institutional settings. As such, moving to best practice could boost educational attainment and reduce pressure on budgetary resources. This paper assesses empirically the relationship between institutional and policy settings and the efficiency of public spending on primary and secondary education across OECD countries. The analysis builds on two previous papers, which respectively developed OECD-area indicators of educational efficiency based on PISA score data and institutional indicators based on questionnaire responses. The results identify a number of institutional and policy settings that appear conducive to raising efficiency, as well as policies that appear to be detrimental to achieving higher levels of efficiency. <P>Liens entre les indicateurs d'efficacité et les indicateurs institutionnels dans le secteur de l'enseignement primaire et secondaire <BR>L'efficacité des établissements scolaires varie énormément dans les pays de la zone OCDE et peut aussi varier sensiblement à l'intérieur d'un même pays. Ces différences de niveaux d'efficience peuvent être attribuées aux politiques publiques et aux structures institutionnelles. De ce fait, s'orienter vers les meilleures pratiques pourrait stimuler les performances des systèmes scolaires. Cet article évalue de manière empirique la relation entre les structures institutionnelles, les politiques gouvernementales et l'efficacité des dépenses publiques consacrées à l'éducation primaire et secondaire dans les pays de l'OCDE. Cette analyse s'appuie sur deux précédentes études, l'une qui a élaboré des indicateurs au niveau de la zone OCDE de l'efficacité des systèmes éducatifs à partir des scores PISA, l'autre des indicateurs des structures institutionnelles à partir des réponses à un questionnaire. Ceci conduit à identifier un certain nombre de structures institutionnelles et de politiques publiques qui semblent induire une efficience accrue, mais aussi des politiques qui semblent nuire à une amélioration des niveaux d'efficacité.
    Keywords: education, dépenses publiques, éducation, public spending, efficiency, efficience, Institutional indicators, Indicateurs institutionnels, efficacité
    JEL: H52 I21 I22 I28
    Date: 2007–06–11
  3. By: Christophe Schalck
    Abstract: This paper studies coordination of fiscal policies in a monetary union in terms of stabilization performance. We use a static model of closed monetary union and numerical simulations in which macroeconomic heterogeneities are introduced. Results show that the coordination is an efficient tool to increase EMU stabilization, even though coordination gains greatly varies according to macroeconomic heterogeneities. We then identify coalitions and free riding behaviours.
    JEL: E61 E63 F42
    Date: 2007
  4. By: Ruta Aidis (University College London and FEE, University of Amsterdam); Cecile Wetzels (FEE, University of Amsterdam and IZA)
    Abstract: This paper explores the relationship between self-employment, partner’s employment, the household and children on a mother’s and father’s probability to choose self-employment. Few studies are available on this topic and their analysis is mainly limited to the female role in the North American context. In this study, we examine the influence of personal characteristics, household and labor market characteristics for both mothers and fathers in a family context and their probability to be self-employed as compared to parents who have chosen formal, gainful employment. We focus on the data from the European context comparing results from Spain, Italy and the Netherlands. Using these large and comparable data sets, our logit model estimates show that mothers who choose self-employment do not work fewer working hours than those in gainful employment. Similar results were found for fathers in Spain and Italy. Perhaps the most striking result is the very strong significance of the partner’s self-employed status on the choice for self-employment for both mothers and fathers in all three countries. Other effects such as human capital, household income, presence of grandmothers and number of young children indicate country differences.
    Keywords: entrepreneurship, parenthood, self-employment, gender, Europe
    JEL: M13 J24 J13 J16
    Date: 2007–05
  5. By: Jose Ignacio Gimenez; Jose Alberto Molina; Almudena Sevilla Sanz
    Abstract: This paper complements conventional economic analysis and presents a social norms interpretation to explain cross-country differences in partnership formation rates, and the dramatic decrease in partnership formation rates in Southern Europe in particular. We argue that increases in female human capital - by raising the opportunity cost of entering a partnership - had a differential impact on partnership formation rates in Northern and Southern Europe due to the different social norms regarding the household division of labor. Social norms are modeled as a constraint on the allocation of household labor that (if binding) diminishes the gains to enter a partnership. Furthermore, highly educated women are less likely to form a partnership, because the utility loss when a partnership is formed is lower the higher the female opportunity cost. We test the predictions of the model using 7 waves of the European Community Household panel (1995-2001). For each country and year we construct the average of the female to male ratio of childcare time as an indicator of social norms regarding the household division of labor. The empirical findings support the predictions of the model. After controlling for the time and country variation in the data, as well as for permanent individual heterogeneity and other aggregate variables at the country level, the results suggest that more traditional social norms regarding the household division of labor negatively affect a woman`s probability of forming a partnership. Thus, a woman living in a country with a more traditional division of household labor has, ceteris paribus, a lower probability of forming a partnership. Furthermore, as predicted by the theory, social norms have a stronger negative effect for highly educated women. To the extent that female education has increased over the years, and that Southern European countries have more traditional social norms, this latter finding may partly explain the dramatic decrease in partnership formation rates in Southern Europe.
    Keywords: Marriage Market, Gender Roles, Household Labor
    JEL: E21 I29
    Date: 2007
  6. By: Aline Valette (LEST - Laboratoire d'économie et de sociologie du travail - [CNRS : UMR6123] - [Université de Provence - Aix-Marseille I][Université de la Méditerranée - Aix-Marseille II])
    Abstract: This paper aims to enlighten the debate around the increase of instability in contemporary labour markets. Based on the case of France and the UK, we analyse the position in the national employment system of employees, from 30 to 55 years old, concerning their job stability. National employment systems are broken down into four stability regimes created from the stability variable we generate. This variable is calculated on the basis of the ratio of tenure in current job to total time spent in the labour market. Both descriptive statistics of the stability variable and probabilities for employees to joint one regime or another, show the absence of a generalised employment instability for this “central” work force.
    Keywords: France; United-Kingdom; Employment system; Job stability;
    Date: 2007–06–21
  7. By: Antonelli Cristiano (University of Turin); Quatraro Francesco (University of Turin)
    Date: 2007–03
  8. By: Lucia Coppola (Max Planck Institute for Demographic Research, Rostock, Germany); Mariachiara Di Cesare
    Abstract: In this paper we investigate the interrelationships between fertility decisions and union dissolution in Italy and Spain. We argue that there might exist a spurious relationship between these two life trajectories. The analysis is based on the 1996 Fertility and Family Survey data for Italy and Spain. Results show that there is a spurious relationship between fertility and union dissolution in Italy but not in Spain. Nevertheless, in both countries, there is an evident direct effect of each process on the other: union dissolution decreases the risk of further childbearing, while childbirth decreases the risk of union dissolution.
    Keywords: Italy, Spain, divorce rate, fertility
    JEL: J1 Z0
    Date: 2007–06
  9. By: Consoli Davide; Patrucco Pier Paolo (University of Turin)
    Date: 2007–03
  10. By: Dora M. Iakova
    Abstract: The United Kingdom allowed workers from the ten new European Union member countries immediate access to its labor market after the accession in 2004. This paper uses a general equilibrium framework to explore the dynamic adjustment of the UK economy to the postaccession surge in immigration. Simulations show that immigration is likely to have positive effects on economic growth, capital accumulation, consumption, and the public finances.
    Keywords: Immigration , new EU member states , globalization , free labor movement , Immigration , United Kingdom , European Union , Globalization , Labor mobility , Economic models ,
    Date: 2007–03–15
  11. By: Peter Hohlfeld (IMK at the Hans Boeckler Foundation)
    Abstract: On the basis of current Eurostat data, which facilitate a largely consistent international comparison of labour costs per hour worked, this study presents an in-depth analysis of the level and evolution of Austrian labour costs compared to those of other European countries. In relation to other EU-15 countries Austria shows a medium level of labour costs. Labour costs in industry are at a similar level as those in France, Finland and the UK. This result already takes into account the relatively low costs of Austrian intermediate products. A look at Austria’s unit labour cost – one decisive variable for international competitiveness – shows that except for Germany no other EU-15 country has improved its competitiveness as much as Austria since the middle of the 1990s.
    Date: 2007
  12. By: Marian Rizov (Middlesex University Business School and Trinity College Dublin); Patrick Paul Walsh (Trinity College Dublin and IZA)
    Abstract: Within a structural model we explicitly allow for the trade orientation of companies to estimate productivity dynamics within 4-digit UK manufacturing industries. We use the FAME data on UK companies over the period 1994-2003. Following Ackerberg et al. (2005) we adjust the algorithm in Olley and Pakes (1996) by augmenting investment and exit decisions to allow for exogenous demand shocks by trade orientation, assuming that labour and capital are state variables, and productivity follows a first-order Markov process. We extend the framework further by allowing exporting to be an additional control variable that is driven by lagged productivity as in Melitz (2003), leading productivity to follow a second-order Markov process. We find that over the period of introduction of the Euro improvements in aggregate productivity were driven by exporters - mainly by market share reallocations away from inefficient and towards efficient export companies. Aggregate productivity also benefited from improvements in productivity of non-exporters but was driven by improvements within companies rather than by market share reallocations. In a period of sustained real exchange rate appreciation both export cleansing and competitive pressure on non-exporters seem to have contributed to improvements of productivity in the UK manufacturing.
    Keywords: productivity dynamics, structural model, trade orientation, manufacturing companies, UK
    JEL: F14 D24
    Date: 2007–05
  13. By: Enrico Santarelli (University of Bologna, Department of Economics; ENCORE, Amsterdam; Max Planck Institute of Economics Jena, Entrepreneurship, Growth and Public Policy); Francesca Lotti (Bank of Italy, Economic Research Department)
    Abstract: The aim of this paper is to test whether patent-based indicators are still reliable measures of innovativeness in light of organizational changes in the field of Intellectual Property Rights (IPR) protection and the regulatory reforms already under way respectively at the U.S. Patent and Trademark Office (USPTO) and the European Patent Office (EPO). For most high-tech industries, patents represent an outcome of the production process and their number can be taken as a proxy for a firm's ability to improve its productivity growth and profitability. The case study reported here concerns the biotechnology industry in Italy, whose firms, by definition, have Intellectual Property (IP) activities in their portfolios. For this purpose, we use a unique data set which collects balance sheet items and patent information from EPO and USPTO. After linking firms' financial and production data with the patent information, we estimate a modified knowledge production function in which the dependent variable is alternatively (labor) productivity growth and profitability. Our findings show that only patents with the EPO, along with larger firm size, have a statistically significant relationship with productivity growth and profitability. This suggests that firms pursue different strategies when patenting with the USPTO and the EPO, and that this difference reflects statutory changes made to the former during the relevant period.
    Keywords: IP Protection, Productivity, Profitability, Italy
    JEL: L25 L65 O34
    Date: 2007–06–25
  14. By: Thomas Zwick
    Abstract: The German dual apprenticeship system came under pressure in recent years because enterprises were not willing to offer a sufficient number of apprenticeship positions. A frequently made argument is that the gap could be closed if more firms would be willing to incur net costs during the training period. This paper investigates for the first time whether German enterprises on average indeed incur net costs during the apprenticeship period, i.e. if the impact of an increase in the share of apprentices on contemporary profits is negative. The paper uses the representative linked employer-employee panel data of the IAB (LIAB) and takes into account possible endogeneity of training intensity and unobserved heterogeneity in the profit estimation by employing panel system GMM methods. An increase in the share of apprentices has no effect on profits. This can be interpreted as a first indication that most establishments in Germany do not invest more in apprentices than their productivity effects during the apprenticeship period.
    Date: 2007
  15. By: Tommy Clausen (Centre for Technology, Innovation and Culture, University of Oslo); Svein Olav Nås (Norwegian Institute for Studies in Research and Education - Centre for Innovation Research); Bart Verspagen (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: We examine the hypothesis that the Norwegian innovation system is locked-in to a specialization pattern of scale dependent, resource intensive industries, in which innovation depends mainly on the in-house activities of (a few) large firms. To this extent, we employ a sectoral empirical analysis using data on industrial dynamics and innovation in the Norwegian economy. Our results indicate that although the Norwegian economy has parts that are resourceand scale dependent, and also sectors in which the market structure is inert and concentrated, these characteristics are not systematically related to the level and nature of innovation activities. Our results indicate that innovation in Norway takes place in two main regimes: a highintensive and a low-intensive regime. This is not correlated systematically with industrial dynamics.
    Date: 2007–06
  16. By: Bergvall, Anders (National Institute of Economic Research); Forsfält, Tomas (National Institute of Economic Research); Hjelm, Göran (National Institute of Economic Research); Nilsson, Jonny (National Institute of Economic Research); Vartiainen, Juhana (National Institute of Economic Research)
    Abstract: KIMOD 1.0 is an annual large-scale macroeconomic model2 of the Swedish economy and is the result of a project that started in 2002 at the National Institute of Economic Research (NIER) in Sweden. In 2003, the model was used for the first time in policy analysis (see NIER, 2003) and from 2004 onwards it has also been applied for forecasting purposes. In November 2005, the time had come to document the first official version of the model, KIMOD 1.0. This document is a resulting part of the documentation project.
    Date: 2007–01–15
  17. By: Alexius, Annika (Department of Economics); Holmlund, Bertil (Department of Economics)
    Abstract: A widely spread belief among economists is that monetary policy has relatively short-lived effects on real variables such as unemployment. Previous studies indicate that monetary policy affects the output gap only at business cycle frequencies, but the effects on unemployment may well be more persistent in countries with highly regulated labor markets. We study the Swedish experience of unemployment and monetary policy. Using a structural VAR we find that around 30 percent of the fluctuations in unemployment are caused by shocks to monetary policy. The effects are also quite persistent. In the preferred model, almost 30 percent of the maximum effect of a shock still remains after ten years.
    Keywords: Unemployment; Monetary policy; structural VARs
    JEL: E24 J60
    Date: 2007–06–18
  18. By: Marika Karanassou; Hector Sala; Dennis Snower
    Abstract: This paper takes a new look at the long-run dynamics of inflation and unemployment in response to permanent changes in the growth rate of the money supply. We examine the Phillips curve from the perspective of what we call “frictional growth,” i.e. the interaction between money growth and nominal frictions. After presenting a theoretical model of this phenomenon, we construct an empirical model of the Spanish economy and, in this context, we evaluate the long-run inflation-unemployment tradeoff for Spain and examine how recent policy changes have affected it.
    Keywords: Inflation-unemployment tradeoff, Phillips curve, staggered wage contracts, nominal inertia, forward-looking expectations, monetary policy
    JEL: E2 E3 E4 E5 J3
    Date: 2007–06
  19. By: F. Alfonso Arellano
    Abstract: The paper analyses the effects of individual and group outplacement services for a group of unemployed workers in Spain on their unemployment spells. Two data bases are used, one from the Spanish Department of Employment (INEM) and other from one of the most important outplacement firms (Creade), between 1998 and 2003. Using (non-parametric) matching methods and unemployment duration as outcome variable, the results suggest outplacement produces a “reservation wage” effect for men, increasing unemployment spell by three and two months for individual and group outplacement, respectively. Women who receive the services increase very slightly unemployment duration, showing also (non-significant) spell reductions for individual outplacement.
  20. By: Polona Domadenik (University of Ljubljana and Institute for South-East Europe (ISEE)); Janez Prasnikar (University of Ljubljana and Institute for South-East Europe (ISEE)); Jan Svejnar (University of Michigan, CERGE-EI, CEPR and IZA)
    Abstract: Paper addresses the recent initiatives of EU Lisbon Agenda to increase level of R&D expenses in EU Member States by studying firm-level panel data in most advanced transition economy, Slovenia. Previous empirical literature - mainly cross-sectional - has tested the demand-pull hypothesis and found in overall that R&D expenses may be driven by output. Using a panel of over 150 Slovene firms over the 1996-2000 period, and checking for fixed effects, time, industrial and size dummies and for the path-dependent nature of R&D, we also find a significant role of sales in inducing R&D expenditures. Besides that data also confirm that internal funds and (un)successful bargaining for higher wages present significant variables for higher R&D expenses. However, at the micro level, the demand-pull, internal funds and bargaining effects play a varying role for the different sub-samples of firms. In particular, exporting firms, those which are liquidity-constrained, those not receiving public subsidies and those not heading a business group, seem to be particularly sensitive in deciding their R&D expenditures. R&D behavior at the firm level is modeled as errorcorrection model and estimated in system GMM specification.
    Keywords: transition, R&D investment, firms in transition, employee ownership and control, institutions, openness
    JEL: C33 D01 L2 O31 P2
    Date: 2007–05
  21. By: Anja Zorob (GIGA Institute of Middle East Studies)
    Abstract: The effect of ‘locking-in’ economic reform and enhancing its credibility is generally regarded as one of the most important potential effects of regional integration. Based on a detailed review of the theoretical debate, this paper develops a general framework for assessment to evaluate the ability of RIAs to serve as effective mechanisms for ‘commitment’ and ‘signalling’. In the second part, this assessment framework is applied to the case of the Syrian-European Association Agreement (AA). Syria initialled an AA with the European Union in October 2004, but two and a half years later, this agreement is still pending formal signature. The empirical findings of this study show that despite several shortcomings, the Syrian-European AA, if it were to come into force, should be able to deliver an appropriate mechanism for signalling and commitment and thus to improve the credibility of the Syrian process of reform at home and abroad. A major loophole of the agreement, however, is represented by its lack of incentives to increase the ‘rewards for good policy’.
    Keywords: Regional integration, Credibility, Commitment, Signalling, European Mediterranean Partnership, Syria
    JEL: F15
    Date: 2007–05

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