nep-eec New Economics Papers
on European Economics
Issue of 2007‒08‒18
sixteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. A new approach to measuring competition in the loan markets of the euro area By Michiel van Leuvensteijn; Jacob A. Bikker; Adrian A.R.J.M. van Rixtel; Christoffer Kok-Sørensen∗
  2. Diesel price convergence and mineral oil taxation in Europe By Axel Dreher; Tim Krieger
  3. The Impact of Cohort Size and Local Labor Market Conditions on Human Capital Accumulation in Europe By Torge Middendorf
  4. Conditional Beta- and Sigma-Convergence in Space: A Maximum Likelihood Approach By Michael Pfaffermayr
  5. Enlarging the EMU to the east: What effects on trade? By Ansgar Belke; Julia Spies
  6. Joining the EU: Capital Flows, Migration and Wages By Catia Batista
  7. Sectoral Transformation, Turbulence, and Labor Market Dynamics in Germany By Ronald Bachmann; Michael C. Burda
  8. Technology, Skills and Retirement By Federico Biagi; Danilo Cavapozzi; Raffaele Miniaci
  9. The patterns and causes of social exclusion in Luxembourg By Raileanu Szeles, Monica
  10. A Cartel Analysis of the German Labor Institutions and Its Implications for Labor Market Reforms By Justus Haucap; Uwe Pauly; Christian Wey
  11. Investment, Internal Funds and Public Banking in Germany By Dirk Engel; Torge Middendorf
  12. The Evolution of Tax Morale in Modern Spain By Jorge Martinez-Vazquez; Benno Torgler
  13. Always Poor or Never Poor and Nothing in Between? Duration of Child Poverty in Germany By Michael Fertig; Marcus Tamm
  14. Savings motives and the effectiveness of tax incentives – an analysis based on the demand for life insurance in Germany By Mathias Sommer
  15. The Labour Market Effects of Alma Mater: Evidence from Italy By Giorgio Brunello; Lorenzo Cappellari
  16. The technical-industrial research institutes in the Norwegian innovation system By Lars Nerdrum; Magnus Gulbrandsen

  1. By: Michiel van Leuvensteijn; Jacob A. Bikker; Adrian A.R.J.M. van Rixtel; Christoffer Kok-Sørensen∗
    Abstract: This paper is the first that applies a new measure of competition, the Boone indicator, to the banking industry. This approach is able to measure competition of bank market segments, such as the loan market, whereas many well-known measures of competition can consider the entire banking market only. A caveat of the Boone-indicator may be that it assumes that banks generally pass on at least part of their efficiency gains to their clients. Like most other model-based measures, this approach ignores differences in bank product quality and design, as well as the attractiveness of innovations. We measure competition on the lending markets in the five major EU countries as well as, for comparison, the UK, the US and Japan. Bearing the mentioned caveats in mind, our findings indicate that over the period 1994-2004 the US had the most competitive loan market, whereas overall loan markets in Germany and Spain were among the best competitive in the EU. The Netherlands occupied a more intermediate position, whereas in Italy competition declined significantly over time. The French, Japanese and UK loan markets were generally less competitive. Turning to competition among specific types of banks, commercial banks tend to be more competitive, particularly in Germany and the US, than savings and cooperative banks.
    Keywords: Banking industry, competition, loan markets, marginal costs, market shares;
    JEL: D4 G21 L1
    Date: 2007–05
  2. By: Axel Dreher (ETH Zurich, KOF Swiss Economic Institute); Tim Krieger (University of Paderborn)
    Abstract: We empirically analyze convergence of European producer and consumer prices for diesel fuel and investigate the role of excise taxation. By comparing the speed of convergence of prices and taxes we find a surprisingly fast speed of convergence for consumer prices. While this can in part be explained by fuel tourism, the main driving force is producer price dynamics. Tax convergence contributes weakly to price convergence, but the overall effect is to slow down consumer relative to producer price convergence.
    Keywords: price convergence, diesel, international taxation, European integration, panel unit roots
    JEL: F15 H7 Q48 C2
    Date: 2007–08
  3. By: Torge Middendorf
    Abstract: Recent studies emphasize the impact of macroeconomic factors on educational attainment. They show that although individual factors like the educational level of one’s parents play a decisive role in determining the human capital accumulation of the children, the cohort size as well as the local labor market seem to have a significant impact, too. This paper analyzes the impact of birth cohort size as well as unemployment on educational attainment in Europe using the European Community Household Panel. Estimation results suggest that neither the size of the birth cohort nor the local unemployment rate induces a change in the individual’s schooling decision.
    Keywords: Educational attainment,demography, multivariate ordered probit
    JEL: I21 J21 J62
    Date: 2007–05
  4. By: Michael Pfaffermayr
    Abstract: Empirical work on regional growth under spatial spillovers uses two workhorse models: the spatial Solow model and Verdoorn's model. This paper contrasts these two views on regional growth processes and demonstrates that in a spatial setting the speed of convergence is heterogenous in both considered models, depending on the remoteness and the income gap of all regions. Furthermore, the paper introduces Wald tests for conditional spatial sigma-convergence based on a spatial maximum likelihood approach. Empirical estimates for 212 European regions covering the period 1980-2002 reveal a slow speed of convergence of about 0.7 percent per year under both models. However, pronounced heterogeneity in the convergence speed is evident. The Wald tests indicate significant conditional spatial sigma-convergence of about 2 percent per year under the spatial Solow model. Verdoorn's specification points to a smaller and insignificant variance reduction during the considered period.
    Keywords: Conditional spatial Beta- and Sigma-convergence; Spatial Solow model; Verdoorn's model; Spatial maximum likelihood estimates; European regions
    JEL: R11 C21 O47
    Date: 2007–08
  5. By: Ansgar Belke; Julia Spies
    Abstract: The purpose of this paper is to assess the implications of the Economic and Monetary Union (EMU) accession of eight Central and Eastern European Countries (CEECs) on their share in EMU-12 imports. Overcoming biases related to endogeneity, omitted variables and sample selection, our results indicate that the common currency has boosted intra-EMU imports by 7%. Under the assumption that the same relationship between the explanatory variables and imports will hold for EMU-CEEC trade, we are able to predict the future impact of the euro. Our findings suggest that except for the least integrated countries, Poland, Latvia and Lithuania, all CEECs can expect increases in the EMU-12 import share.
    Keywords: Central and Eastern European countries, Euro area enlargement, gravity model, panel estimation
    JEL: F15 F41
    Date: 2007–07
  6. By: Catia Batista
    Abstract: What is the impact of joining the European Union on a small, less developed economy? This is the general question driving this research paper. In particular, the role of factor movements in explaining real wage behavior in Portugal after its entry in the European Union (EU) is evaluated. Based on these results, counterfactual exercises are performed to measure the impact of foreign investment and emigration on skilled and unskilled wages between 1985 and 1999. We find a small role for labor movements, and a more important one for capital inflows. This should constitute a good starting point to think about the consequences of the Eastern enlargement of the EU and of other integration experiences that abolish barriers to factor mobility.
    Keywords: International Migration, Capital Flows, Wages, Skill, Capital-Skill Complementarity, Economic Integration, European Union, Portugal
    JEL: F15 F2 J31 J61 O15 O33
    Date: 2007
  7. By: Ronald Bachmann; Michael C. Burda
    Abstract: The secular rise of European unemployment since the 1960s is hard to explain without reference to structural change. This is especially true in Germany, where industrial employment has declined by more than 30% and service sector employment has more than doubled over the past three decades. Using individual transition data onWest German workers, we document a marked increase in structural change and turbulence, in particular since 1990. Net employment changes resulted partly from an increase in gross flows, but also from an increase in the net transition “yield” at any given gross worker turnover. In growing sectors, net structural change was driven by accessions from nonparticipation rather than unemployment; contracting sectors reduced their net employment primarily via lower accessions from nonparticipation. While gross turnover is cyclically sensitive and strongly procyclical, net reallocation is countercyclical, meaning that recessions are associated with increased intensity of sectoral reallocation. Beyond this cyclical component, German reunification and Eastern enlargement appear to have contributed significantly to this accelerated pace of structural change.
    Keywords: Gross worker flows, sectoral and occupational mobility, turbulence
    JEL: J63 J64 J62
    Date: 2007–04
  8. By: Federico Biagi (Università di Padova); Danilo Cavapozzi (Università di Padova); Raffaele Miniaci (Università di Brescia)
    Abstract: In our work we study the role of Information and Communication Technology (ICT) skills and their utilization in the retirement decision. We provide empirical evidence based on Italian panel data in favour of the hypothesis that - ceteris paribus - better educated male employees with ICT know-how retire later. Such effect is stronger the longer the time horizon considered, and its magnitude is remarkably larger than the one observed in US and Germany in previous studies. We also document that ICT do not play a crucial role in the retirement decision of women. Our results are robust to the estimation strategy adopted.
    Keywords: retirement, skill-biased technological change
    JEL: J26 J24 J14
    Date: 2007–07
  9. By: Raileanu Szeles, Monica (Transylvania University of Brasov, CEPS/ INSTEAD Luxembourg)
    Abstract: The paper investigates the forms and determinants of social exclusion in Luxembourg and addresses both conceptual and empirical issues. We therefore examine the following issues: what definition of social exclusion is more appropriate for Luxembourg, if the economic and social disadvantages cumulate within the social exclusion process in Luxembourg, if the “spiral of precariousness” applies for Luxembourg, how poverty and deprivation lead to social exclusion, which are the main determinants of social exclusion and deprivation and if there are significant differences between them. The analysis is based on the data coming from the Luxembourg socioeconomic panel (PSELL-2).
    Keywords: social exclusion; deprivation ; cumulative disadvantage
    JEL: I32
    Date: 2007–08
  10. By: Justus Haucap; Uwe Pauly; Christian Wey
    Abstract: This paper offers a cartel explanation for the stability of German collective bargaining institutions.We show that a dense net of legal safeguards has been yarned around the wage setting cartel. These measures make deviation by cartel insiders less attractive and simultaneously erect entry barriers for alternative unions. As we argue many recent labor policy measures, which make wages more flexible, serve to further stabilize the labor cartel, while truly pro-competitive proposals have not been implemented exactly because of their destabilizing effects.We propose policy measures that remove entry barriers and facilitate outside competition by alternative collective bargaining organizations.
    Keywords: Labor market cartel, labor market institutions, collective bargaining
    JEL: J52 K31 L12
    Date: 2007–05
  11. By: Dirk Engel; Torge Middendorf
    Abstract: Previous studies argued that low investment-cash flow sensitivities of German firms may be caused by dominance of public banking.The paper addresses this topic and applies a unique accounting dataset of German firms. Results from a dynamic panel data approach show that the dependence of investment spending on internal funds does not significantly differ between firms attached to savings banks, cooperative banks or commercial banks. Thus, the importance of the public banking sector in Germany may not explain the rather low dependence of firms on internal funds and public ownership of borrowers seems not essential to reduce financing constraints.
    Keywords: Investment, Relationship Banking, Panel Data,GMM
    JEL: G32 D92 L21 C23
    Date: 2007–05
  12. By: Jorge Martinez-Vazquez; Benno Torgler
    Abstract: This paper studies the evolution of tax morale in Spain in the post-Franco era. In contrast to the previous tax compliance literature, the current paper investigates tax morale as the dependent variable and attempts to answer what actually shapes tax morale. The analysis uses survey data from two sources: the World Values Survey and the European Values Survey, allowing us to observe tax morale in Spain for the years 1981, 1990, 1995, and 1999/2000. The study of the evolution of tax morale in Spain over nearly a 20-year span is particularly interesting because the political and fiscal system evolved very rapidly during that period.
    Keywords: Spain, Tax morale, Tax compliance, Constitutional and political changes, fiscal system, endogenous preferences.
    JEL: H26 H73 K42 O17 Z13
    Date: 2007–08–14
  13. By: Michael Fertig (RWI Essen and IZA Bonn); Marcus Tamm (RWI Essen and Ruhr-University Bochum)
    Abstract: This paper analyses the duration of child poverty in Germany. In our sample, we observe the entire income history from the individuals' birth to their coming of age at age 18. Therefore we are able to analyze dynamics in and out of poverty for the entire population of children, whether they become poor at least once or not. Using duration models, we allow poverty exit and re-entry to be correlated even after controlling for observable characteristics and also account for correlations with initial conditions. Our results indicate that household composition, most importantly single parenthood, and the labour market status as well as level of education of the household head are the main driving forces behind exit from and re-entry into poverty and thus determine the (long-term) experience of child poverty. However, unobserved heterogeneity seems to play an important role as well.
    Keywords: Child poverty, duration analysis, unobserved heterogeneity.
    JEL: C41 D31 I32
    Date: 2007
  14. By: Mathias Sommer (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: We exploit data on German households’ savings in life insurance products, the characteristics of life insurance products and the specific tax treatment of savings in life insurance products to assess the importance of different savings motives and the effectiveness of tax incentives. Our insights about the determinants of the demand for life insurance products also allow a broad assessment of the possible consequences from the recent reforms of the pension system and of the tax treatment of life insurance policies. Socioeconomic and institutional factors generate substantial variation within the population and over time, e.g. in the replacement rates of the public pension system and the household tax rates, which allows us to disentangle savings motives and the effects of tax incentives from other factors. We employ a number of indicators for the different savings motives. Further, based on the specifics of the German tax law and the richness of our data we are able to generate a unique measure of possible tax savings associated with savings in life insurance products. We find support for our hypothesis that savings in life insurance products may substitute for a low replacement rate in the public pension system. Only high income households who face lower replacement rates from the public pension system do not increase their demand for life insurance products. Further, we use several measures for a possible bequest or family insurance motive. Our evidence on the relevance of such savings motives is mixed like the existing literature. The presence of a family increases the demand for term life insurance but households with children do not accumulate higher levels of life insurance wealth. Further, some income inequality within a couple increases the likelihood to save in life insurance. The effects are not increasing in the degree of income inequality though and only partly significant. Finally, we find households with high tax rates to be more likely to invest in life insurance products, indicating that the tax free interest earnings from a long term insurance contract play a strong role in households’ choice to invest in life insurance. The possibility to deduct contributions from taxable income turns out to be no incentive to save in life insurance products.
    JEL: D14 G11 G22
    Date: 2007–08–02
  15. By: Giorgio Brunello (Università di Padova,); Lorenzo Cappellari (Università Cattolica di Milano,)
    Abstract: We use data from a nationally representative survey of Italian graduates to study whether Alma Mater matters for employment and earnings three years after graduation. We find that the attended college matters, and that there are important college related differences, both among and within regions of the country. These differences, however, do not persist over time and are not large enough to trigger substantial mobility flows from poorly performing to better performing institutions. We also find evidence that going to a private university pays off at least in the early part of a career. Only part of this gain can be explained by the fact that private universities have lower pupil - teacher ratios than public institutions.
    Keywords: economic impact, efficiency, salary wage differential, school choice
    JEL: I21 J24
    Date: 2007–04
  16. By: Lars Nerdrum (Norwegian Institute for Studies in Research and Education - Centre for Innovation Research); Magnus Gulbrandsen (Norwegian Institute for Studies in Research and Education - Centre for Innovation Research)
    Abstract: This paper analyses the role of technical-industrial research institutes for industrial innovation in Norway. Using statistical data and a survey among firms, the paper shows that there are many different types of interaction between institutes and firms. In addition to R&D and technical services, the institutes are a significant source of skilled manpower for firms. We highlight three central roles for the institutes: they are a learning partner for industry, they help increase absorptive capacity, and they constitute a flexible repository in the innovation system by helping firms in peak periods and by reducing the pressure on universities through assisting in teaching and supervision.
    Date: 2007–08

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