nep-eec New Economics Papers
on European Economics
Issue of 2007‒09‒09
25 papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Macroeconomic Differentials and Adjustment in the Euro Area By Iulia Traistaru-Siedschlag
  2. Fiscal Discipline as a Social Norm: The European Stability Pact By Jean-Paul Fitoussi; Francesco Saraceno
  3. Liquidity, Competition & Price Discovery in the European Corporate Bond Market By BIAIS, Bruno; DECLERCK, Fany
  4. Distributional Effects of Public Education Transfers in Seven European Countries By Tim Callan; Tim Smeeding; Panos Tsakloglou
  5. The "Muslim Factor" and the Future of "Integration Policy" in Europe. By Tausch, Arno; Bischof, Christian; Mueller, Karl
  6. European Community--Sugar : cross-subsidization and the World Trade Organization By Howse, Robert; Hoekman, Bernard
  7. Incertitudes économiques et insécurité juridique : la notion de position dominante collective dans les politiques de concurrence européennes By Frédéric Marty
  8. The euro goes East. Implications of the 2000-2002 economic slowdown for synchronisation of business cycles between the euro area and CEEs By Fidrmuc, Jarko; Korhonen, Iikka
  9. Bilaterial equilibrium exchange rates of EU accession countries against the euro By Rahn , Jörg
  10. Sectoral Agglomeration Economies in a Panel of European Regions By Brülhart, Marius; Mathys, Nicole Andréa
  11. Trade, product variety and welfare: A quantitative assessment for the transition economies in Central and Eastern Europe By Funke, Michael; Ruhwedel, Ralf
  12. Export variety and economic growth in East European transition economies By Funke, Michael; Ruhwedel, Ralf
  13. Reforms, Macroeconomic Policy and Economic Performance in Germany By Carlin, Wendy; Soskice, David
  14. Banking consolidation and small businessfinance : empirical evidence for Germany By Marsch, Katharina; Schmieder, Christian; Forster-van Aerssen, Katrin
  15. Low-skilled Jobs: The French Strategy By Henri Sterdyniak
  16. The Earnings of Immigrants in Ireland: Results from the 2005 EU Survey of Income and Living Conditions By Alan Barrett; Yvonne McCarthy
  17. A New Indicator of Competitiveness for Italy and the Main Industrial and Emerging Countries By Finicelli, Andrea; Liccardi, Alessandra; Sbracia, Massimo
  18. Varieties of Capitalism, Varieties of Markets: Mergers and Acquisitions in Japan, Germany, France, the UK and USA By Gregory JACKSON; MIYAJIMA Hideaki
  19. Tax Structure and Female Labour Market Participation: Evidence from Ireland By Tim Callan; A. Van Soest; John R. Walsh
  20. Taxation, growth and welfare: Dynamic effects of Estonia’s 2000 income tax act By Funke, Michael; Strulik, Holger
  21. A large scale experiment: wages and educational expansion in France By Marc Gurgand; Eric Maurin
  22. Corporate Governance and Investments in Scandinavia - ownership concentration and dual-class equity structure By Eklund, Johan E.
  23. Choice of ownership structure and firm performance: Evidence from Estonia By Jones, Derek C.; Kalmi, Panu; Mygind, Niels
  24. Diesel price convergence and mineral oil taxation in Europe By Axel Dreher; Tim Krieger
  25. Airline Emissions of Carbon Dioxide in the European Trading System By John FitzGerald; Richard S.J Tol

  1. By: Iulia Traistaru-Siedschlag (Economic and Social Research Institute (ESRI))
    Date: 2006–10
  2. By: Jean-Paul Fitoussi (Observatoire Français des Conjonctures Économiques); Francesco Saraceno (Observatoire Français des Conjonctures Économiques)
    Abstract: This paper reviews the arguments for and against the ‘Stability and Growth Pact’ signed by the countries of the Euro area. We find the theoretical debate to be inconclusive, as both externality and credibility arguments can be used to yield opposite, and equally plausible conclusions. We also argue that evidence in favour of a Pact-like rule is scant. We therefore suggest the view that the Stability Pact is a public social norm, and that a country’s adherence to that norm is in fact a response to the need to preserve reputation among the other members of the European Union. Using this extreme but not implausible hypothesis, we build a simple model similar in spirit to Akerlof’s (1980) seminal paper on social norms, and we show that reputation issues may cause the emergence of a stable but inferior equilibrium. We further show that after the enlargement, with a number of countries anxious to prove their ‘soundness’ joining the club, the problems posed by the pact/social norm are likely to increase.
    Keywords: Stability Pact, Fiscal Rules, Fiscal Policy, Social Norms, Reputation, Enlargement
    JEL: D63 D71 E62 E63
    Date: 2007
  3. By: BIAIS, Bruno; DECLERCK, Fany
    Date: 2007–08
  4. By: Tim Callan (Economic and Social Research Institute (ESRI)); Tim Smeeding (Syracuse University); Panos Tsakloglou (Athens University of Economics and Business)
    Abstract: Empirical studies of inequality and poverty are usually based on disposable cash incomes, disregarding incomes in-kind (non-cash incomes). Since individuals also derive utility from the consumption of goods and services provided in-kind monetary income is not always a good indicator of an individual’s utility or “command over resources”. Thus, distributional analysis based on cash incomes may be seriously biased. Inclusion of non-cash incomes (arising from private sources or from public provision of services such as health, housing and education) may allow for better targeting and allocation of resources in fighting poverty and social exclusion. The present paper focuses on non-cash incomes arising from publicly provided education in seven European countries (Belgium, Germany, Greece, Italy, Ireland, the Netherlands and the UK), as part of a broader research project (AIM-AP Accurate Income Measurement for the Assessment of Policy) investigating the distributional implications of including elements of non-cash income in the measurement of wider resources. In all countries under examination public education transfers account for a considerable proportion of the total transfers of the state to the citizens. The paper uses static incidence analysis under the assumption that public education transfers do not create noticeable externalities, combining the information of existing nationwide income surveys with external information on spending per student in particular levels of the education system. In all countries public education transfers are found to reduce aggregate inequality. These effects are driven by the impact of primary and, especially, secondary education transfers at the time of their receipt and assuming benefits are valued at cost by recipients. In a static framework, transfers in the field of tertiary education appear to have a small distributional impact while the size and the sign of this impact depend on the treatment of tertiary education students living away from the parental home.
    Date: 2007–09
  5. By: Tausch, Arno; Bischof, Christian; Mueller, Karl
    Abstract: This paper systematically evaluates the freely available data, contained in the European Social Survey and other international, open sources, on the problems of internal security and social policy in Europe for the Muslim and the non-Muslim populations in Europe. It is the attempt to try to present an interpretation pattern for the complex reality of poverty; social exclusion, religious and societal values, and day to day contact of different population groups in Europe with the law. A variety of results and methods are presented – aggregations of survey results at the national level, cross-national comparisons of these survey results with cross-national political science data; factor analyses of the opinion and civic culture structure of the totality of Muslims and non-Muslims in all of Europe, multiple regressions of the determinants of their trust in the police, in democracy, and in personal happiness, and a re-linking of the “Muslim Calvinist” results with new global level data about migration, Islam, and national well-being. At the end of this exercise of quantitative political science, Tausch and associates arrive at the conclusion that Islamophobia is baseless, and that European Muslims; above all, deserve economic freedom, markets and respect.
    Keywords: C2 - Single Equation Models; Single Variables; C43 - Index Numbers and Aggregation; D31 - Personal Income; Wealth; and Their Distributions; F02 - International Economic Order; F15 - Economic Integration; F5 - International Relations and International Political Economy; H11 - Structure; Scope; and Performance of Government; H2 - Taxation; Subsidies; and Revenue; H26 - Tax Evasion; J70 - General - Labor Discrimination; O10 – General - Economic Development; O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements; O57 - Comparative Studies of Countries; Z12 - Religion
    JEL: Z12
    Date: 2007
  6. By: Howse, Robert; Hoekman, Bernard
    Abstract: An important recent World Trade Organization dispute settlement case for many developing countries concerned European Union exports of sugar. Brazil, Thailand, and Australia alleged that the exports have substantially exceeded permitted levels as established by European Union commitments in the WTO. This case had major implications for both European Union sugar producers and developing countries that benefited from preferential access to the European Union market. It was also noteworthy in the use of economic arguments by the WTO dispute settlement panel, which held that the excess sugar exports were in part a reflection of illegal de facto cross-subsidization-rents from production that benefited from high support prices being used to cover losses associated with exports of sugar to the world market. Although in principle the economic arguments of the panel could apply to many other policy areas, in practice WTO provisions greatly limit the scope to bring similar arguments for trade in products that are not subject to explicit export subsidy reduction commitments of the type that were made for sugar and other agricultural commodities.
    Keywords: Economic Theory & Research,Trade Law,Tax Law,Food & Beverage Industry,Agribusiness & Markets
    Date: 2007–08–01
  7. By: Frédéric Marty (Observatoire Français des Conjonctures Économiques)
    Date: 2007
  8. By: Fidrmuc, Jarko (BOFIT); Korhonen, Iikka (BOFIT)
    Abstract: We assess the correlation of supply and demand shocks between current countries in the euro area and EU accession candidates from 1993/1995 to 2002. Supply and demand shocks are recovered from estimated structural VAR models of output growth and inflation. Notably, the economic slowdown between 2000 and 2002 increased heterogeneity of business cycles between the euro area and acceding counties. We find that several acceding countries have a quite high correlation of underlying shocks with the euro area and conclude that continuing integration within the EU is likely to align the business cycles of these countries in a manner similar to the synchronisation of supply and demand shocks we document for the EU in the 1990s.
    Keywords: optimum currency area; EU enlargement; structural VAR
    JEL: E32 F42
    Date: 2007–09–05
  9. By: Rahn , Jörg (BOFIT)
    Abstract: We apply BEER and PEER approaches to calculate real equilibrium exchange rates for five EU accession countries in central and east Europe. Bilateral nominal equilibrium exchange rates against the euro are obtained through algebraic transformation of the results. Panel cointegration techniques are used to check the adequacy of the empirical model. The results reveal substantial overvaluations of the real exchange rate in several EU accession countries. Overvaluation is even higher when these exchange rates are expressed in nominal terms against the euro.
    Keywords: real exchange rates; equilibrium exchange rates; transition economies; panel cointeg
    JEL: C23 F31 F41
    Date: 2007–09–06
  10. By: Brülhart, Marius; Mathys, Nicole Andréa
    Abstract: We estimate agglomeration economies, defined as the effect of density on labour productivity in European regions. The analysis of Ciccone (2002) is extended in two main ways. First, we use dynamic panel estimation techniques (system GMM), thus offering an alternative methodological treatment of the inherent endogeneity problem. Second, the sector dimension in the data allows for disaggregated estimation. Our results confirm the presence of significant agglomeration effects at the aggregate level, with an estimated long-run elasticity of 13 percent. Repeated cross-section regressions suggest that the strength of agglomeration effects has increased over time. At the sector level, the dominant pattern is of cross-sector "urbanisation" economies and own-sector congestion diseconomies. A notable exception is financial services, for which we find strong positive productivity effects from own-sector density.
    Keywords: Dynamic panel GMM; Employment density; European regions; Productivity
    JEL: R10
    Date: 2007–08
  11. By: Funke, Michael (BOFIT); Ruhwedel, Ralf (BOFIT)
    Abstract: We calculate welfare gains of trade liberalization in the Central and East European transition economies, following the approach of Romer (1994), who emphasized that proper modeling of the impact of trade restrictions on the number of available product varieties is crucial to quantifying the welfare impact of trade liberalization. The empirical work relies on direct measures of product variety calculated from 5-digit trade data. Although the issue is far from settled, the emerging conclusion is that freer trade has boosted welfare.
    Keywords: trade liberalization; product variety; welfare; transition economies
    JEL: D60 F14 F15
    Date: 2007–09–06
  12. By: Funke, Michael (BOFIT); Ruhwedel, Ralf (BOFIT)
    Abstract: Utilising panel data for 14 East European transition economies, we find support for the hypothesis that a greater degree of export variety relative to the U.S. helps to explain relative per capita GDP levels. The empirical work relies upon some direct measures of product variety calculated from 5-digit OECD trade data. Although the issue is far from settled, the emerging view is that the index of relative export variety across countries correlates significantly with relative per capita income levels.
    Keywords: product variety; transition economies; Eastern Europe; economic growth; panel data
    JEL: C33 F43 O31 O33 O52
    Date: 2007–09–05
  13. By: Carlin, Wendy; Soskice, David
    Abstract: The conventional diagnosis of Germany’s poor economic performance focuses on supply-side weaknesses and the need for more vigorous reforms to make low-skill labour markets more flexible. We question this on both theoretical and empirical grounds. In an extended version of a New Keynesian model shifts in aggregate demand can move the economy along a range of constant-inflation medium-run unemployment equilibria. The evolution of the real exchange rate and the external balance help to identify whether aggregate supply or aggregate demand shifts have been dominant in accounting for changes in unemployment. We provide some prima facie evidence for Germany and the UK that aggregate demand factors have played an important role in sustaining growth in the UK and weakening it in Germany over the medium run. We show that Germany has a relatively strong record in implementing OECD recommended reforms but the expected employment effects in low-skill service sectors appear disappointing and poverty has increased. By contrast, it is in high productivity sectors including services that the German economy has performed well, especially in exports. Here labour markets are not flexible in the conventional sense: codetermination, vocational training, and coordinated wage bargaining are important. We pursue the implications of these claims for the design and political economy of reforms in Germany.
    Keywords: aggregate demand; German economic performance; labour market reforms; macroeconomic policy
    JEL: E65 J59
    Date: 2007–08
  14. By: Marsch, Katharina; Schmieder, Christian; Forster-van Aerssen, Katrin
    Abstract: Since the early 1990s an unprecedented process of consolidation has taken place in the banking sector in most industrialised countries raising concern of policymakers that it may reduce access to credit for the small business sector. While most of the existing empirical studies have focused on the U.S., this paper is the first one empirically investigating the effects of banking consolidation in Germany. As small and medium sized German companies traditionally almost exclusively rely on bank credit and as they represent the vast majority of the corporate sector reduced credit availability for those companies could particularly endanger economic growth. Based on an exceptional panel dataset comprising merged data of the German credit register and balance sheet data of German firms and banks we find - contrary to public fear - that the ongoing banking consolidation in Germany does not have a significant negative impact on the financing of small and medium-sized enterprises (SME). We measure the financing opportunities of SMEs based on the bank debt/assets ratio and the logarithmized credit size and control both explicitly for bank mergers and for the increase in the average bank size in the course of the consolidation process. In addition, we observe that the concentration in the banking market is insignificant for SME financing and that there is no significant difference between commercial banks, savings banks and private banks.
    Keywords: Banking consolidation, bank mergers, SME financing
    JEL: G1 G2 G21
    Date: 2007
  15. By: Henri Sterdyniak (Observatoire Français des Conjonctures Économiques)
    Date: 2007
  16. By: Alan Barrett (Economic and Social Research Institute and IZA); Yvonne McCarthy (Central Bank and Financial Services Authority of Ireland, formerly of the Economic and Social Research Institute)
    Abstract: This paper has three objectives. First, a review of the developing body of work on the economics of immigration in Ireland is provided. Second, the analysis undertaken by Barrett and McCarthy (forthcoming) of earnings of immigrants in Ireland is updated. Third, the earnings of immigrant women are assessed to see if they experience a "double disadvantage". Among other findings, the review of the emerging literature points to immigrants faring less well in the Irish labour market relative to native employees. As regards the analysis conducted in this paper, we find that immigrants were earning 15 percent less than comparable natives employees in 2005. For immigrants from non-English speaking countries, the wage disadvantage was 20 percent. The corresponding figure for immigrants from the EU’s New Member States was 31 percent. A double disadvantage is found for immigrant women, with the earnings of female immigrants found to be 14 percent less than those of comparable native female employees. This double disadvantage is concentrated among female immigrants with third level degrees.
    Keywords: immigrants’ earnings, Ireland
    JEL: J61
    Date: 2007–08
  17. By: Finicelli, Andrea; Liccardi, Alessandra; Sbracia, Massimo
    Abstract: This paper presents the new competitiveness indicators of the Bank of Italy. While the old ones were calculated with reference to 25 industrial or OECD countries, the new indicators are available for 62 countries, including the main emerging and developing economies. In order to extend the country coverage, we have used a new methodology to compute country weights, introduced by the Federal Reserve, which is entirely based on trade flows; by contrast, the previous IMF-BIS methodology adopted for the old indicators required also data on the domestic production of the manufacturing sector — figures that are rarely available for non-industrial countries. In addition, we have adjusted the trade flows of China and Hong Kong as suggested in the literature, in order to reduce the distortions due to the entrepôt trade of these two countries. Results show that methodological differences have a negligible impact on competitiveness indicators; on the other hand, the effect of the country coverage may be quite remarkable. In Italy’s case, the old and new indicators show a similar dynamics in the period from January 1980 to September 2005; differences in levels, well-contained between 1980 and 1993, grow thereafter reaching a maximum of 5.5 percentage points. During the recent phase of dollar depreciation began in February 2002, Italy recorded a sharp decline in competitiveness. In addition to the United States, the countries that mostly contributed to this negative performance were Japan, China, Hong Kong and Taiwan. These losses were partly offset by the gains recorded with respect to several central and eastern European countries.
    Keywords: Real Effective Exchange Rate; Entrepôt trade; Competitiveness;
    JEL: C43 F31 F10
    Date: 2005–12–05
  18. By: Gregory JACKSON; MIYAJIMA Hideaki
    Abstract: This paper compares the characteristics of M&A in 1991-2005 across five countries: Japan, France, Germany, the UK and USA. We ask what factors explain the growth of M&A markets across these countries, and what similarities and differences exist in the ways the M&A market operates. We find that the growth of M&A reflects a rather similar combination of sectoral, international, and financial factors. However, despite some convergence toward increasing levels, we find important differences in the characteristics of M&A transactions that reflect institutional differences found within different national 'varieties of capitalism'. We find systematic differences between what Hall and Soskice (2001) call liberal market economies (UK and USA) and coordinated market economies (Japan, France, and Germany) across a wide range of in deal characteristics: takeover bids, the size of stakes purchased, the prior stakes held, the use of private negotiation, degree of hostility, and takeover premium. In line with theories of the social embeddedness of markets (Granovetter 1985), we find that in countries with 'coordinated' market economies, M&A reflects greater 'coordination' of transactions through on going business relations. As such, the market for corporate control does not necessary entail a convergence of national business systems, but a pattern of change influenced by strong continuities.
    Date: 2007–09
  19. By: Tim Callan (Economic and Social Research Institute (ESRI)); A. Van Soest (RAND, Tilburg University); John R. Walsh (Economic and Social Research Institute (ESRI))
    Abstract: How great an effect does the structure of income taxes have on women’s labour market participation? This issue is investigated using a discrete choice static labour supply model for married couples in Ireland. The model incorporates fixed costs of working and simultaneously explains participation decisions and preferred hours of work. Details of the tax system are fully incorporated, and key elements of the welfare system are also taken into account. The model is estimated using data from the 1994 wave of the Living in Ireland Survey. The results are used to analyse the labour supply effects of a move to greater independence in the tax treatment of couples. The influence of tax structure on participation is reconsidered in the light of trends in women’s participation in the labour market and two key changes in the structure of taxation: a shift from a joint or aggregated basis of assessment to an “income-splitting” system in 1980 and a further substantial shift from income-splitting towards greater independence from 2000 onwards.
    JEL: H31 J22
    Date: 2007–09
  20. By: Funke, Michael (BOFIT); Strulik, Holger (BOFIT)
    Abstract: This paper analyses the long-run effects of Estonia’s 2000 Income Tax Act with a dynamic general equilibrium model. Specifically, we consider the impact of the shift from an imputation system to one where companies only pay taxes on distributed profits. Balanced growth paths, transitional dynamics and welfare costs are computed. Our results indicate that the 2000 Income Tax Act leads to higher per capita income and investment, but lower welfare. A sensitivity analysis shows the results are rather robust.
    Keywords: growth; welfare; taxation; tax reform; Estonia
    JEL: H25 H32 O41 O52
    Date: 2007–09–06
  21. By: Marc Gurgand; Eric Maurin
    Abstract: We evaluate the wage impact of the strong and rapid increase in schooling levels experienced by the cohorts born after WWII in France. In order to identify the causal effect of education, we exploit the fact that the small group of people graduating from elite education (Grandes Ecoles) remained stable, while the rest of the system experienced tremendous transformation. This provides a well defined control group. Using large scale labor force surveys for the 1990's, we find that the cohorts that received more education have a lower wage gap, relative to Grandes Ecoles. We show that such a large scale experiment measures a social return to schooling even in the presence of signaling, whereas strategies based on quasi-experiments are not necessarily robust to signaling. Our instrumental variable estimation finds returns to schooling very similar to the rest of the literature, which is a strong case against the signaling hypothesis.
    Date: 2007
  22. By: Eklund, Johan E. (JIBS and CESIS)
    Abstract: Juridical-political theories suggest that legal origin (La Porta et al. (1997)) and political factors (Roe (2003)) matters for firm performance. In Scandinavia there are a number of legal practices, with common political roots, that impinge on the distribution of corporate control, which accordingly may affect firm performance. This paper examines the return on investments and the effects of ownership concentration in a large sample of listed Scandinavian firms. As a performance measure marginal q developed by Mueller and Reardon (1993) is used. Marginal q measures the marginal return on capital relative its cost of capital. This is a more appropriate measure of performance than Tobin’s average q. The question of how ownership concentration affects managerial investment decisions is examined. A Scandinavian corporate governance feature is the wide spread use of vote-differentiation. How deviations from the one-share-one-vote principle affects this ownership-performance relationship is analyzed.
    Keywords: Investments; Marginal q; Corporate Governance; Ownership Concentration; Dual-Class Shares
    JEL: C23 G30 K22 L25
    Date: 2007–09–06
  23. By: Jones, Derek C. (BOFIT); Kalmi, Panu (BOFIT); Mygind, Niels (BOFIT)
    Abstract: In this paper we use rich panel data for a representative sample of Estonian enterprises to analyse diverse issues related to the determinants of ownership structures and ownership changes after privatisation. A key focus is to determine whether ownership changes are related to economic efficiency. While employee owned firms are found to be much more prone than other firms to switch ownership categories, often “employee owned” firms remain “insider-owned” as ownership passes from current employees to managers and former employees. Logit analyses of the determinants of ownership structures and ownership changes provides mixed support for several hypotheses. As predicted: (i) wealth and resource constraints play a crucial role in the determination of ownership, with foreigners buying firms with the highest equity levels and insiders buying firms with the lowest equity valuations; (ii) risk aversion explains subsequent ownership changes, especially away from employee ownership; (iii) allocation of ownership depends on the pre-privatisation origin and location of the firm, and these factors also influence subsequent ownership changes. Finally we compare our findings with those achieved by using more conventional approaches to analyze efficiency that use very similar data. Reassuringly the evidence presented in this paper is consistent with the view that efficiency considerations drive ownership changes (while earlier analysis for Estonia and for many other transition economies has identified the impact of ownership on economic performance.) However, the findings in this paper also establish that there are important influences besides economic efficiency that affect enterprise ownership and ownership changes.
    Keywords: privatisation; ownership change; employee ownership; transition economies; Estonia
    JEL: G30 J50 P20 P30
    Date: 2007–09–05
  24. 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
  25. By: John FitzGerald (Economic and Social Research Institute (ESRI)); Richard S.J Tol (Economic and Social Research Institute (ESRI))
    Abstract: A simulation model of international tourist flows is used to estimate the impact of including carbon dioxide emissions from aviation fuels in the European Trading System. The effect on global carbon dioxide emissions from international aviation is minimal: -0.01% at current permit prices, and –0.13% for the aggressive climate policy advocated by the Stern Review. In the latter case, total CO2 emissions from fossil fuels would fall by 0.004%, and total greenhouse gas emissions by 0.002%. Tourist numbers in Europe would fall by up to 0.6%, and would increase in the rest of the world. If the permits are grandparented, the airlines would receive a subsidy of €3 bln at current prices, and €40 bln for the Stern policy. If permits are auctioned, the effect on the airline industry would be minimal. Including aviation in the market for emission permits has almost no effect on the environment and may have a negative effect on the economy.
    Keywords: International tourism, tradable permit, carbon dioxide, aviation
    Date: 2007–01

This nep-eec issue is ©2007 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.