nep-eec New Economics Papers
on European Economics
Issue of 2007‒10‒06
23 papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. CONSTRUCTING HISTORICAL EURO AREA DATA By Heather Anderson; Mardi Dungey; Denise R. Osborn; Farshid Vahid
  2. The Causes of Excessive Deficits in the European Union By Vítor Castro
  3. Analysis of the determinants of Temporary employment in 19 European countries By Frederic Salladarre; Boubaker Hlaimi
  4. Regional real exchange rates and Phillips curves in monetary unions - Evidence from the US and EMU By Jan Marc Berk; Job Swank
  5. Intellectual property rights and standard setting in financial services: the case of the Single European Payments Area By Robert M. Hunt; Samuli Simojoki; Tuomas Takalo
  6. The role of financial markets and innovation in productivity and growth in Europe By Philipp Hartmann; Florian Heider; Elias Papaioannou; Marco Lo Duca
  7. Instability and nonlinearity in the Euro area Phillips curve. By Alberto Musso; Livio Stracca; Dick van Dijk
  8. The role of credit aggregates and asset prices in the transmission mechanism: a comparison between the euro area and the US By Sylvia Kaufmann; Maria Teresa Valderrama
  9. The Cyclical Behaviour of European Bank Capital Buffers By Jokipii, Terhi; Milne, Alistair
  10. The Future of Key Actors in the European Research Area By Madeleine Akrich; Riel Miller
  11. Financial Integration within EU Countries: The Role of Institutions, Confidence and Trust By Mehmet Fatih Ekinci; Sebnem Kalemli-Ozcan; Bent Sorensen
  12. The Effect of Job Displacement on the Transitions to Employment and Early Retirement for Older Workers in Four European Countries By Konstantinos Tatsiramos
  13. The role of the exchange rate for adjustment in Boom and Bust episodes. By Reiner Martin; Ludger Schuknecht; Isabel Vansteenkiste
  14. The Endogeneity of Association Agreements and their Impact on Trade for Eastern Countries: Empirical Evidence for Romania By Christophe RAULT; Ana Maria SOVA; Robert SOVA
  15. The Impact of the Accession of the Western Balkan Countries on Voting and Coalition Formation within the European Council of Ministers By Eleni Mylona
  16. Improving Education Outcomes in the Slovak Republic By David Carey
  17. The Wage Impact of Trade Unions In the UK Public and Private Sectors By David G. Blanchflower; Alex Bryson
  18. Distributional effects of price reforms in the Italian utility markets By Raffaele Miniaci; Carlo Scarpa; Paola Valbonesi
  19. Improving Employment Prospects in the Slovak Republic: Building on Past Reforms By Andrés Fuentes
  20. Boosting Austria's Innovation Performance By Willi Leibfritz; Jürgen Janger
  21. The Employment and Earnings of Migrants in Great Britain By Martyn Andrews; Ken Clark; William Whittaker
  22. Measuring the Effectiveness of R&D Tax Credits in the Netherlands By Lokshin, Boris; Mohnen, Pierre
  23. How Regulatory Reforms in Sweden have boosted Productivity By Espen Erlandsen; Jens Lundsgaard

  1. By: Heather Anderson; Mardi Dungey; Denise R. Osborn; Farshid Vahid
    Abstract: Time series analysis for the Euro Area requires the availability of sufficiently long historical data series, but the appropriate construction methodology has received little attention. The benchmark dataset, developed by the European Central Bank for use in its Area Wide Model (AWM), is based on fixed-weight aggregation across countries with historically distinct monetary policies and financial markets of varying international importance. This paper proposes a new methodology, based on the historical distance from monetary integration between core and periphery countries, for producing back-dated monetary and financial series for the Euro Area. The impact of using the new methodology versus the AWM data is illustrated through a structural VAR analysis and estimates of an international DSGE model. An important advantage of the new methodology is that it can be applied to develop appropriate series as new member countries join the Euro Area.
    JEL: C82 C43 E58
    Date: 2007–10
  2. By: Vítor Castro (Universidade do Minho - NIPE)
    Abstract: Several studies have identified the factors that cause public deficits in industrial democracies. They consider that economic, political and institutional factors play an important role in the understanding of those deficits. However, the study of the determinants of excessive deficits remains practically unexplored. Since excessive deficits can have large negative spillover effects when countries are forming a monetary union without a centralised budget – as it is the case for a group of European countries – this paper tries to explore that gap in the literature by identifying the main causes of excessive deficits and the ways of avoiding them. Binary choice models are estimated over a panel of 15 European Union countries for the period 1970-2006, where an excessive deficit is defined as a deficit higher than 3% of GDP. Results show that a weak fiscal stance, low economic growth, the timing of parliamentary elections and majority left-wing governments are the main causes of excessive deficits in the EU countries. Moreover, the institutional constraints imposed after Maastricht over the EU countries’ fiscal policy have succeeded in reducing the probability of excessive deficits in Europe, especially in small countries. Therefore, this study concludes that supranational fiscal constraints, national efforts to reduce public debts, growth promoting policies and mechanisms to avoid political opportunism and partisan effects are essential factors for an EU country to avoid excessive deficits. Finally, the results presented in this paper raise the idea that a good strategy for the EU countries to avoid excessive deficits caused by the opportunistic behaviour of their policymakers would be to schedule elections for the beginning or the end of the year.
    Keywords: Excessive public deficits; European Union; Political opportunism; Binary choice models
    JEL: E62 H6 O52
    Date: 2007
  3. By: Frederic Salladarre (LEN - Laboratoire d'Economie de Nantes - [Université de Nantes]); Boubaker Hlaimi (LEN - Laboratoire d'Economie de Nantes - [Université de Nantes], 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 studies the determinants of temporary employment in 19 European countries using data from the European Social Survey. The analysis shows that temporary employment is more feminized. Fixed term employment appears conversely connected with the age, which supports the fact that temporary employment seems to become the stepping stone to permanent jobs. In addition, temporary employees appear to work less than permanent workers with reference to working time, which reduced relatively their potential wages. Moreover, the probability of being in a fixed term contract is negatively correlated with the trade-union membership. However, non-permanent workers seem to be more favourable than permanent employees for the necessity of having strong trade unions, even if atypical employment is often associated with a less trade-union presence on the place of work. From another hand, past unemployment is likely to reduce considerably the chance to be re-employed on a contract of unspecified duration. Finally, estimates from a bivariate probit show that part time employment concerns more frequently citizens of the country while fixed term employment is more devoted to immigrants. However, some points of convergence characterize part-time and fixed-term’ contracts. Women are more frequently associated with these two kinds of flexibility. Nonetheless, part-time employment is more feminized than fixed-term contract. Age acts in the same sense, but fixed-term workers are younger than part-time workers. In the two cases, domicile location has no impact on probability to work in part-time or in fixed-term contract
    Keywords: temporary jobs, fixed term contract, contract of unspecified duration
    Date: 2007–09–25
  4. By: Jan Marc Berk; Job Swank
    Abstract: We study price level convergence within the US and EMU, using panel estimates of regional Phillips curves of the hybrid New-Keynesian type. The estimated half lives of deviations from trend PPP are around three years for US regions and two years for euro area countries. The start of EMU had no noticeable influence on PPP convergence in the euro area. Where nominal exchange rates accounted for the bulk of the adjustment process before 1999, this role was taken over by relative prices thereafter. Notwithstanding clear evidence of forward-lookingness, inflation persistence is substantial in both monetary unions, especially in the US.
    Keywords: Inflation; monetary union; purchasing power parity
    JEL: E31 E52 F41
    Date: 2007–09
  5. By: Robert M. Hunt; Samuli Simojoki; Tuomas Takalo
    Abstract: For many reasons, payment systems are subject to strong network effects; one of those is the necessity of interoperability among participants. This is often accomplished via standard-setting organizations. The goal of the Single European Payments Area (SEPA) is to establish modern cross-boarder consumer payment systems for Europe. This too will require a standard-setting arrangement. But patents are also becoming an important feature of electronic payment systems and thus standard setting under SEPA should incorporate a policy to address the ownership and licensing of essential intellectual property. Using examples from the experience of European mobile telephony and financial patenting in the United States, the authors argue that the lack of a well-developed IP policy creates significant risks for participants in the new SEPA payment systems.
    Keywords: Intellectual property
    Date: 2007
  6. By: Philipp Hartmann (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Florian Heider (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Elias Papaioannou (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Marco Lo Duca (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: The extended period of limited growth experienced until recently in many European countries raises the issue as to which policies could be most effective in improving their economic performance. This paper argues that further financial sector reforms may be a valuable complement to ongoing efforts to reform labour and product markets. There is a long-standing view in the economic literature that well-functioning financial systems allow economies to exploit the benefits of innovation in terms of productivity and growth. Moreover, measured productivity differentials between Europe and the United States seem to originate particularly in the financial sector and from sectors that are particularly dependent on external financing. Building on and summarising the existing literature, this paper first introduces a number of concepts that are important for financial sector analyses and policies. Second, it presents a selection of indicators describing the efficiency and development of the European financial system from the perspective of a variety of dimensions. Third, an attempt is made to estimate the extent to which greater financial efficiency might improve the allocation of productive capital in Europe. While in the recent past the research and policy debate in Europe has focused on fostering financial integration, the present paper puts the main emphasis on financial development or modernisation in the context of the finance and growth literature. The results suggest that there are a number of ways in which the financial market framework conditions in Europe can be improved to increase the contribution of the financial system to innovation, productivity and growth. The most robust conclusions can be drawn for certain aspects of corporate governance, the efficiency of legal systems in resolving conflicts in financial transactions and some structural features of European bank sectors. For example, econometric estimations indicate that improving these conditions is likely to increase the size of capital markets – a summary measure of overall financial development – and thereby enhance the speed with which the financial system helps to reallocate capital from declining sectors to sectors with good growth potentials. JEL Classification: G00, O16, O43, E61.
    Date: 2007–09
  7. By: Alberto Musso (European Central Bank, Kaiserstraße 29, 60311 Frankfurt, Germany.); Livio Stracca (European Central Bank, Kaiserstraße 29, 60311 Frankfurt, Germany.); Dick van Dijk (Econometric Institute, Erasmus University Rotterdam, P.O. Box 1738, NL-3000 DR Rotterdam, The Netherlands.)
    Abstract: This paper provides a comprehensive analysis of the functional form of the euro area Phillips curve over the past three decades. In particular, compared to previous literature we analyse the stability of the relationship in detail, especially as regards the possibility of a time-varying mean of inflation. Moreover, we conduct a sensitivity analysis across different measures of economic slack. Our main findings are two. First, there is strong evidence of time variation in the mean and slope of the Phillips curve occurring in the early to mid 1980s, but not in inflation persistence once the mean shift is allowed for. As a result of the structural change, the Phillips curve became flatter around a lower mean of inflation. Second, we find no significant evidence of non-linearity, in particular in relation to the output gap. JEL Classification: E52, E58.
    Keywords: Inflation, output gap, structural change, asymmetry, smooth transition model.
    Date: 2007–09
  8. By: Sylvia Kaufmann (Oesterreichische Nationalbank, Economic Studies Division, Otto-Wagner-Platz 3, 1090 Vienna, Austria.); Maria Teresa Valderrama (Oesterreichische Nationalbank, Economic Studies Division, Otto-Wagner-Platz 3, 1090 Vienna, Austria.)
    Abstract: We analyze the interaction between credit and asset prices in the transmission of shocks to the real economy. We estimate a Markov switching VAR for the euro area and the US, including additionally GDP, CPI and a short-term interest rate. We find evidence for two distinct states in both regions. For the euro area, we find a regime which is correlated to the business cycle and which captures periods of very low real credit growth at the end of recessions. However, during this regime credit markets and asset price markets do not impede economic recovery. In the other regime, we do find a procyclical effect of credit and asset price shocks on GDP. Shocks in both variables explain each about 20% of GDP’s forecast error variance after four years. Credit shocks have a positive effect on inflation and explain about 35% of the forecast error variance, which confirms that credit aggregates contain information about the monetary stance. The effect of asset price shocks on inflation is insignificant and their share in explaining the forecast error variance negligible. For the US, regime 1 captures periods of stable GDP growth, and low and stable inflation, combined with accelerating asset prices. We find procyclical effects of credit and asset price shocks on GDP only in regime 2. Shocks in both variables explain about the same share (20%) of GDP forecast error variance, whereby the share explained by asset price shocks is about two and a half times larger than in regime 1. Shocks to credit and asset prices have no significant effect on CPI and explain each about 10% of its forecast error variance in both regimes. This is consistent with the view that monetary policy may achieve price stability without necessarily achieving financial stability. JEL Classification: C11, C32, E32, E44.
    Keywords: Asymmetry, asset prices, financial system, lending, transmission mechanism.
    Date: 2007–09
  9. By: Jokipii, Terhi (Stockholm School of Economics); Milne, Alistair (Bank of Finland and Cass Business School)
    Abstract: Using an unbalanced panel of accounting data from 1997 to 2004 and controlling for individual bank costs and risk, we find capital buffers of the banks in the EU15 have a significant negative co-movement with the cycle. For banks in the accession countries there is significant positive co-movement. Capital buffers of commercial and savings banks, and of large banks, exhibit negative co-movement. Those of co-operative and smaller banks exhibit positive co-movement. Speeds of adjustment are fairly slow. We interpret these results and discuss policy implications, noting that negative co-movement of capital buffers will exacerbate the procyclical impact of Basel II.
    Keywords: Bank capital; bank regulation; business cycle fluctuations
    JEL: G21 G28
    Date: 2007–07–15
  10. By: Madeleine Akrich (CSI - Centre de sociologie de l'innovation - [CNRS : UMR7120] - [Ecole Nationale Supérieure des Mines de Paris]); Riel Miller (DTI - Danish Technology Institute - [Ministry of Science, Technology and Innovation])
    Abstract: This text is the synthesis report based on the work of the High Level Expert Group on the Future of <br />Research Actors (RA) in the European Research Area (ERA). This group was set up by the Technology Foresight Group, DG Research, European Commision. Many of the conclusions of this synthesis report are fully consistent with the directions of <br />current research policies. The work of the group highlights the importance of <br />efforts, already well underway, to reinforce the functioning of the ERA as an integrated base <br />that overcomes a wide range of geographic, institutional and disciplinary barriers to the both <br />the competition and sharing of knowledge. Knitting together the different European research <br />actors into a more transparent and diversified whole would seem to be one of the best ways <br />to create a stronger platform for knowledge creation and diffusion. A less anticipated <br />conclusion, and less part of the existing consensus, is that simply pursuing the ambition of <br />multiplying the number of effective research platforms in Europe may miss a key part of <br />tomorrow's research agenda. The in-depth expert papers on the eight different research <br />actors of the ERA, the insights arising from the synthesis developed in this paper, and the <br />analytical results of a rare scenario pooling exercise, all point very clearly to the risk that <br />current policies are excessively technology centric and may miss crucial emerging attributes <br />of research and research actors in the knowledge society. Thus, over and above the value- <br />added for assessing the direction and implementation of current approaches to improving the <br />production and use of research in Europe, this report recommends new policies aimed at <br />accelerating the development of emergent forms and sources of research. The policy <br />message is that Europe must move beyond industrial-era challenges to embrace those of the <br />knowledge society. <br />Further opening, expanding and integrating the European Research Area requires: <br />1) Policies that put into practice expanded criteria for designing and funding research <br />programmes for the European Research Area to include user-centred technological, <br />organisational and social innovation. <br />2) Policies that initiate experiments that validate (quality/trust/transparency) new forms and <br />producers (including individual independent researchers) of knowledge. <br />3) Policies, both budgetary and regulatory, that create and facilitate both new collaborative <br />environments for research, including user-centred research, and new governance <br />processes.<br />4) Policies to enhance the capacity of policy makers (including at the regional level) to <br />recognise and facilitate new forms of research and particularly new approaches to the <br />governance of research processes. <br />5) Policies to abolish national borders for researchers and for students both within Europe <br />and outside Europe. <br />6) Policies to strengthen the autonomy of universities, including areas so far strictly <br />controlled by most governments such as a university's strategic profile and selection of <br />specialisations. <br />7) Further research is required regarding the relationship between the changing nature of <br />research and intellectual property rights (IPR). <br />8) Further research is required regarding the functional division of labour amongst different <br />research actors in the context of the emerging “open innovation model”. <br />9) Further research is required in order to describe and analyse the contribution of civil <br />society to research and innovation. <br />10) Further research is required on how to establish trust in highly complex and diversified <br />knowledge societies. <br />11) Further research is required to define and measure new forms of innovation, particularly <br />with respect to the innovation related research occurring in the service sector, SMEs and <br />the community (social innovation) that point towards new models of innovation.
    Date: 2007
  11. By: Mehmet Fatih Ekinci; Sebnem Kalemli-Ozcan; Bent Sorensen
    Abstract: We investigate the degree of financial integration within and between European countries. We construct two measures of de-facto integration across European regions to capture "diversification" and "development" finance in the language of Obstfeld and Taylor (2004). We find evidence that capital market integration within the EU is less than what is implied by theoretical benchmarks and also less than what is found for U.S. states. We ask - why is this the case? Using country-level data for economic institutions, we find that these are not able to explain differences between countries. Using regional data from the World Values Surveys, we investigate the effect of "social capital" on financial integration among European regions. We find regions, where the level of confidence and trust is high, are more financially integrated with each other.
    JEL: F21 F41
    Date: 2007–09
  12. By: Konstantinos Tatsiramos (IZA)
    Abstract: Despite the increased frequency of job loss for older workers in Europe, little is known on its effect on the work-retirement decision. Employing individual data from the European Community Household Panel for Germany, Italy, Spain, and the U.K., a multivariate competing-risks hazard model is estimated in which the effect of job displacement is identified separately for transitions into re-employment and retirement. The findings suggest that in countries with institutional provisions for older unemployed which offer a pathway to early retirement such as, Germany and Spain, older displaced workers exhibit lower reemployment and higher retirement rates compared to the non-displaced. These results are robust to dynamic selection due to unobserved heterogeneity and to the endogeneity of displacement.
    Keywords: job displacement, job loss, unemployment duration, retirement, competing risks
    JEL: J14 J26 J63 J64
    Date: 2007–09
  13. By: Reiner Martin (European Central Bank, Kaiserstraße 29, 60311 Frankfurt, Germany.); Ludger Schuknecht (European Central Bank, Kaiserstraße 29, 60311 Frankfurt, Germany.); Isabel Vansteenkiste (European Central Bank, Kaiserstraße 29, 60311 Frankfurt, Germany.)
    Abstract: Numerous countries have experienced boom-bust episodes in asset prices in the past 20 years. This study looks at stylised facts and conducts statistical and econometric analysis for such episodes, distinguishing between industrialised countries that experienced external adjustment (via real effective exchange rate depreciation during busts) and those that relied on an internal adjustment process (and experienced no depreciation). The study finds that different adjustment experiences are correlated with the degree of macroeconomic imbalances and balance sheet problems. Internal adjustment seems more prevalent when financial vulnerabilities, excess demand and competitiveness loss remain relatively contained in the boom. In the bust, internal adjusters experience more protracted but less deep downturns than external adjusters as imbalances unwind more slowly. Some Central and East European EU Member States are currently experiencing strong credit and asset price growth in conjunction with rapid economic expansion. Against this background the experience of other countries may raise awareness of related policy challenges. JEL Classification: E32, E63, E65.
    Keywords: Booms and busts, external and internal adjustment, exchange rates, financial imbalances, competitiveness.
    Date: 2007–09
  14. By: Christophe RAULT; Ana Maria SOVA; Robert SOVA
    Abstract: The main goal of regionalization is the creation of free trade areas and the guarantee for countries to accede to a widened market. Many studies dealing with the effects of regional free trade agreements on trade flows already exist in the economic literature and the explosion of regional agreements among nations has recently stressed the key role of regionalization. However, the effects of agreements on trade have not yet been clearly determined in those studies. Our research in this paper aims at reassessing the genuine role of associations. For this matter, we particularly study the association of Romania with European Union countries. Our econometric analysis based on qualitative choice models highlights in particular why European countries chose to conclude an association agreement with Romania, and stresses the fact that European Union countries select endogenously the conclusion of association agreements. We also find a 0.29 positive impact of the association agreement on Romanian export performances.
    Keywords: Regionalization, European integration, Qualitative choice models, Probit
    JEL: E61 F13 F15 C25
    Date: 2007–04–01
  15. By: Eleni Mylona
    Abstract: This paper looks into the impact the accession of the Western Balkan countries of Albania, Serbia, Montenegro, Croatia, Bosnia and Herzegovina, and FYROM would have on voting power in the EU Council. Particular attention is paid to the implications of a priori coalitions between member states. The Shapley-Shubik power index is used to estimate voting power and two scenarios are considered: accession under the Nice Treaty and the Reform Treaty rules. If the Western Balkans accede under the Nice Treaty rules then the efficiency and workability of the EU would deteriorate, although the “paradox of new members” might occur where the power of some existing members is increased. Conversely if the accession took place under the Reform Treaty rules then there would be little impact on the ability of the EU to act. The inefficiency of a priori coalition formation between countries of dissimilar size is revealed, as well as the likely occurrence of the “paradox of size” where some countries are made worse off through cooperation. The enlargement will not affect this.
    Date: 2007–10
  16. By: David Carey
    Abstract: Improving education outcomes is vital for achieving convergence with GDP per capita levels in Western European countries and for reducing income inequality. While some education outcomes are favourable, such as the low secondary-school drop-out rate, others have room for improvement: education achievement is below the OECD average and strongly influenced by socio-economic background; Roma children, who are mainly from disadvantaged socio-economic backgrounds, have particularly poor achievement; labour-market outcomes are poor for graduates of secondary vocational programmes not leading to tertiary education; and tertiary attainment is low, albeit rising. Reforms have been made in recent years or are planned to address many of these weaknesses, but much remains to be done. In particular, more progress needs to be made in increasing participation in early childhood education and care, reducing stratification in the education system, helping Roma children to integrate into the education mainstream, and in attracting high quality graduates to teaching, especially in socio-economically disadvantaged schools. In addition, secondary vocational education not leading to tertiary education needs to be made more pertinent to labour-market requirements. Tertiary education also needs to be made more attractive for technical secondary school graduates. <P>Améliorer les résultats de l’éducation dans la République slovaque <BR>L’amélioration des résultats de l’éducation est vitale pour converger vers les niveaux du PIB par habitant des pays de l’Europe occidentale et pour réduire les inégalités de revenus. Alors que ces résultats sont favorables à certains égards – le faible taux de décrochage scolaire dans le secondaire par exemple –-, des améliorations sont possibles dans d’autres domaines : les résultats du système éducatif sont inférieurs à la moyenne de la zone OCDE et varient énormément selon le milieu socioéconomique ; les enfants roms qui sont pour l’essentiel issus de milieux défavorisés affichent des résultats particulièrement médiocres ; les diplômés des filières professionnelles du secondaire ne donnant pas accès à l’enseignement supérieur ont un devenir peu brillant sur le marché du travail ; et le taux de diplômés du supérieur est faible, bien qu’en progression. Des réformes ont été opérées ces dernières années ou sont prévues pour remédier à nombre de ces insuffisances mais de grands progrès sont encore nécessaires. Il faut en particulier augmenter la fréquentation des structures d’accueil et d’éducation de la petite enfance, réduire la stratification du système éducatif, aider les enfants roms à intégrer le circuit scolaire ordinaire et attirer les diplômés de très haut niveau vers l’enseignement, en particulier dans les écoles défavorisées du point de vue socioéconomique. En outre, l’enseignement secondaire professionnel, qui ne donne pas accès aux études supérieures, doit être davantage adapté aux exigences du marché du travail. L’enseignement supérieur doit par ailleurs attirer davantage les diplômés des écoles secondaires techniques.
    Keywords: education, éducation, tertiary education, enseignement supérieur, formation professionnelle, PISA, achievement, secondary education, attainment, school system, tracking, streaming, teachers' skills, pre-school education, general education, PISA, réussite scolaire, éducation secondaire, système scolaire, compétences des enseignants, éducation préscolaire, éducation générale
    JEL: I2 J24
    Date: 2007–07–24
  17. By: David G. Blanchflower (Dartmouth College, University of Stirling, Bank of England, NBER, CESifo and IZA); Alex Bryson (Policy Studies Institute and Centre for Economic Performance)
    Abstract: This paper draws attention to an increase in the size of the union membership wage premium in the UK public sector relative to the private sector. We find the public sector membership wage premium is approximately double that in the private sector controlling for a full range of individual, job and workplace characteristics. Using data from the Labour Force Surveys of 1993-2006 the gap between the membership premium in the public and private sectors closes with the addition of three digit occupational controls, although significant wage premia remain in both sectors. However, using data from the Workplace Employment Relations Survey of 2004, the public sector union membership wage premium remains roughly twice the size of the private sector membership premium having accounted for workplace fixed effects, workers’ occupations, their job characteristics, qualifications and worker demographics. Furthermore, the membership wage premium among workers covered by collective bargaining is only apparent in the public sector.
    Keywords: trade unions, wage differentials, public and private sectors
    JEL: J31
    Date: 2007–09
  18. By: Raffaele Miniaci (Università di Brescia); Carlo Scarpa (Università di Brescia); Paola Valbonesi (Università di Padova)
    Abstract: In this paper we analyse some distributional effects of the reforms of water and energy services in Italy. We first document the new regulation setting in these services, illustrating the dynamics of utility prices and of household expenditure in the period 1998-2005. We then propose a way to measure the affordability of public utilities, in order to investigate how many households would incur a potentially excessive burden, if they consumed a minimum quantity of utility services. Finally, we calculate this index on data from the ‘Survey on Family Budgets’. Our results show how the affordability of utility bills varies from region to region depending on climate, income, family endowment and size. The analysis – also based on a counterfactual exercise – finds that so far, utility reforms do not seem to have produced any negative effects on weaker households.
    Keywords: Affordability, Public Utilities, Regulation, Gas, Electricity, Water
    JEL: D12 L51 L97
    Date: 2007–09
  19. By: Andrés Fuentes
    Abstract: While employment growth has accelerated, allowing unemployment to fall significantly since 2005, many low-skilled workers are still unemployed and the duration of unemployment spells is still long. The introduction of an in-work benefit for workers in low-income households, subject to a minimum of hours worked, could lower barriers to higher employment which result from a relatively high tax wedge on lowskill workers, as would the elimination of poverty traps in the pension system. Measures to improve mobility of workers across regions, notably housing policy reform, would lower long unemployment durations, as would the provision of more training to the unemployed. Impediments to higher labour market participation of young women and older workers need to be removed. <P>Améliorer les perspectives d’emploi en République Slovaque : faire fond sur les réformes passées <BR>Si la croissance de l’emploi s’est accélérée, permettant un recul notable du chômage depuis 2005, néanmoins il y a encore beaucoup de travailleurs peu qualifiés au chômage et la durée des épisodes de chômage reste longue. L’introduction d’une prestation liée à l’exercice d’une activité pour les travailleurs appartenant à des ménages à faible revenu, sous réserve d’un volume minimum d’heures travaillées, pourrait abaisser les obstacles à l’augmentation de l’emploi qui résultent du fait que le coin fiscal qui pèse sur les revenus des travailleurs peu qualifiés est relativement élevé, et l’élimination des trappes à pauvreté que crée le système de pension devrait avoir le même effet. Des mesures visant à accroître la mobilité des travailleurs entre régions, notamment avec une réforme de la politique du logement, permettraient de réduire les durées de chômage, de même qu’une offre accrue de formation à l’intention des chômeurs. Les éléments qui font obstacle à une plus forte participation des femmes jeunes et des travailleurs seniors à l’activité devraient être supprimés.
    Keywords: unemployment, chômage, prestations liées à l'exercice d'un emploi, employment protection legislation, employment, emploi, pensions, active labour market policies, protection de l'emploi, salaire minimum, minimum wage, in-work benefits, labour market participation, participation au marché du travail, programmes du marché du travail
    JEL: J21 J26 J32 J38 J59
    Date: 2007–09–24
  20. By: Willi Leibfritz; Jürgen Janger
    Abstract: Enhancing growth through more innovation has become a priority for Austrian policy makers in line with European policies as laid down in the Lisbon Agenda. This paper discusses Austria’s innovation performance, its innovation policies, and general framework conditions for innovation and growth. Austria has increased its R&D spending as a share of GDP over the last ten years, largely reflecting more business R&D, and aims at increasing it further to 3% of GDP by 2010. Innovation activity as measured by output indicators has also improved in various fields, including the number of innovating SMEs. Furthermore, policy instruments and institutions have been improved and a culture of policy evaluation is developing. However, the paper identifies some weaknesses, particularly in general economic framework conditions, which may limit the creation and diffusion of innovation and productivity growth. It suggests focusing more on these framework conditions, notably by strengthening competition in non-manufacturing product markets, such as retail and professional services, reducing the cost of firm creation and improving human capital. It also argues that focusing on a numerical target for R&D spending as an end in itself is very unlikely to be cost effective. With its university reform in 2002, Austria has made a major step in improving the efficiency of tertiary education but more needs to be done. <P>Comment améliorer la performance de l’Autriche en matière d’innovation <BR>Dans le droit fil des politiques européennes prévues par la Stratégie de Lisbonne, le renforcement de la croissance par un surcroît d’innovation est devenu une priorité pour les responsables autrichiens de l’action publique. Nous abordons dans le présent document les performances et les politiques de l’Autriche en matière d’innovation, ainsi que ses conditions-cadres pour l’innovation et la croissance. En pourcentage du PIB, le pays affiche sur la décennie écoulée une augmentation des dépenses de R-D largement imputable à une progression de la R-D dans les entreprises, et s’est fixé pour objectif de l’accroître encore à hauteur de 3 % du PIB d’ici 2010. À l’aune des indicateurs de production, les activités d’innovation ont connu des améliorations dans différents domaines, et le nombre de PME innovantes notamment a progressé. Les autorités ont également fait évoluer les moyens d’action et les institutions publiques, et une culture de l’évaluation des politiques menées se met en place. Nous détaillons cependant quelques points faibles qui, en particulier sous l’angle des conditions-cadres économiques, sont susceptibles de restreindre l’éclosion et la diffusion de l’innovation, ainsi que la croissance de la productivité. Nous suggérons d’axer davantage l’action sur ces conditions-cadres, notamment en renforçant la concurrence sur les marchés de produits non manufacturés tels que le commerce de détail et les services assurés par les professions libérales, en diminuant les coûts liés à la création d’une entreprise et en valorisant le capital humain. Nous indiquons par ailleurs que l’assignation aux dépenses de R-D d’un objectif numérique considéré comme une fin en soi a très peu de chances d’être économiquement rentable. Avec la réforme universitaire engagée en 2002, l’Autriche a franchi une étape cruciale sur la voie de l’amélioration de l’efficience de son enseignement supérieur, mais elle doit encore fournir d’autres efforts.
    Keywords: economic growth, productivity, croissance économique, productivité, competition, innovation, innovation, concurrence, subsidies, research and development, technological change, tertiary education, recherche-développement, changement technologique, enseignement supérieur, subventions
    JEL: H2 J2 O30 O31 O33 O38 Q40 Q43 Q52
    Date: 2007–09–24
  21. By: Martyn Andrews (University of Manchester); Ken Clark (University of Manchester and IZA); William Whittaker (University of Manchester)
    Abstract: Using nationally representative, longitudinal data from the first 14 waves of the British Household Panel Survey we examine the labour market returns to inter-regional migration in Great Britain. Controlling for endogeneity, heterogeneity and self-selection, we find substantial long-run wage premiums associated with migration for both males and females who move for job-related reasons. There is, however, no evidence that moving across regions increases the probability of employment for males and females; in fact, some female movers experience a long-run employment penalty.
    Keywords: migration, wages, employment, sample selection
    JEL: C33 J31 J61 J64 R23
    Date: 2007–09
  22. By: Lokshin, Boris (UNU-MERIT); Mohnen, Pierre (UNU-MERIT)
    Abstract: This paper examines the impact of the Dutch R&D fiscal incentive program, known as WBSO, on R&D capital formation. Taking a factor-demand approach we measure the elasticity of firm R&D capital accumulation to its user cost. An econometric model is estimated using a rich unbalanced panel covering the period 1996-2004 with firm-specific R&D user costs varying with tax incentives. Using the estimated user cost elasticity, we examine the impact of the R&D incentive program. We find evidence that the program of R&D incentives in the Netherlands has been effective in reducing the user cost of R&D and in stimulating firms' investment in R&D.
    Keywords: R&D tax credits, panel data, crowding out, user-cost elasticity, R&D, fiscal incentives
    JEL: O32 O38 H25 H50 C23
    Date: 2007
  23. By: Espen Erlandsen; Jens Lundsgaard
    Abstract: The economic crisis in the early 1990s prompted action on reforming the Swedish welfare state and its institutions, including deregulation of a wide range of product markets. In that way, Sweden took early action compared to other OECD countries currently struggling with how to make public finances more robust in an ageing context. The reforms that were implemented during the 1990s are now paying off in terms of productivity and GDP growth. Empirical evidence suggests that deregulation has delivered a considerable “productivity dividend”. Although significant progress therefore has been made, renewed regulatory reform is needed to safeguard Sweden’s ambitious public policy goals. Efforts should focus on improving enterprise formation and labour utilisation, as well as on providing better value for money in the public sector by raising its efficiency and delivering high quality services. <P>Comment les réformes réglementaires en Suède ont stimulé la productivité <BR>La crise économique du début des années 90 a servi de catalyseur pour la réforme de l’État providence suédois, qui s’est aussi accompagnée par une vaste libéralisation de des marchés des produits. Ce faisant, la Suède a agi de manière précoce comparée à d'autres pays de l’OCDE qui peinent à trouver une solution pour assainir les finances publiques dans le contexte du vieillissement de la population. Les réformes mises en oeuvre au cours des années 90 se sont révélées payantes en termes de productivité et de croissance du PIB. Les données disponibles suggèrent que la déréglementation s’est soldée par un « dividende de productivité » considérable. Malgré d’importants progrès dans ce domaine, de nouvelles réformes réglementaires sont nécessaires afin de sauvegarder les objectifs de politique publique ambitieux de la Suède. Il faudrait se concentrer sur l’amélioration des conditions de création d’entreprise et une meilleure utilisation de la main d’oeuvre, en plus d’une meilleure valeur ajoutée dans le secteur public en augmentant son efficacité et la qualité des services fournis.
    Keywords: product market regulation, network industries, industrie de réseau, regulatory reforms, réforme réglementaire
    JEL: D40 E20 E60 F40 H11 H40 H60 J20 L11 L50 L51 L53 O47
    Date: 2007–09–24

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