nep-eec New Economics Papers
on European Economics
Issue of 2007‒12‒01
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Government Risk Premiums in the Bond Market: EMU and Canada By Schuknecht, Ludger; von Hagen, Jürgen; Wolswijk, Guido
  2. The Maastricht Inflation Criterion: What is the Effect of Expansion of the European Union? By John Lewis; Karsten Staehr
  3. Costs and Benefits of Euro Membership: a Counterfactual Analysis By Emmanuel Dubois; Jerome Hericourt; Valerie Mignon
  4. Coping with People's Inflation Perceptions during a Currency Changeover By Thomas A. Eife; W. Timothy Coombs
  5. EU Competition Policy: Some Real Case Applications By Jalles, João Tovar
  6. The Determinants of Venture Capital in Europe - Evidence Across Countries By Elisabete Gomes Santana Félix; Cesaltina Pires; Mohamed Azzim Gulamhussenb
  7. R&D collaboration networks in the European FrameworkProgrammes: Data processing, network construction and selected results By Roediger-Schluga, Thomas; Barber, Michael J.
  8. Migration and Trade in a World of Technological Differences: Theory with an Application to Eastern-Western European Integration By Susana Iranzo; Giovanni Peri
  9. The determinants of allowance prices in the European Emissions Trading Scheme - Can we expect an efficient allowance market 2008? By Wilfried Rickels; Vicki Duscha; Andreas Keller; Sonja Peterson
  10. Mitigation of CO2 emissions in 2020 : impacts of the " 20/20/20 " European policy By Loreta Stankeviciute
  11. Regional Dispersion of Economic Activities And Models of Capitalism in Europe By Francesca Gambarotto; Stefano Solari
  12. Inflation Dynamics and the Cross-Sectional Distribution of Prices in the E.U. Periphery By Constantina Kottaridi; Diego Mendez-Carbajo; Dimitrios Thomakos
  13. High Growth Continues, with Risks of Overheating on the Horizon By Vladimir Gligorov; Sándor Richter
  14. Consumer Confidence in Portugal – What does it really matter? By António Caleiro; Esmeralda Ramalho
  15. Stock market performance and pension fund investment policy: rebalancing, free float, or market timing? By Jacob A. Bikkera; Dirk W.G.A. Broeders; Jan de Dreu
  16. Welfare Reform and Lone Parents in the UK By Paul Gregg; Susan Harkness; Sarah Smith
  17. Financial Constraints of Ethnic Entrepreneurship: Evidence from Germany By Jana Bruder; Doris Neuberger; Solvig Raethke-Döppner
  18. The Impact of Firm Level Contracting on Wage Levels and Inequality: Spain 1995-2002. By Sara de la Rica; Ainara González de San Román
  19. East German Unemployment from a Macroeconomic Perspective By Jens Rubart; Willi Semmler
  20. Wealth portfolio of Hungarian households – Urban legends and facts By Gábor Vadas

  1. By: Schuknecht, Ludger; von Hagen, Jürgen; Wolswijk, Guido
    Abstract: This paper focuses on risk premiums paid by central governments in Europe and sub-national governments in Germany, Spain, and Canada. With regard to the European governments, we are interested in how these premiums were affected by the introduction of the euro. Using data for bond yield spreads relative to an appropriate benchmark, for the period 1991-2005, we find that risk premiums incurred by central governments of EU member states respond positively to central government debts and deficits. This is consistent with the notion of market-imposed fiscal discipline. We find that German states and, among them, especially those usually receiving transfers under the German fiscal equalization system, enjoyed a very favourable position in the financial markets before EMU as their risk premiums did not respond to fiscal balances. This special status seems to have disappeared with start of EMU. Monetary union, therefore, imposes more fiscal discipline on German states. In contrast, Spanish provinces paid risk premiums related to their fiscal balances both before and after the start of EMU. Both German and Spanish sub-central governments paid fixed interest rate premiums over their national governments which became smaller after the introduction of the euro and are more likely to be interpreted as liquidity premiums. We also estimate empirical models of risk premiums for Canadian provinces for which we find financial market penalties of adverse fiscal balances and debt indicators. However, as in the case of Germany before EMU, those provinces that typically receive transfers under the Canadian fiscal equalization scheme have a more favourable bond market treatment than others. The evidence of market discipline at work in European government bond markets supports the notion that the no-bailout clause in the EU Treaty is credible.
    Keywords: bail out; fiscal policy; government debt; interest rates; regional public finances
    JEL: E43 E62 H63 H74
    Date: 2007–11
  2. By: John Lewis; Karsten Staehr
    Abstract: Following the Maastricht criteria, a country seeking to join the European Monetary Union cannot have an inflation rate in excess of 1.5 percent plus the average inflation rates in the three 'best performing' EU countries. This inflation reference value is a non-increasing function of the number of EU members. Looking backwards, the effect of increasing the number of EU countries from 15 to 27would have been sizeable in 2003 and 2004, but relatively modest since 2005. Monte Carlo simulations show that the expansion of the EU from 15 to 27 members reduces the expected inflation reference value by 0.15-0.2 percentage points, but with a considerable probability of a larger reduction. The treatment of countries with negative inflation rates in the calculation of the reference value has a major impact on the results.
    Keywords: Maastricht Treaty; European Monetary Union; inflation; convergence.
    Date: 2007–11
  3. By: Emmanuel Dubois; Jerome Hericourt; Valerie Mignon
    Abstract: The aim of this paper is to gauge quantitatively the macroeconomic costs or gains of EMU membership. Building on the Global VAR framework designed by Pesaran et al. (2004), we want to shed light on the following important questions: What if the euro had never been launched? How would have evolved national outputs and inflation rates? What would have been the consequences for Italy of not participating to Stage 3? We show that we cannot draw any general conclusion for the three largest euro area members, namely Germany, France and Italy. It is however certain that these countries had, and probably still have, conflicting interests regarding the most suitable monetary policy for each of them. Conversely, small euro area members like Finland, the Netherlands and Spain, seem to have benetted from the pre-euro convergence and from the single currency regime. Besides, the single currency regime probably did not have any significant impact on price developments. Finally, the non-participation of Italy to the single currency is quite neutral on the macroeconomic performances of the euro area.
    Keywords: Euro; counterfactual analysis; global VAR
    JEL: C32 E17 F42
    Date: 2007–11
  4. By: Thomas A. Eife (University of Heidelberg, Department of Economics); W. Timothy Coombs (University of Illinois)
    Abstract: The discrepancy between popular impressions of how the 2002 changeover to the euro affected prices and its actual impact is perhaps the most surprising consequence of the single currency’s introduction. Following the changeover, perceived inflation rose significantly and returned to its prechangeover level only several months later. This paper argues that people’s inflation misperceptions could have been avoided. Using principles of crisis communication, we identify the mistakes made and present policy recommendations for future changeovers
    Keywords: euro changeover, perceived inflation, communication, perceptual crisis
    JEL: E50 E60 Y80
    Date: 2007–11
  5. By: Jalles, João Tovar
    Abstract: European Union Antitrust Laws have been successfully applied to anti-competitive behaviour, which can take place abroad, but have an effect within the EU. Under Antitrust Laws, not only abuse of dominant position practices but also mergers that restrain competition are regarded as illegal and subject to severe remedies. This paper accesses both Microsoft-WMP and Volvo-Scania cases in the light of the EU Competition Policy and identifies the circumstances involved, final decisions made as well as the suggested remedies and the consequences from the consumers’ perspective. The issues considered are per se controversial and these are clear examples of the long path to go through, in order to make the competition law regime uniformly applicable in all member states. The lack of international consensus on competition law and enforcement requires huge efforts in co-operation between countries and organisations, because in combination with economic liberalisation, nations have come to recognise competition as a powerful instrument for stimulating innovation and economic growth. This paper focus on the past, i.e., already assessed anticompetitive cases; the present - the current EU Competition Policy rules - and finally on the future of Antitrust jurisdiction, in which part I will briefly describe the major actual concerns in the long course towards a common and homogeneously valid system of International Competition Policy.
    Date: 2007
  6. By: Elisabete Gomes Santana Félix (Universidade de Évora,Departamento de Gestão); Cesaltina Pires (Universidade de Évora,Departamento de Gestão); Mohamed Azzim Gulamhussenb (Instituto Superior de Ciências do Trabalho e da Empresa,Departamento de Finanças e Contabilidade)
    Abstract: This article analyzes the determinants of the European venture capital market, extending the equilibrium model from Jeng and Wells (2000). Our empirical model includes many of the determinants already tested in previous studies. In addition, we test whether the unemployment rate, the trade sale divestment and the market-to-book ratio are important factors in explaining venture capital. We use aggregated data from the European venture capital market as well as macroeconomic data, to estimate panel data models, with fixed and random effects. The random effects models revealed to be the most adequate. Our results confirm the importance of some of the already known factors and show that the unemployment rate and trade sale divestments are important determinants in the European venture capital market.
    Keywords: Venture capital, Europe, Venture capital determinants, IPO, Trade sale, Write-off, Unemployment rate
    JEL: C23 G24 G32 G34 M13
    Date: 2007
  7. By: Roediger-Schluga, Thomas (Oesterreichische Kontrollbank); Barber, Michael J. (Department of Technology Policy, Austrian Research Centers)
    Abstract: We describe the construction of a large and novel data set on R&D collaboration networks in the first five EU Framework Programmes (FPs), examine key features and provide economic interpretations for our findings. The data set is based on publicly available raw data that pre-sents numerous challenges. We critically examine the different problems and detail how we have dealt with them. We describe how we construct networks from the processed data. The resulting networks display properties typical for large complex networks, including scale-free degree distributions and the small-world property. The former indicates the presence of net-work hubs, which we identify. Theoretical work shows the latter to be beneficial for knowl-edge creation and diffusion. Structural features are remarkably similar across FPs, indicating similar network formation mechanisms despite changes in governance rules. Several findings point towards the existence of a stable core of interlinked actors since the early FPs with inte-gration increasing over time. This core consists mainly of universities and research organisa-tions. The paper concludes with an agenda for future research.
    Keywords: R&D collaboration, EU Framework Programmes, complex networks, small world effect, knowledge creation, knowledge diffusion, European Research Area
    JEL: L14 O38 Z13
    Date: 2007
  8. By: Susana Iranzo; Giovanni Peri
    Abstract: Two prominent features of globalization in recent decades are the remarkable increase in trade and in migratory flows between industrializing and industrialized countries. Due to restrictive laws in the receiving countries and high migration costs, the increase in international migration has involved mainly highly educated workers. During the same period, technology in developed countries has become progressively more skill-biased, increasing the productivity of highly educated workers more than less educated workers. This paper extends a model of trade in differentiated goods to analyse the joint phenomena of migration and trade in a world where countries use different skill-specific technologies and workers have different skill levels (education). We calibrate the model to match the features of the Western European countries (EU-15) and the new Eastern European members of the EU. We then simulate the effects of freer trade and higher labor mobility between the two regions. Even in a free trade regime the removal of the restrictions on labor movements would benefit Europe as a whole by increasing the GNP of Eastern and Western Europe. Interestingly, we also find that the resulting skilled migration (the so-called "brain drain") from Eastern European countries would not only benefit the migrants but, through trade, could benefit the workers remaining in Eastern Europe as well.
    JEL: F16 F22 J31 J61 O52
    Date: 2007–11
  9. By: Wilfried Rickels; Vicki Duscha; Andreas Keller; Sonja Peterson
    Abstract: The European emissions trading scheme (EU-ETS) for CO2 is the largest existing emissions trading scheme in the world. The main reason for the implementation of this scheme is to reach the European Kyoto targets at minimal cost and to establish a price for emissions. The right to emit CO2 therefore becomes a scarce production input. In this paper we want to analyze the determinants of the price for allowances in the EU-ETS and study whether it reacts to fundamental influence factors such as energy prices. The results show, that as long as the market viewed the allowances as a scarce input factor, the price reacts to changes in energy prices and weather variations.
    Keywords: European Emissions Trading Scheme, allowance prices, energy prices, weather variation
    JEL: C22 Q56 Q58 Q54
    Date: 2007–11
  10. By: Loreta Stankeviciute (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: The study aims to quantify the interactions between the three European objectives in the horizon of 2020: (1) the reduction of 20% of greenhouse gas emissions (GHG) (2) the saving of 20% of the energy consumption and (3) the share of 20% of renewables energies in the overall energy consumption. Particular focus is, however, placed on the influence of the environmental policies on the<br />CO2 emission reduction and the carbon price in 2020.<br />The national objectives for the energy savings and renewables energies in our study are realized with the quota systems in every country: white and green certificate systems, while the CO2 emission reduction is carried out at the European level within the ETS in the<br />context of international carbon market. In order to exploit the interactions among the different<br />environmental policies, a number of scenarios are tested within a combination of two powerful<br />modeling tools: POLES world energy model and ASPEN, dedicated for the analysis of quota systems.<br />The paper shows, in particular, that the order of environmental policies does not affect significantly the reduction of emissions and the carbon price. On the other hand, the presence of these policies diminishes highly the marginal European reduction cost and, consequently, the compliance costs for ETS participants.
    Keywords: CO2 emissions ; carbon price ; white certificate price ; green certificate price ; European objectives in 2020
    Date: 2007–11
  11. By: Francesca Gambarotto (University of Padua); Stefano Solari
    Abstract: This study hypothesises that the EU15 contains at least four models of capitalism which rely on some different institutional arrangements. Our aim is to show that some relationship exists between the different institutional settings and the different geographical patterns of development at regional level. After testing the statistical relevance of our territorial areas, we have calculated several concentration and dispersion indexes to the available regional economic data. We conclude that in Europe different institutional macro-configurations do display dissimilar growth models based on rather diverse core-periphery models.
    Keywords: models of capitalism, dispersion of economic activity, core-periphery
    JEL: O11 P25 R12 R58
    Date: 2007
  12. By: Constantina Kottaridi; Diego Mendez-Carbajo; Dimitrios Thomakos
    Abstract: We explore the connection between inflation and its higherorder moments for three economies in the periphery of the European Union (E.U.), Greece, Portugal and Spain. Motivated by a micro-founded model of inflation determination, along the lines of the hybrid New Keynesian Phillips curve, we examine whether and how much does the cross-sectional skewness in producer prices affect the path of inflation. We develop our analysis with the perspective of economic integration/inflation harmonization (in the E.U.) and discuss the peculiarities of these three economies. We find evidence of a strong positive relation between aggregate inflation and the distribution of relative-price changes for all three countries. A potentially important implication of our results is that, if the cross-sectional skewness of prices is directly related to aggregate inflation, not only the direction but also the magnitude of a nominal shock would influence output and inflation dynamics. Moreover, the effect of such a shock could be received asymmetrically, even when countries share a common currency.
    Keywords: Cross-sectional distribution of prices; Greece, Portugal, Spain, European Union, Harmonization.
    Date: 2007
  13. By: Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw); Sándor Richter (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The 1st of May 2007 marked the third anniversary of the accession of the new member states (NMS) to the European Union: the economic balance of the first three years is a clear success for the whole EU. Over the period 2001-2003 GDP in the NMS had increased by 3.1% per year on average; over the period 2004-2006, however, it expanded by 5.3% per year - an increase of the annual growth rate by 2.2 percentage points. In part, this growth acceleration is attributable to the more favourable international environment and the distinctly better growth performance in the 'old' EU; nevertheless the NMS substantially increased their lead in terms of growth over the EU-15: up from 1.7 p.p. in 2001-2003 to 3.1 p.p. in 2004-2006. The catching-up process to the level of development of the 'old' EU has thus accelerated. In the field of investments the difference between the pre- and post-accession period was even more spectacular: while in 2001-2003 both the EU-15 and the NMS recorded an only marginal expansion, in 2004 2006 investment growth in the NMS was 4.7 p.p. higher than in the 'old' EU member states. The NMS also became more attractive targets for FDI. And their export growth rates nearly doubled after EU accession: import growth lagged behind export growth, yielding better trade balances. The stronger economic growth reduced unemployment: the aggregate unemployment rate in the NMS declined by 1.7 p.p. in the post-accession period. However, three macroeconomic stability indicators - inflation, current account status and fiscal balance - reveal a more differentiated and less favourable picture than those measuring changes in the real economy. Given the expected continuation of the favourable international environment, the period of high growth in the NMS will continue in 2007 and 2008, except for Hungary. Nevertheless, in all but two countries (the Czech Republic and Hungary) growth rates in 2008 will be somewhat lower than, or only as high as, in 2007, thus hinting at constraints on further growth acceleration. Household consumption remains the engine of growth in the Czech Republic, Poland, Bulgaria and Romania, as well as in the Baltic States. Investments will boom in Poland, Slovenia, Bulgaria, Romania and the Baltic States. Supply-side constraints on a very rapid expansion of the economy will be felt in more and more countries of the region, especially in terms of the tight labour market. There are clear signs of overheating in Bulgaria, Romania and the Baltic States where the external balance has been deteriorating and no turnaround is in sight. Inflation will remain relatively low. This is the outcome of the contradicting effect of inflationary pressures from an increasingly tight labour market and its consequences, and the considerable appreciation of the national currencies. High export growth will reflect the favourable international environment and the growing import demand of the region's main trading partner countries. Economic developments in the future member states (FMS) of the EU - the candidate and potential candidate countries of the Balkans - continue to surprise positively. All countries report respectable growth rates of their GDPs, and the growth looks sustainable. Industrial production, a weak sector traditionally, grows faster than GDP, except in Montenegro. Tourism - an important sector in the Balkans - is attracting investments, private as well as public. In general, investments are proving to be an important driver of growth, though consumption is still the dominant contributor. In addition, exports are growing rather fast though so are imports too. These positive developments are supported by the belief in the political and policy stability in these countries. Though external and internal imbalances, i.e. in the labor markets, are still quite large, price stability does not seem threatened. Even in countries such as Turkey or Serbia, where exchange rates and prices are more volatile, the risks of serious crisis are rather low. In addition to macroeconomic stability, the underlying political stability seems to have improved as well. Though no breakthrough has been achieved in the longstanding political problems, progress in democratization is bringing the security and political risks down. Though economies are doing better in the FMS, public and corporate governance as well as structural reforms are not necessarily contributing decisively to that. The most commonly used indices of progress in reforms, business climate and public governance, do not give a consistent picture and certainly do not unequivocally report improvement. The prospects of EU integration have improved during the German presidency and will add to the positive outlook. Growth should stay between 5% and 6%, investments and exports should grow even faster and macroeconomic stability should be sustained in the medium run. Russia's economic growth accelerated in 2007, driven by booming consumption and investments (including FDI). More expenditures on state-sponsored priority programmes and industrial policy measures focusing on public-private partnership projects should foster restructuring and innovations. The wiiw forecast reckons with ongoing reliance on energy revenues and an average annual GDP growth of 5.3% in the coming years. With more money and power consolidation at home, Russian self-confidence will grow further - and this may lead to more conflicts with the West. In Ukraine, strong consumer demand, vigorous investment activity and solid exports have all contributed to impressive GDP growth of 7.9% in January-May 2007. Rising consumption and housing construction are increasingly driven by expanding consumer credit, not least due to the growing presence of foreign banks. However, we expect economic growth for the year as a whole to be somewhat lower, between 6.5% and 7%. Imports growing faster than exports will translate into a rising current account deficit, possibly up to 4% of GDP in 2007 and even higher next year. The prospects for greater political stability in the country remain bleak. GDP grew by 11.1% in China in the first quarter of 2007, faster than expected by most experts. Obviously, the official efforts to contain growth have so far not been successful. The economy was driven by a rebound of investment and by a ballooning trade surplus, but supported by a certain acceleration of consumer demand as well. Recent data point to a continuation of the rapid expansion, which may result in a growth rate for the whole year between 10.5% and 11%.
    Keywords: Central and East European new EU member states, Southeast Europe, Balkans, former Soviet Union, China, Turkey, GDP, industry, productivity, labour market, foreign trade, exchange rates, inflation, fiscal deficits, EU integration
    JEL: O52 O57 P24 P27 P33 P52
    Date: 2007–07
  14. By: António Caleiro (Universidade de Évora – Departamento de Economia); Esmeralda Ramalho (Universidade de Évora – Departamento de Economia)
    Abstract: Confidence, in general, and consumer confidence, in particular, are subject to an increasing interest by many agents, such as central banks and governments, at a national level, as well as by supra-national entities, such as the European Commission of the European Union. Although this interest is shared by the academic community, the literature in this area is mainly focused on the use of consumer confidence to predict variables which describe the business cycle, like consumption. Instead, the objective of our paper is to examine empirically which factors underpinne the formation of consumer confidence in Portugal. To the best of our knowledge, this kind of approach was only followed by De Boef and Kellstedt (2004) for the United States. Our empirical study uses monthly data for the period January 1987—December 2006. We found that consumer confidence, besides presenting some inertia, is basically explained by the unemployment rate as well as by electoral circumstances.
    Keywords: Consumer Confidence, Elections, Unemployment, Portugal
    JEL: C22 C51 D12 E21
    Date: 2007
  15. By: Jacob A. Bikkera; Dirk W.G.A. Broeders; Jan de Dreu
    Abstract: This paper is the first that examines the impact of stock market performance on the investment policy of pension funds. We find that stock market prices influence the asset allocation of Dutch pension funds in two ways. In the short term, outperformance of equities over bonds and other investment categories automatically results in a higher actual equity allocation (and vice versa), as pension funds do not continuously rebalance their investment portfolios. Each quarter, pension funds rebalance, on average, around 39 percent of excess equity returns, leaving 61 percent for free floating. In the medium term, outperformance of equities induces pension funds to increase their strategic equity allocation (and vice versa). These findings suggest that the investment policies of pension funds are partially driven by the cyclical performance of the stock market. Pension funds respond asymmetrically to stock market shocks: rebalancing is much stronger after negative equity returns. On average, this strategy led to negative excess returns over the period under consideration. Investment policies of large funds deviate from that of small funds: they hold more equity and their equity allocation is much more strongly affected by actual equity returns, reflecting less rebalancing. The largest funds react highly asymmetrically to positive excess equity returns, adjusting their portfolios by significantly more than 100%, reflecting 'overshooting' of free floating, or positive feedback trading. Apparently, managers of large funds demonstrate great risk tolerance, particularly in bull markets.
    Keywords: Pension fund returns; portfolio choice; excess returns; strategic equity allocation; size effects; asymmetrical behavior
    Date: 2007–11
  16. By: Paul Gregg; Susan Harkness; Sarah Smith
    Abstract: The last thirty years saw dramatic increases in the proportion of children living in lone parent households. In 1997 the incoming Labour government initiated a series of policy reforms aimed at reducing this high level of child poverty. A key element of their strategy was a move towards increasing employment rates among families with children by a combination of increased in-work support through the Working Families Tax Credit and active case management of the population on welfare through the New Deal for Lone Parents. The assessment of this policy reform agenda has focused to date mainly on lone mothers’ employment and poverty. In this paper we extend this to include at the impact on the numbers of lone parent families and a range of outcomes for mothers and children. We cover mothers’ mental well-being and health, child outcomes and relationship patterns. As well as representing the basic facts about employment incomes and hours of work. Our results show there was no significant impact of these policy reforms on family structure. Mothers malaise scores are, unsurprisingly, very high on family break up but they tend to recover after around 2 years. WFTC is found to reduce the spike of high malaise co-incident with the transition into lone parenthood but to have no longer term effects. This decline in malaise is strongly associated with improved financial indicators. Adolescent children in lone parents families report lower self-esteem, more unhappiness, lower quality relationships with the mother and a number of worse or risky behaviours. Difference-in-difference techniques suggest a marked narrowing if these gaps since WFTC. The magnitude of these changes are quite large, half of the gap in self-esteem and unhappiness scores and in truanting, smoking and planning to leave school at age 16 are eliminated after the policy reforms. This strongly suggests that the increases in incomes and employment associated with the reforms have profoundly changed the quality of life children in lone parent families.
    Keywords: Welfare reform, lone parents, tax Credits
    JEL: J13 J18 H53
    Date: 2007–09
  17. By: Jana Bruder (University of Rostock); Doris Neuberger (University of Rostock); Solvig Raethke-Döppner (University of Rostock)
    Abstract: This is the first attempt to test hypotheses about financial constraints of ethnic minority owned businesses in Germany. Using data from a survey among 3,000 ethnic and native entrepreneurs, we examine differences in the financing patterns between both demographic groups. We find that entrepreneurs with a migration background are more likely to be denied credit or to obtain smaller loan amounts than requested. After controlling for observed risk factors and financial relationships as explanatory variables, ethnicity plays no role in explaining differences in the probability of credit rationing. These can be rather explained by the firm's location and characteristics of the bank-customer relationship. Thus, we find no evidence for prejudicial discrimination in the loan market.
    JEL: G21 G32
    Date: 2007
  18. By: Sara de la Rica (The University of the Basque Country, IZA); Ainara González de San Román (The University of the Basque Country)
    Abstract: This paper provides microeconomic evidence on the variation over time of the firm-specific wage premium in Spain from 1995 to 2002, and its impact on wage inequality. We make use of two waves of a detailed linked employer-employee data set. In addition, a new data set with financial information on firms is used for 2002 to control as flexibly as possible for di¤erences in the performance of firms (aggregated at industry level). To our knowledge, there is no microeconomic evidence on the dynamics of the firm-specific wage premium for Spain or for any other country with a similar institutional setting. Our results suggest that there is a clear tendency towards centralization in the collective bargaining process in Spain over this seven-year period, that the firm-level contract wage premium undergoes a substantial decrease, particularly for women, and finally that the "centralization" observed in the collective bargaining process has resulted in a slight decrease in wage inequality.
    Keywords: Firm-level contracts, Matched employer-employee data, wage inequality
    Date: 2007–11–26
  19. By: Jens Rubart (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Willi Semmler (Institut für Volkswirtschaftslehre (Department of Economics), Universität Bielefeld (University of Bielefeld); Graduate Faculty, New School for Social Research, New York)
    Abstract: When reviewing the literature concerning the development of the Eastern German economy, a too rigid labor market and its respective institutions are considered as the main source of the persistent high unemployment rates and the slow economic performance. However, when important macroeconomic variables are considered a significant decline in investment in new technologies is observed. In addition, we find evidences that the decline in investment might be affected by the steady migration of young and skilled workers to West Germany. The decline in the proportion of skilled workers induces firms not to invest in Eastern Germany which leads to a general decline in job creating activities irrespective rigid labor markets and generous social benefits. In the recent paper we employ a rather standard Dynamic General Equilibrium model in order to study the effects of a decline in the proportion of skilled workers as well as the impacts of increasing benefit payments. Furthermore, we assume equilibrium unemployment due to search and matching frictions on the labor market. This approach enables us further to consider job creating activities of the firms. We show that an emigration shock of skilled- workers is capable to reproduce the findings for the decline in economic activity. This effect is strengthened by assuming generous social benefit payments.
    Keywords: DSGE Model, Heterogenous Labor, Skill Biased Technological Change, Search Unemployment, Employment Protection, Minimum Wages
    JEL: E20 J21 J24 J64
    Date: 2007–09
  20. By: Gábor Vadas (Magyar Nemzeti Bank)
    Abstract: As significant part of national wealth, households’ wealth is the central issue in both policy debate and academic literature. Nevertheless, in Hungary little effort has been made so far to conduct thorough evaluation of households’ wealth for the last decade. Under the auspices of ‘the plural of anecdote is not evidence’ axiom, this study provides a formal evaluation of Hungarian wealth and connects the development of wealth elements to economic events. Doing so, as a by-product, we also display the estimated wealth levels of households. Based on international comparison and econometric techniques, it is confirmed that the recent financial wealth level of Hungarian households is still relatively low, meanwhile the current housing wealth is not evidently below the equilibrium level. These results provide an explanation why governmental housing subsidy scheme has its major effect on house prices rather than housing stock. Besides, the soaring house prices, via housing loans, vanished financial savings. The ‘saving disaster’, i.e. small or in some periods even negative saving rates, experienced in early 2000’s, to a certain extent, is the other side of the ‘saving miracle’ of early and mid 90’s when households rearranged their wealth portfolio from real assets to financial assets implying decreasing house prices and high saving rate.
    Keywords: household wealth, housing subsidy scheme, house price.
    JEL: E00 E21 E31 H31
    Date: 2007

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