nep-eec New Economics Papers
on European Economics
Issue of 2008‒01‒12
twenty-six papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Deeper, wider and more competitive? Monetary integration, eastern enlargement and competitiveness in the European Union By Gianmarco Ottaviano; Daria Taglioni; Filippo di Mauro
  2. Actual versus Perceived Transparency: The Case of the European Central Bank By Carin van der Cruijsen en Sylvester Eijffinger
  3. The general equilibrium effects of fiscal policy: estimates for the euro area By Lorenzo Forni; Libero Monteforte; Luca Sessa
  4. Integration in euro area retail banking markets – convergence of credit interest rates By Vajanne, Laura
  5. Identifying the evolution of stock markets stochastic structure after the euro By Caiado, Jorge; Crato, Nuno
  6. Fiscal forecasting - lessons from the literature and challenges By Teresa Leal; Javier J. Pérez; Mika Tujula; Jean-Pierre Vidal
  7. Bank profitability and taxation By Ugo Albertazzi; Leonardo Gambacorta
  8. Securitisation and the bank lending channel By Yener Altunbas; Leonardo Gambacorta; David Marqués
  9. Credit Constraints as a Barrier to the Entry and Post-Entry Growth of Firms By Philippe Aghion; Thibault Fally; Stefano Scarpetta
  10. Crossing The Alps: Three Transport Policy Options By Gerardo Marletto
  11. Do Labour Market Institutions Matter? Micro-Level Wage Effects of International Outsourcing in Three European Countries By Ingo Geishecker; Holger Görg; Jakob Roland Munch
  12. The Paradox of New Members in the Council of Ministers: A Noncooperative Approach By Maria Montero
  13. Does Immigration Affect the Phillips Curve? Some Evidence for Spain By Samuel Bentolila; Juan J. Dolado; Juan F. Jimeno
  14. Are Immigrants More Mobile Than Natives? Evidence from Germany By Matthias Schündeln
  15. Economic Importance of Belgian Transport Logistics By Frédéric Lagneaux
  16. The Trend in Female Labour Force Participation: What Can Be Expected for the Future? By Rob Euwals; Marike Knoef; Daniel van Vuuren
  17. Tax Enforcement for SMEs: Lessons from the Italian Experience? By Giampaolo Arachi and Alessandro Santoro
  18. Reconciling work and family life : the effect of french family policies. By Julie Moschion
  19. Does Work Pay in France ? Monetary Incentives, Hours Constraints and the Guaranteed Minimum Income By Marc Gurgand; David Margolis
  20. Sweden’s Pensioners: How They Have Fared in the Roller Coaster Ride through the Past Decade and a Half of Deep Recession and Economic Exuberance By Björn Gustafsson; Mats Johansson; Edward Palmer
  21. Offre de travail des mères françaises : l'effet d'une variation exogène du nombre d'enfants. By Julie Moschion
  22. Private School Quality in Italy By Giuseppe Bertola; Daniele Checchi; Veruska Oppedisano
  23. Do Regional Price Levels Converge? : Paneleconometric Evidence Based on German Districts By Christian Dreger; Reinhold Kosfeld
  24. Environmental Accounts for the Republic of Ireland: 1990-2005 By Seán Lyons; Karen Mayor; Richard S.J. Tol
  25. Publications: German Economic Research Institutes on Track By Rolf Ketzler; Klaus F. Zimmermann
  26. The Impact of Direct Democracy on Public Education: Evidence for Swiss Students in Reading, Mathematics and Natural Science By Fischer, Justina A.V.

  1. By: Gianmarco Ottaviano (University of Bologna, Via Zamboni 33, 40126 Bologna, Italy.); Daria Taglioni (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Filippo di Mauro (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: What determines a country’s ability to compete in international markets? What fosters the global competitiveness of its firms? And in the European context, have key elements of the EU strategy such as EMU and enlargement helped or hindered domestic firms’ competitiveness in local and global markets? We address these questions by calibrating and simulating a conceptual framework that, based on Melitz and Ottaviano (2005), predicts that tougher and more transparent international competition forces less productive firms out the market, thereby increasing average productivity as well as reducing average prices and mark-ups. The model also predicts a parallel reduction of price dispersion within sectors. Our conceptual framework allows us to disentangle the effects of technology and freeness of entry from those of accessibility. On the one hand, by controlling for the impact of trade frictions, we are able to construct an index of ‘revealed competitiveness’, which would drive the relative performance of countries in an ideal world in which all faced the same barriers to international transactions. On the other hand, by focusing on the role of accessibility while keeping ‘revealed competitiveness’ as given, we are able to evaluate the impacts of EMU and enlargement on the competitiveness of European firms. We find that EMU positively affects the competitiveness of firms located in participating economies. Enlargement has, instead, two contrasting effects. It improves the accessibility of EU members but it also increases substantially the relative importance of unproductive competitors from Eastern Europe. JEL Classification: F12, R13.
    Keywords: European integration, gains from trade, competitiveness, firm-level data, total factor productivity.
    Date: 2007–12
  2. By: Carin van der Cruijsen en Sylvester Eijffinger
    Abstract: Central banks have become more and more transparent about their monetary policy making process. In the central bank transparency literature the distinction between actual and perceived transparency is often lacking. However, as perceptions are crucial for the actions of economic agents this distinction matters. We investigate the mismatch between actual and perceived transparency and its relevance by analyzing data of a Dutch household survey on the European Central Bank's transparency. A discrepancy between actual and perceived transparency exists because of incomplete and incorrect transparency knowledge and other (psychological) factors. We find that respondents with relatively high transparency perceptions are more likely to have more trust in the ECB and better alligned inflation perceptions and expectations. Therefore, it might be beneficial for a central bank to increase transparency perceptions, either by improving its actual disclosure practices or by focusing on its transparency strengths in its communicationpolicy.
    Keywords: Central bank transparency; Perceptions; Survey; CentERpanel; Behavioral Economics
    JEL: D80 E52 E58
    Date: 2008–01
  3. By: Lorenzo Forni (Bank of Italy); Libero Monteforte (Bank of Italy); Luca Sessa (Bank of Italy)
    Abstract: This paper describes a dynamic stochastic general equilibrium model featuring a fraction of non-Ricardian agents in order to estimate the effects of fiscal policy in the euro area by means of Bayesian techniques. The model accounts for distortionary taxation on labor and capital income and on consumption, while expenditures are broken down into purchases of goods and services, compensation of public employees, and transfers to households. A newly computed quarterly dataset of fiscal variables is used. Our results point to a prevalence of mild Keynesian effects of fiscal policy. In particular, although innovations in fiscal policy variables tend to be rather persistent, government purchases of goods and services and compensation of public employees have small and short-lived expansionary effects on private consumption, while innovations in transfers to households show a slightly more sizeable and lasting effect. On the revenue side, decreases in labor income and consumption tax rates have a sizable effect on consumption and output, while a reduction in capital tax favors investment and output in the medium run. Finally, with the exception of transfers to households and labor income tax rates, most fiscal policy variables contribute little to the cyclical variability of the main macro variables.
    Keywords: fiscal policy, distortionary taxation, DSGE modeling, Bayesian estimation
    JEL: E32 E62
    Date: 2007–11
  4. By: Vajanne, Laura (Department of Financial Markets and Statistics)
    Abstract: Since the introduction of the single currency in 1999, major progress has been made towards achieving an integrated European capital and financial market. Available evidence suggests, nevertheless, that the degree of integration varies greatly depending on market segment. Retail banking markets are generally seen to be much less integrated than other segments of financial markets. Most consumers still buy retail financial services from domestic suppliers, cross-border entry of financial services firms is rare – even if it is growing – and the range of products available or terms attached thereto differ substantially across euro area countries. The purpose of this paper is to assess integration of retail banking in the euro area from January 2003 to December 2006. The empirical analysis is based on a monthly panel of recently published harmonised interest rates from euro area monetary financial institutions. We estimate two commonly used measures of convergence, namely â- and ó-convergence, to assess the speed and degree of integration. Tests for convergence are based on a panel unit root test. The tests provide evidence of a process of convergence in retail banking credit interest rates for households and non-financial corporations and show this convergence has recently being continuing. Thus, even if there are substantial cross-country differences in interest rate levels, progress towards integration is observable.
    Keywords: financial market integration; euro area interest rates; panel data estimation
    JEL: F36 G21
    Date: 2008–01–08
  5. By: Caiado, Jorge; Crato, Nuno
    Abstract: Previous studies have investigated the comovements of international equity markets by using correlation, cointegration, common factor analysis, and other approaches. In this paper, we investigate the stochastic structure of major euro and non-euro area stock market series from 1994 to 2006, by using cluster analysis techniques for time series. We use an interpolated-periodogram based metric for level and squared returns in order to compute distances between the stock markets. This method captures the stochastic dependence structure of the time series and solves the shortcoming of unequal sample sizes found for different countries. The clusters of countries are formed by the dendrogram and the principal coordinates associated with the sample spectrum for both the series of returns and volatilities. The empirical results suggest that the cross-country groups have become considerably more homogeneous with the introduction of the euro as an electronic currency. For reference, we also explore the pairwise correlations among the series.
    Keywords: Cluster analysis; Euro area; International stock markets; Periodogram; Stock returns; Volatility
    JEL: C32 G15
    Date: 2008–01
  6. By: Teresa Leal (Department of Economics and Statistics, University of Huelva, Dr. Cantero Cuadrado 6, 21071 Huelva, Spain.); Javier J. Pérez (Directorate General Economics, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Mika Tujula (Directorate General Economics, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Jean-Pierre Vidal (Directorate General Economics, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: While fiscal forecasting and monitoring has its roots in the accountability of governments for the use of public funds in democracies, the Stability and Growth Pact has significantly increased interest in budgetary forecasts in Europe, where they play a key role in the EU multilateral budgetary surveillance. In view of the increased prominence and sensitivity of budgetary forecasts, which may lead to them being influenced by strategic and political factors, this paper discusses the main issues and challenges in the field of fiscal forecasting from a practitioner’s perspective and places them in the context of the related literature. JEL Classification: H6, E62, C53.
    Keywords: Fiscal policies, government budget, forecasting, monitoring.
    Date: 2007–12
  7. By: Ugo Albertazzi (Banca d'Italia); Leonardo Gambacorta (Banca d'Italia)
    Abstract: This paper investigates how bank profitability is affected by corporate income tax (CIT) using aggregate data on the banking sector of the main industrialized countries for the period 1981-2003. Two main novelties emerge with respect to the existing literature. First, the paper explicitly considers that CIT is not specific to the banking sector, so that changes in the CIT rate can affect both banks and borrowing firmsÂ’ behaviour. Thus, with the help of a simple theoretical model we derive a set of predictions about the impact of CIT on banksÂ’ income statement. Second, by considering all the main components of banksÂ’ profit and loss accounts, we are able to test such predictions and to disentangle the extent to which a bank is able to shift its tax-burden onto its borrowers, depositors, and purchasers of fee-generating services. It turns out that CIT has a substantial impact on the composition of banking sector revenues but cannot explain large differences in the level of profitability across countries.
    Keywords: tax-shifting, corporate income tax, bank profitability
    JEL: C53 G20 G21
    Date: 2007–11
  8. By: Yener Altunbas (Centre for Banking and Financial Studies, University of Wales, Bangor); Leonardo Gambacorta (Bank of Italy); David Marqués (European Central Bank, Monetary Policy Directorate)
    Abstract: The dramatic increase in securitisation activity has modified the functioning of credit markets by reducing the fundamental role of liquidity transformation performed by financial intermediaries. We claim that the changing role of banks from “originate and hold” to “originate, repackage and sell” has also modified banks’ abilities to grant credit and the effectiveness of the bank lending channel of monetary policy. Using a large sample of European banks, we find that the use of securitisation appears to shelter banks’ loan supply from the effects of monetary policy. Securitisation activity has also strengthened the capacity of banks to supply new loans but this capacity depends upon business cycle conditions as well as upon banks’ risk positions. In this respect the recent experience of the sub-prime mortgage loans crisis is very instructive.
    Keywords: asset securitisation, bank lending channel, monetary policy
    JEL: E44 E52
    Date: 2007–11
  9. By: Philippe Aghion (Harvard University); Thibault Fally (Paris-Jourdan Sciences Economiques); Stefano Scarpetta (OECD and IZA)
    Abstract: Advanced market economies are characterized by a continuous process of creative destruction. Market forces and technological developments play a major role in shaping this process, but institutional and policy settings also influence firms’ decision to enter, to expand if successful and to exit if competition becomes unbearable. In this paper, we focus on the effects of financial development on the entry of new firms and the expansion of successful new businesses. Drawing from harmonized firm-level data for 16 industrialized and emerging economies, we find that access to finance matters most for the entry of small firms and in sectors that are more dependent upon external finance. This finding is robust to controlling for other potential entry barriers (labor market regulations and entry regulations). On the other hand, financial development has either no effect or a negative effect on entry by large firms. Access to finance also helps new firms expand if successful. Both private credit and stock market capitalization are important for promoting entry and post entry growth of firms. Altogether, these results suggest that, despite significant progress over the past decade, many countries, including those in Continental Europe, should improve their financial markets so as to get the most out of creative destruction, by encouraging the entry of new (especially small) firms and the post-entry growth of successful young businesses.
    Keywords: financial development, entry, post-entry growth, firm size, micro data
    JEL: D21 D92 L11 G32
    Date: 2007–12
  10. By: Gerardo Marletto
    Abstract: In recent years crossing the Alps has become a central issue in transport policy. The constant increase in global transport flow has contributed to bringing two distinct objectives to the centre of attention: making transalpine transportation of goods easier and reducing the negative impact of this on the alpine environment. The debates and disagreements on the subject are often bad-tempered, and are evidence of the lack of communication between the interested parties. This is also due to the existence of three distinct transport policy options: territiorial competition, sustainable development and de-growth. The different positions taken by the various parties are more understandable when one is aware of these options, and this awareness could assist the parties in making the necessary decisions, which all those involved recognise are important.
    Keywords: Transport policy; Alps; Territorial marketing; Sustainibility; De-growth
    JEL: R49 Q01
    Date: 2007
  11. By: Ingo Geishecker (University of Göttingen); Holger Görg (GEP, University of Nottingham, CEPR and IZA); Jakob Roland Munch (University of Copenhagen)
    Abstract: This paper studies the impact of outsourcing on individual wages in three European countries with markedly different labour market institutions: Germany, the UK and Denmark. To do so we use individual level data sets for the three countries and construct comparable measures of outsourcing at the industry level, distinguishing outsourcing by broad region. Estimating the same specification on different data show that there are some interesting differences in the effect of outsourcing across countries. We discuss some possible reasons for these differences based on labour market institutions.
    Keywords: international outsourcing, individual wages, labour market institutions
    JEL: F16 J31 C23
    Date: 2007–12
  12. By: Maria Montero (University of Nottingham)
    Abstract: Power indices suggest that adding new members to a voting body may increase the power of an existing member, even if the number of votes of all existing members and the decision rule remain constant. This phenomenon is known as the paradox of new members. This paper shows that the paradox has theoretically occurred in the EU using the leading model of legislative bargaining. Furthermore, it is possible for a majority of members to be in favor of enlargement, even if voters are bargaining over a fixed budget.
    Keywords: legislative bargaining, weighted voting, power measures, EU enlargement, paradox of new members
    JEL: C71 C72 C78
    Date: 2007–12
  13. By: Samuel Bentolila (CEMFI, CEPR and CESifo); Juan J. Dolado (Universidad Carlos III de Madrid, CEPR and IZA); Juan F. Jimeno (Banco de España, CEPR and IZA)
    Abstract: The Phillips curve has flattened in Spain over 1995-2006: unemployment has fallen by 15 percentage points, with roughly constant inflation. This change has been more pronounced than elsewhere. We argue that this stems from the immigration boom in Spain over this period. We show that the New Keynesian Phillips curve is shifted by immigration if natives’ and immigrants’ labour supply or bargaining power differ. Estimation of the curve for Spain indicates that the fall in unemployment since 1995 would have led to an annual increase in inflation of 2.5 percentage points if it had not been largely offset by immigration.
    Keywords: immigration, Phillips curve
    JEL: E31 J64
    Date: 2007–12
  14. By: Matthias Schündeln (Harvard University and IZA)
    Abstract: Low rates of internal migration in many European countries contribute to the persistence of significant regional labor market differences. To further our understanding of the underlying reasons I study internal migration in Germany, using the Mikrozensus, a very large sample of households living in Germany. The first contribution of this paper is to quantify the low mobility of the German population by estimating the unobserved cost of migration. I then focus on the differences between immigrants and natives, and start by presenting reducedform econometric evidence for the hypothesis that immigrants, once they are in the country of destination, are more mobile than natives. Observable, individual-level characteristics can only explain part of this finding. To estimate differences in the responsiveness to labor market characteristics that are due to unobserved characteristics, I then estimate conditional logit models of the migration decision across the German federal states. I find significantly higher responsiveness to labor market differentials in the immigrant population than in the native population. Unobserved moving costs for immigrants are estimated to be only about 37% of this same cost for natives. The findings bear on the assessment of the economic impact of immigration, and the paper contributes to the current immigration-related policy debates that feature prominently in many European countries, and that likely will continue to be important in light of the ongoing EU expansion and the expected resulting east-west migration.
    Keywords: internal migration, immigrants, cost of migration, regional convergence, Germany
    JEL: J61 R23
    Date: 2007–12
  15. By: Frédéric Lagneaux (National Bank of Belgium, Microeconomic Information Department)
    Abstract: This paper is a publication issued by the Microeconomic Analysis service of the National Bank of Belgium. This is the outcome of a first research project on the Belgian transport logistics sectors. In the past few years, the logistics business has turned out to play a significant part in wealth creation in our country, whose economy is driven by services. This study can be seen as an extension of Working Paper No. 115 on Belgian ports, issued in May 2007, as the activities under review are closely tied to transport in general and maritime transport in particular. Considering that this is a first attempt to estimate the economic importance of Belgian transport logistics, it was decided to favour a sectoral approach, by focusing on some freight transport logistics sectors clearly defined in the NACE classification. The impact is presented in two parts: the direct effects and the indirect effects. Furthermore, a short analysis is provided about the economic impact of other activities, such as in-house logistics and European distribution centres. An overview of some developments per sub-sector is provided for the period 2000 - 2005, with the emphasis on 2005. The core of the analysis, which is statistical and therefore not based on a survey, looks more specifically into developments in terms of value added, employment, investment and the financial situation of the companies concerned. A first estimate of developments over the 2005 - 2006 period is also provided for value added and employment. Annual accounts data from the Central Balance Sheet Office are used for the calculation of direct effects, the study of financial ratios and analysis of the social balance sheet. Also worth mentioning is that the indirect effects of the activities concerned have been estimated in terms of value added and employment, on the basis of data from the NAI (National Accounts Institute). A comprehensive analysis of the linkages between the sectors under review and the other Belgian sectors is presented. The activities under review accounted for no less than 3.1 p.c. of Belgian GDP and 3.4 p.c. of the country's domestic employment in 2005. Including indirect effects, these percentages respectively amounted to 5 and 5.3 p.c. in the same year. Taking some survey data into account, the overall impact would reach roughly 8 p.c. of the Belgian economy, if transport logistics business provided by external branches on the one hand and in-house transport logistics on the other were added to these above-mentioned sectoral percentages. This report provides a comprehensive account of these issues, giving information per economic sector.
    JEL: C67 J21 L91 L92 L93 L96 R15 R34 R41
    Date: 2008–01
  16. By: Rob Euwals (CPB, Netspar and IZA); Marike Knoef (Tilburg University, Netspar and CentERdata); Daniel van Vuuren (CPB and Netspar)
    Abstract: During the 1980s and 1990s, the Netherlands experienced a strong increase in the labour force participation of women. This study investigates the increase of participation over the successive generations of women, and produces an educated guess for future participation. For this purpose, we estimate a binary age-period-cohort model for the generations born between 1925 and 1986, using data from the Dutch Labour Force Survey 1992-2004. The results indicate that the increasing level of education, the diminishing negative effect of children, and unobserved cohort effects have played an important role. According to our estimates, the increase in unobserved cohort effects has stopped since the generation born in 1955. This result is in line with results of studies on social norms and attitudes towards the combination of female employment and family responsibilities, which show a similar pattern over the successive generations. We observe that future participation growth importantly depends on the evolvement of attitudes towards the combination of paid work and children. We have therefore constructed two alternative future scenarios, the first with constant norms with respect to this factor, and the second with a further evolvement. It is estimated that the remaining growth will compensate for about one third of the structural fiscal deficit caused by population ageing in the Netherlands.
    Keywords: female labour force participation, age-period-cohort-analysis, future development
    JEL: J11 J21
    Date: 2007–12
  17. By: Giampaolo Arachi and Alessandro Santoro
    Abstract: The paper aims to provide a detailed description and evaluation of the Italian experience in tax auditing and enforcement for SMEs which we believe may have some lessons for developing countries with similar sized shadow economies and large numbers of micro-enterprises. We focus on an audit strategy known as “Studi di settore”, which roughly translates as “business sector analyses”, which relies on statistical methods to select the taxpayers to be audited. We show how Studi di settore can be used as an audit rule or as a presumptive tax and we compare it with optimal audit rules and with alternative presumptive taxes on the basis of the available evidence for Italy. We discuss whether Studi di settore may be a useful policy tool for establishing presumptive taxation for SMEs in developing countries when resources for tax auditing are scarce. A presumptive regime may naturally evolve in a full-fledged audit selection mechanism following the development of the private and public sectors.
    Keywords: tax evasion, shadow economy, SMEs, audit strategies, presumptive taxation, Italy, developing countries
    Date: 2008–01–07
  18. By: Julie Moschion (Centre d'Economie de la Sorbonne)
    Abstract: In France, having more than two children has a causal negative impact on mothers' labour supply. The question addressed in this paper is whether some family policies alter this effect. The idea is that by improving the conditions of the conciliation between family life and professional life, family policies could reduce the negative impact of having more than two children on mothers' participation. Conversely, some family policies could increase this effect by inciting mothers to have an entry-exit strategy on the labour market according to the different periods of their lives, rather than to reconcile family and professional ressponsibilities. To address this issue, we focus on two different types of family policy : the paid parental leave and the supply of child care for young kids. To measure the effect of these family policies, we have spotted temporal or spatial changes that modify the conditions in which individual decisions are taken. Firstly, we show that after the July 1994 extension of the Allocation parentale d'éducation to parents of two children (among which one is less than three years old), that is when families of two and more than two children have the same incentive to take a paid parental leave, having more than two children has no longer a negative effect on the participation probability of mothers. In addition, this is particularly true for young women having no more than the school-leaving certificate, which happen to be the main beneficiaires of the benefit. Secondly, using the heterogeneity in the geographical distribution of two-years-old in pre-elementary public schools, we find that supplying mothers of two years old children with developed child care modifies the effect of fertility on mothers' labour supply and seems to help mothers to better conciliate family and professional life but our estimates are less convincing.
    Keywords: Fertility, women's participation in the labour market, family policies.
    JEL: J13 J22
    Date: 2007–12
  19. By: Marc Gurgand (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Normale Supérieure de Paris); David Margolis (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: This paper uses a representative sample of individuals on France's main welfare program (the Revenu Minimum d'Insertion, or RMI) to estimate monetary incentives for employment among welfare recipients. Based on the estimated joint distribution of wages and hours potentially offered to each individual, we compute potential gains from working in a very detailed<br />manner. Relating these gains to observed employment, we then estimate a simple structural labor supply model. We find that potential gains are almost always positive but very small on average, especially for single mothers,<br />because of the high implicit marginal tax rates embedded in the system. Employment rates are sensitive to incentives with extensive margin elasticities<br />for both men and women usually below one. Conditional on these elasticities, simulations indicate that existing policies devoted to reducing marginal tax rates at the bottom of the income distribution, such as the intéressement earnings top-up program, have little impact in this population due to their very limited scope. The recently introduced negative income tax (Prime pour l'emploi), seems to be an exception.
    Keywords: Welfare; labor earnings; transfers, tax-system
    Date: 2007–09
  20. By: Björn Gustafsson (University of Göteborg and IZA); Mats Johansson (Swedish Social Insurance Agency); Edward Palmer (Uppsala University and Swedish Social Insurance Agency)
    Abstract: This study analyses the development of the economic well-being of the elderly in Sweden since 1990 - a period characterized by increased influence from the financial market and extreme economic events - using data from the Household Income Survey. The elderly were not isolated as pensions were cut, full indexation abandoned and taxes increased during Sweden’s deep recession in the 1990s. Instead, relatively, pensioners fared better than the working age population. On the other hand, poverty increased in absolute terms. In contrast in the following years of rapid economic growth, the growth in the income of the pensioners fell behind that of workers and relative poverty increased. The analysis shows that the limited resources of many of the elderly put them close to a socially interesting poverty line. Income inequality among the elderly has increased with an increase in the importance of capital income for the better off among the elderly, with a clear tendency towards delineation between the better and worse off, which we conclude has implications for public expenditures for the elderly. Overall, poverty among the elderly in Sweden remains low in an international perspective and our analysis leads us to conclude that the Swedish welfare state has maintained its resilience.
    Keywords: Sweden, pensions, income, poverty, income inequality
    JEL: D31 H55 I32 J14
    Date: 2007–12
  21. By: Julie Moschion (Centre d'Economie de la Sorbonne)
    Abstract: Between 1962 and 2005, whereas the activity rate of French men decreased, the activity rate of French women increased from 45,8% to 63,8%. However, women's activity rate remains correlated with the number of children : women with the lowest number of children are also the ones with the highest participation rate in the labour market. To what extent having an additional child reduces the mother's probability to participate in the labour market ? The link between fertility and mothers' participation decisions is complex because they have joint determinants, and influence each other. Hard then to say a priori if the choice of working or not is the cause or the consequence of the decision of having a certain number of children. As Angrist and Evans (1998), we use a source of exogenous and random variation of fertility to measure the causal effect of fertility on French mothers' labour supply. As in the United States, we find that the probability of having a third child is higher among parents with same sex siblings, and that in this case, mothers' participation in the labour market is reduced. Because sex mix is randomly assigned and because it has an effect on participation only through its impact on the probability of having a third child, we produce instrumental variable estimates of the effect of having more than two children on mothers' participation in the labour market. We find that having more than two children reduces significantly the mothers' participation proobability and the hours worked per week. These results are confirmed by the use of twin second birth as the exogenous fertility shock. Also, our results indicate that having more than two children especially affects the labour supply of less graduated mothers but has no effect on fathers' labour supply.
    Keywords: Fertility, mothers' labour supply.
    JEL: J13 J22
    Date: 2007–12
  22. By: Giuseppe Bertola (University of Turin); Daniele Checchi (University of Milan and IZA); Veruska Oppedisano (University of Turin)
    Abstract: We discuss how a schooling system’s structure may imply that private school enrolment leads to worse subsequent performance in further education or in the labour market, and we seek evidence of such phenomena in Italian data. If students differ not only in terms of their families’ ability to pay but also in terms of their own ability to take advantage of educational opportunities ("talent" for short), theory predicts that private schools attract a worse pool of students when publicly funded schools are better suited to foster progress by more talented students. We analyze empirically three surveys of Italian secondary school graduates, interviewed 3 year after graduation. In these data, the impact of observable talent proxies on educational and labour market outcomes is indeed more positive for students who (endogenously) choose to attend public schools than for those who choose to pay for private education.
    Keywords: private schooling, talent
    JEL: I21
    Date: 2007–12
  23. By: Christian Dreger; Reinhold Kosfeld
    Abstract: We investigate price index convergence on the base of regional data for 439 German districts. Prices refer to the overall consumer price index as well as to the index without housing prices. To increase the efficiency of the testing framework, a panel unit root analysis is performed, where cross section dependencies are taken into account. The tests indicate a lack of regional price convergence. While the idiosyncratic component of price differentials is mostly stationary, their common component is driven by a unit root. The results are very similar for the overall price index and the index without housing prices, and for the Western and Eastern part of the German economy. Obviously the elimination of housing prices is not sufficient to obtain a price index where tradable products dominate. One rationale of our findings is the persistent west-east divide in consumer prices. A second argument is related to the persistence of the price gradient between urban and rural regions.
    Keywords: Regional price differentials, price convergence, panel unit roots
    JEL: E31 R10 C33
    Date: 2007
  24. By: Seán Lyons (Economic and Social Research Institute (ESRI)); Karen Mayor (Economic and Social Research Institute (ESRI)); Richard S.J. Tol (Economic and Social Research Institute (ESRI))
    Date: 2008–01
  25. By: Rolf Ketzler (DIW Berlin); Klaus F. Zimmermann (DIW Berlin, IZA and University of Bonn)
    Abstract: The request for a strengthening of academic research at the German economic research institutes by the German Science Council more than a decade ago was founded on the crucial insight that sound policy advice - the traditional task of the institutes - can only be guaranteed in the long term if it is based on applied research carried out within the institutes themselves. Based on publications in academic journals, the central criterion of research evaluation, research output has improved remarkably in scope and quality and has involved an ever rising number of scholars within the institutes. It can be considered to be a substantial success of German reform policy, which should be internationally recognized. The present study demonstrates the implications of different methods of filtering and weighting research output to measure publication performance. The ranking of the institutes computed here on the basis of a wide range of alternative concepts provides fairly robust findings. The results are distorted, however, if they are based on a highly selective list of journals as was the case in previous literature.
    Keywords: economic research institutes, research evaluation, publication measurement
    JEL: A11 I L31
    Date: 2007–12
  26. By: Fischer, Justina A.V. (Dept. of Economics, Stockholm School of Economics)
    Abstract: Empirical analyses for the US suggest that stronger people’s control over the school budget is deleterious to student performance. Using Swiss data on ninth graders in mathematics, reading and natural science collected jointly with the PISA study 2000, this paper tests this hypothesis for Switzerland, exploiting inter-cantonal variation in political institutions. For both student performance in reading and mathematics, stronger popular rights appear to lower educational achievement through the school budget channel. In particular, the qualification of teachers is identified as most influential determinant of student achievement, which is shown to be linked to educational spending.
    Keywords: Direct democracy; public finance; economics of education; PISA
    JEL: H10 H41 I28
    Date: 2007–12–31

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