nep-eec New Economics Papers
on European Economics
Issue of 2008‒03‒25
ten papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Pay inequality in 25 European countries By Sîle O'Dorchai
  2. Does Money Growth Granger-Cause Inflation in the Euro Area? Evidence from Out-of-Sample Forecasts Using Bayesian VARs By Helge Berger; Pär Österholm
  3. Money and the natural rate of interest: structural estimates for the United States and the euro area By Javier Andrés; David López-Salido; Edward Nelson
  4. Euro-zone Inflation Rates: Stationary or Regime-wise Stationary Processes By Claude Lopez
  5. Did the Single Market Cause Competition in Excise Taxes? Evidence from EU Countries By Lockwood, Ben; Migali, Giuseppe
  6. The Exit Decision in the European Venture Capital Market By Elisabete Gomes Santana Félix; Cesaltina Pires; Mohamed Azzim Gulamhussenb
  7. The cyclical response of fiscal policies in the euro area. Why do results of empirical research differ so strongly? By Roberto Golinelli; Sandro Momigliano
  8. Russian market power on the EU gas market: can Gazprom do the same as in Urkaine? By Joris Morbée; Stef Proost
  9. The Relationship between Knowledge Intensity and Market Concentration in European Industries: An inverted U-Shape By Niels Krap; Johannes Stephan
  10. Explaining Differences in Hours Worked among OECD Countries: an empirical analysis By Orsetta Causa

  1. By: Sîle O'Dorchai (DULBEA, Université libre de Bruxelles, Brussels)
    Abstract: This paper analyses disparity in women’s pay across 25 European countries using EU-SILC 2005. First, the gender pay gap is examined. Next, the impact of working hours and parenthood is analysed. We show that women suffer a wage disadvantage compared with men all over Europe, except for Poland. Motherhood usually reinforces the gender gap but most discrimination is sex-related so that it concerns all women as potential mothers. There is no uniform relationship between the parenthood and the gender wage gap. Finally, female part-timers face either a bonus or penalty (between 2% and 30% roughly).
    Keywords: wage gap estimation/decomposition, gender, parenthood, working time.
    JEL: C21 J24 J31 J71
    Date: 2008–03
  2. By: Helge Berger; Pär Österholm
    Abstract: We use a mean-adjusted Bayesian VAR model as an out-of-sample forecasting tool to test whether money growth Granger-causes inflation in the euro area. Based on data from 1970 to 2006 and forecasting horizons of up to 12 quarters, there is surprisingly strong evidence that including money improves forecasting accuracy. The results are very robust with regard to alternative treatments of priors and sample periods. That said, there is also reason not to overemphasize the role of money. The predictive power of money growth for inflation is substantially lower in more recent sample periods compared to the 1970s and 1980s. This cautions against using money-based inflation models anchored in very long samples for policy advice.
    Keywords: Inflation , Euro Area , Demand for money , Monetary policy , Monetary aggregates ,
    Date: 2008–03–04
  3. By: Javier Andrés (Universidad de Valencia); David López-Salido (Federal Reserve Board); Edward Nelson (Federal Reserve Bank of St. Louis)
    Abstract: We examine the role of money in three environments: the New Keynesian model with separable utility and static money demand; a nonseparable utility variant with habit formation; and a version with adjustment costs for holding real balances. The last two variants imply forward-looking behavior of real money balances, with forecasts of future interest rates entering current portfolio decisions. We conduct a structural econometric analysis of the U.S. and euro area economies. FIML estimates confirm the forward-looking character of money demand. A consequence is that real money balances are valuable in anticipating future variations in the natural interest rate.
    Keywords: Money, natural rate, New Keynesian models
    JEL: E51 E52
    Date: 2008–03
  4. By: Claude Lopez
    Abstract: This study investigates the stationary behavior of the inflation rates for the Euro- zone members and some neighboring countries, for the 1957:2 to 2007:3 period. The analysis uses univariate unit root tests with enhanced small-sample performances that allow up to two breaks in the intercept, namely those of Elliott et al. (1996) and Lopez (2008). The results strongly reject the unit root null hypothesis for all the countries. Furthermore, they demonstrate that some of the Euro-zone inflation rates are stationary and others are regime-wise stationary. While such results may reconcile some of the literature findings and provide empirical evidence that the Maastricht criterion is respected, they also highlight the importance of accounting for breaks when studying these series.
    Date: 2008
  5. By: Lockwood, Ben (University of Warwick); Migali, Giuseppe (Lancaster University)
    Abstract: The introduction of the Single Market resulted in a switch from destination to origin-based taxation of cross-border transactions by individuals. The theory of commodity tax competition predicts that this change should give rise to excise tax competition and thus intensify strategic interaction in the setting of excise taxes. In this paper, we provide an empirical test of this prediction using a panel data set of 12 EU countries over the period 1987-2004. We find that for all excise duties that we consider (still and sparkling wine, beer, ethyl alcohol, and cigarettes), strategic interaction between countries significantly increased after 1993, consistently with the theoretical prediction. Indeed, for all these products except for cigarettes, there is no evidence of strategic interaction prior to 1993, so our findings are consistent with the hypothesis that the single market caused tax competition. For beer and ethyl alcohol, there is evidence that the minimum taxes, also introduced in 1993, have intensified strategic interaction.
    Keywords: tax competition ; excise taxes ; cross-border shopping
    JEL: H70 H71 H77
    Date: 2008
  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 exit decision in the European venture capital market, studying when to exit and how it interacts with the exit form. The paper emphasizes the impact of asymmetric information on the divestment decision. Our model considers the impact of haracteristics of the venture capital investor, characteristics of the investment and contracting variables on the exit decision. Our results show that venture capitalists associated with .nancial institutions have quicker exits, a result which is stronger for trade-sales exits. In addition, our results highlight the importance of the contracting variables on the exit decision. An unexpected but interesting result is that the presence in the board of directors leads to longer investment duration.
    Keywords: Asymmetric information, venture capital, trade sales, IPO, write-offs, exit decision, competing risks model
    JEL: C24 G24 G32 G38 K22
    Date: 2008
  7. By: Roberto Golinelli (University of Bologna, Department of Economics); Sandro Momigliano (Bank of Italy, Department for Structural Economic Analysis)
    Abstract: Whether discretionary fiscal policies in industrialized countries act counter- or pro-cyclically and whether their reaction is symmetric or asymmetric over the cycle are still largely unsettled questions. This uncertainty remains even when attention is restricted to euro-area countries, where these questions have important implications for the debate on European fiscal rules. We review the recent empirical literature to explain why the results of the various studies differ so greatly. We find that differences are driven partly by the choices made in modelling fiscal behaviour and in the related notions of fiscal policy cyclicality. Results are also affected by data source and vintage (ex post or real-time). The time period chosen is relatively less important. We conclude that the notion of pro-cyclical fiscal policies often upheld in the debate is not justified by the data. Ex post data suggest either a-cyclicality or weak counter-cyclicality. Real-time information gives clearer indications of counter-cyclical behaviour, especially when we progress from a very simple “core” model to a more complex one, including at least the impact of fiscal rules. As for symmetry or asymmetry, the answer varies with sources of data and time periods. With the more complex model the indications of asymmetric behaviour are more robust. Whenever asymmetry is present, it entails shifts in all the parameters of the fiscal rule and not necessarily in the output gap parameter.
    Keywords: fiscal policy, euro-area countries, fiscal rules, pro and counter-cyclical policies, policy symmetry over the cycle, ex post and real-time data, dynamic panel models.
    JEL: E61 D72 E62 H60
    Date: 2008–01
  8. By: Joris Morbée; Stef Proost
    Abstract: In the course of 2006, Gazprom sharply increased gas prices for Ukraine, Belarus, Georgia and Moldova. This paper assesses (i) to what extent Europe is vulnerable to similar use of market power by Russia, and (ii) to what extent the construction of strategic gas storage could help Europe to reduce its vulnerability. The European market for imported gas is described by differentiated Cournot competition between Russia and other – potentially more reliable – suppliers, in particular LNG imports. The results show that Russian market power is limited, because demand is not completely inelastic even in the short run. Moreover, if Russia’s unreliability increases (or if European short-run demand elasticity decreases) Russia gives away more and more of its expected profits to the other suppliers. For Europe, buying gas from more reliable suppliers at a price premium turns out to be more attractive than building storage capacity.
    Date: 2008–03
  9. By: Niels Krap; Johannes Stephan
    Abstract: This paper is motivated by the European Union strategy to secure competitiveness for Europe in the globalising world by focussing on technological supremacy (the Lisbon - agenda). Parallel to that, the EU Commission is trying to take a more economic approach to competition policy in general and anti-trust policy in particular. Our analysis tries to establish the relationship between increasing knowledge intensity and the resulting market concentration: if the European Union economy is gradually shifting to a pattern of sectoral specialisation that features a bias on knowledge intensive sectors, then this may well have some influence on market concentration and competition policy would have to adjust not to counterfeit the Lisbon-agenda. Following a review of the available theoretical and empirical literature on the relationship between knowledge intensity and market structure, we use a larger Eurostat database to test the shape of this relationship. Assuming a causality that runs from knowledge to concentration, we show that the relationship between knowledge intensity and market structures is in fact different for knowledge intensive industries and we establish a non-linear, inverted U-curve shape.
    Keywords: market structure, knowledge intensity, competition policy
    JEL: L16 L40 O33
    Date: 2008–03
  10. By: Orsetta Causa
    Abstract: This working paper investigates the policy determinants of hours worked among employed individuals in OECD countries, focussing on the impact of taxation, working-time regulations, and other labour and product market policies. It explores the factors underlying cross-country differences in hours worked — in line with previous aggregate approaches — while at the same time it looks more closely at labour force heterogeneity — in the vein of microeconomic labour supply models. The paper shows that policies and institutions have a different impact on working hours of men and women. Firstly, while high marginal taxes create a disincentive to work longer hours for women, their impact on hours worked by men is almost insignificant. Secondly, working-time regulations have a significant impact on hours worked by men, and this impact differs across education categories. Thirdly, other labour and product market policies, in particular stringent employment protection of workers on regular contracts and competition-restraining product market policies, have a negative impact on hours worked by men, over and beyond their impact on employment levels. <P>Expliquer les différences d’heures travaillées dans les pays de l’OCDE : une analyse empirique <BR>Résumé: Cet article analyse les déterminants politiques des heures travaillées par la population employée dans les pays de l‘OCDE. Ce travail porte sur l‘impact des taxes, des réglementations du temps de travail, et des politiques du marché du travail et du marché des produits sur la marge intensive de l‘utilisation du travail. Il s‘interroge sur les facteurs sous-jacents les différences d‘heures travaillées — en ligne avec les approches agrégées — mais analyse également l‘hétérogénéité de la force de travail-dans la veine des analyses microéconomiques de l‘offre de travail. Cet article montre que les politiques et les institutions ont un impact sur les heures travaillées par différentes sous-populations composant la force de travail. Pour résumer, tandis que les heures travaillées par les femmes sont sensibles à la fiscalité du travail, les heures travaillées par les hommes répondent davantage aux réglementations sur la durée du temps de travail ainsi qu‘aux politiques du marché du travail et du marché des produits. Premièrement, alors qu‘un niveau élevé de taxation marginale implique une désincitation à augmenter le nombre d‘heures travaillées chez les femmes, l‘impact de la fiscalité sur les heures travaillées par les hommes est nul. Deuxièmement, la réglementation sur la durée du temps de travail a un impact significatif sur les heures travaillées par les hommes, et cet impact varie en fonction du niveau d‘éducation. Troisièmement, d‘autres politiques structurelles, et en particulier la rigueur de la protection de l‘emploi sur les contrats permanents, ainsi qu‘une réglementation anti compétitive du marché des produits, ont un impact négatif sur les heures travaillées par les hommes, par-delà leur impact sur leur niveau d‘emploi.
    Keywords: taxation, labour market policies, politique du marché du travail, offre de travail, labour supply
    JEL: H31 J22 J58
    Date: 2008–03–10

This nep-eec issue is ©2008 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.