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on European Economics |
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Issue of 2008‒04‒04
thirteen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Jan-Egbert Sturm (KOF Swiss Economic Institute, ETH Zurich Switzerland and CESifo); Timo Wollmershäuser (Ifo Institute for Economic Research, Munich Germany and CESifo) |
| Abstract: | This paper estimates forward-looking Taylor rules for the euro area. Using the asymmetries in inflation and cyclical output developments across countries, we investigate the adequacy of the single monetary policy for each of the European Monetary Union (EMU) member countries. Notable differences emerge across the countries. Taking a euro area perspective, we also show that it depends upon the underlying country weighting scheme in the monetary decision process of the ECB whether or not there has been a synchronisation of business and inflation cycles among the EMU member countries over the years. Finally, we produce an estimate of the actual policy weights the ECB has implicitly attached to each of the member countries. Developments in small member countries have received more than proportional weights in actual monetary policy decisions of the ECB. |
| Keywords: | Taylor rule, monetary policy, ECB, stress, business cycle synchronisation |
| JEL: | C22 E32 E52 E58 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:08-190&r=eec |
| By: | Mark David Witte (Department of Economics and Finance, College of Charleston); |
| Abstract: | If a country’s imports are invoiced in a foreign currency then the import prices paid by consumers, and the importing country’s inflation rate, are vulnerable to exchange rate movements. Using a unique multiple market model I exam a representative firm’s currency denomination decision when selling to different countries. The simulation studies the impact of EU expansion on the currency denomination of trade. Results suggest that when preferences are similar across countries EU expansion decreases the likelihood of price discrimination and could decrease the use of the euro as an invoicing currency in the original EU’s imports. |
| Keywords: | currency invoicing, exchange rate, inflation, EU expansion, price discrimination |
| JEL: | F14 F31 |
| URL: | http://d.repec.org/n?u=RePEc:coc:wpaper:3&r=eec |
| By: | Sa, Filipa (Bank of England) |
| Abstract: | High levels of employment protection reduce hiring and firing and have a theoretically ambiguous effect on the employment level. Immigrants, being new to the labor market, may be less aware of employment protection regulations and less likely to claim their rights, which may create a gap between the costs for employers of hiring a native relative to hiring an immigrant. This paper tests that hypothesis drawing on evidence for the EU and on two natural experiments for Spain and Italy. The results suggest that strict employment protection legislation (EPL) gives immigrants a comparative advantage relative to natives. Stricter EPL is found to reduce employment and reduce hiring and firing rates for natives. By contrast, stricter EPL has no effect on most immigrants and may even increase employment rates for those who have been in the country for a longer time. |
| Keywords: | employment protection, immigration |
| JEL: | J6 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3414&r=eec |
| By: | Köhler, Matthias |
| Abstract: | Although there is anecdotal evidence that merger control may constitute a barrier to the integration of European retail banking markets, systematic empirical evidence is missing until now. This paper aims to fill this gap. Based on a unique dataset on the transparency on merger control in the EU banking sector, we estimate the probability that a bank is taken over as a function of its characteristics, country characteristics and the transparency of merger control in the banking sector. The results indicate that a bank is systematically more likely to be taken over by foreign credit institutions if the regulatory process is transparent. Particularly large banks are less likely to be taken over by foreign credit institutions if merger control lacks transparency. This is in line with the hypothesis that governments may block crossborder bank merger because they want the largest institution in the country to be domestically owned. Domestic mergers are not affected. This suggests that merger control may therefore constitute an important barrier to cross-border consolidation and that further integration of EU banking markets requires a higher degree of transparency of the regulatory process. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:7020&r=eec |
| By: | Herrmann, Sabine; Winkler, Adalbert |
| Abstract: | Financial globalisation has been associated with divergent current account patterns in emerging market economies. While countries in emerging Asia have been running sizeable current account surpluses, countries in emerging Europe have been facing large current account deficits. In this paper we test for the relevance of financial market characteristics in explaining divergent current account patterns in emerging Europe and emerging Asia based on the assumption that both regions constitute two different convergence clubs with the euro area and the US representing the core, respectively. In line with the theoretical literature, we find that better developed and more integrated financial markets increase emerging markets´ ability to borrow abroad. The degree of financial integration within the convergence clubs as well as the extent of reserve accumulation are found to be the most significant factors to explain divergent current account patterns in emerging Europe and emerging Asia. We conclude that the overall character of integration matters for the pattern of current account developments in catching-up economies. |
| Keywords: | real convergence, economic integration, saving and investment, current account developments, financial markets, emerging market economies |
| JEL: | F15 F21 O16 O52 O53 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp1:7116&r=eec |
| By: | Börsch-Supan, Axel (Sonderforschungsbereich 504) |
| Abstract: | Disability insurance – the insurance against the loss of the ability to work – is a substantial part of social security expenditures in many countries. The enrolment rates in disability insurance vary strik-ingly across European countries and the US. This paper investigates the extent of, and the causes for, this variation, using data from SHARE, ELSA and HRS. We show that even after controlling for differences in the demographic structure and health status these differences remain. In turn, indicators of disability insurance generosity explain 75% of the cross-national variation. We conclude that country-specific disability insurance rules are a prime can-didate to explain the observed cross-country variation in disability insurance enrolment. |
| Date: | 2007–05–08 |
| URL: | http://d.repec.org/n?u=RePEc:xrs:sfbmaa:07-23&r=eec |
| By: | Lal, Kaushalesh (UNU-MERIT); Dunnewijk, Theo (UNU-MERIT, Maastricht University) |
| Abstract: | Innovation strategies of entrepreneurs are mapped with growth and performance of their firms in this study. Findings of the study are based on the data collected from 1238 small ICT firms located in 25 member states of European Union. The survey was conducted during October 2006 and March 2007. Results of Logit analysis suggest that firms that pursued continuous innovation strategies experienced more employment growth, higher profitability, and better sales dynamics than those that adopted occasional innovation approach. Market growth of continuous innovating firms realized faster pace than other type of firms. Another distinguishing characteristic of two types of firms emerged is market preference. Target market of continuous innovating firms has been European or global markets while innovative activities of other firms targeted domestic market. The study concludes that European innovation policies should be focused towards continuous innovation activities with due attention at human resource development policies. |
| Keywords: | dynamic capabilities, continuous innovation, occasional innovation, competitiveness, human resources, internationalization |
| JEL: | O31 O32 O38 L25 L63 O15 J24 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2008016&r=eec |
| By: | Gatti, Donatella (University of Paris 13) |
| Abstract: | The paper investigates the impact of ownership concentration on GDP growth, for a sample of 18 OECD countries over the period 1980 to 2004. The econometric analysis shows that more concentrated ownership can speed up growth, for countries approaching the technological frontier, provided that labour market regulation is sufficiently tight. In the absence of employment regulation, the logic of financial markets discipline applies and dispersed ownership appears as more favorable for growth. Based on econometric results, impact coefficients are calculated allowing to evaluate the growth points gained/lost following a given change in ownership concentration. This exercise reveals that a reform in the domain of ownership structure can yield sizeable effects in terms of growth. Importantly, these effects are unequally distributed across countries: Anglo-Saxon countries would take more advantage of deregulation (i.e. increased dispersion of ownership in a context of deregulated labour markets) while continental European countries would benefit more from increased concentration of ownership in a context of reinforced labour regulation. |
| Keywords: | ownership concentration, labour market regulation, growth, developed countries |
| JEL: | O43 O57 G32 K31 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3415&r=eec |
| By: | Nuno Bento (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II) |
| Abstract: | This paper aims to investigate the transition to a new energy system based on hydrogen in the European liberalized framework. After analyzing the literature on the hydrogen infrastructure needs in Europe, we estimate the size and scope of the transition challenge. We take the theoretical framework of network economics to analyze early hydrogen infrastructure needs. Therefore, several concepts are applied to hydrogen economics such as demand club effects, scale economies on large infrastructures, scope economies, and positive socio-economical externalities. On the examples of the electricity and natural gas industry formation in Europe, we argue for public intervention in order to create conditions to reach more rapidly the critical size of the network and to prompt network externalities allowing for the market diffusion of and, thus, an effective transition to the new energy system. |
| Keywords: | Network economics ; infrastructure ; hydrogen |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00266304_v1&r=eec |
| By: | Friedrich Heinemann (Centre for European Economic Research (ZEW)); Eckhard Janeba (University of Mannheim, CESifo) |
| Abstract: | The process of globalization has an important impact on national tax policies. Most of the literature does not focus directly on the political decision making process and assumes that the desired tax policy is responding to objective underlying tradeoffs. Based on an original survey of members of German national parliament (Bundestag) in 2006/7 we document a strong ideological bias among policy makers with respect to the perceived mobility of international tax bases (real capital and paper profits). Ideology via party affiliation influences also directly and indirectly the perceived national autonomy in tax setting and preferences for a EU minimum tax for companies. There seems little consensus as to what the efficiency costs of capital taxation in open economies are, even though our survey falls in a period of extensive debate about and actual adoption of a company tax reform bill in Germany. From a comparative politics perspective our results document the strong role of party discipline in a parliamentary democracy as the actual voting behaviour within a party is much more cohesive than the survey evidence suggests. |
| Keywords: | Globalization, business taxation, beliefs, member of parliament, profit shifting, party discipline, yardstick competition |
| JEL: | D78 D83 H25 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:btx:wpaper:0805&r=eec |
| By: | Büttner, Thiess; Overesch, Michael; Schreiber, Ulrich; Wamser, Georg |
| Abstract: | This paper analyzes the e®ectiveness of thin-capitalization rules in preventing debt finance by intercompany loans and explores their consequences for corporate decisions. A theoretical discussion emphasizes that limitations of the deduction of interest owed to foreign affiliates would not only affect multinationals' capital structure choice but also investment. An empirical investigation exploits a large firm-level panel dataset of multinationals in order to analyze the impact of thin-capitalization rules on capital structure choice and investment in the OECD and some further European countries in the time period between 1996 and 2004. The results indicate that thin-capitalization rules are effective in curbing tax planning via intercompany loans. However, investment is found to be adversely affected. |
| Keywords: | Corporate Income Tax, Multinationals, Leverage, Thin-Capitalization Rules, Firm-Level Data |
| JEL: | G32 H25 H26 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp1:7114&r=eec |
| By: | Bayo-Moriones, Alberto (University of Navarra); Galdón-Sánchez, José Enrique (Universidad Pública de Navarra); Martinez-de Moretin, Sara (University of Navarra) |
| Abstract: | This article presents a study of the determinants of pay settlements in a sample of Spanish and British establishments. We find that variables such as establishment size and age, foreign ownership, labour costs, the existence of internal labour markets, a strategic approach to human resource management and pay setting institutions are related to the factors that shape pay adjustments. Moreover, our findings show that there are significant differences in the determinants of pay settlements between Spain and Great Britain. We suggest that the labour market institutions developed in each country influence pay setting decisions. |
| Keywords: | compensation systems, labor market institutions, wage settlements, establishment level data |
| JEL: | J30 J40 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3401&r=eec |
| By: | Schulz, Alexander; Wolff, Guntram B. |
| Abstract: | The paper presents a comprehensive data set of all bonds issued by the sixteen German states (L¨ander) since 1992. It thus provides a complete picture of a capital market comparable in size to funds raised in the German fixed income market for corporations. The quantitative analysis reveals that L¨ander follow different issuing strategies: while some concentrate to a greater extend on large issues or issue joint bonds with other L¨ander (Jumbos), others rely more on comparatively small but frequent issues. Moreover, some L¨ander issue a significant volume-share of their bonds in foreign currencies. Suitable bonds are used to compute yields for the respective L¨ander at a daily frequency. In addition, we construct a measure of liquidity based on the standard deviation of yields of those bonds that are used to compute the average yield. |
| Keywords: | sovereign bond market, yields, liquidity, fiscal federalism, Germany |
| JEL: | E43 E44 G10 G12 G18 H63 H74 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp1:7117&r=eec |