nep-eec New Economics Papers
on European Economics
Issue of 2008‒08‒14
nineteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Imports and profitability in the euro area manufacturing sector - the role of emerging market economies By Tuomas A. Peltonen; Martin Skala; Alvaro Santos Rivera; Gabor Pula
  2. Russia, EU enlargement and the euro By Zbigniew Polanski; Adalbert Winkler
  3. Longitudinal Data Collection in Continental Europe: Experiences from the Survey of Health, Ageing and Retirement in (SHARE) By Axel Börsch-Supan; Karsten Hank; Hendrik Jürges; Mathis Schröder
  4. Recent Trends and Structural Breaks in US and EU15 Labour Productivity Growth By Laure Turner; Hervé Boulhol
  5. Monetary and financial integration in the EMU: Push or pull? By Mark M. Spiegel
  6. Mass Media and Contested Meanings: EU Constitutional Politics after Popular Rejection By Ulrike LIEBERT; Hans-Jörg TRENZ
  7. Reforming the Polish Tax System to Improve its Efficiency By Alain de Serres
  8. Optimal reserve composition in the presence of sudden stops - the euro and the dollar as safe haven currencies By Roland Beck; Ebrahim Rahbari
  9. Evaluating the Economic Cost of Strategic Storage of Natural Gas By Joao Miguel Ejarque
  10. UK Welfare Reform 1996 to 2008 and beyond: A personalised and responsive welfare system? By Paul Gregg
  11. The effect of educational mismatch on wages for 25 countries By Peter Galasi
  12. European Commission Opinions to National Courts in Antitrust Cases: Consistent Application and the Judicial-Administrative Relationship By Kathryn Wright
  13. The High Cost of Low Fertility in Europe By David E. Bloom; David Canning; Günther Fink; Jocelyn E. Finlay
  14. Regional Inflation Persistence: Evidence from Italy By Andrea Vaona; Guido Ascari
  15. Studying Abroad and the Effect on International Labor Market Mobility: Evidence from the Introduction of Erasmus By Matthias Parey; Fabian Waldinger
  16. Evaluation of European wetland restoration potentials by considering economic costs under different policy options By Christine Schleupner; Uwe A. Schneider
  17. Demographic effects on the German labour supply : a decomposition analysis By Fuchs, Johann; Söhnlein, Doris; Weber, Brigitte
  18. Mapa de exposición internacional de la economía española By Miguel García-Posada; Josep M.ª Vilarrubia
  19. The transition to IFRS: disclosures by Portuguese listed companies By Patricia Teixeira Lopes; Rui Couto Viana

  1. By: Tuomas A. Peltonen (Corresponding author: Directorate General International and European Relations, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Martin Skala (Directorate General International and European Relations, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Alvaro Santos Rivera (Directorate General Market Operations, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Gabor Pula (Directorate General International and European Relations, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: The paper analyses the impact of import penetration on firms’ profitability in 15 manufacturing industries in 10 euro area countries during 1995-2004, focusing on the role of emerging market economies. Our results indicate that import competition from emerging market economies has had an overall negative impact on companies’ profitability in the euro area manufacturing sector, especially for imports coming from China and Russia. However, similar negative effects are also estimated for imports from the United States. In contrast, imports from Latin America are estimated to be positively correlated with profitability. Finally, we find asymmetric effects on profitability across euro area countries and sectors. JEL Classification: L11, L13, F12, C23.
    Keywords: Profitability, import penetration, euro area, emerging markets, globalisation.
    Date: 2008–07
  2. By: Zbigniew Polanski (Narodowy Bank Polski and Warsaw School of Economics, ul. Swietokrzyska 11/21, 00-919 Warsaw, Poland.); Adalbert Winkler (Frankfurt School of Finance and Management, Sonnemannstrasse 9-11, 60314 Frankfurt am Main, Germany.)
    Abstract: This paper reviews selected aspects of economic relations between the EU and Russia, focusing on the impact that the last two waves of EU enlargement have had on Russia, as well as the role of the euro in Russia. The analysis suggests that if EU enlargement has had any diversion effects on trade between the EU and Russia at all, they have been minimal, while robust growth in both the EU and Russia, as well as high oil and gas prices, has boosted trade. Likewise, FDI to and from Russia has increased, with the direct impact of enlargement again difficult to disentangle from other factors. Use of the euro by Russian residents and authorities in international transactions has increased, albeit at an uneven pace. While, in general, the US dollar remains the major foreign currency used by Russian residents, the euro has gained importance as an anchor and reserve currency in Russian exchange rate policies. This has happened in the context of an overall monetary policy strategy aiming at a gradual shift from an exchange rate-oriented monetary policy to inflation targeting. JEL Classification: F14, F15, F21, F36.
    Keywords: Economic integration, trade diversion, foreign direct investment, international currencies.
    Date: 2008–08
  3. By: Axel Börsch-Supan; Karsten Hank; Hendrik Jürges; Mathis Schröder (Mannheim Research Institute for the Economics of Aging (MEA))
    Date: 2008–08–05
  4. By: Laure Turner; Hervé Boulhol
    Abstract: This paper examines shifts in labour productivity growth in the United States and in Europe between 1970 and 2007 based on econometric tests of structural breaks. Additionally, it makes use of time-series-based projected labour productivity growth up to 2009 in order to detect any recent break according to a central scenario as well as high and low scenarios, both derived from a 95% confidence interval. The identification of structural breaks in US labour productivity growth is far from obvious. A statistically significant break date is found in the late 1990s only if the upper scenario materialises in the future, which means that despite a clear pick-up in productivity growth in the second half of the 1990s, the size of the hump is not still large enough compared with past variation to make this change a statistically significant break. However, a significant breakpoint is detected in the mid-1990s for the difference in labour productivity growth between the United States and the EU15 based on observed data, which seems to be due to both the initial catch-up of Europe and the halt of the convergence process in the mid-1990s. Finally, European ICT-intensive countries are shown to have structurally performed better in terms of productivity growth than non-ICT-intensive countries. <P>Tendances récentes et ruptures structurelles de la croissance de la productivité du travail aux États-Unis et dans UE15 <BR>Ce papier étudie les changements structurels dans la croissance de productivité du travail aux États-Unis et en Europe entre 1970 et 2007 à partir de tests de rupture de tendance. Il incorpore également des prévisions de la croissance de la productivité du travail jusqu’en 2009 afin de détecter des ruptures récentes selon un scénario central, ainsi que haut et bas tous deux définis à partir d’un intervalle de confiance à 95%. Premièrement, l’identification de ruptures structurelles dans la croissance de la productivité du travail aux États-Unis ne va pas de soi. Une rupture à la fin des années 1990 est mise en évidence seulement si le scenario haut est amené à se réaliser dans le futur, ce qui signifie que malgré la réelle hausse de la croissance de la productivité américaine dans la seconde moitié des années 1990, seuls des chiffres à venir élevés feraient de ce changement une rupture statistiquement significative au regard des variations passées. Cependant, sur la période observée, la différence entre les taux de croissance américain et européen de la productivité du travail présente une rupture significative au milieu des années 1990, qui semble due au rattrapage de l’Europe et à l’arrêt de la convergence au milieu des années 1990. Enfin, les pays Européens dont l’accumulation de capital dans les TIC a été plus intensive ont eu une croissance de la productivité structurellement plus forte que les pays dont l’investissement a été moindre.
    Keywords: ICT, TIC, labour productivity growth, structural break tests, croissance de la productivité du travail, tests de rupture structurelle
    JEL: E30 O47 O51 O52
    Date: 2008–08–04
  5. By: Mark M. Spiegel
    Abstract: A number of studies have recently noted that monetary integration in the European Monetary Union (EMU) has been accompanied by increased financial integration. This paper examines the channels through which monetary union increased financial integration, using international panel data on bilateral international commercial bank claims from 1998-2006. I decompose the relative increase in bilateral commercial bank claims among union members following monetary integration into three possible channels: A "borrower effect," as a country's EMU membership may leave its borrowers more creditworthy in the eyes of foreign lenders; a "creditor effect," as membership in a monetary union may increase the attractiveness of a nation's commercial banks as intermediaries, perhaps through increased scale economies enjoyed by commercial banks themselves or through an improved regulatory environment after the advent of monetary union; and a "pairwise effect," as joint membership in a monetary union increases the quality of intermediation between borrowers and creditors when both are in the same union. This pairwise effect could be attributed to mitigated currency risk stemming from monetary integration, but may also indicate that monetary union integration increases borrowing capacity. I decompose the data into a series of difference-in-differences specifications to isolate these three channels and find that the pairwise effect is the primary source of increased financial integration. This result is robust to a number of sensitivity exercises used to address concerns frequently associated with difference-in-differences specifications, such as serial correlation and issues associated with the timing of the intervention.
    Keywords: Banks and banking - Europe ; Euro ; European Monetary System (Organization)
    Date: 2008
  6. By: Ulrike LIEBERT; Hans-Jörg TRENZ
    Abstract: This paper applies a normative democratic perspective on European constitutional politics to the analysis of discursive practices related to the crisis of the 'Treaty establishing a Constitution for Europe' (TCE), in the aftermath of the failed referenda. Starting from three distinct logics of constitutionalisation, we ask whether and in which ways EU constitutional politics has interacted with the general public sphere. In terms of constitution politics, did the national mass media basically ignore the European dimension, and fail to take the debate beyond the national state? Or did they closely represent deliberations that went on during the 'reflection period,' and present the various reasons for and against this joint agreement designed to get the EU out of its impasse? And, moreover, did they represent social contentions and enhance the diversity of interests and identities involved in the constitutional crisis debates in the run up to the Lisbon Reform Treaty? To answer these questions, we will use the methodology of comparative discourse analysis and a data set covering constitutional media debates from May 2005 - June 2007 in 14 EU member and candidate countries.
    Keywords: constitution building; discourse; media; normative political theory; treaty reform
    Date: 2008–07–15
  7. By: Alain de Serres
    Abstract: The Polish tax system is characterised by high social security contributions for both employers and employees. As a result, Poland has one of the highest tax wedges in the OECD, despite relatively low personal income tax rates. This, combined with a relatively high minimum wage and generous early-retirement and disability benefit programmes, contributes to low employment rates, in particular among low-skilled workers. The system also relies heavily on consumption taxes, whereas relatively little revenue is collected from such bases as environment externalities, inheritances and, in particular, property. One of the key implications of the tax structure is that the system as a whole is one of the least redistributive among OECD countries. This paper reviews the main features of the tax system and explores options to improve its efficiency, including possibilities to broaden existing tax bases as well as to shift the tax burden from labour towards less mobile and distorting sources such as property. <P>Réformer le système fiscal polonais afin d’améliorer son efficience <BR>Le système fiscal polonais se caractérise par des cotisations patronales et salariales de sécurité sociale élevées. Par conséquent, la Pologne compte l’un des coins fiscaux les plus élevés de l’OCDE, malgré des taux de l’impôt sur le revenu des personnes physiques relativement bas. Cette situation, associée à un salaire minimum relativement conséquent et à des indemnités généreuses de retraite anticipée et d’invalidité, contribue à la faiblesse des taux d’emploi, surtout parmi les travailleurs peu qualifiés. Par ailleurs, le système s’appuie massivement sur les impôts sur la consommation, tandis que les recettes provenant d’autres sources telles que les taxes sur les produits polluants, les droits de mutation et surtout les impôts fonciers sont relativement minimes. L’une des principales conséquences de cette structure fiscale est que le système est, dans son ensemble, l’un des moins redistributifs parmi les pays de l’OCDE. Cette étude examine les principales caractéristiques du régime fiscal polonais et envisage différentes solutions pour améliorer son efficience, comme l’élargissement des assiettes d’imposition existantes et le transfert de la charge fiscale du travail vers des sources moins mobiles et entraînant moins de distorsions, telles l’immobilier.
    Keywords: taxation, fiscalité, tax reform, impôt sur le revenu, property tax, taxe foncière, TVA, labour tax wedge, VAT, personal income tax, corporate income tax, polish tax system, réforme de la taxation, coin fiscal, impôt sur les profits, système de taxation polonais
    JEL: H20 H22 H23 H24 H25
    Date: 2008–08–01
  8. By: Roland Beck (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Ebrahim Rahbari (London Business School, Economics Department, Regent’s Park, London, NW1 4SA, United Kingdom.)
    Abstract: We analytically derive optimal central bank portfolios in a minimum variance framework with two assets and "transaction demands" caused by sudden stops in capital inflows. In this model, the transaction demands become less important relative to traditional portfolio objectives as debt to reserve ratios decrease. We empirically estimate optimal dollar and euro shares for 24 emerging market countries and find that optimal reserve portfolios are dominated by anchor currencies and, at current debt to reserve ratios, introducing transactions demand has a relatively modest effect. We also find that euro and dollar bonds act as "safe haven currencies" during sudden stops. Dollars are better hedges for global sudden stops and for regional sudden stops in Asia and Latin America, while the euro is a better hedge for sudden stops in Emerging Europe. We reproduce qualitatively the recent decline in the share of the dollar in emerging market reserves and find that the denomination of foreign currency debt has very little importance for optimal reserve portfolios. JEL Classification: F31, F32, F33, G11.
    Keywords: Foreign exchange reserves, currency composition, sudden stops.
    Date: 2008–07
  9. By: Joao Miguel Ejarque
    Abstract: The European Commission wants to implement a single market for gas. One of the components of this market is a regulated provision for "security of supply" which consists of rules for the implementation and use of a given reserve stock of gas. We investigate the impact of this policy on the profitability of a storage operator, using data from Denmark and Italy. Keeping storage capacity constant, the costs of the strategic stock are around 20% of the value of the storage market for Denmark, and 16% for Italy. This cost is due to the inability to extract arbitrage profits from the captive stock.
    Date: 2008–07–31
  10. By: Paul Gregg
    Abstract: The UK welfare system has undergone three very profound periods of reform of the post-war model laid down by Beveridge. The first was a move in the direction of (but never fully converged with) the Bismarkian model of a contributory social insurance model with time limited earnings related benefits with a low value means tested social assistance safety net. This occurred slowly through the 1960s and up to the mid-1970s. The second phase started in 1979 and involved a dramatic move to curtail the social insurance entitlements and end all earnings related benefits. The result was a residualist low value means tested social assistance model, which ended both the Beveridge model and completely reversed the drift toward a European Bismarkian approach. Finally from 1996 a new model has emerged based on an activational welfare model with greater emphasis on incentives, support services and conditionality. As a direction of travel from the previous regime(s) this represents an increase in the engagement and support functions, increases in the (disciplinary) required activity functions combined with increased financial support for children and pensioners and personalised support services. The emerging model is far from completion and the final make up of the system remains uncertain. However, it bears strong similarities with developments in New Zealand and to a degree Australia and Canada. Within Europe the model most closely resembles a less generous version of the welfare systems in Denmark or Holland, which are sometimes referred to as embodying Flex-security. This evolutionary process of reform had some antecedents prior to 1996 but has really come to the fore since that date. This paper discusses reform in depth from 1996 and looks at its current direction of evolutionary change.
    Keywords: welfare reform, tax credits, lone parents, disabled adults
    JEL: H21 J22 J13 I38
    Date: 2008–04
  11. By: Peter Galasi (Department of Human Resources, Corvinus University of Budapest)
    Abstract: By making use of the Duncan&Hoffman model, the paper estimates returns to educational mismatch using comparable microdata for 25 European countries. Our aim is to investigate the extent to which the main empirical regularities produced by other papers on the subject are confirmed by our data base. On the basis of tests proposed by Hartog&Oosterbeek, we also consider whether the observed empirical patterns are in line with the Mincerian basic human capital model and Thurow’s job competition model. Using Heckman’s sample-selection estimator, we find that results are rather consistent with those found in the literature, and that the job-competition model could be accepted, whereas the Mincerian human capital model could be rejected for most of the countries.
    Keywords: job-education matching, overeducation, undereducation, returns to over- and undereducation, international comparison
    JEL: J21 J23 J24 J31
    Date: 2008–08
  12. By: Kathryn Wright (Centre for Competition Policy, University of East Anglia)
    Abstract: The House of Lords judgment in Inntrepreneur v Crehan, where the court did not consider itself bound by a finding of the European Commission, demonstrated the potentially contentious and constitutionally significant nature of the relationship between the European Commission and national judges in the field of antitrust. The decentralisation of enforcement of Articles 81 and 82EC arguably carries greater risks of divergent application of EC antitrust enforcement rules. While national competition authorities are linked through the European Competition Network, no such mechanism exists for national courts as this would offend against the principles of judicial independence and procedural autonomy. The Commission, as primary enforcer of competition law in the Community, has therefore attempted to complement the formal judicial 'dialogue' of the European Court of Justice's preliminary reference procedure with a strengthening of its own relations with the national courts. After addressing the broader theoretical context of administrative intervention in judicial decision-making, this paper examines the use of one tool to promote consistent application of EC antitrust rules - non-binding European Commission opinions and amicus curiae briefs to national courts in antitrust proceedings under Article 15 of the Modernisation Regulation. It identifies national cases where the Commission has actually intervened under Article 15 and assesses the nature and efficacy of this soft law mechanism. One finding is the difficulty in finding and tracing the cases, making the impact of the Commission’s advice difficult to judge. Transparency is desirable for legitimacy, legal certainty, and if Commission opinions are to have the most impact for promoting convergent application of EC antitrust rules among national judges.
    Keywords: European Commission, national courts, amicus curiae, Modernisation Regulation, public and private competition enforcement
    JEL: K12 K49 P48
    Date: 2008–07
  13. By: David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Günther Fink (Harvard School of Public Health); Jocelyn E. Finlay (Harvard School of Public Health)
    Abstract: We analyze the effect of fertility on income per capita with a particular focus on the experience of Europe. For European countries with below-replacement fertility, the high cost of continued low fertility will only be observed in the long run. We show that in the short run, a fall in the fertility rate will lower the youth dependency ratio and increase the working-age share, thus raising income per capita. In the long run, however, the burden of old-age dependency dominates the youth dependency decline, and continued low fertility will lead to small working-age shares in the absence of large immigration inflows. To illustrate these effects we construct a population accounting model and simulate steady-state outcomes. Regression analysis indicates the differing marginal effects of long-term fertility change in Europe versus the rest of the world.
    Keywords: demography, growth, age structure, population, economy.
    Date: 2008–06
  14. By: Andrea Vaona (Facoltà di Economia, Università di Lugano, Svizzera); Guido Ascari (Dipartimento di Economia e Metodi Quantitativi, Facoltà di Economia, Università di Pavia, Italia)
    Abstract: Regional patterns of inflation persistence have received attention only at a very coarse level of territorial disaggregation, that of EMU member states. However economic disparities within EMU member states are an equally important policy issue. This paper considers a country with a large regional divide, i.e., Italy, at a fine level of territorial disaggregation (NUTS3). Our results show that economically backward regions display greater inflation persistence. Moreover, we show that higher persistence is linked to a lower degree of competitiveness in the retail sector.
    Keywords: inflation persistence, retail sector, regions.
    JEL: E0 E30 R0 R10
    Date: 2007–07–28
  15. By: Matthias Parey; Fabian Waldinger
    Abstract: We investigate the e¤ect of studying abroad on international labor market mobility later in life for German university graduates. As a source of identifying variation, we exploit the introduction and expansion of the ERASMUS student exchange program, which significantly increases a student's probability of studying abroad. Using an Instrument Variable approach we control for unobserved heterogeneity between individuals who studied abroad and those who did not. Our results indicate that student exchange mobility is an important determinant of later international labor market mobility: We find that studying abroad increases an individual's probability of working in a foreign country by about 15 to 20 percentage points, suggesting that study abroad spells are an mportant channel to later outmigration. The results are robust to a number of specification checks.
    Date: 2007–08
  16. By: Christine Schleupner; Uwe A. Schneider (Research unit Sustainability and Global Change)
    Date: 2008–07
  17. By: Fuchs, Johann (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Söhnlein, Doris (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Weber, Brigitte (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Forecasts show a substantially decreasing and ageing labour force in Germany. This paper provides a decomposition of the projected change in the overall labour force into three parts. The first, called the 'demographic component', shows the effects of fertility, mortality and a changing age structure of the population. The second effect is the migration component. This part is due to the cumulative net inflow of migrants, but includes their reproductive behaviour as well. Changes in the participation rates give the third effect, the participation component. The decomposition was conducted by comparing different labour force scenarios until 2050. The method can easily be extended for decomposition into more than three factors. Not surprisingly, the downward trend in the labour force is attributable only to population effects. Ageing of the baby-boom generation and low birth rates both are the responsible factors behind. Neither a strong increase in labour force participation nor large immigration flows can halt this trend in the labour force. As the age structure is almost given and increasing fertility rates only have positive effects in the very long run, the projected decline in the labour force should be taken as a fact." (author's abstract, IAB-Doku) ((en))
    Keywords: Arbeitskräfteangebot - Prognose, Erwerbspersonenpotenzial - Determinanten, demografischer Wandel, Wanderung - Auswirkungen, Erwerbsverhalten, Geschlechterverteilung
    JEL: J11 J21 F22
    Date: 2008–08–06
  18. By: Miguel García-Posada (Banco de España); Josep M.ª Vilarrubia (Banco de España)
    Abstract: Este estudio analiza los niveles de interdependencia y riesgo que se dan en las relaciones económicas entre España y un gran número de países. Para ello se utilizan datos bilaterales sobre vínculos comerciales y financieros de España con el resto del mundo para construir, mediante el análisis de componentes principales, un índice de interdependencia de España con cada país. Asimismo, la agregación mediante la misma técnica de diversas medidas de riesgo, como las calificaciones crediticias soberanas y otras más genéricas, permite construir un índice de riesgo para cada país. Combinando la información de ambos índices, se encuentra que las mayores interdependencias de la economía española se dan con países asociados a niveles reducidos de riesgo (esencialmente países de la OCDE), mientras que las principales interdependencias asociadas a niveles intermedios de riesgo se dan en relación a países de América Latina y países exportadores de productos energéticos.
    Keywords: integración comercial, integración financiera, dependencia energética, riesgo
    JEL: F14 F15
    Date: 2008–08
  19. By: Patricia Teixeira Lopes (University of Porto, Faculty of Economics); Rui Couto Viana (University of Porto, Faculty of Economics)
    Abstract: In the context of the CESR and of the Portuguese market regulator recommendations regarding the disclosure of the impacts of the transition to IFRS, this paper analyses the content of those disclosures by Portuguese listed companies. We found a high degree of variability among the disclosure either regarding the qualitative (narrative explanations of transition) or quantitative (reconciliations) disclosures. The results show that the objective of comparability, relevance and understandability stated in CESR’s recommendation were not achieved. Regarding accounting changes, the analysis shows that the reported impacts by companies confirmed expectations based on prior de jure studies on major impacts of changing from Portuguese GAAP to IFRS; these major impacts regard the recognition of intangibles, the accounting treatment of goodwill and financial instruments. Finally, Gray’s (1980) “conservatism” index was computed using the reconciliated profits to IFRS reported by companies. This analysis shows that Portuguese standards are more conservative than IFRS. This study is relevant to several parties: to the market regulators and policy makers in predicting the level of compliance with IFRS and calling attention for the importance of enforcement mechanisms; to the preparers, auditors and users in identifying the most problematic areas of implementation of IFRS.
    Keywords: International Accounting, Disclosure, IAS/IFRS, Portugal
    JEL: M41
    Date: 2008–08

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