nep-eec New Economics Papers
on European Economics
Issue of 2008‒11‒25
eighteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Bootstrap Panel Granger-Causality Between Government Spending and Revenue By António Afonso; Cristophe Rault
  2. Social protection performance in the European Union: comparison and convergence By COELLI, Tim; LEFEBVRE, Mathieu; PESTIEAU, Pierre
  3. Monetary Policy and European Unemployment By Ronald Schettkat; Rongrong Sun
  4. The ECB and IMF indicators for the macro-prudential analysis of the banking sector: a comparison of the two approaches By Anna Maria Agresti; Patrizia Baudino; Paolo Poloni
  5. Evaluating the impact of average cost based contracts on the industrial sector in the European emission trading scheme By OGGIONI, Giorgia; SMEERS, Yves
  7. The behaviour of food relative prices: An analysis across the European countires By Gutierrez, L.; Brasili, C.; Fanfani, R.
  8. Similarity in export composition and catching-up By Luca De Benedictis; Lucia Tajoli
  9. MODELLING IMPACTS OF SOME EUROPEAN BIOFUEL MEASURES By von Ledebur, Oliver; Salamon, Petra; Zimmermann, Andrei; van Leeuwen, Myrna; Tabeau, Andrej; Chantreuil, Frederic
  10. European food quality policy: the importance of geographical indications, organic certification and food quality insurance schemes in European countries By Becker, T.; Staus, A.
  11. FDI Implications of Recent European Court of Justice Decision on Corporation Tax Matters By Frank Barry and Rosemary Healy-Rae
  12. Costs of compliance with EU regulations and competitiveness of the EU dairy sector By Bezlepkina, I.V.; Jongeneel, R.; Brouwer, F.; Dillen, K.; Meister, A.; Winsten, J.; De Roest, K.; Demont, M.
  13. Dynamic impacts of a financial reform of the CAP on regional land use, income and overall growth. By Jansson, T.; Bakker, M.M.; Le Mouel, P.; Schirmann-Duclos, D.; Verhoog, D.; Verkerk, P.J.
  15. Risks Perceptions and Risk Management Instruments in the European Union: do farmers have a clear idea of what they need? By Morales, C; Garrido, A.; Palinkas, P.; Szekely, C.
  16. Prices and output co-movements : an empirical investigation for the CEECs. By Iuliana Matei
  17. EU Enlargement Implications on the New Member States Agri-food Trade By Dasa, Bartosova; Lubica, Bartova; Jarko, Fidrmuc
  18. Impact of public subsidies on farms€٠technical efficiency in New Member States before and after EU accession By Latruffe, L.; Bakucs, L.; Bojnec, S.; Ferto, I.; Fogarasi, J.; Gavrilescu, C.; Jelinek, L.; Luca, L.; Medonos, T.; Toma, C.

  1. By: António Afonso; Cristophe Rault
    Abstract: Using bootstrap panel analysis, allowing for cross-country correlation, without the need of pre-testing for unit roots, we study the causality between government revenue and spending for the EU in the period 1960-2006. Spend-and-tax causality is found for Italy, France, Spain, Greece, and Portugal, while tax-and-spend evidence is present for Germany, Belgium, Austria Finland and the UK, and for several EU New Member States.
    Keywords: panel causality; fiscal policy; EU.
    JEL: C23 E62 H62
    Date: 2008–07
  2. By: COELLI, Tim (CEPA, University of Queensland); LEFEBVRE, Mathieu (CREPP, Université de Liège); PESTIEAU, Pierre (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: In this paper we use data on five social inclusion indicators (poverty, inequality, unemployment, education and health) to assess the performance of 15 European welfare states (EU15) over a ten-year period from 1995 to 2004. Aggregate measures of performance are obtained using index number methods similar to those employed in the construction of the widely used Human Development Index (HDI). These are compared with alternative measures derived from data envelopment analysis (DEA) methods. The influence of methodology choice and the assumptions made in scaling indicators upon the results obtained is illustrated and discussed. We also analyse the evolution of performance over time, finding evidence of some convergence in performance and no sign of social dumping.
    Keywords: performance measure, best practice frontier, social protection.
    JEL: H50 C14 D24
    Date: 2008–03
  3. By: Ronald Schettkat (Department of Economics University of Wuppertal); Rongrong Sun (Department of Economics University of Wuppertal)
    Abstract: In the long history of rising and persistent unemployment in Europe almost all institutions - employment protection legislation, unions, wages, wage structure, unemployment insurance, etc. - have been alleged and found guilty to have caused this tragic development at some point in time. Later, welfare state institutions in interaction with external shocks were identified as more plausible causes for rising equilibrium unemployment in Europe. Monetary policy has managed to be regarded as innocent. Based on the assertion of the neutrality of money in the medium and long run, the search for causes of European unemployment has shied away from the policy of central banks. But actually the institutional setup regarding monetary policy is very different between the FED and the Bundesbank (ECB). We argue that the interaction of negative external shocks and tight monetary policies may have been the major - although probably not the only - cause of unemployment in Europe remaining at ever higher levels after each recession. We identify the monetary policy of the Bundesbank as asymmetrical in the sense that the Bank did not actively fight against recessions, but that it dampened recovery periods. Less constraint on growth would have kept German unemployment at lower levels.
    Keywords: Production, Employment, Unemployment, Monetary Policy, Central Banks and Their Policies
    JEL: E23 E24 E42 E43 E52 E58
    Date: 2008–10
  4. By: Anna Maria Agresti (International Financial Corporation, World Bank Group, 2121 Pennsylvania Avenue, NW Washington, DC 20433 USA.); Patrizia Baudino (Financial Stability Forum, Bank for International Settlements, Basel, Switzerland.); Paolo Poloni (European Central Bank, Directorate General Statistics, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: In January 2007 the International Monetary Fund (IMF) published, on an ad hoc basis, a series of financial soundness indicators (FSIs) based on a common methodology (the IMF compilation Guide) for 62 countries, including all 27 European Union countries. The European Central Bank (ECB), jointly with the Banking Supervision Committee (BSC), has an interest in monitoring the development of this IMF initiative in the context of its own work on compiling macro-prudential indicators (MPIs). The aim of this paper is to identify the main similarities and differences between the FSIs and the MPIs for national banking sectors, as the overlap between MPIs and FSIs in this sub-set is greatest. As a result of the recently issued amendments to the IMF compilation Guide for FSIs, some key methodological differences between the two approaches have been eliminated and it is therefore expected that the figures published by the two institutions will soon converge. The paper concludes with an investigation of the few other areas where the remaining differences could potentially be narrowed. JEL Classification: C82, G20, G21, G28, G32
    Keywords: Macro-prudential indicators (MPIs), financial soundness indicators (FSIs), financial stability statistics
    Date: 2008–11
  5. By: OGGIONI, Giorgia (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); SMEERS, Yves (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: The inception of the Emission Trading System in Europe (EU-ETS) has made power price more expensive. This affects the competitiveness of electricity intensive industrial consumers and may force them to leave Europe. Taking up of a proposal of the industrial sector, we explore the possible application of special contracts, based on the average cost pricing system, which would mitigate the impact of CO2 cost on their electricity price. The model supposes fixed generation capacities. A companion paper treats the case with capacity expansion. We first consider a reference model representing a perfectly competitive market where all consumers (households and industries) are price-takers and buy electricity at the short-run marginal cost. We then change the market design assuming that large industrial consumers pay power either at a single or at a nodal average cost price. The analysis of these problems is conducted with simulation models applied to the Northwestern European market. The equilibrium models developed are implemented in the GAMS environment.
    Keywords: average cost pricing, complementarity conditions, EU-ETS, Northwestern Europe market.
    Date: 2008–01
  6. By: Grethe, Harald; Nolte, Stephan; Banse, Martin
    Abstract: This paper presents a partial equilibrium simulation analysis of EU sugar market reforms with a version of the European Simulation Model (ESIM) addressing three issues: preferential EU imports are a function of the price differential between world market and EU price, EU supply functions are estimated based on FADN data, and the production of bioethanol in the EU and the rest of the world is taken into account as an important component in sugar beet and sugar cane demand. It is found that the current sugar market reform including the restructuring process until the end of 2007 is sufficient to allow the EU to comply with its WTO commitments only very narrowly. EU sugar supply is simulated to decrease from roughly 19 million tons in the base period to 15.5 million tons by 2015 and the EU price remains at a level of about 450 ‚̯t and thus significantly above the reference price. In case of full liberalization production in the EU is projected to decrease to 7.5 million tonnes by 2015.
    Keywords: Sugar, Common Agricultural Policy, Sugar Market Reform, Partial Equilibrium Modelling, Everything But Arms, Agricultural and Food Policy, Crop Production/Industries, International Relations/Trade,
    Date: 2008
  7. By: Gutierrez, L.; Brasili, C.; Fanfani, R.
    Abstract: In this paper we analyze the behavior of relative food prices for a set of 24 European countries observed during the period 1996.1 - 2007.7. Using new methods for analyzing nonstationary panels, we are able to show that relative food prices have a common component which accounts for a large share of their variance. We show that this component has had a greater effects on the group of countries that adopt the Euro. We also find that countries in the Euro area are more market integrated, i.e. food prices tend to converge, than countries that have not adopted the Euro. Finally, we report that the half-live of a shock to relative food prices varies depending on the product, and that the adjustment is generally faster, on average about 10 months, than those usually reported in literature.
    Keywords: Food relative prices, Non stationarity, Common factors, Demand and Price Analysis,
    Date: 2008
  8. By: Luca De Benedictis (Università di Macerata); Lucia Tajoli (Politecnico di Milano)
    Abstract: <div><div>In this paper we look at the role of export composition in the growth process, considering how increased similarity in trade structure among countries can induce catching-up in income levels. We apply our analysis to the Central and Eastern European Countries (CEECs) using the EU as a benchmark. We explicitly consider the sectoral export patterns of the CEECs by comparing them to those of the current members of the EU, focusing on countries' specialization as suppliers for the EU market.</div><div>Our main result is that similarity in export composition has a positive, significant and nonlinear impact on catching-up, and seems to be driven by the growth of the main export market more than by other factors. Results are robust to controlling for openness and country-size and for investment, schooling, and the quality of institutions.</div></div>
    Keywords: EU enlargement,CEECs,,growth,,export composition,
    JEL: O1 O11
    Date: 2005–10
  9. By: von Ledebur, Oliver; Salamon, Petra; Zimmermann, Andrei; van Leeuwen, Myrna; Tabeau, Andrej; Chantreuil, Frederic
    Abstract: Against the background of increasing concerns regarding the energy supply security as well as environmental concern the interest for renewable energy sources has increased in recent years. The biofuel sector, backed by public policies, experienced a strong increase in and outside Europe. A methodology that allows for the estimation of the impacts of the fulfilment of the proposed biofuel targets in the EU member states is proposed and implemented in the AGMEMOD model for France and Germany. The so called normative approach, based on the use of a logistic function as biofuel demand function allows to perform simulations to assess the impact of the biofuel demand expansion on agricultural markets. The implemented approach and the simulation results indicate that crops production would adjust to the modified demand situation and depending on the proposed scenario the domestic supply would not be enough for the achievement of the biofuel targets in France and Germany.
    Keywords: biofuel targets, biodiesel, ethanol, modelling, Crop Production/Industries, Public Economics, Resource /Energy Economics and Policy,
    Date: 2008
  10. By: Becker, T.; Staus, A.
    Abstract: The protection of geographical indications, organic certification and food quality assurance schemes are the cornerstones of European food quality policy. In this paper the importance of these voluntary quality policy schemes in the different Member States of the European Union is investigated. Member States may be grouped into four cluster according to the food quality orientation.
    Keywords: food quality policy, protected geographical indications, organic certification, quality assurance schemes, Europe, cluster, PDO, PGI, TSG, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety,
    Date: 2008
  11. By: Frank Barry and Rosemary Healy-Rae
    Abstract: Corporation tax rates significantly influence the location of foreign direct investment (FDI) as well as company decisions on corporate borrowing, transfer pricing, dividend and royalty payments, and research and development. While direct taxation remains within the competence of individual EU member states, the European Court of Justice (ECJ) has faced an increasing number of corporation-tax-related cases over recent years and its judgements have significantly redrawn the European tax landscape. The present paper reviews and synthesises these ECJ decisions and analyses their implications for the FDI decisions of Multinational Corporations.
    Date: 2008–11–14
  12. By: Bezlepkina, I.V.; Jongeneel, R.; Brouwer, F.; Dillen, K.; Meister, A.; Winsten, J.; De Roest, K.; Demont, M.
    Abstract: The introduction of cross-compliance mechanism in the European Union with its 2003 CAPreform might affect the costs of production and thus competitiveness of the EU. Little evidence is available to asses the costs of compliance with regulations and it implication for trade. In this study a farm level competitiveness analysis of the impacts of the Nitrate Directive and the Identification & registration Directive focuses on the dairy sector in Germany, France, Italy, Netherlands and UK (within EU), and the US and New Zealand (outside EU). The findings from this study are integrated into a trade analysis which assesses the impact of compliance costs on competitiveness of the various trading nations in global trade. Representative farm studies were used as a basis for the cost increase calculations. Best-estimates of compliance are used from the existing literature and expert judgements. The negative impact of these measures (for nitrates, and animal identification and registration) on EU imports and exports are less than 3 percent. If a smaller increase in compliance takes place, these already relatively small trade impacts will be further diminished. When the standards for nitrate pollution taken by the US and New Zealand are taken into account along with full compliance assumption in all countries analysed, this would only slightly improve the EU exports. The trade impacts obtained when no changes are assumed to happen in key competitor countries can thus be argued as providing the upper bound of the likely trade impacts.
    Keywords: Compliance, dairy sector, GTAP, Livestock Production/Industries,
    Date: 2008
  13. By: Jansson, T.; Bakker, M.M.; Le Mouel, P.; Schirmann-Duclos, D.; Verhoog, D.; Verkerk, P.J.
    Abstract: In this paper we investigate the impacts of abolishing the Common Agricultural Policy (CAP) for the post-2013 European Union (EU) financial perspective and the impacts of re-investing the released funds on research and development (R&D). We apply a linked system of models to analyze the impacts for the EU member states. The linked system consists of five land-use sector models (agriculture, forestry, urban area, tourism and transport infrastructure), which are connected to a macro-econometric model. Additionally, a land cover model is used to disaggregate land use countries to a 1 km² grid. Three scenarios are analysed. In the €ܢaseline€ݠcurrently decided policies are assumed to be continued until 2025. In the €ܴax rebate€ݠscenario agricultural support (first pillar) is removed, and the member states€٠contributions to EU lowered. In the €ܒ&D investments€ݠscenario agricultural support is also removed, and the released funds are used to increase general R&D efforts in the EU. We find that in both liberalization scenarios, agricultural producer prices drop compared to the baseline. Agricultural production drops too, but less so in the €ܒ&D investment€ݠscenario due to productivity gains resulting from the increased R&D spending. In some countries, the productivity gains totally offset the negative impact of liberalisation on agricultural production. Smaller agricultural production implies less agricultural land use, and the more so in the €ܒ&D Investment€ݠscenario where productivity increases. The fall in agricultural production and prices negatively affects economic activity and households€٠purchasing power, but the reduced direct taxation compensates this effect and results in a GDP gain of 0.53% and 0.8 million additional jobs. In €ܒ&D investment€ݠGDP gain reaches 2.57% and yields 2.95 million additional jobs in EU in 2025. The GDP, consumption and employment gains in the €ܒ&D Investment€ݠscenario widely exceed the losses in the agriculture sectors. The analysis indicates that if no external effects of agriculture are considered, then the CAP is an inefficient use of tax money, and that a considerable contribution to reaching the goals of the Lisbon agenda would be achieved if the same amount of money was instead invested in R&D.
    Keywords: CAP reform, economical growth, land use, Agricultural and Food Policy, Land Economics/Use,
    Date: 2008
  14. By: Davidova, Sophia
    Abstract: The 2003 reform represents a significant shift in the EU policy, particularly in its movement to decoupled support. The potential impact of the reform depends on a range of factors including the modalities of its implementation and the structure of farming sectors in different countries. The then acceding countries had the flexibility to choose to implement the Single Payment Scheme (SPS) or to opt for the simplified Single Area Payment Scheme (SAPS). This paper attempts to provide a comparative overview of the level and distributional aspects of direct payments across seven New Member States (NMS) covering different sub-regions, the Baltics, Central and Eastern Europe, and the two most recent Member States from the Balkans €ӠBulgaria and Romania. Although the choice of 10 out of 12 NMS was similar €Ӡto implement SAPS €Ӡthe preaccession policies, the structure of agricultural output and the distribution of farm sizes have created substantial differences in the distribution of support and the choices between decoupled and coupled Complementary National Direct Payments (CNDP) or €شop-ups€ٮ As expected, due to the phasing-in process there has been a tendency of increased payments per hectare over time; however this increase has not been uniformly manifested. The differences in the output structure and labour intensity, as well as the large differences in farm structures and farm size distribution have brought about substantial differences in amounts of direct payments per beneficiary and AWU. One of the countries with the most concentrated land use in large farms, some of them corporate farms (companies or co-operatives), are the Czech Republic and Slovakia. Hungary and Bulgaria occupy the middle ground, whilst the Baltic States, Poland and Romania are characterised by small size farms almost across the board. This variety across the NMS has substantial implications for several aspects of SAPS implementation and its beneficiaries, including the amount of direct payments per beneficiary, the average size of beneficiary and the share of holdings benefitting from the scheme. The share of beneficiaries varies from a small segment of the holdings covered by the Farm Structure Survey (FSS), as for example in Bulgaria and Slovakia, to covering almost all holdings included in FSS (Lithuania). One of the positive signals is that in some NMS the concentration of SAP on a small segment has been decreasing (although slowly) in parallel with the increasing farmers and administration experiences. All these structural and distributional differences mean that setting payments limitations or including (eventually) the NMS in a system of progressive modulation may have widely different effects on different NMS and thus may generate substantially different political positions. Analytical survey results are presented concerning the change (or the lack of) of farmers strategic plans as a result of the implementation of SAPS in two of the above NMS with contrasting farm structures and payment distribution. The results indicate that as the implementation of SAPS means more predictable and increasing payments in comparison to the pre-accession policy the main change in the strategic farmers€٠plans is their increased willingness to stay longer in farming and increase the farm area operated. The expected response to 2003 CAP reform, namely lower incentives to produce and increased drive to diversification to non-farm activities was not detected in this early survey in NMS. However, it is difficult to disentangle the changes induced by SAPS from the general expectations due to accession to the EU.
    Keywords: Single Area Payment Scheme, new member states., Agricultural and Food Policy, Political Economy, Q1, Q18,
    Date: 2008–11–14
  15. By: Morales, C; Garrido, A.; Palinkas, P.; Szekely, C.
    Abstract: This paper explores and analyzes farmers€٠ risk perceptions, risk management instruments€٠demand and usage in five Member States (Hungary, Spain, the Netherlands, Germany and Poland). A survey completed by 1047 representative farmers of these EU Member Status collected information that allowed us to set apart two focus areas: the first looks at the declared importance of several sources of farms€٠risk and income instability, and at the actual means that farmers pursue to manage and face them. The second area focuses on the demand for risk management instruments. The paper€ٳ objective is to determine the factors that explain farmers€٠responses in the first area, and based on those factors, analyse the demands for two instruments (insurance, and future & option markets). After carrying out basic descriptive statistic analyses, we perform factor analysis in order to establish the linkages between the perceptions and ranking of risks with the declared strategies to manage them. Logit models were fit to determine potential demand of insurance, and futures & options based on the three factors, and other variables like activity types and other controls, like nationality. Results from the factor analysis show that the perception of risk and actual use of risk management are very diverse. Logit models show that insurance is clearly an alternative instrument to diversification, but its demand is poorly explained by the other factors. Furthermore the demand for the use of futures and options is explained by the three factors, with the volatility factor, positively linked; market access /contractual risks; and diversification, negatively linked. In conclusion, policy makers should proceed with caution selecting the most adequate risk management instruments for farmers. It appears that the expected demand of risk management tools does not fit perfectly with the stated perception of risks.
    Keywords: risk, risk management, farmer€ٳ perception., Risk and Uncertainty,
    Date: 2008
  16. By: Iuliana Matei (Centre d'Economie de la Sorbonne)
    Abstract: This article studies the features of co-movements of prices and production between six CEECs recently joined the EU and the euro zone. More precisely, based partially on the methodology suggested by Alesina, Barro and Tenreyro [2002], we evaluate the size and the persistence of prices and outputs shocks between each CEECs and euro zone. Results will contribute to the debate around the participation of the new members to the EMU.
    Keywords: European monetary integration, co-movements, AR models, CEECs.
    JEL: C22 E30 F33 F42 F47
    Date: 2008–10
  17. By: Dasa, Bartosova; Lubica, Bartova; Jarko, Fidrmuc
    Abstract: In the paper dynamic gravity models are estimated for the agricultural trade of six new EU Member States (the Czech Republic, Latvia, Lithuania, Romania, Slovakia, and Slovenia) with selected countries and trade groupings between 1996 and 2005. In general, we find low income elasticities and high price elasticities of import demand for agricultural commodities. The lagged values for trade were highly significant. The accession to the EU increased the new Member States€٠exports, but had less impact on their imports. The new Member States have gained significantly from liberalized access to the EU agri-food market.
    Keywords: Agricultural trade, EU enlargement, dynamic panel data models, International Relations/Trade,
    Date: 2008
  18. By: Latruffe, L.; Bakucs, L.; Bojnec, S.; Ferto, I.; Fogarasi, J.; Gavrilescu, C.; Jelinek, L.; Luca, L.; Medonos, T.; Toma, C.
    Abstract: This paper presents some results of a twoyear (2006-2007) research project supported by the French Ministry of Research€ٳ funding program ECONET. One of the project€ٳ objectives was to investigate the determinants of farm technical efficiency in New Member States before and after accession to the European Union, and in particular the role of public subsidies on this performance variable. Four countries were considered: Hungary, the Czech Republic and Slovenia, who acceded to the EU in 2004, and Romania, whose accession was in 2007. The study found that subsidies had a negative impact on farm technical efficiency in Hungary over the period 2001-2005, in the Czech dairy corporate sector over the period 2000-2004, in Slovenia over the period 1994-2003, and in the Romanian crop sector in 2005.
    Keywords: technical efficiency, farms, subsidies, Hungary, Czech Republic, Slovenia, Romania, Farm Management,
    Date: 2008

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