nep-eec New Economics Papers
on European Economics
Issue of 2009‒01‒31
thirty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The Co-integration of European Stock Markets after the Launch of the Euro By Jose Soares da Fonseca
  2. Are sectoral stock prices useful for predicting euro area GDP? By Andersson, Magnus; D'Agostino, Antonello
  3. A European Mandate for Financial Sector Supervisors in the EU By Daniel C. L. Hardy
  4. Reflections on Americans' Views of the Euro Ex Ante By Martin S. Feldstein
  5. Business cycle volatility and inventories behavior:new evidence for the Euro Area By Tatiana Cesaroni; Louis Maccini; Marco Malgarini
  6. Regional Financial Interlinkages and Financial Contagion Within Europe By Zsofia Arvai; Karl Driessen; Inci Otker-Robe
  7. Economic Policy: protectionism as an elite strategy By Le, Vo Phuong Mai; Minford, Patrick; Nowell, Eric
  8. The European Microsoft case at the crossroads of competition policy and innovation By Larouche, P.
  9. Explaining How Delayed Motherhood Affects Fertility Dynamics in Europe By Bratti, Massimiliano; Tatsiramos, Konstantinos
  10. Bank Competition Efficiency in Europe: A Frontier Approach By Wilko Bolt; David Humphrey
  11. Why the Euro Will Rival the Dollar By Menzie Chinn; Jeffrey Frankel
  12. Full Employment as a Possible Objective for EU Policy II. Review of Some Empirical aspects By Massimo Cingolani
  13. Is Corporate R&D Investment in High-Tech Sectors More Effective? Some Guidelines for European Research Policy By Ortega-Argilés, Raquel; Piva, Mariacristina; Potters, Lesley; Vivarelli, Marco
  14. Does Employment Protection Legislation Affect Firm Investment? The European Case By Giorgio Calcagnini; Germana Giombini
  15. Firm Entry Dynamics and Taxation of Corporate Profits: Evidence from Europe By Da Rin, M.; Di Giacomo, M.; Sembenelli, A.
  16. Impact of Energy Markets on the EU Agricultural Sector, The By Simla Tokgoz
  17. How Far From the Euro Area? Measuring Convergence of Inflation Rates in Eastern Europe By Bettina Becker; Stephen G. Hall
  18. Migration in an Enlarged EU: A Challenging Solution? By Kahanec, Martin; Zimmermann, Klaus F.
  19. Catching-up and inflation in transition economies: the Balassa-Samuelson effect revisited By Dubravko Mihaljek; Marc Klau
  20. Measuring Convergence of the New Member Countries’ Exchange Rates to the Euro By Bettina Becker; Stephen G. Hall
  21. Migration and Trade: Theory with an Application to the Eastern-Western European Integration By Susana Iranzo; Giovanni Peri
  22. Tax Competition in an Expanding European Union By Ronald B. Davies and Johannes Voget
  23. Re-Evaluating Swedish Membership in EMU: Evidence from an Estimated Model By Söderström, Ulf
  24. Recent French Export Performance: Is There a Competitiveness Problem? By Alain N. Kabundi; Francisco Nadal-De Simone
  25. The Topology of Danish Interbank Money Flows By Kirsten Bonde Rørdam; Morten Linnemann Bech
  26. Vouchers and Caseworkers in Public Training Programs: Evidence from the Hartz Reform in Germany By Rinne, Ulf; Uhlendorff, Arne; Zhao, Zhong
  27. Complements or Substitutes? Immigrant and Native Task Specialization in Spain By Amuedo-Dorantes; Sara de la Rica
  28. Upgrading the Low Skilled: Is Public Provision of Formal Education a Sensible Policy? By Stenberg, Anders
  29. Product innovation and renewal: foreign firms and clusters in Belgium By Filip De Beule; Ilke Van Beveren
  30. The Financial and Operating Performance of Privatized Firms in Sweden By Tatahi, Motasam; Heshmati, Almas

  1. By: Jose Soares da Fonseca (University of Coimbra, Portugal)
    Abstract: This article studies the international integration of the national stock markets of sixteen European countries. The international financial market is represented by two indices: a European index and a World index. The methodology of co-integration, used in this article, is the proper econometrical solution for the treatment of non-stationary series as those used in the present research. Complementarily, co-integration offers the possibility of distinguishing the long-term and the short-term interdependence, which very important when the variables are financial market indices. The empirical tests in this research have shown that both European and non European international factors are necessary to explain the international integration of the national stock markets under analysis.
    Keywords: Co-integration, Stock markets, Euro
    JEL: F36 F37 G15
    Date: 2008–06
  2. By: Andersson, Magnus (European Central Bank); D'Agostino, Antonello (Central Bank and Financial Services Authority of Ireland)
    Abstract: This paper evaluates how well sectoral stock prices forecast future economic activity compared to traditional predictors such as the term spread, dividend yield, exchange rates and money growth. The study is applied to euro area financial asset prices and real economic growth, covering the period 1973 to 2006. The paper finds that the term spread is the best predictor of future growth in the period leading up to the introduction of Monetary Union. After 1999, however, sectoral stock prices in general provide more accurate forecasts than traditional asset price measures across all forecast horizons.
    Date: 2008–04
  3. By: Daniel C. L. Hardy
    Abstract: The EU is deliberating the introduction of an explicit "European mandate" for financial sector supervisors to supplement national mandates. Suggestions are made on (i) the formulation of a European mandate; (ii) the policy areas to which it should apply; (iii) which institutions should be given a European mandate; (iv) the legal basis for the mandate; (v) how to implement the mandate in practice; and (vi) how to achieve accountability for fulfilling a European mandate. Decisions on these issues are needed if the introduction of a European mandate is to have a substantive positive effect.
    Date: 2009–01–15
  4. By: Martin S. Feldstein
    Abstract: This paper was prepared for a session of the 2009 American Economic Association meeting devoted to examining the views of American economists about the euro and the European Economic and Monetary Union on the tenth anniversary of the euro. I had written an article in 1992 in the Economist and subsequent articles in the Journal of Economic Perspecties and in Foreign Affairs. I begin by reviewing the arguments that I offered at that time about the claimed advantages of a single currency and about what I regarded as the disadvantages. I then discuss my claims that the primary motivation for the creation of the euro was political, not economic and that the creation of the euro could lead to increased conflict within Europe and with the United States. I conclude with a discussion of the implications for the EMU of the current recession and the likely future economic conditions in Europe.
    JEL: F02 F4 F5 F51
    Date: 2009–01
  5. By: Tatiana Cesaroni (MEF-Treasury Ministry of Economy); Louis Maccini (John Hopkins University); Marco Malgarini (ISAE - Institute for Studies and Economic Analyses)
    Abstract: In recent years a number of studies have investigated stylised facts concerning the most important US macroeconomic time series(Stock and Watson, 2002; McConnell and Perez-Quiros, 2000; Blanchard and Simon, 2001; Arias, Hansen, and Ohanian, 2006); One of the main results of the analysis concerns a marked volatility reduction emerging from the data since the early eighties. In this respect, the aim of this paper is twofold. Firstly, it analyzes the Euro Area business cycle stylised facts in order to gain better understanding of the European economy as compared with that of the US. Secondly, it explores the technological innovation hypothesis as an explanation of the ‘Great Moderation’, focusing on the advances in inventory management techniques due to computerisation.
    Keywords: Business cycle stylized facts, European survey data, Inventory behaviour.
    JEL: C32 E32
    Date: 2009–01
  6. By: Zsofia Arvai; Karl Driessen; Inci Otker-Robe
    Abstract: This paper focuses on financial interlinkages within Europe and potential contagion channeled through these interlinkages. It discusses the increased role of external financing as a source of funding for credit growth; analyzes potential channels of contagion through financial linkages; and assesses the magnitude of cross-border exposures between emerging and western European countries. Based on the stylized facts on these exposures, the paper provides simple indices of exposure to regional contagion that could help identify the likely pressure points and capture potential spillover effects and propagation channels of a regional shock originating from a given country.
    Date: 2009–01–21
  7. By: Le, Vo Phuong Mai (Cardiff Business School); Minford, Patrick (Cardiff Business School); Nowell, Eric
    Abstract: The EU has pursued protectionist policies not merely in food but also in manufacturing at the customs union level. In services it has not dismantled much of the existing national protectionism. The economic costs are calculated here at some 3% of GDP for the UK and some 4% for the rest of the EU --- or much larger under liberal planning assumptions. Added to its social interventionism, these costs suggest that the EU has put political integration before economic efficiency. This policymaking pattern suggests that European elites believe their position would be threatened by the domestic effects of world competition.
    Keywords: protectionism; manufactures; anti-dumping; tariff equivalent; customs union; competition
    JEL: F13 F14
    Date: 2009–01
  8. By: Larouche, P. (Tilburg University, Tilburg Law and Economics Center)
    Date: 2008
  9. By: Bratti, Massimiliano (University of Milan); Tatsiramos, Konstantinos (IZA)
    Abstract: This paper analyzes the effect of delayed motherhood on fertility dynamics for women living in several European countries, which differ in terms of their institutional environments. We show that the effect of delaying the first child on the transition to the second birth differs both among working and non-working women and across countries. For non-working women delayed motherhood leads to a postponement effect which is higher in countries where religion and social norms determine a relative larger stigma effect for giving birth late. For working women, delaying the first birth raises the likelihood of progressing to the second parity due to an income effect, which is larger in countries with high childcare provision and part-time employment opportunities. We show that the overall effect of delayed motherhood depends on these two opposite forces, which are determined by the institutional environment.
    Keywords: age, childbirth, duration, ECHP, fertility, postponement
    JEL: C41 J13
    Date: 2008–12
  10. By: Wilko Bolt; David Humphrey
    Abstract: There are numerous ways to indicate the degree of banking competition across countries. Antitrust authorities rely on the structure-conduct-performance paradigm while academics prefer price mark-ups (Lerner index) or correlations of input costs with output prices (H-statistic). These measures are not always strongly correlated when contrasted across countries or positively correlated within countries over time. Frontier efficiency analysis is used to devise an alternative indicator of competition and rank European countries by their dispersion from a \competition frontier". The frontier is determined by how well payment and other costs explain variations in loan-deposit rate spread and non-interestactivity revenues.
    Keywords: Banking competition; frontier analysis; European banks
    JEL: C31 F21 F23 F43 O47
    Date: 2009–01
  11. By: Menzie Chinn (University of Wisconsin); Jeffrey Frankel (Harvard University)
    Abstract: The euro has arisen as a credible eventual competitor to the dollar as leading international currency, much as the dollar rose to challenge the pound 70 years ago. This paper uses econometrically-estimated determinants of the shares of major currencies in the reserve holdings of the world’s central banks. Significant factors include: size of the home country, rate of return, and liquidity in the relevant home financial center (as measured by the turnover in its foreign exchange market). There is a tipping phenomenon, but changes are felt only with a long lag (we estimate a weight on the preceding year’s currency share around .9). The equation correctly predicts out-of-sample a (small) narrowing in the gap between the dollar and euro over the period 1999-2007. This paper updates calculations regarding possible scenarios for the future. We exclude the scenario where the United Kingdom joins euroland. But we do take into account of the fact that London has nonetheless become the de facto financial center of the euro, more so than Frankfurt. We also assume that the dollar continues in the future to depreciate at the trend rate that it has shown on average over the last 20 years. The conclusion is that the euro may surpass the dollar as leading international reserve currency as early as 2015.
    Keywords: Foreign exchange market, Euro, Dollar, Reserve currency
    JEL: E42 F0 F02 F31
    Date: 2008–07
  12. By: Massimo Cingolani (European Investment Bank)
    Abstract: A contribution appeared in the previous issue of Panoeconomicus reviewed the theoretical arguments brought by Alain Parguez and Jean Gabriel Bliek in support of their idea of assigning a full employment objective to European economic policies and their coordination (Bliek and Parguez (2007) and Parguez (2007b)). Without pretending at exhaustiveness, this contribution reviews and partly extends the empirical evidence they presented in support of their argument with reference to selected macroeconomic developments in several countries and different historical periods, in particular for the US, Canada, Japan and the EU. It confirms the descriptive power of the circuit and its relevance for the discussion of alternative economic policies, in particular in the field of employment. Together with the previous article, it shows that the circuit can be used to update economic policy thinking, nourishing also the necessary democratic debate amongst policy alternatives.
    Keywords: Unemployment, Capacity utilisation, Circuit, Long-term interest rates, Disequilibrium
    JEL: D5 E12 H5 H6 E4
    Date: 2008–01
  13. By: Ortega-Argilés, Raquel (European Commission); Piva, Mariacristina (Università Cattolica del Sacro Cuore); Potters, Lesley (Utrecht School of Economics); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    Abstract: This paper discusses the link between R&D and productivity across the European industrial and service sectors. The empirical analysis is based on both the European sectoral OECD data and on a unique micro longitudinal database consisting of 532 top European R&D investors. The main conclusions are as follows. First, the R&D stock has a significant positive impact on labour productivity; this general result is largely consistent with previous literature in terms of the sign, the significance and the magnitude of the estimated coefficients. More interestingly, both at sectoral and firm levels the R&D coefficient increases monotonically (both in significance and magnitude) when we move from the low-tech to the medium and high-tech sectors. This outcome means that corporate R&D investment is more effective in the high-tech sectors and this may need to be taken into account when designing policy instruments (subsidies, fiscal incentives, etc.) in support of private R&D. However, R&D investment is not the sole source of productivity gains; technological change embodied in gross investment is of comparable importance on aggregate and is the main determinant of productivity increase in the low-tech sectors. Hence, an economic policy aiming to increase productivity in the low-tech sectors should support overall capital formation.
    Keywords: R&D, productivity, high-tech sectors, innovation, industrial policy
    JEL: O33
    Date: 2009–01
  14. By: Giorgio Calcagnini (Dipartimento di Economia e Metodi Quantitativi, Università di Urbino); Germana Giombini (Dipartimento di Economia e Metodi Quantitativi, Università di Urbino (Italy))
    Abstract: This paper aims at analyzing the impact of Employment Protection Legislation (EPL) on rms' investment policies in the presence of financial imperfections. Our results show that investment is positively correlated to measures of internal funds available to firms and negatively to the level of national labour market regulation. Moreover, the latter is stronger wherever financial market imperfections are larger: firms with better access to financial markets are in a position to determine their optimal investment policy, even in the presence of stringent Employment Protection Laws, than those facing financial constraints. Our results support the effort put forward by European institutions in recent years to reform both markets.
    Keywords: Employment Protection Legislation, Financial Constraints, Investments.
    JEL: J30 D92 C23
    Date: 2009
  15. By: Da Rin, M.; Di Giacomo, M.; Sembenelli, A. (Tilburg University, Center for Economic Research)
    Abstract: Can tax policy foster the creation of new companies? To answer this question, we assemble a novel country-industry level panel database with entry data of European companies between 1997 and 2004. We compute effective tax rates and explore the effect of corporate taxation policy on entry rates at country-industry level. Drawing on the recent political economy literature, we also account for the endogeneity of taxation. We find a significant negative effect of corporate income taxation on entry rates. The effect is concave and suggests that tax reductions affect entry rates only below a certain threshold tax level. We also find that a reduction in corporate tax rates is more effective in countries with better institutional infrastructure. Our results are robust to alternative measures of effective taxation and to the use of alternative and additional explanatory variables.
    Keywords: Corporate Taxation;Political Economy;Firm Entry;Entry Regulation;Panel Data.
    JEL: C23 H32 L51 M13
    Date: 2008
  16. By: Simla Tokgoz (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: The objective of this study is to analyze the impact of crude oil prices on the EU agricultural sector in an era when the biofuels sector is expanding because of policy initiatives and the desire to find alternative fuel sources. To this end, first a baseline is set up for the EU ethanol, grain, and dried distillers grains markets. In the next step, two different scenarios are run. The first scenario incorporates a 10-Euros-per-barrel increase in the EU crude oil price with the ethanol import tariffs in place. The second scenario incorporates the same shock with the ethanol import tariffs removed. In the first scenario, higher crude oil prices increase ethanol consumption, production, and therefore grain prices. In the second scenario, the impact of trade liberalisation is larger than the impact of the higher crude oil price. So, grain prices decline in this scenario despite an expansion in ethanol consumption. If there were a high enough crude oil price shock, which would affect the EU ethanol market more than trade liberalisation, the net impact on grain, feed, and food prices from the crude oil price shock would be mitigated by the increased trade from trade liberalisation. The study shows that the impact of energy prices on the EU agricultural sector is increasing with the emergence of the biofuels sector. It also illustrates the importance of trade policy in responding to higher crude oil and grain prices.
    Keywords: bioeconomic models, energy, trade analysis and policy.
    Date: 2009–01
  17. By: Bettina Becker; Stephen G. Hall
    Abstract: We present a common factor framework of convergence which we implement using principal components analysis. We apply this technique to a dataset of monthly inflation rates of EMU and the Eastern European New Member Countries (NMC) over 1996-2007. In the earlier years, the NMC rates moved independently from an average of the three best performing countries over the past twelve months, while they moved somewhat closer in line with them in the later years. Looking at the sample of the EMU and NMC countries as a whole, there is evidence of a formation of convergence clubs across the two groups.
    Keywords: Convergence; inflation rates; European Monetary Union; principal components analysis
    JEL: C22 F31
    Date: 2009–01
  18. By: Kahanec, Martin (IZA); Zimmermann, Klaus F. (IZA, DIW Berlin and Bonn University)
    Abstract: The 2004 and 2007 enlargements of the European Union were unprecedented in a number of economic and policy aspects. This essay provides a broad and in-depth account of the effects of the post-enlargement migration flows on the receiving as well as sending countries in three broader areas: labour markets, welfare systems, and growth and competitiveness. Our analysis of the available literature and empirical evidence shows that (i) EU enlargement had a significant impact on migration flows from new to old member states, (ii) restrictions applied in some of the countries did not stop migrants from coming but changed the composition of the immigrants, (iii) any negative effects in the labour market on wages or employment are hard to detect, (iv) post-enlargement migration contributes to growth prospects of the EU, (v) these immigrants are strongly attached to the labour market, and (vi) they are quite unlikely to be among welfare recipients. These findings point out the difficulties that restrictions on the free movement of workers bring about.
    Keywords: migration, migration effects, EU Eastern enlargement, free movement of workers
    JEL: F22 J15 J61
    Date: 2008–12
  19. By: Dubravko Mihaljek; Marc Klau
    Abstract: This paper estimates the Balassa-Samuelson effects for 11 countries in central and eastern Europe on a disaggregated set of quarterly data covering the period from the mid-1990s to the first quarter of 2008. The Balassa-Samuelson effects are clearly present and explain around 24% of inflation differentials vis-à-vis the euro area (about 1.2 percentage points on average); and around 84% of domestic relative price differentials between non-tradables and tradables; or about 16% of total domestic inflation (about 1.1 percentage points on average). The paper presents mixed evidence on whether the Balassa-Samuelson effects have declined since 2001 compared with the second half of the 1990s.
    Keywords: Balassa-Samuelson effect, productivity, inflation, transition, convergence, European monetary union, Maastricht criteria
    Date: 2008–12
  20. By: Bettina Becker; Stephen G. Hall
    Abstract: We propose a common factor approach to analyse convergence, which we implement using principal components analysis. This technique has not been used to analyse convergence of time series but is shown to provide a useful new tool. We show how it is in many ways a more natural way of approaching the convergence debate. We apply these ideas to a dataset of bilateral Euro and US-Dollar exchange rates of the new member countries of the European Union. Our empirical application gives sensible results about the convergence process of the new member countries’ exchange rates to the Euro.
    Keywords: Convergence; exchange rates; transition economies; principal components analysis
    JEL: F31 C22
    Date: 2009–01
  21. By: Susana Iranzo (Universitat Rovira Virgili); Giovanni Peri (University of California, Davis and NBER)
    Abstract: The remarkable increase in trade flows and in migratory flows of highly educated people are two important features of globalization of the last decades. This paper extends a two-country model of inter- and intra-industry trade to a rich environment featuring technological differences, skill differences and the possibility of international labor mobility. The model is used to explain the patterns of trade and migration as countries remove barriers to trade and to labor mobility. We calibrate the model to match the features of the Western and Eastern European members of the EU and analyze first the effects of the trade liberalization which occurred between 1989 and 2004, and then the gains and losses from migration which would occur if barriers to labor mobility are reduced. The lower barriers to migration result in significant migration of skilled workers from Eastern European countries. Interestingly, this would not only benefit the migrants and most Western European workers but, via trade, it would also benefit the workers remaining in Eastern Europe.
    Date: 2009–01
  22. By: Ronald B. Davies and Johannes Voget
    Abstract: This paper empirically examines whether expansion of the EU has increased international tax competition. To do so, we use a simple model of tax competition to determine how a given country weights the taxes of others when choosing its own tax. This indicates that the market potential of a country (which includes both domestic consumption and exports) is the appropriate weight. This is an improvement on the adhoc and often endogenous weighting schemes used elsewhere. Unlike those studies, we find robust evidence for tax competition. In particular, our estimates suggest that EU membership affects responses with EU members responding more to the tax rates of other members. This lends credence to the above-noted concerns.
    Date: 2008–01–15
  23. By: Söderström, Ulf (Research Department, Central Bank of Sweden)
    Abstract: I revisit the potential costs and benefits for Sweden of joining the Economic and Monetary Union (EMU) of the European Union. I first show that the Swedish business cycle since the mid-1990s has been closely correlated with the Euro area economies, suggesting that common shocks have been an important driving force of business cycles in Europe. However, evidence from an estimated model of the Swedish economy instead suggests that country specific shocks have been important for fluctuations in the Swedish economy since 1993, implying that EMU membership could be costly. The model also indicates that the exchange rate has to a large extent acted to destabilize, rather than stabilize, the Swedish economy, pointing to the costs of independent monetary policy with a flexible exchange rate. Finally, counterfactual simulations of the model suggest that Swedish in inflation and GDP growth might have been slightly higher if Sweden had been a member of EMU since the launch in 1999, but also that GDP growth might have been more volatile. The evidence is therefore not conclusive about whether or not participation in the monetary union would be advantageous for Sweden.
    Keywords: Monetary union; Open economy; Optimum Currency Area; DSGE model.
    JEL: E42 E58 F41
    Date: 2008–12–01
  24. By: Alain N. Kabundi; Francisco Nadal-De Simone
    Abstract: Recently, the export performance of France relative to its own past and relative to a major trading partner, Germany, deteriorated. That deterioration seems related to the geographical destination and product composition of trend exports. Faced with an increase in unit labor costs or in its terms of trade, France adjusts relatively less via price and wage changes, and more via employment changes. Given that SMIC convergence resulted in a significant increase in unit labor costs, foreign sector difficulties might be structural. Trade flows relevance and euro area policy constraints highlight the importance of structural reforms that increase markets flexibility.
    Keywords: Export competitiveness , Performance indicators , Terms of trade , International trade , Exports , Trade models , Productivity , Euro Area ,
    Date: 2009–01–12
  25. By: Kirsten Bonde Rørdam (Department of Economics, University of Copenhagen); Morten Linnemann Bech (Federal Reserve Bank of New York)
    Abstract: This paper presents the first topological analysis of Danish money market flows. We analyze the structure of two networks with different types of transactions. The first network is the money market network, which is driven by banks' behaviour on the interbank market, the second is the network of customer driven transactions, which is driven by banks' customers' transactions demand. We show that the structure of these networks differ. This paper adds to the new and growing literature on network topological analysis of payment systems.
    Keywords: network; topology; payment system; money market
    Date: 2008–12
  26. By: Rinne, Ulf (IZA); Uhlendorff, Arne (IZA); Zhao, Zhong (Renmin University of China)
    Abstract: This paper studies the role of training vouchers and caseworkers in public training programs. Using a rich administrative data set, we apply matching and regression methods to measure the effect of the Hartz reform in Germany, which introduced training vouchers and imposed more selective criteria on participants. Besides estimating the overall reform effect, we isolate the effect induced by changes in the composition of program participants due to stricter selection by the caseworkers (selection effect) from the effect based on the introduction of vouchers (voucher effect). Analyzing the most important type of training in Germany, we find a slightly positive impact of the reform. Our decomposition results suggest that the selection effect is − if at all − slightly negative, and that the voucher effect increased both, the employment probability and earnings of the participants.
    Keywords: active labor market policy, program evaluation, matching, voucher, caseworker, training, Hartz reform
    JEL: J64 J68 H43
    Date: 2008–12
  27. By: Amuedo-Dorantes (San Diego State University, IZA); Sara de la Rica (Universidad del País Vasco, FEDEA, IZA)
    Abstract: Learning about the impact that immigration has on the labor market of the receiving nation is a topic of major concern, particularly in Spain, where immigration has more than doubled from 4 percent to roughly 10 percent of the population within a decade. Yet, very little is known about the impact that large immigrant inflows have had on the labor market outcomes of Spanish natives. Furthermore, most studies assume that natives and immigrants are perfect substitutes within skill groups –a questionable assumption given recent findings in the literature. In this paper, we first document that foreign-born workers are not perfect substitutes of similarly skilled native Spanish workers, which may help explain why immigration has not significantly lowered natives’ wages. Instead, immigration has affected the occupational distribution of natives. Specifically, owing to the comparative advantage of foreign-born workers in manual as opposed to interactive tasks, natives relocated to occupations with a lower content of manual tasks –such as technical and alike professional occupations, clerical support jobs, and sales and service occupations. Yet, possibly owing to the significant and simultaneous reduction in the manual to interactive task supply resulting from the increase in the share of native female workers, the increase in the relative supply of manual to interactive tasks from foreign-born workers does not appear to have significantly changed the overall manual to interactive task supply in the Spanish economy.
    Date: 2008–11
  28. By: Stenberg, Anders (Swedish Institute for Social Research, Stockholm University)
    Abstract: At various political levels, including the OECD and the EU, it is repeatedly emphasized that upgrading the low skilled is an important area for the economic and social development of modern societies. Employers are typically reluctant to train low skilled, who in their turn are unwilling to participate due to financial constraints or a perception of low quality and/or returns to training. If this is a market imperfection, a possible remedy is suggested by public provision of formal education where enrollees are eligible for financial support. However, the costs may be large and the economic returns to formal adult education (AE) for low skilled, a crucial measure to assess if expenses should be increased or decreased, is a virtually unexplored issue. This study uses Swedish register data 1990-2004 of low skilled siblings aged 24-43 in 1994 to estimate difference-indifference- in-differences models which include family fixed effects. It is found that a year of AE improves earnings by 4.4 per cent, but calculations indicate that the private returns alone only roughly cover the costs incurred by society, implying that social returns to AE are needed to justify the expenses.
    Keywords: Human capital; adult education; earnings
    JEL: H30 H52 I20 J24 O30
    Date: 2009–01–19
  29. By: Filip De Beule; Ilke Van Beveren
    Abstract: Using the cluster definitions of the European Cluster Observatory, this paper investigates the link between cluster membership and firm-level product innovation and renewal,using data from the Community Innovation Survey for Belgium. Clustered firms account for 71 percent of total product renewal generated in 2004 and for 53 percent of product innovators; compared to 29 and 47 percent for non-clustered firms, respectivily. Furthermore, cluster membership is shown to be conducive to firm-level product innovation and renewal once firm size, export intensity and reseach inputs are taken into account. Foreign firms are not more prone to carry out product innovation, except for subsidiaries in clusters.
    Keywords: Product Innovation, Clusters, Community Innovation Survey, Multinational Firms
    JEL: D21 F23 O31 O33
    Date: 2008
  30. By: Tatahi, Motasam (European Business School London); Heshmati, Almas (Seoul National University)
    Abstract: This paper examines the change in operating and financial performance of Swedish firms that were either partly or fully privatized during the period of 1989-2007. Two different methods are used to empirically investigate the performance of privatized firms. First, accounting data prior to and after the privatization are employed to measure the operating performance of privatized firms. We have found no significant difference in performances under state and private ownerships. Second, a return-based event study is found useful to measure the financial performance of privatized firms, since all the firms in the sample that were privatized have used an initial public offering (IPO). This approach allows comparison to the rest of the IPOs that were launched in the same period. It is found that the cumulative returns for the privatized firms are significantly different to private counterparts. Overall results, however, show that the privatization in Sweden was not as successful as it might have been expected and in comparison with those in other countries.
    Keywords: Sweden, efficiency, performance measure, privatization, ratio analysis, event-study, public and private relationship
    JEL: C12 D21 L25 L33
    Date: 2009–01

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