nep-eec New Economics Papers
on European Economics
Issue of 2009‒02‒14
25 papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Fiscal sustainability and policy implications for the euro area By Fabrizio Balassone; Jorge Cunha; Geert Langenus; Bernhard Manzke; Jeanne Pavot; Doris Prammer; Pietro Tommasino
  2. A New Metric for Banking Integration in Europe By Gropp, Reint Eberhard; Kashyap, Anil K.
  3. An Evaluation of the Tax-Transfer Treatment of Married Couples in European Countries By Immervoll, Herwig; Kleven, Henrik Jacobsen; Kreiner, Claus Thustrup; Verdelin, Nicolaj
  4. Financial Reforms and Capital Flows to Emerging Europe By Martin Schmitz
  5. Gender Pay Gap and Quantile Regression in European Families By Nicodemo, Catia
  6. Main Drivers of Income Inequality in Central European and Baltic Countries: Some Insights from Recent Household Survey Data By Zaidi, Salman
  7. Labour market institutions in Hungary with a focus on wage and employment flexibility By Hedvig Horváth; Zoltán Szalai
  8. The Italian public finances in the period 1998-2007: temporary factors, medium-term trends and discretionary measures By Maria Rosaria Marino; Sandro Momigliano; Pietro Rizza
  9. Which is the Right Dose of EU Cohesion Policy for Economic Growth? By Hagen, Tobias; Mohl, Philipp
  10. Alleviating Adverse Implications of EU Climate Policy on Competitiveness: The Case for Border Tax Adjustments or the Clean Development Mechanism? By Alexeeva-Talebi, Victoria; Anger, Niels; Löschel, Andreas
  11. Unemployment and Worker-Firm Matching Theory and Evidence from East and West Europe By Munich, Daniel; Svejnar, Jan
  12. The Economic Drivers of Human Trafficking: Micro-Evidence from Five Eastern European Countries By Toman Omar Mahmoud; Christoph Trebesch
  13. The process of convergence towards the euro for the Visegrad-4 countries By Giuliana Passamani
  14. Do Danes and Italians Rate Life Satisfaction in the Same Way? Using Vignettes to Correct for Individual-Specific Scale Biases By Viola Angelini; Danilo CAVAPOZZI; Luca CORAZZINI; Omar PACCAGNELLA
  15. How to interpret the CPIS data on the distribution of foreign portfolio assets in the presence of sizeable cross-border positions in mutual funds. Evidence for Italy and the main euro-area countries By Alberto Felettigh; Paola Monti
  16. Strategic Storage and Competition in European Gas Markets By Edmond Baranes; François Mirabel; Jean-Christophe Poudou
  17. The Immigrant Wage Gap in Germany By Aldashev, Alisher; Gernandt, Johannes; Thomsen, Stephan L.
  18. Bank internationalization and trade: What comes first? By Giovanni Ferri; Alberto Franco Pozzolo
  19. RELATIONSHIP LENDING - EMPIRICAL EVIDENCE FOR GERMANY By Memmel, Christoph; Schmieder, Christian; Stein, Ingrid
  20. Financial interlinkages and risk of contagion in the Finnish interbank market By Toivanen, Mervi
  21. An estimated DSGE model of the Hungarian economy By Zoltán M. Jakab; Balázs Világi
  22. Measurement and Identification of Asset-Poor Households: A Cross-National Comparison of Spain and the United Kingdom By Francisco Azpitarte
  23. The 1990’s financial crises in Nordic countries By Honkapohja, Seppo
  24. Cross-border purchases of health services : a case study on Austria and Hungary By Obermaier, Andreas J.
  25. The regulatory reforms in Italian local public services: an overview and some lessons for the future By Magda Bianco; Paolo Sestito

  1. By: Fabrizio Balassone (Banca d'Italia); Jorge Cunha (Banco de Portugal); Geert Langenus (National Bank of Belgium, Research Department); Bernhard Manzke (Deutsche Bundesbank); Jeanne Pavot (Banque de France); Doris Prammer (Oesterreichische Nationalbank; European Commission); Pietro Tommasino (Banca d'Italia)
    Abstract: In this paper we examine the sustainability of euro area public finances against the backdrop of population ageing. We critically assess the widely used projections of the Working Group on Ageing Populations (AWG) of the EU's Economic Policy Committee and argue that ageing costs may be higher than projected in the AWG reference scenario. Taking into account adjusted headline estimates for ageing costs, largely based upon the sensitivity analysis carried out by the AWG, we consider alternative indicators to quantify sustainability gaps for euro area countries. With respect to the policy implications, we assess the appropriateness of different budgetary strategies to restore fiscal sustainability taking into account intergenerational equity. Our stylised analysis based upon the lifetime contribution to the government's primary balance of different generations suggests that an important degree of pre-funding of the ageing costs is necessary to avoid shifting the burden of adjustment in a disproportionate way to future generations. For many euro area countries this implies that the medium-term targets defined in the context of the revised stability and growth pact would ideally need to be revised upwards to significant surpluses.
    Keywords: population ageing, fiscal sustainability, generational accounting, medium-term objectives for fiscal policy
    JEL: H55 H60
    Date: 2009–01
  2. By: Gropp, Reint Eberhard; Kashyap, Anil K.
    Abstract: Most observers have concluded that while money markets and government bond markets are rapidly integrating following the introduction of the common currency in the euro area, there is little evidence that a similar integration process is taking place for retail banking. Data on cross-border retail bank flows, cross-border bank mergers and the law of one price reveal no evidence of integration in retail banking. This paper shows that the previous tests of bank integration are weak in that they are not based on an equilibrium concept and are neither necessary nor sufficient statistics for bank integration. The paper proposes a new test of integration based on convergence in banks’ profitability. The new test emphasises the role of an active market for corporate control and of competition in banking integration. European listed banks profitability appears to converge to a common level. There is weak evidence that competition eliminates high profits for these banks, and underperforming banks tend to show improved profitability. Unlisted European banks differ markedly. Their profits show no tendency to revert to a common target rate of profitability. Overall, the banking market in Europe appears far from being integrated. In contrast, in the U.S. both listed and unlisted commercial banks profits converge to the same target, and high profit banks see their profits driven down quickly.
    Date: 2008
  3. By: Immervoll, Herwig (OECD); Kleven, Henrik Jacobsen (University of Copenhagen); Kreiner, Claus Thustrup (University of Copenhagen); Verdelin, Nicolaj (University of Copenhagen)
    Abstract: This paper presents an evaluation of the tax-transfer treatment of married couples in 15 EU countries using the EUROMOD microsimulation model. First, we show that many tax-transfer schemes in Europe feature negative jointness defined as a situation where the tax rate on one person depends negatively on the earnings of the spouse. This stands in contrast to the previous literature on this question, which has focused on a specific form of positive jointness. The presence of negative jointness is driven by family-based and means-tested transfer programs combined with tax systems that usually feature very little jointness. Second, we consider the labour supply distortion on secondary earners relative to primary earners implied by the current tax-transfer systems, and study the welfare effects of small reforms that change the relative taxation of spouses. By adopting a small-reform methodology, it is possible to set out a simple analysis based on more realistic labour supply models than those considered in the existing literature. We present microsimulations showing that simple revenue-neutral reforms that lower the tax burden on secondary earners are associated with substantial welfare gains in most countries. Finally, we consider the tax-transfer implications of marriage and estimate the so-called marriage penalty. For most countries, we find large marriage penalties at the bottom of the distribution driven primarily by features of the transfer system.
    Keywords: labour supply, redistribution, optimal tax, couples, marriage tax, joint taxation
    JEL: H20
    Date: 2009–01
  4. By: Martin Schmitz
    Abstract: Analysis of 21 emerging European economies reveals a substantial role for domestic financial reforms in attracting net capital flows. Controlling for standard determinants of capital flows, we find in particular banking sector reforms to be consistent with larger current account deficits and net financial inflows, whereas opposite or no effects are found for security market reforms as well as for indicators of financial depth. Additional net inflows are reaped by the EU accession countries. Banking reforms are found to have a significant impact on FDI and “other” investment net inflows; they have a significant effect on gross financial inflows, but not on outflows.
    Date: 2009–01–30
  5. By: Nicodemo, Catia (Universitat Autònoma de Barcelona)
    Abstract: In this paper we analyze the trend of the gender gap between wives and husbands for Mediterranean countries with a strong family tradition, using data from the European Household Panel (ECHP) of 2001 and the European Survey on Income and Living Conditions (EU-SILC) of 2006. In general, wives and husbands, when married, have the same characteristics but wives suffer from two types of discrimination with respect to husbands: a lower wage for the same work and a primary responsibility for children. This paper uses quantile regression and counterfactual decomposition methods to investigate whether a glass ceiling exists or if instead a sticky floor is more prevalent among European families over time (2001 and 2006). We correct for selectivity the unconditional wage distribution of married women and we show that the wage gap decomposition is different if we ignore self-selection. We find that the wage gap is positive in each country, and the greater part of it is composed of a discrimination effect, while the characteristics effect is small. In Mediterranean countries, wives suffer from the sticky floor effect, i.e. the gender gap is bigger at the bottom of distribution, while we can observe that the glass ceiling effect decreased in most countries in 2006.
    Keywords: gender pay gap, selection, quantile regression, counterfactual decomposition
    JEL: J16 J31 C2 C3
    Date: 2009–01
  6. By: Zaidi, Salman (The World Bank)
    Abstract: Present levels of income inequality in Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovakia, and Slovenia remain considerably higher than their pre-transition levels, although the relative pace of change over time has varied quite a bit across countries. Using data from the 2006 European Union Survey of Income and Living Conditions, this paper finds that prevailing levels of income inequality in these countries continue to be low by international standards, and that this is in large part due to the very high redistributive impact of direct taxes and public transfers. In addition to the instrumental role of tax and transfer policies in redistributing income, the paper highlights the important role played by differences in education levels and labor market participation rates in explaining observed inequalities across people and across different regions (although not in explaining observed differences across countries). The paper includes an analysis of key factors that help explain observed variation across countries in the level of public support for redistribution, including peoples' economic background and relative success in life, whether they perceive poverty to be associated with factors within or outside the control of those it afflicts (for example, laziness/lack of willpower vs. injustice in society).
    Keywords: accounting; Average income; average incomes; average share; calculations; capital investments; cash transfers; client country; consumer; consumer durable; Contribution; Cross-country comparisons
    Date: 2009–01–01
  7. By: Hedvig Horváth (Central European University); Zoltán Szalai (Magyar Nemzeti Bank)
    Abstract: It is widely believed today, that the operation of the labour markets is influenced by institutional factors, affecting macroeconomic adjustment in response to shocks. In this way, labour market institutions affect both cyclical and long-term growth and inflation performance of an economy. The aim of our paper is to review the operation of Hungarian labour market institutions from the point of view of labour market flexibility and find its place in international comparison in the light of existing stock of knowledge on the subject. We describe the institutional setup of the labour markets through seven dimensions (unemployment generosity, tax wedge, active labour market policies, employment protection legislation, product market regulation, union density and coverage and wage bargaining institutions) for which internationally comparable data are available. We conclude that the Hungarian labour market institutions are rather flexible in EU-comparison. However, tax wedge is high and the active labour market policies still perform poorly, both contributing to weak employment.
    Keywords: wage flexibility, unemployment, labour market institutions, product market regulation, policy complementarity.
    JEL: J31 J51 K20 L43
    Date: 2008
  8. By: Maria Rosaria Marino (Banca d'Italia); Sandro Momigliano (Banca d'Italia); Pietro Rizza (Banca d'Italia)
    Abstract: The paper examines the development of Italy’s public finances after the consolidation period 1992-97, which secured participation in the European Monetary Union from the outset. The “structural” developments in the main budgetary components are assessed, excluding the effects of the economic cycle and of temporary measures. The analysis shows a rapid deterioration in the years 1998-2003, whose roots can be traced back to the consolidation of the early 1990s, achieved primarily by means of tax increases and cuts in capital expenditure. Since 2004 there has been a structural improvement, initially modest but substantial in 2006 and 2007. Sustaining this adjustment and making further progress may again prove difficult, as the fiscal correction is similar in nature to the previous consolidation effort. Looking at the whole period 1998-2007, the deterioration of the public finances seems attributable to the difficulty to restrain the growth of current primary expenditure.
    Keywords: structural budget, business cycle, temporary measures, public finances
    JEL: H62 H20 H50 E69
    Date: 2008–07
  9. By: Hagen, Tobias; Mohl, Philipp
    Abstract: The current empirical literature on the impact of EU Cohesion Policy on the economic growth rates of the European regions mainly relies on functional form assumptions. However, it is ex ante not clear which functional form is appropriate with regard to the relationship between structural funds pay- ments and regional economic growth. In order to avoid such assumptions, this paper applies the method of generalized propensity score (GPS) to a sample of 122 NUTS-1 and NUTS-2 EU-15 regions for the time period 1995{2005, which leads to the estimation of a dose-response function, as proposed by Hirano and Imbens (2004). Our results indicate that structural funds payments have a positive, but not statistically significant, impact on the regions' average three-year growth rates. This implies that it does not matter which \dose" of structural funds payments a region receives.
    Keywords: EU structural funds, economic growth, continuous treatment, dose-response function
    JEL: C21 I38 R11
    Date: 2008
  10. By: Alexeeva-Talebi, Victoria; Anger, Niels; Löschel, Andreas
    Abstract: Ambitious unilateral EU environmental policy has raised concerns about adverse competitiveness implications for European energy-intensive and export-oriented sectors. We analyze the economic and environmental implications of two different measures to address these concerns in the EU Emission Trading Scheme (EU ETS): border tax adjustments (BTA) and the Clean Development Mechanism (CDM). Numerical simulations with a computable general equilibrium model of the global economy demonstrate that alternative BTA regimes are suitable to alleviate adverse competiveness implications of unilateral European climate policy on energy-intensive and export-oriented industries. The regulatory protection of these industries via subsidies for EU exporters and tariffs for non-EU importers goes, however, at the expense of sectors which are excluded from the EU ETS. We show that the choice of alternative benchmarks (i.e. carbon intensities) for the level of BTA substantially affects these competitiveness implications. The simulations further indicate that limited access to low-cost emission abatement via the CDM in the EU ETS alleviates adverse competitiveness impacts to a comparable extent as the most ambitious BTA scheme. Increasing “where-flexibility” of emission abatement thus represents an attractive market-based alternative to the application of border tax adjustments in unilateral climate policy.
    Keywords: Emissions Trading, EU ETS, Competitiveness, Border tax adjustments, Clean Development Mechanism, CGE model
    JEL: D58 F18 H23 Q48
    Date: 2008
  11. By: Munich, Daniel (University of Michigan,); Svejnar, Jan (University of Michigan,)
    Abstract: The paper tests three hypotheses about the causes of unemployment in the Central-East European transition economies and in a benchmark market economy (Western part of Germany). The first hypothesis (H1) is that unemployment is caused by inefficient matching. Hypothesis 2 (H2) is that unemployment is caused by low demand. Hypothesis 3 (H3) is that restructuring is at work. Our estimates suggest that the west and east German parts of Germany, Czech Republic and Slovakia are consistent with H2 and H3. Hungary provides limited support to all three hypotheses. Poland is consistent with H1. The economies in question hence contain one broad group of countries and one or two special cases. The group comprises the Czech Republic, Hungary, Slovak Republic and (possibly) East Germany. These countries resemble West Germany in that they display increasing returns to scale in matching and unemployment appears to be driven by restructuring and low demand. The East German case is complex because of its major active labor market policies and a negative trend in efficiency in matching. In some sense, East Germany resembles more Poland, which in addition to restructuring and low demand for labor appears to suffer from a structural mismatch reflected in relatively low returns to scale in matching. Finally, our data provide evidence that goes counter to one of the main predictions of the theories of transition, namely that the turnover (inflow) rate in the transition countries would rise dramatically at the start of the transition, be temporarily very high and gradually decline and approach the level observed in otherwise similar market economies such as West Germany.
    Keywords: access to information; Active Employment; Active Employment Policy; active labor; active labor market; active labor market policies; active labor market programs; Active Labour; Active Labour Market
    JEL: C33 J40 J60 P20
    Date: 2009–02–03
  12. By: Toman Omar Mahmoud; Christoph Trebesch
    Abstract: Human trafficking is a humanitarian problem of global scale, but quantitative research on the issue barely exists. This paper is a first attempt to explore the economic drivers of human trafficking and migrant exploitation using micro data. We argue that migration pressure combined with informal migration patterns and incomplete information are the key determinants of human trafficking. To test our argument, we use a unique new dataset of 5513 households from Belarus, Bulgaria, Moldova, Romania, and Ukraine. The main result is in line with our expectations: Migrant families in high migration areas and with larger migrant networks are much more likely to have a trafficked victim among their members. Our results also indicate that illegal migration increases trafficking risks and that awareness campaigns and a reduction of information asymmetries might be an effective strategy to reduce the crime
    Keywords: Human Trafficking, Migrant Exploitation, Illegal Migration, Migration Networks, Eastern Europe
    JEL: F22 J61 K42 O17
    Date: 2009–02
  13. By: Giuliana Passamani
    Abstract: The aim of the paper is to analyze the foreign transmission mechanism between each of the Visegrad-4 countries and the eurozone, through an empirical analysis of the basic international parity conditions linking Czech, Hungarian, Polish and Slovakian inflations and interest rates with the ones of the current euro area members. The focus of the analysis is to show the differences among these catching-up economies, with particular attention to their process of convergence towards the eurozone economy. For reasons due to the availability of data, the sample covers the last decade. We use the cointegrated VAR model to define longrun stationary relations as well as common stochastic trends. The methodology adopted is properly apt to uncover the dynamic structure underlying the stochastic behaviour of prices, interest rates and exchange rate. Of particular interest is the empirical finding that the parities do not hold on their own, as expected, but that weaker form of the same parities, or linear combinations of them, hold in our data set, with some differences for each country. Also the process of convergence is different: the Czech Republic seems to have reached a relative convergence, while for the other countries we have that the process show a tendency towards convergence.
    Keywords: Visegrad_4 countries, PPP, UIP, RIP, Cointegrated VAR, Convergence
    JEL: E31 E43 F31
    Date: 2008
  14. By: Viola Angelini (University of Padua); Danilo CAVAPOZZI (University of Padua); Luca CORAZZINI (University of Padua); Omar PACCAGNELLA (University of Padua)
    Abstract: Self-reported life satisfaction is highly heterogeneous across similar countries. We show that this phenomenon can be largely explained by the fact that individuals adopt different scales and benchmarks in evaluating themselves. Using a cross sectional dataset on individuals aged 50 and over in ten European countries, we compare estimates from an Ordered Probit in which life satisfaction scales are invariant across respondents with those from a Hopit model in which vignettes are used to correct for individual-specific scale biases. We find that variations in response scales explain a large part of the differences found in raw data. Moreover, the crosscountry ranking in life satisfaction dramatically depends on scale biases.
    Keywords: Life satisfaction, scale biases, vignette, counterfactuals.
    JEL: C42 D12 I31 J14
    Date: 2009–02
  15. By: Alberto Felettigh (Banca d'Italia); Paola Monti (Banca d'Italia)
    Abstract: The data collected by the IMF in the Coordinated Portfolio Investment Survey (CPIS) provide a unique source for foreign portfolio asset holdings, with details on the breakdown by instrument and counterpart country. In the presence of sizeable cross-border positions in mutual funds, which are indistinctly classified as equity assets, the economic interpretation of the instrument and geographic composition of a country’s foreign assets might be distorted. The instrument composition tends to be skewed towards equity assets; the geographical one tends to be biased towards the countries hosting the mutual funds. This is the case of Italy, whose position in Irish and Luxembourgian mutual funds represents more than half of its entire foreign portfolio equity assets. France, Germany and Spain are in a similar, yet less disproportionate, situation. The paper proposes a correction method in order to ‘pierce the veils’ introduced by positions in foreign mutual funds.
    Keywords: CPIS, asset allocation, mutual funds, index of foreign bias
    JEL: F36 G11
    Date: 2008–08
  16. By: Edmond Baranes; François Mirabel; Jean-Christophe Poudou
    Abstract: In this paper, we study how competition on downstream gas markets is influenced by sourcing decisions in the supply chain. We analyze the sequential relationships between storage decisions and intermediate pricing in spot markets. We show that an upstream leadership in the access to storage facilities leads a dominant firm to adopt strategic storage decision. This strategy consists in stockpiling more than supplied in the downstream market. This behavior is a part of a raising rival's cost strategy for the leader. Furthermore in some cases, optimal regulation of gas storage access may not prevent such a behavior.
    Keywords: Storage, spot market, gas markets, regulation
    Date: 2008
  17. By: Aldashev, Alisher; Gernandt, Johannes; Thomsen, Stephan L.
    Abstract: Immigrants consist of foreigners and citizens with migration background. We analyze the wage gap between natives and these two groups in Germany. The estimates show a substantial gap for both groups with respect to natives. Discarding immigrants who completed education abroad reduces much of the immigrants’ wage gap. This implies educational attainment in Germany is an important component of economic integration and degrees obtained abroad are valued less.
    Keywords: Immigration, wage gap, decomposition, Germany
    JEL: J15 J31 J61
    Date: 2008
  18. By: Giovanni Ferri (Universit… degli Studi di Bari); Alberto Franco Pozzolo (Universit… degli Studi del Moliste)
    Abstract: We study the dynamic nexus that changes in foreign bank penetration have with changes in trade and FDI between some selected OECD countries and Central and Eastern Europe countries (CEECs). Following the literature, we contemplate the possibility that such a nexus might differ depending on whether foreign bank entry materializes through the opening of branches or by acquiring local subsidiaries. The question that we try to answer is whether bank internationalization led or followed the increase in trade and manufacturing FDI. Using data on the changes in the bilateral linkages between OECD origin countries and CEECs target countries between 1995 and 2002, we find only one strong link, going from the share of bilateral trade over total trade from the country of origin, which we define a "push factor", to the change in the presence of foreign branches. The link from trade to bank acquisition of foreign subsidiaries is instead much weaker. In addition, we find some evidence that the share of bilateral trade over total trade with the target country, which we define a "pull factor", affects bank internationalization through the acquisition of subsidiaries, but not through the opening of branches.
    Date: 2009–01
  19. By: Memmel, Christoph (Deutsche Bundesbank); Schmieder, Christian (European Investment Bank); Stein, Ingrid (Deutsche Bundesbank)
    Abstract: Relationship lending is a common practice in credit financing all over the world, notably also in the European Union, which has been assumed to be particularly beneficial for Small and Medium-Sized Enterprises (SMEs). During recent years, there has been the impression that relationship lending loses ground due to a change of the banks' business models, which could ultimately yield to a worsening of the business environment for corporates and SMEs. In this study, we investigate the determinants of relationship lending for Germany, where relationship lending traditionally plays an important role. Compared to previous studies, we refer to much more comprehensive data with information on more than 16,000 firm-bank relationships. Our findings confirm the assumption that relationship lending seems to be an important pillar for economic growth and employment: We find that the firms that are most likely to contribute to (future) economic growth, namely small and R&D-intensive firms, tend to choose a relationship lender. The same is observed for firms of high credit quality, independent of their size or R&D intensity. Furthermore, we also observe that the importance of relationship lending did not decrease since the mid 1990s.
    Keywords: Relationship banking; German banking system; SME
    JEL: G21 G32
    Date: 2008–05–20
  20. By: Toivanen, Mervi (Bank of Finland Research)
    Abstract: Using the maximum entropy method, this paper estimates the danger of contagion in the Finnish interbank market in 2005–2007 as well as the existence of contagion during a Finnish banking crisis. The contagion analysis of the early 1990s is able to predict the most troublesome and defaulting banks in the banking sector. The simulation results for 2005–2007 suggest that five of ten deposit banks are possible starting points for contagious effects. The magnitude of contagion is conditional on the first failing bank. In addition to large commercial banks, middle-sized banks also cause damaging domino effects. Over the last few years, the negative effects of contagion on the Finnish banking sector have been, on average, more limited than those of the early 1990s. The contagion is currently a low probability event in the Finnish interbank market.
    Keywords: contagion; interbank markets; Finland; maximum entropy
    JEL: G21
    Date: 2009–01–28
  21. By: Zoltán M. Jakab (Magyar Nemzeti Bank); Balázs Világi (Magyar Nemzeti Bank)
    Abstract: This paper presents and estimates a dynamic stochastic general equilibrium (DSGE) small-open-economy model for the Hungarian economy. The model features different types of frictions, real and nominal rigidities which are necessary to replicate the empirical persistence of Hungarian data. Bayesian methods are applied, and the structural break due to changing monetary regime over the studied period is explicitly taken into account in the estimation procedure. A real-time adaptive learning mechanism describes agents’ perception on underlying inflation. This creates an additional inertia in inflation. We describe the properties of the estimated model by impulse-response analysis, variance decomposition and the analysis of identified structural shocks. Our results are compared with that of estimated euro-area DSGE models, and estimated non-DSGE models of the Hungarian economy. As a robustness check, a model without real time adaptive learning is also estimated and it’s results are also compared to those of the original model.
    Keywords: New Keynesian models, DSGE models, small open economy, Bayesian econometrics.
    JEL: E40 E50
    Date: 2008
  22. By: Francisco Azpitarte (Universidade de Vigo)
    Abstract: This paper is concerned with the analysis of the wealth dimension of poverty in developed countries, which can hardly be measured by means of the information on household income. We focus in identifying the group of households that lack enough wealth holdings to sustain them during a period of economic crisis in order to quantify asset poverty, and its demographic weight, in two industrialized countries with particularly different household demographics and saving attitudes such as Spain and the United Kingdom. Our results show that the age profile of the asset poor is remarkably similar in the two countries. In both it is individuals in households whose head is under 45 years old who are more likely to be asset poor, even if, when the housing wealth component is excluded, both show that the incidence of asset poverty by head of household age follows a clear U-shape pattern. However, some country-specific differences also arise. For instance, the incidence of wealth poverty in the United Kingdom is twice that of Spain. Using counterfactual analysis we find that, although the different household demographics clearly contribute importantly to this result, there remains a significant part of the asset-poverty gap which is not explained by this relevant factor.
    Date: 2008
  23. By: Honkapohja, Seppo (Bank of Finland)
    Abstract: The current financial crisis, which has lasted almost one and a half years, is the 19th such crisis in the post-war period in advanced economies. Recent literature classifies the Nordic crises in Norway, Sweden and Finland in late 1980's and early 1990’s among the Big Five crises that have happened before the current crisis, which is now of a global nature. This paper outlines the developments of the Nordic crises, reasons behind them and crisis management by the authorities. Relatively more emphasis is placed on the Finnish crisis, as it was the deepest one. The paper concludes by considering the lessons that can be drawn from the Nordic crises.
    Keywords: financial deregulation; bank lending; overheating; financial crisis
    JEL: E44 G21
    Date: 2009–01–21
  24. By: Obermaier, Andreas J. (European Integration Research, Austrian Academy of Sciences)
    Abstract: This paper explores the structure of cross-border health purchasing between Austria and Hungary and determines the size of this phenomenon as well as the barriers to a further increase. Austrian patients may receive health care treatment in Hungary in three different ways. First, patients may receive benefits in the context of the European Community Regulations 1408/71 and 574/72 (Category I patients). Second, outside those regulatory structures, Austrian patients travel to Hungary to receive medical treatment, especially dental treatment, and then seek reimbursement from their Austrian insurance (Category II patients). Third, some patients receive medical treatment in Hungary outside both schemes (Category III patients). There are about 42,500 Category I patients per year; and 58,000 Category II patients world-wide per year. An unknown but supposedly greater number of patients travel to Hungary to receive mainly dental treatment and cosmetic surgery (Category III). Most health actors in both Austria and Hungary do not regard cross-border purchasing of health services as having cost-saving effects. They put forward major legal, institutional, political, and psychological barriers, which inhibit public and private Austrian providers, to facilitate trade in health care and which inhibit individual patients to realize cost savings through capitalizing on lower health care prices in Hungary. Therefore, for the time being, trade in health care and patient mobility between Austria and Hungary is a circumscribed phenomenon in terms of quantities, and it will most probably remain so in the near future.
    Keywords: access to health care; adequate resources; aid; beds; cataract surgery; clinics; Community hospitals; Consumer Protection; cost effectiveness; costs of treatment; dental care; dental treatment; dentists; Diagnosis; discrimination; disease; doctor; doctors; domestic law; employment; entitlement; expenditures; families; financial resources; fundamental principles; general practitioner; Health Affairs; health care; health care centers; health care costs; health care coverage; health care facilities; health care institutions; health care insurance; health care law; health care provider; health care providers; health care sector; health care services; health care standards; health care system; health care systems; Health Care Systems in Transition; health expenditure; health facilities; health insurance; health insurance companies; health insurance funds; health insurance system; health insurers; Health Organization; health organizations; health policy; health providers; health sector; health service; Health Services; health system; health systems; Health Systems in Transition; Healthcare; hospital care; hospital financing; Hospital Operator; hospital sector; hospital treatment; hospitals; hygiene; income; insurance; insurance coverage; insurance systems; Integration; judicial proceedings; legal provisions; marketing; Medical Association; medical associations; medical benefits; medical care; medical facilities; medical science; medical services; medical treatment; medicine; Migration; National Health; National Health Insurance; National Health Insurance Fund; national health policy; nurses; patient; patient care; patient treatment; patients; physician; physicians; Policy ReseaRch; Primary Care; private health insurance; private health insurers; private hospitals; private households; private insurance; private insurer; private insurers; private sector; provision of health care; provision of services; public health; public health care; public health insurance; public hospitals; public sector; quality control; quality of health; quality of health care; rehabilitation; reimbursement rates; right to health care; social health insurance; social insurance; Social Policy; social security; social security schemes; social security systems; surgery; therapy; treatments; Use of Health Care Services; visits; workers
    Date: 2009–01–01
  25. By: Magda Bianco (Banca d'Italia); Paolo Sestito (Banca d'Italia)
    Abstract: The paper summarizes the framework used in a research project on local public services carried out by Bank of Italy researchers. It discusses motivations, characteristics, results and general lessons of the project, whose sector-specific results are detailed in individual papers. The project was set up to analyze the effectiveness and outcomes of a set of reforms initiated approximately 15 years ago (but still unfinished in many respects). Studies of specific economically important and socially sensitive sectors were performed, to obtain an updated picture of the current framework (ownership structure, role of local authorities) and evaluate performance (market structure, costs and quality, profitability, environmental results). A set of horizontal studies (on the evolution of regulation, the spread of project financing, the growth of some large players) complemented the sectoral analyses. As a whole the project confirmed that the results of the reforms have been unsatisfactory. The paper also discusses some characteristics of the regulatory framework and market structures that could explain the reforms’ poor results: a) insufficient attention to sectoral peculiarities in the regulatory design; b) the approach used in determining tariffs that should have covered full costs; c) excessively fragmented regulatory authorities, which were set up at too local a level; d) insufficient separation between the different roles played by local authorities as regulators, majority shareholders of service providers and representatives of consumers’ interests.
    Keywords: local public services, liberalization, regulation
    JEL: H23 H42 H75 K23 L33 L43
    Date: 2008–09

This nep-eec issue is ©2009 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.