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on European Economics |
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Issue of 2009‒04‒25
fifteen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Schmitz, Birgit; von Hagen, Jürgen |
| Abstract: | While the current account of euro area as a whole has remained almost balanced in the past two decades, several member countries have sizeable deficits or surpluses. In this paper, we interpret these imbalances as indicators of net capital flows among the euro-area countries and show that these net flows follow differences in per-capita incomes. Our results show that the elasticity with respect to per-capita incomes of net capital flows between euro-area countries and the euro area has increased. This is not the case for net capital flows between non-euro area countries and the euro area, nor for euro-area countries and the rest of the world. We interpret this as evidence for increasing financial integration in the euro area. There is also some evidence suggesting that the introduction of the euro has lead to some financial diversion. |
| Keywords: | Current Account Imbalances; European Monetary Union; Financial Integration |
| JEL: | F21 F33 F34 F36 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7262&r=eec |
| By: | Karen, CRABBE; Hylke, VANDENBUSSCHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics) |
| Abstract: | Tax competition within the EU is fiercer than in the rest of the OECD with tax rates falling rapidly. This paper analyzes tax responses of EU-15 countries to corporate tax changes in the EU-10 new member states as a function of their proximity to these new member states. The average corporate tax rate in the new member states has always been considerably lower than the average in the EU-15 countries. Their entry into the EU eliminated capital barriers, allowing firms to locate in one of the new EU-10 with full access to the European Market. Our results indicate that EU-15 countries geographically closer to the new member states respond stronger to corporate tax changes in these new member states. We use a theoretical and a spatial regression framework to test the hypothesis that distance to a low tax region intensifies countriesÕ tax reaction functions |
| Keywords: | H25; H77; H39 |
| Date: | 2008–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2008050&r=eec |
| By: | Brenke, Karl; Yuksel, Mutlu; Zimmermann, Klaus F |
| Abstract: | The numbers of migrants from the accessions countries have clearly increased since the enlargement of the EU in 2004. Following enlargement, the net inflow of EU8 immigrants has become 2.5 times larger than the four-year period before enlargement. Poles constitute the largest immigrant group among the EU8 immigrants: since enlargement, 63% of all immigrants and 71% of EU8 immigrants are from Poland. This chapter presents new evidence on the impact of immigrant flow from EU8 countries on the German labor market since EU enlargement. Unlike other EU countries, Germany has not immediately opened up its labor market for immigrants from the new member states. Nevertheless, our analysis documents a substantial inflow and suggests that the composition of EU8 immigrants has changed since EU enlargement. The majority of the new EU8 immigrants are male and young, and they are less educated compared to previous immigrant groups. We also find that recent EU8 immigrants are more likely to be self-employed than employed as a wage earner. Furthermore, these recent EU8 immigrants earn less conditional on being employed or self-employed. Our findings suggest that these recent EU8 immigrants are more likely to compete with immigrants from outside of Europe for low-skilled jobs instead of competing with German natives. While Germany needs high-skilled immigrants, our analysis suggests that the new EU8 immigrants only replace non-EU immigrants in low-skilled jobs. These results underline the importance of more open immigration policies targeting high-skilled immigrants. The current policy not only cannot attract the required high-skilled workforce, but also cannot avoid the attraction of low-skilled immigrants, and is a complete failure. |
| Keywords: | employment; EU enlargement; international migration; wages |
| JEL: | E24 F22 J61 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7274&r=eec |
| By: | Michael Artis; Christian Dreger; Konstantin Kholodilin |
| Abstract: | We examine real business cycle convergence for 41 euro area regions and 48 US states. Results obtained by a panel model with spatial correlation indicate that the relevance of common business cycle factors is rather stable over the past two decades in the euro area and the US. Ongoing business cycle convergence often detected in cross-country data is not confirmed at the regional level. The degree of synchronization across the euro area is similar to that to be found for the US states. Thus, the lack of conver-gence does not seem to be an impediment to a common monetary policy. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:118&r=eec |
| By: | Barbone, Luca; Bontch-Osmolovsky, Misha; Zaidi, Salman |
| Abstract: | Despite the purported surge in internal migration following the 2004 enlargement of the European Union, data from the 2006 European Union Survey of Income and Living Conditions show that internal migrants are a relatively small share of the European Union's population. Depending on the exact definition used, only about 1 to 2 percent of the population of European Union-13 countries (members prior to the 2004 enlargement, not including Germany and Luxembourg) were born in other European Union countries, while the corresponding share for European Union-4 countries (Poland, Hungary, Czech Republic, and Slovakia) is even lower. By contrast, about 6 percent of the population of European Union-13 countries was born outside the European Union. On examining the demographic and socio-economic background of the migrant population (both from within as well as outside the European Union), this paper finds that migrants tend to include a concentration of both low as well as highly educated workers. Both sets of migrants uniformly contribute to raising the working-age population of receiving countries. Using data on average incomes and taxes paid and benefits received by migrant and non-migrant households, the authors find no evidence to support the contention that migrant workers contribute much less in taxes than the native-born population, or consume significantly higher benefits. On the contrary, our calculations suggest that migrant workers make a net contribution of approximately 42 billion euros to the national tax and benefit systems of European Union-13 countries. |
| Keywords: | Population Policies,Gender and Law,,Gender and Law,Access to Finance |
| Date: | 2009–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4899&r=eec |
| By: | Luca Benati (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | Following Fuhrer and Moore (1995), several authors have proposed alternative mechanisms to ‘hardwire’ inflation persistence into macroeconomic models, thus making it structural in the sense of Lucas (1976). Drawing on the experience of the European Monetary Union, of inflation-targeting countries, and of the new Swiss monetary policy regime, I show that, in the Phillips curve models proposed by Fuhrer and Moore (1995), Gali and Gertler (1999), Blanchard and Gali (2007), and Sheedy (2007), the parameters encoding the ‘intrinsic’ component of inflation persistence are not invariant across monetary policy regimes, and under the more recent, stable regimes they are often estimated to be (close to) zero. In line with Cogley and Sbordone (2008), I explore the possibility that the intrinsic component of persistence many researchers have estimated in U.S. post-WWII inflation may result from failure to control for shifts in trend inflation. Evidence from the Euro area, Switzerland, and five inflation-targeting countries is compatible with such hypothesis. JEL Classification: E30, E32. |
| Keywords: | New Keynesian models, inflation persistence, Bayesian estimation. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:200901038&r=eec |
| By: | Diana Bozhilova |
| Abstract: | For decades after founding the ECSC (1951) the member states have relegated the issue of joint supranational energy policy development. The situation changed decisively in the early 1990s, with the dramatic shift in the geo-politics of the resource-rich Eurasia, following such developments as the collapse of the USSR and the Gulf War. In light of these developments, European states gradually consolidated their position in favour of supranational energy policy development. This paper presents an analysis of developments in EU energy policy given the ongoing realignment of strategic interest. It outlines the process of Europeanization, identifying caveats in the security of energy supply. It then proposes a solution to the main problematic of diversification of hydrocarbons supply through the fostering of regional co-operation amongst the states of South-East Europe (mainly Greece, Bulgaria and Turkey). The paper argues that this is the only viable and lasting solution to EU energy dependency away from Russia, at once showing the fundamental importance of pipeline ‘mapping’ in the area. |
| Keywords: | Energy, Regional Co-operation, Europeanization, Transmission Pipelines. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:hel:greese:24&r=eec |
| By: | Kai Christoffel (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Keith Kuester (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Tobias Linzert (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | In this paper, we explore the role of labor markets for monetary policy in the euro area in a New Keynesian model in which labor markets are characterized by search and matching frictions. We first investigate to which extent a more flexible labor market would alter the business cycle behaviour and the transmission of monetary policy. We find that while a lower degree of wage rigidity makes monetary policy more effective, i.e. a monetary policy shock transmits faster onto inflation, the importance of other labor market rigidities for the transmission of shocks is rather limited. Second, having estimated the model by Bayesian techniques we analyze to which extent labor market shocks, such as disturbances in the vacancy posting process, shocks to the separation rate and variations in bargaining power are important determinants of business cycle fluctuations. Our results point primarily towards disturbances in the bargaining process as a significant contributor to inflation and output fluctuations. In sum, the paper supports current central bank practice which appears to put considerable effort into monitoring euro area wage dynamics and which appears to treat some of the other labor market information as less important for monetary policy. JEL Classification: E32, E52, J64, C11. |
| Keywords: | Labor Market, wage rigidity, bargaining, Bayesian estimation. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:200901035&r=eec |
| By: | De Laet, Jean-Pierre; Wöhlbier, Florian |
| Abstract: | Policy makers as well as taxpayers are interested in comparing the tax burden in their countries with others, particularly given the wide variations in taxation levels and policies. In order to assess the heterogeneous national tax systems on a fully comparable basis, it is essential to have a unified statistical framework. This paper presents key trends in the tax burden in the Member States of the European Union, based on the European Commission's report 'Taxation trends in the European Union' The main focus lies on analysing the tax burden by economic function (i.e. consumption, labour and capital). The paper presents the methodology that is applied in order to allocate the tax revenue of the different taxes to the economic functions. Moreover, we present measures for the average effective tax burden on different types of income or activities, the so-called implicit tax rates. Results of the calculations are presented looking both at differences between Member States and trends over time. |
| Keywords: | tax burden; tax indicators; effective tax rates |
| JEL: | H20 E00 H71 |
| Date: | 2008–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14761&r=eec |
| By: | Kotsadam, Andreas (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Using advanced panel data methods on ECHP (European Community Household Panel) data, female labor force participation at both the intensive and extensive margin is found to be negatively associated with informal caregiving to elderly. The effects of informal caregiving seem to be more negative in the Southern European countries, less negative in the Nordic countries, and in between these extremes in the Central European countries included in the study. That is, not only do women in some countries provide more care, the care they provide also has a stronger negative correlation with the probability of being employed and the number of hours worked. It is argued in this paper that a candidate explanation for the phenomenon of lower marginal effects in countries with more formal care and less pronounced gendered care norms has to do with the degree of coercion in the caring decision.<p> |
| Keywords: | Informal care; Female labor supply; European welfare states |
| JEL: | I11 I12 J22 |
| Date: | 2009–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0353&r=eec |
| By: | Bertola, Giuseppe |
| Abstract: | Economic integration fosters production efficiency by enhancing market competition, and makes it difficult for National governments to conduct independent fiscal policies and to enforce income redistribution schemes. Controlling for country-level income variation, available data suggest that Europe’s Economic and Monetary Union (EMU) was associated with a small but significant increase in disposable income inequality, reflecting less generous social policies. |
| Keywords: | Policy competition; Social policy |
| JEL: | E0 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7251&r=eec |
| By: | Guglielmo Maria Caporale; Luis A. Gil-Alana |
| Abstract: | In this paper we specify a multi-factor long-memory process that enables us to estimate the fractional differencing parameters at each frequency separately, and adopt this framework to model quarterly prices in three European countries (France, Italy and the UK). The empirical results suggest that inflation in France and Italy is nonstationary. However, while for the former country this applies both to the zero and the seasonal frequencies, in the case of Italy the nonstationarity comes exclusively from the long-run or zero frequency. In the UK, inflation seems to be stationary with a component of long memory at both the zero and the semi-annual frequencies, especially at the former. |
| Keywords: | Fractional Integration, Long Memory, Inflation |
| JEL: | C22 O40 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp879&r=eec |
| By: | David Howell and Ana Okatenko (New School for Social Research, New York, NY) |
| Keywords: | labor markets; Europe |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepawp:2008-2&r=eec |
| By: | Lambrelli, D; O’Donnell, O |
| Abstract: | We analyze the relative importance of population versus institutional factors in explaining cross-country variation in the utilization of pharmaceuticals among older Europeans. Use of medication is examined among all individuals aged 50+ in eleven European countries and, to better control for need, among those diagnosed with medical conditions for which there exist effective drug therapies. Organizational factors include the density of pharmacies and of physicians, retail prices, reimbursement rates, restrictions on retailing of pharmaceuticals and incentives designed to influence prescribing behaviour. Differences in population health and demographics account for almost 75% of the cross-country variation in the propensity to use pharmaceuticals among all older Europeans but this fraction falls to only 12% among those with a diagnosed condition, while, for this group, differences in the organization of the pharmaceutical and health sectors explain 32-54% of the cross-European variation in utilization of medicines. Organizational differences are more important in explaining variation in receipt of medication for serious conditions, such as asthma, arthritis, diabetes, heart attack and stroke, for which 60-80% of the crosscountry variation can be explained by population and organizational factors, and less important for asymptomatic conditions, such as high cholesterol and hypertension, for which less than 35% of the variation is explained. |
| Keywords: | Pharmaceuticals, heath care, elderly, Europe |
| JEL: | I11 I18 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:yor:hectdg:09/06&r=eec |
| By: | Vivien Procher |
| Abstract: | This paper analyzes the location choice determinants of French first-time investments in Europe, North America and North Africa. Firm locations are examined on two geographical scales, the national and regional level. The final sample comprises 307 location decisions in 27 countries and across 45 regions. Both, location- and firm-specific variables are used for analysing the investment strategy of French firms. The results show that higher market demand and cultural proximity to France increase the likelihood of a particular location to be chosen, whereas higher labour cost and a larger distance between a foreign location and the headquarters deter FDI investments. Manufacturing and older companies are more likely to establish their first subsidiary in Eastern Europe. Furthermore, this study examines the extent to which French investors choose foreign locations that already host a significant number of French firms.The results obtained from regressions with various absolute and relative agglomeration measures suggest that French investors are rather attracted by firm cluster in general, or by the unobserved factors that led to the agglomeration in the first place, than by any nation-specific firm cluster. |
| Keywords: | Foreign direct investment, location choices, agglomeration, smalland medium-sized enterprises |
| JEL: | F21 F23 D21 R30 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0100&r=eec |