nep-eec New Economics Papers
on European Economics
Issue of 2009‒07‒28
28 papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The euro and firm restructuring By Matteo Bugamelli; Fabiano Schivardi; Roberta Zizza
  2. Individual earnings and educational externalities in the European Union By Andrés Rodríguez-Pose; Vassilis Tselios
  3. Assessing the Fiscal Costs and Benefits of A8 Migration to the UK By Christian Dustmann; Tommaso Frattini; Caroline Halls
  4. Are social welfare states facing a race to the bottom? A theoretical perspective By G. RAYP; B. VANBERGEN
  5. Options Introduction and Volatility in the EU ETS By Julien Chevallier; Yannick Le Pen; Benoît Sévi
  6. Oil and the Euro Area Economy By G. PEERSMAN; I. VAN ROBAYS
  7. Intergenerational Social Mobility in European OECD Countries By Orsetta Causa; Sophie Dantan; Åsa Johansson
  8. Estimation and Decomposition of Total Factor Productivity Growth in the EU Manufacturing Sector: a Stochastic Frontier Approach By Marco Fioramanti
  9. Firm growth, European industry dynamics and domestic business cycles By Harald Oberhofer
  10. Examining nonmarital childbearing in Europe: how does union context differ across countries? By Brienna Perelli-Harris; Wendy Sigle-Rushton; Trude Lappegård; Paola Di Giulio; Aiva Jasilioniene; Keizer Renske; Katja Köppen; Caroline Berghammer; Michaela Kreyenfeld
  11. Homeownership and the Labour Market in Europe By Casper van Ewijk; Michiel van Leuvensteijn
  12. Do Prices in the EMU Converge (Non-linearly)? By Ulrich Fritsche; Sarah Lein; Sebastian Weber
  13. ARE EU BUDGET DEFICITS STATIONARY? By Mark J. Holmes; Jesús Otero; Theodore Panagiotidis
  14. Counterfactual Distribution Dynamics across European Regions By Davide Fiaschi, Andrea Mario Lavezzi and Angela Parenti
  15. Prospect Theory and Inflation Perceptions - An Empirical Assessment By Lena Vogel; Jan-Oliver Menz; Ulrich Fritsche
  16. Can Immigration Compensate for Europe's Low Fertility? By Wolfgang Lutz; Sergei Scherbov
  17. Housing Finance and Monetary Policy. By Alessandro Calza; Tommaso Monacelli; Livio Stracca
  18. Preference Theory and Low Fertility: A Comparative Perspective By Agnese Vitali; Francesco C. Billari; Alexia Prskawetz; Maria Rita Testa
  19. Gender Pay Differences in the European Union: Do Higher Wages Make Up For Discrimination? By Canton, E.J.F.; Verheul, I.
  20. The 2007 Subprime Market Crisis Through the Lens of European Central Bank Auctions for Short-Term Funds By Nuno Cassola; Ali Hortacsu; Jakub Kastl
  21. Equity in Student Achievement Across OECD Countries: An Investigation of the Role of Policies By Orsetta Causa; Catherine Chapuis
  22. A systemic approach to financial regulation: a European perspective By Michel Aglietta; Laurence Scialom
  23. Skill-biased technological change and endogenous labor supply in EU Transition Economies and the US By Guido Cazzavillan; Krzysztof Olszewski
  24. A Comparison among the director networks in the main listed companies in France, Germany, Italy, and the United Kingdom. By Santella, Paolo; Drago, Carlo; Polo, Andrea; Gagliardi, Enrico
  25. Innovation and productivity in SMEs. Empirical evidence for Italy By Bronwyn H. Hall; Francesca Lotti; Jacques Mairesse
  26. Teacher Evaluation: Current Practices in OECD Countries and a Literature Review By Marlène Isoré
  27. Monetary and Exchange Rate Regimes Changes: The Cases of Poland, Czech Republic, Slovakia and Republic of Serbia By Jean-Pierre Allegret; Kosta Josifidis; Emilija Beker Pucar
  28. Household wealth and entrepreneurship: is there a link? By Silvia Magri

  1. By: Matteo Bugamelli (Bank of Italy); Fabiano Schivardi (University of Cagliari and EIEF); Roberta Zizza (Bank of Italy)
    Abstract: We test whether and how the adoption of the euro, narrowly defined as the end of competitive devaluations, has affected member states’ productive structures, distinguishing between within and across sector reallocation. We find evidence that the euro has been accompanied by a reallocation of activity within rather than across sectors. Since its adoption, productivity growth has been relatively stronger in country-sectors that once relied more on competitive devaluations to regain price competitiveness. This effect is robust to potential omitted-variable bias and correlated effects. Firm-level evidence from Italian manufacturing confirms that low-tech businesses, which arguably benefited most from devaluations, have been restructuring more since the adoption of the euro. Restructuring has entailed a shift of business focus from production to upstream and downstream activities, such as product design, advertising, marketing and distribution, and a corresponding reduction in the share of blue collar workers.
    Keywords: euro, devaluations, productivity growth, firm restructuring, skill intensity
    JEL: F33 J24 L16 O47
    Date: 2009–06
  2. By: Andrés Rodríguez-Pose (London School of Economics); Vassilis Tselios (Newcastle University)
    Abstract: This paper examines whether differences in educational externalities affect individual earnings across regions in the EU. Using microeconomic data from the European Community Household Panel, the analysis relies on spatial economic analysis in order to determine to what extent differences in individual earnings are the result of (a) the educational attainment of the individual, (b) the educational attainment of the other members of the household he/she lives in, (c) the educational endowment of the region where the individual lives, or (d) the educational endowment of the neighbouring regions. The results highlight that, in addition to the expected positive returns of personal educational attainment, place-based regional and supra-regional educational externalities generate significant pecuniary benefits for workers. These findings are robust to the inclusion of different individual, household, and regional control variables.
    Keywords: individual earnings; educational attainment; externalities; households; regions; Europe
    Date: 2009–07–23
  3. By: Christian Dustmann (University College London, CReAM); Tommaso Frattini (University College London, CReAM); Caroline Halls (CReAM)
    Abstract: This paper assesses the fiscal consequences of migration to the UK from the Central and Eastern European countries that joined the EU in May 2004 (A8 countries). We show that A8 immigrants who arrived after EU enlargement in 2004, and who have at least one year of residence – and are therefore legally eligible to claim benefits - are 60% less likely than natives to receive state benefits or tax credits, and 58% less likely to live in social housing. Even if A8 immigrants had the same demographic characteristics of natives, they would still be 13% less likely to receive benefits and 28% less likely to live in social housing. We then compare the net fiscal contribution of A8 immigrants with that of individuals born in the UK, and find that in each fiscal year since enlargement in 2004, A8 immigrants made a positive contribution to public finance despite the fact that the UK has been running a budget deficit over the last years. This is because they have a higher labour force participation rate, pay proportionately more in indirect taxes, and make much lower use of benefits and public services.
    Date: 2009–07
    Abstract: Every step towards the completion of European integration appears to be met with renewed concern over its potential negative social side-effects, particularly as regards to protection against social risks (unemployment, sickness and invalidity, age,. . . ) and poverty. In the 1980s and 1990s, governments of different Member States as well as the two EU Commissions headed by Jacques Delors took seriously the menace of .beggar-thy-neighbour. policies by means of in- come or social security measures in an integrated market. The EMU may have provided an even greater temptation to do so because other economic policy instruments such as trade policy or monetary policy are kept under tight control. Since the end of the 1990s, there are indeed some signs that the welfare state is rolling back in core EU-member states such as Germany, the Netherlands and France. The fear of lower social protection levels and harsher labour conditions in a more integrated European Union are often cited as an explanation of the opposition against further economic integration in Europe
    Date: 2009–03
  5. By: Julien Chevallier (EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre); Yannick Le Pen (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Benoît Sévi (GRANEM LEMNA - Université d'Angers - Université de Nantes)
    Abstract: To improve risk management in the European Union Emissions Trading Scheme (EU ETS), the European Climate Exchange (ECX) has introduced option instruments in October 2006 after regulatory authorization. The central question we address is: can we identify a potential destabilizing effect of the introduction of options on the underlying market (EU ETS futures)? Indeed, the literature on commodities futures suggest that the introduction of derivatives may either decrease (due to more market depth) or increase (due to more speculation) volatility. As the identification of these effects ultimately remains an empirical question, we use daily data from April 2005 to April 2008 to document volatility behavior in the EU ETS. By instrumenting various GARCH models, endogenous break tests, and rolling window estimations, our results overall suggest that the introduction of the option market had no effect on the volatility in the EU ETS. These finding are robust to other likely influences linked to energy and commodity markets.
    Keywords: EU ETS, Option prices, Volatility, GARCH, Rolling Estimation, Endogenous Structural Break Detection
    Date: 2009–07–20
    Abstract: We examine the macroeconomic effects of different types of oil shocks and the oil transmission mechanism in the Euro area. A comparison is made with the US and across individual member countries. First, we find that the underlying source of the oil price shift is crucial to determine the repercussions on the economy and the appropriate monetary policyreaction. Second, the transmission mechanism is considerably different compared to the US. In particular, inflationary effects in the US are mainly driven by a strong direct passthrough of rising energy prices and indirect effects of higher production costs. In contrast, Euro area inflation reacts sluggishly and is much more driven by second-round effects of increasing wages. Third, there are also substantial asymmetries across member countries. These differences are due to different labour market dynamics which are further aggravated by a common monetary policy stance which does not fit all.
    Date: 2009–04
  7. By: Orsetta Causa; Sophie Dantan; Åsa Johansson
    Abstract: This paper breaks new ground by providing comparable estimates of intergenerational wage and education persistence across 14 European OECD countries based on a new micro data from Eurostat. A further novelty is that it examines the potential role of public policies and labour and product market institutions in explaining observed differences in intergenerational wage mobility across countries. The empirical estimates show that intergenerational wage persistence is relatively high in southern European countries, as well as in the United Kingdom. Likewise, intergenerational persistence in education is relatively high both in southern European countries and in Luxembourg and Ireland. By contrast, both persistence in wages and education tends to be lower in Nordic countries. In addition, empirical results show that education is one important driver of intergenerational wage persistence across European countries. There is a positive crosscountry correlation between intergenerational wage mobility and redistributive policies, as well as a positive correlation between wage-setting institutions that compress the wage distribution and mobility.<P>Mobilité sociale intergénérationnelle dans les pays européens de l'OCDE<BR>Cet article comble une faille dans la littérature en présentant de nouvelles mesures harmonisées du degré de mobilité sociale intergénérationnelle de salaire et d’éducation pour 15 pays européens de l’OCDE, grâce à l’utilisation de nouvelles donnes microéconomiques publiées par Eurostat. Il analyse également le rôle des politiques en vigueur sur le marché du travail et sur le marché des produits dans l’explication des différences de mobilité entre pays. Les estimations suggèrent que la persistance intergénérationnelle des salaires est relativement élevée dans les pays du Sud de l’Europe, ainsi qu’au Royaume-Uni. De la même façon, la persistance intergénérationnelle du niveau d’éducation est relativement élevée dans les pays du Sud de l’Europe, ainsi qu’au Luxembourg. En revanche, la persistance intergénérationnelle, aussi bien du niveau de l’éducation que des salaires, est relativement faible dans les pays nordiques. De plus, les résultats empiriques montrent que dans les pays européens de l’OCDE, l’éducation est un vecteur important de la mobilité sociale intergénérationnelle. L’étude suggère qu’il existe une corrélation positive entre la mobilité sociale intergénérationnelle des salaires et la générosité des politiques de redistribution du revenu, résultat qui s’applique également à l’analyse de l’impact des instances de négociation collective qui compressent la grille salariale.
    Keywords: education, éducation, public policy, politique publique, intergenerational wage mobility, mobilité sociale intergénérationnelle des salariés, intergenerational education mobility, mobilité sociale intergénérationnelle de l'éducation, household survey data, données sur les ménages
    JEL: C20 C21 H23 H31 J60 J62
    Date: 2009–07–07
  8. By: Marco Fioramanti (ISAE - Institute for Studies and Economic Analyses)
    Abstract: In this paper the Stochastic Frontier approach was used for the estimation and decomposition of manufacturing TFP growth in 14 EU member countries, drawing upon the EU-KLEMS database. This study identifies some key issues: in the period 1970-2005, the TFP rate of change in the EU manufacturing sector constantly decreased, mainly due to the reduction in technical efficiency and, to a lesser extent, to the decline in the rate of growth of input factors and allocative efficiency. In the same period, the sector recorded considerable technical progress, which, nonetheless, did not offset the negative forces which pulled the EU TFP growth down, especially in the last decade of the sample period.
    Keywords: Stochastic frontier, Total Factor Productivity, Technical efficiency, Technical change, Allocative efficiency.
    JEL: D24 O47 C33
    Date: 2009–06
  9. By: Harald Oberhofer
    Abstract: Based on the empirical firm growth literature and on heterogeneous (microeconomic) adjustment models, this paper empirically investigates the impact of European industry fluctuations and domestic business cycles on the growth performance of European firms. Since the implementation of the Single market program (SMP) the EU 27 member states share a common market. Accordingly, the European industry business cycle is expected to become a more influential predictor of European firms' behavior at the expense of domestic fluctuations. Empirically, the results of a two-part model for a sample of European manufacturing firms reject this hypothesis. Additionally, subsidiaries of Multinational Enterprises (MNEs) constitute the most stable firm cohort throughout the observed business cycle.
    Keywords: Firm growth, industry dynamics, domestic business cycle, multinational enterprises, two-part model
    JEL: L11 L16 L25
    Date: 2009–07
  10. By: Brienna Perelli-Harris (Max Planck Institute for Demographic Research, Rostock, Germany); Wendy Sigle-Rushton; Trude Lappegård; Paola Di Giulio (Max Planck Institute for Demographic Research, Rostock, Germany); Aiva Jasilioniene (Max Planck Institute for Demographic Research, Rostock, Germany); Keizer Renske; Katja Köppen (Max Planck Institute for Demographic Research, Rostock, Germany); Caroline Berghammer (Max Planck Institute for Demographic Research, Rostock, Germany); Michaela Kreyenfeld (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: This study analyzes the dramatic increase in nonmarital childbearing in Europe, an increase which occurred primarily within cohabitation. Using data from 10 countries, we present descriptive trends in nonmarital childbearing from 1970 to the early 2000s. In addition, we analyze union context at conception, birth, and one year after birth. This allows for the classification of different patterns of family formation into five broad categories. We also investigate how the relationship between fertility and union status changed over time and developed along different trajectories. Our research shows that despite widespread claims that marriage is disappearing in Europe, it still remains the preferred institution for raising children.
    Keywords: Europe, family formation
    JEL: J1 Z0
    Date: 2009–07
  11. By: Casper van Ewijk; Michiel van Leuvensteijn
    Abstract: Increasing labour market flexibility is at the top of the European agenda. A new and challenging view is a lack of mobility in the labour market may arise from rigidities in the housing market. The research in this book has been inspired by the intriguing hypothesis put forward by Andrew Oswald that homeownership may be a hindrance to the smooth working of the labour markets, as homeowners tend to be less willing to accept jobs outside their own region.<br> This book brings together leading economists from across Europe to analyse the interaction between housing markets and labour markets. In the EU homeownership rates have been on the increase, often as a result of government policies, making the barriers that homeownership creates in terms of labour mobility increasingly important. This book shows on the one hand, at the individual level, that homeownership limits the likelihood of becoming unemployed and increases the probability of finding a job once unemployed. On the other hand, the transaction costs inherent in the housing market and homeownership hamper job-to-job changes and increase unemployment at the country level. This insight provides a clear policy message to European policymakers: reform in the housing market, aimed at lowering transaction costs and providing less generous subsidies for homeowners could be an effective instrument for reducing unemployment and improving labour market flexibility.
    Keywords: home ownership; labour market; Europe; housing market; transaction costs; labor mobility; unemployment
    JEL: J60 J61 R23
    Date: 2009–04
  12. By: Ulrich Fritsche (Department for Socioeconomics, Department for Economics, University of Hamburg); Sarah Lein (Swiss National Bank (SNB)); Sebastian Weber (German Institute for Economic Research (DIW) Berlin)
    Abstract: This paper examines the current state of price convergence amongst the eleven initial EMU member states. Special attention is given to possible changes in the convergence process during the euro cash changeover. We apply the sigma-convergence approach using both panel estimates of changes in the deterministic time trend of a coefficient of variation and stochastic kernel-density estimates. We find that convergence took place before 2000, slowed down substantially between 2000 and 2003, and resurfaced after 2003. This points to a non-linear convergence path. We show that stronger convergence is associated with periods of positive and less-dispersed output gaps across member states. There are no big differences between the results for tradables and non-tradables, indicating that Balassa-Samuelson effects are relatively weak.
    Keywords: Prices, European Monetary Union, Sigma-convergence, Kernel-density Estimation, Balassa-Samuelson Effect
    JEL: C14 C33 E31 F15
    Date: 2009–07
  13. By: Mark J. Holmes (Waikato University Management School, New Zealand); Jesús Otero (Universidad del Rosario, Colombia); Theodore Panagiotidis (University of Macedonia, Greece and The Rimini Center for Economic Analysis, Italy)
    Abstract: In this paper, we test for the stationarity of European Union budget deficits over the period 1971 to 2006, using a panel of thirteen member countries. Our testing strategy addresses two key concerns with regard to unit root panel data testing, namely (i) the presence of cross-sectional dependence among the countries in the panel and (ii) the identification of potential structural breaks that might have occurred at different points in time. To address these concerns, we employ an AR-based bootstrap approach that allows us to test the null hypothesis of joint stationarity with endogenously determined structural breaks. In contrast to the existing literature, we find that the EU countries considered are characterised by fiscal stationarity over the full sample period irrespective of us allowing for structural breaks. This conclusion also holds when analysing sub-periods based on before and after the Maastricht treaty.
    Keywords: Heterogeneous dynamic panels, fiscal sustainability, mean reversion, panel stationarity test.
    JEL: C33 F32 F41
    Date: 2009–01
  14. By: Davide Fiaschi, Andrea Mario Lavezzi and Angela Parenti
    Abstract: This paper proposes a methodology which combines elements of parametric regression analysis with the nonparametric distribution dynamics approach in order to analyse the role of some variables in the convergence of productivity across European regions over the period 1980-2002. We find that the initial productivity crucially accounts in the convergence process across European regions. Differently, employment growth seems not to play a role, while the Structural and Cohesion Funds seem to play a positive role, even though such effect seems to be very low and statistically significant only at the low bound of the range of initial productivity. The structural change of regional economies plays a positive role, but such e effect is statistically significant only for the least productive regions. The output composition of a region in 1980 a effects the convergence process of productivity growth in several ways. In particular, the share of non market services on output acts like a source of convergence from 1980 to 2002 but in the long-run it plays a negligible role. Finally, the share of finance acts like a force of divergence across European regions, especially for the least productive regions.
    Keywords: European regional policy, structural change, convergence, European regions.
    JEL: C21 E62 R11 O52
    Date: 2009–06–19
  15. By: Lena Vogel (Department for Economics and Politics, University of Hamburg); Jan-Oliver Menz (Department for Economics and Politics, University of Hamburg); Ulrich Fritsche (Department for Economics and Politics, University of Hamburg)
    Abstract: Building on the hypotheses of loss aversion with respect to price increases and availability of frequently bought goods, Brachinger (2006,2008) constructs an alternative index of perceived inflation (IPI), which can reproduce the jump in the measure for perceived inflation after the Euro introduction in Germany that was not observable in standard HICP inflation. We test the hypotheses of Prospect Theory with regard to households’ inflation perceptions underlying Brachinger’s IPI in a panel estimation for 12 European countries. There is evidence that perceptions react more strongly to ‘losses’ in inflation than to ‘gains’ before the Euro cash changeover, but not afterwards. Moreover, we find empirical support for the availability hypothesis, stating that frequently bought goods have a stronger influence on inflation perceptions than the overall price index.
    Keywords: Inflation Perceptions, Prospect Theory, Dynamic Panel
    JEL: D81 D82 E52 C33
  16. By: Wolfgang Lutz; Sergei Scherbov
    Abstract: This paper addresses in a systematic demographic manner the widely discussed question: To what extent can immigration compensate for low fertility in Europe? We begin with a set of 28 alternative scenarios combining seven different fertility levels with four different migration assumptions at the level of the EU-15 to 2050. Next, we address the research question in the context of probabilistic population projections, and the new concept of conditional uncertainty distributions in population forecasting is introduced. Statistically this is done by sorting one thousand simulations into low, medium, and high groups for fertility and migration according to the average levels of paths over the simulation period. The results show a similar picture to that of the probability-free scenarios, but also indicate that for the old-age dependency ratio, the uncertainty about future mortality trends greatly adds to the ranges of the conditional uncertainty distributions.
    Date: 2009–05
  17. By: Alessandro Calza (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Tommaso Monacelli (IGIER, Università Bocconi, Via Sarfatti, 25 Milano, Italy.); Livio Stracca (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: We study how the structure of housing finance affects the transmission of monetary policy shocks. We document three main facts: first, the features of residential mortgage markets differ markedly across industrialized countries; second, and according to a wide range of indicators, the transmission of monetary policy shocks to residential investment and house prices is significantly stronger in those countries with larger flexibility/development of mortgage markets; third, the transmission to consumption is stronger only in those countries where mortgage equity release is common and mortgage contracts are predominantly of the variable-rate type. We build a two-sector DSGE model with price stickiness and collateral constraints and analyze how the response of consumption and residential investment to monetary policy shocks is affected by alternative values of two institutional features: (i) down-payment rate; (ii) interest rate mortgage structure (variable vs. fixed rate). In line with our empirical evidence, the sensitivity of both variables to monetary policy shocks increases with lower values of the down-payment rate and is larger under a variable- rate mortgage structure. JEL Classification: E21, E44, E52.
    Keywords: Housing finance, mortgage markets, collateral constraint, monetary policy.
    Date: 2009–07
  18. By: Agnese Vitali (Carlo F. Dondena Centre for Research on Social Dynamics, Università Bocconi); Francesco C. Billari (Carlo F. Dondena Centre for Research on Social Dynamics, IMQ and IGIER, Università Bocconi); Alexia Prskawetz (Vienna Institute of Demography, Austrian Academy of Sciences); Maria Rita Testa (Vienna Institute of Demography, Austrian Academy of Sciences)
    Abstract: The discussion on the causes of the most recent fertility decline in Europe, and in particular on the emergence of lowest low fertility, emphasises the relevance of cultural factors in addition to economic ones. Being part of such a cultural framework, the heterogeneity of preferences concerning the “career vs. family” dichotomy has been systematised in the “Preference Theory” approach developed by Catherine Hakim. So far, however, this heterogeneity in preferences has been underinvestigated in a comparative framework. This paper makes use of new comparative data from the 2004/05 Round of the European Social Survey to test the links between individual-level preferences and both fertility outcomes and intentions in a variety of social settings. Results confirm a link between work-family lifestyle preferences and realised fertility in a variety of European countries, while they do not support the relevance of lifestyle preferences for fertility intentions.
    Keywords: Preference Theory, low and lowest low fertility, Europe, European Social Survey, welfare regime.
    Date: 2009–05
  19. By: Canton, E.J.F.; Verheul, I. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This paper explores the role of social interactions at the work floor for understanding gender pay differences in the EU. Using data from the Fourth European Working Conditions Survey, we find that sex similarity of subordinate and supervisor decreases the pay disadvantage for women in non-managerial occupations, though working for a female boss is associated with a lower wage than working for a man. This may point at a ‘discrimination-for-pay’ effect. Female workers can avoid part of the discrimination against them by working for a woman and accepting lower pay. And when they face stronger discrimination in the situation of a male supervisor, they are ‘bribed’ by being offered a higher salary. Different results are obtained for managerial workers where sex similarity of worker and superior actually puts women at a further disadvantage. In addition to effects of vertical gender segregation, we examine whether wage formation is influenced by the proportion of women per sector (i.e., horizontal segregation), but find only weak support for the so-called social bias theory. Our main message is that while the traditional human capital model tends to study the wage formation process in isolation, gender pay differentials can also be seen as a social phenomenon, stemming from social interactions in labor markets.
    Keywords: gender pay differences;wages;European Union
    Date: 2009–07–01
  20. By: Nuno Cassola; Ali Hortacsu; Jakub Kastl
    Abstract: In this paper we study European banks’ demand for short-term funds (liquidity) during the summer 2007 subprime market crisis. We use bidding data from the European Central Bank’s auctions for one-week loans, their main channel of monetary policy implementation. Through a model of bidding, we show that banks’ behavior reflects their cost of obtaining short-term funds elsewhere (i.e., in the interbank market) as well as a strategic response to other bidders. We find considerable heterogeneity across banks in their willingness to pay for short-term funds supplied in these auctions. Accounting for the strategic component is important: while a naive interpretation of the raw bidding data may suggest that virtually all banks suffered a dramatic increase in the cost of obtaining funds in the interbank market, we find that for about one third of the banks, the change in bidding behavior was simply a strategic response. Using a complementary data set, we also find that banks’ pre-turmoil liquidity costs, as estimated by our model, are predictive of their post-turmoil liquidity costs, and that there is considerable heterogeneity in these costs with respect to the country-of-origin. Finally, among the publicly traded banks, the willingness to pay for short-term funds in the second half of 2007 are predictive of stock prices in late 2008.
    JEL: D44 D53 E5
    Date: 2009–07
  21. By: Orsetta Causa; Catherine Chapuis
    Abstract: This paper focuses on inequalities in learning opportunities for individuals coming from different socioeconomic backgrounds as a measure of (in) equality of opportunity in OECD countries and looks at the role played by policies and institutions in shaping countries’ relative positions. Based on harmonised 15- year old students’ achievement data collected at the individual level, the empirical analysis shows that while Nordic European countries exhibit relatively low levels of inequality, continental Europe is characterised by high levels of inequality - in particular of schooling segregation along socio-economic lines - while Anglo-Saxon countries occupy a somewhat intermediate position. Policies allowing increasing social mix are found to reduce school socio-economic segregation without affecting overall performance. Countries that emphasise childcare and pre-school institutions exhibit lower levels of inequality of opportunity, suggesting the effectiveness of early intervention policies in reducing persistence of education outcomes across generations. There is also a positive association between inequality of opportunities and income inequality. As a consequence, cross-country regressions suggest that redistributive policies can help to reduce inequalities of educational opportunities associated with socioeconomic background and, hence, persistence of education outcomes across generations.<P>Équité et compétences scolaires dans les pays de l'OCDE : examen du rôle des politiques publiques<BR>Cet article analyse les inégalités de compétences scolaires pour des individus d’origine sociale différente comme une mesure d’(in)égalité des chances dans les pays de l’OCDE et étudie le rôle joué par les politiques publiques dans ce contexte. Le travail empirique est basé sur l’analyse de données individuelles harmonisées entre pays mesurant les compétences scolaires d’étudiants âgés de 15 ans. Les résultats montrent que les pays d’Europe du Nord sont caractérises par des niveaux relativement faibles d’inégalités, tandis que les pays d’Europe continentale sont caractérises par des niveaux relativement élevés d’inégalités, en particulier en termes de ségrégation socio-économique a l’école; enfin, les pays anglosaxons occupent a ce titre une position intermédiaire. Les politiques favorables à la mixité sociale à l’école réduisent la ségrégation scolaire sans en affecter la performance générale. Les pays qui mettent l’accent sur les services à la petite enfance et sur les institutions préscolaires sont caractérisés par des niveaux relativement faibles d’inégalités des chances, ce qui suggère l’efficacité potentielle des interventions éducatives précoces dans la promotion de la mobilité intergénérationnelle. L’analyse empirique suggere l’existence d’une association positive entre inégalités de compétences scolaires et inégalités de revenu. Par conséquent, les régressions inter-pays suggerent que les politiques redistributives peuvent aider à réduire les inégalités de compétences scolaires associées a l’origine sociale, et, ce faisant, les phénomènes de persistance éducative entre les générations.
    Keywords: education, éducation, public policy, politique publique, equality of education opportunity, égalité des chances scolaires, equity in student achievement, school socio-economic segregation, ségrégation socioéconomique à l'école, équité et compétences scolaires
    JEL: H23 I20 I21 I28 I38
    Date: 2009–07–07
  22. By: Michel Aglietta; Laurence Scialom
    Abstract: The global financial crisis has pinpointed the relevance and the virulence of systemic risk in modern innovative finance. It is grounded in the propensity of credit markets to drift to extremes in close correlation with asset price spikes and slumps. In turn, such a propensity is nurtured by the heuristic behaviour of market participants under severe uncertainty. While plagued by disaster myopia, market participants spread systemic risk. Such adverse conditions have been magnified by financial innovations that have made finance predatory and capable of capturing regulators to annihilate prudential policies. Malfunctioning in finance is so deep and disorders are so widespread that sweeping reforms are the order of the day, if financial stability is viewed as a primary public concern. In this paper we argue that macro prudential policy should be the linchpin of relevant reforms. Being a top-down approach, it impinges both upon monetary policy and micro prudential policy. Central banks should pursue a dual objective of price and financial stability. Bank supervisors should broaden their oversight on a much larger perimeter, encompassing all systematically important institutions. Counter cyclical capital provisions should be required and linked to the control of aggregate credit supply. Leveraged institutions without deposit base should be subject to incentives for a much stricter liquidity management. To stem regulatory capture, prompt corrective action should be enlarged in its scope and adapted to mark-to-market financial intermediaries. Implementing macro prudential policy entails institutional changes. Central banks, bank supervisors and other financial regulators need to work much closer than beforehand, because the spread of systemic risk is not deterred by institutional and geographical frontiers. The changes to make are particularly stringent in Europe, where national parochialism makes the resolution of orderly cross-border bank crisis all but impossible.
    Date: 2009
  23. By: Guido Cazzavillan (Department of Economics, University Of Venice Cà Foscari); Krzysztof Olszewski (Department of Economics, University Of Venice Cà Foscari)
    Abstract: In this paper skill-biased technological change is linked with endogenous labor supply which allows for unemployment. This is a novel approach, as the literature on skill-biased technological change considers inelastic labor supply. Elastic labor supply allows us to explain how the observed increasing unemployment of unskilled workers is caused by skill-biased technological change. Our numerical analysis shows that if the skill-biased technological change is not followed by the growth of total factor productivity, then output, physical capital stock and consumption decline. Using empirical data on wages and education, we construct a time series for skill-biased technological change for Poland and the US. The empirical relevance of the model is tested by calibrating it to empirical data for Poland over the period 1996-2006 and US over the period 1992-2008. With only two necessary inputs, share of skilled workers in total population and the technology adopted by firms, this model allows to simulate the future behaviour of the labor market.
    Keywords: Skill-biased technological change, Endogenous labor supply, Transition Economies
    JEL: O11 O3 O41
    Date: 2009
  24. By: Santella, Paolo; Drago, Carlo; Polo, Andrea; Gagliardi, Enrico
    Abstract: The purpose of this paper is to contribute to the literature on director interlocks by illustrating and analysing the interlocking directorships among the Italian, French, German, UK and US listed Blue Chips. The comparison of the five countries considered shows that two national models stand out. On the one hand a model made of a high number of companies linked to each other through a small number of shared directors who serve on several company boards at the time (France, Germany, and Italy). On the other hand, in the UK much fewer companies are connected to each other essentially through directors who have no more than two board positions at the time. A case in between is represented by the US, where a high number of companies are connected to each other just like Germany, France, and Italy. However, just like the UK, such connections are made through directors who tend to have just two board positions at the time, a sign that, differently from Italy, Germany, and France, the UK and US networks might not be functional to systemic collusion.
    Keywords: corporate governance; interlocking directorships; antitrust; competition; social network analysis (SNA); exploratory data analysis (EDA); empirical corporate finance
    JEL: C0 G3 M2 L1 C1 L4
    Date: 2009–01–20
  25. By: Bronwyn H. Hall (Department of Economics, University of California at Berkeley); Francesca Lotti (Bank of Italy); Jacques Mairesse (CREST (ENSAE, Paris))
    Abstract: Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture. Therefore, in this paper, we develop a structural model of innovation which incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures. We then apply the model to data on Italian SMEs from the &#x201C;Survey on Manufacturing Firms&#x201D; conducted by Mediocredito-Capitalia covering the period 1995-2003. The model is estimated in steps, following the logic of firms&#x2019; decisions and outcomes. We find that international competition fosters R&D intensity, especially for high-tech firms. Firm size, R&D intensity, along with investment in equipment enhances the likelihood of having both process and product innovation. Both these kinds of innovation have a positive impact on firm&#x2019;s productivity, especially process innovation. Among SMEs, larger and older firms seem to be less productive.
    Keywords: R&D, innovation, productivity, SMEs, Italy
    JEL: L60 O31 O33
    Date: 2009–06
  26. By: Marlène Isoré
    Abstract: This paper discusses the most relevant issues concerning teacher evaluation in primary and secondary education by reviewing the recent literature and analysing current practices within the OECD countries. First, it provides a conceptual framework highlighting key features of teacher evaluation schemes. In particular, it emphasises the importance of clarifying the purposes of teacher appraisal, whether summative when designed to assure that the practices enhancing student learning are undertaken or formative when conducted for further professional development objectives. It also encompasses the diverse criteria and instruments commonly used to assess teachers as well as the actors generally involved in the process and potential consequences for teachers’ professional life. Second, it deals with a number of contentious points, including the question of the use of student outcomes to measure teaching performance, the advantages and drawbacks of different approaches given the purpose emphasised and resource restrictions, the implementation difficulties resulting from different stakeholders’ interests and possible ways to overcome these obstacles. Finally, it provides an account of current empirical evidence, pointing out mixed results stemming from difficulties in assessing the effects of such evaluation schemes on teaching quality, teachers’ motivation and student learning. It concludes by considering the circumstances under which teacher evaluation systems seem to be more effective, fair and reliable. Developing a comprehensive approach to evaluate teachers is critical to make demands for educational best practice compatible with teachers’ appropriation of the process as well as to enhance the decisive attractiveness and recognition of the teaching profession.<BR>Ce document examine les principales questions relatives à l’évaluation des enseignants du primaire et du secondaire en passant en revue la littérature récente et en analysant des pratiques actuelles au sein des pays de l’OCDE. Premièrement, il fournit un cadre conceptuel mettant en évidence les éléments clés entrant dans les processus d’évaluation des enseignants. En particulier, il souligne l’importance de clarifier les objectifs de l’évaluation, qu’ils soient de nature sommative lorsqu’ils visent à assurer que les pratiques favorisant l’apprentissage des élèves sont à l’oeuvre ou de nature formative lorsqu’ils sont conduits à des fins de formation professionnelle continue. Il comprend également les différents critères et instruments communément utilisés pour évaluer les enseignants ainsi que les acteurs généralement impliqués dans le processus et les conséquences potentielles sur la vie professionnelle des enseignants. Deuxièmement, il traite d’un certain nombre de points conflictuels, parmi lesquels la question de l’utilisation des résultats des élèves pour mesurer la performance des enseignants, les avantages et inconvénients de différentes approches compte tenu de l’objectif mis en exergue et de ressources limitées, ou encore les difficultés de mise en place résultant de divergence d’intérêts et les moyens possibles d’y remédier. Enfin, il examine l’évidence empirique sur le sujet et explique en quoi ses résultats nuancés tiennent aux difficultés d’estimer les effets de tels processus sur la qualité de l’enseignement, la motivation des personnels et l’apprentissage des élèves. Pour conclure, il considère les circonstances dans lesquelles l’évaluation des enseignants semble plus efficace, équitable et fiable. Développer une approche d’évaluation compréhensive est cruciale pour concilier les exigences d’enseignement et l’appropriation du processus par les enseignants, tout en recherchant une nécessaire amélioration de l’attractivité et de la reconnaissance du métier d’enseignant.
    Date: 2009–07–07
  27. By: Jean-Pierre Allegret (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Kosta Josifidis (Faculty of Economics Subotica - Novi Sad University); Emilija Beker Pucar (Faculty of Economics Subotica - Novi Sad University)
    Abstract: The paper explores (former) transition economies, Poland, Czech Republic, Slovakia and the Republic of Serbia, concerning abandonment of the exchange rate targeting and fixed exchange rate regimes and movement toward explicit/implicit inflation targeting and flexible exchange rate regimes. The paper identifies different subperiods concerning crucial monetary and exchange rate regimes, and tracks the changes of specific monetary transmission channels i.e exchange rate channel, interest rate channel, indirect and direct influences to the exchange rate, with variance decomposition of VAR/VEC model. The empirical results indicate that Polish monetary strategy toward higher monetary and exchange rate flexibility has been performed smoothly, gradually and planned, compared to the Slovak and, especially, Czech case. The comparison of three former transition economies with the Serbian case indicate strong and persistent exchange rate pass-through, low interest rate pass-through, significant indirect and direct influence to the exchange rate as potential obstacles for successful inflation targeting in the Republic of Serbia.
    Keywords: Exchange rate targeting; Inflation targeting; Intermediate exchange rate regimes; Monetary transmission channels
    Date: 2009
  28. By: Silvia Magri (Bank of Italy)
    Abstract: In the absence of any correlation between wealth and entrepreneurial talent, initial net wealth should have an explanatory power in the decision to become an entrepreneur only for households that are financially constrained; further, its importance should decrease with wealth. I test these theoretical predictions for the Italian case, using the Survey of Household Income and Wealth. The evidence is that household's initial wealth is indeed important in the decision to become an entrepreneur and its effect is lower for the richest households. When net wealth is instrumented, the results are similar. Furthermore, the effect of net wealth is stronger when legal enforcement of the loan contract is weaker, as also predicted by the model. Finally, conditional on becoming entrepreneurs, initial household wealth does not significantly affect the size of the business. In summary, it seems that imperfections in capital markets can induce people to accumulate assets in order to facilitate the decision to become entrepreneurs.
    Keywords: entrepreneurship, start-up businesses, household wealth
    JEL: D13 E21 L26
    Date: 2009–06

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