nep-eec New Economics Papers
on European Economics
Issue of 2009‒09‒05
twelve papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Shocking aspects of monetary integration (SVAR approach) By Mirdala, Rajmund
  2. Intraday price formation and volatility in the European Union emissions trading scheme: an introductory analysis By Rotfuß, Waldemar
  3. EU-type carbon emissions trade and the distributional impact of overlapping emissions taxes By Thomas Eichner; Rüdiger Pethig
  4. Going Separate Ways? School-to-Work Transitions in the United States and Europe By Glenda Quintini; Thomas Manfredi
  5. Common corporate tax base (CCTB) and effective tax burdens in the EU member states By Oestreicher, Andreas; Reister, Timo; Spengel, Christoph
  6. Outsourcing Motives, Location Choice and Labour Market Implications: An Empirical Analysis for European Countries By Marcus Neureiter; Peter Nunnenkamp
  7. The effects of privatization and consolidation on bank productivity: comparative evidence from Italy and Germany By Fiorentino, Elisabetta; Vincenzo, Alessio De; Heid, Frank; Karmann, Alexander; Koetter, Michael
  8. The Dynamic Interrelations between Unequal Neighbors: An Austro-German Case Study By Klaus Prettner; Robert M. Kunst
  9. Specialized search and innovation performance: evidence across Europe By Sofka , Wolfgang; Grimpe, Christoph
  10. Retirement behaviour and retirement incentives in Spain By Raquel Vegas; Isabel Argimón; Marta Botella; Clara I. González
  11. Do small family businesses have a peculiar attitude toward growth? Evidence from French SMEs. By Anaïs Hamelin
  12. Aging and the Financing of Social Security in Switzerland By Christian Keuschnigg; Mirela Keuschnigg; Christian Jaag

  1. By: Mirdala, Rajmund
    Abstract: One of the most challenging areas relating to the European Monetary Union (EMU) enlargement is the question of new member countries’ vulnerability to exogenous shocks related to euro adoption. Even if well prepared, and also considering the business cycles of the EMU candidate countries became more correlated as the result of persisting convergence toward the old EU member countries, their real output will be still vulnerable to the exogenous structural disturbances. The responsiveness of the new EMU member countries’ real output to the exogenous shocks may of course differ in intensity and durability. If we also assume a possibly low shocks correlation in these countries, the overall short-term wealth effect of the EMU membership may be rather low or even negative at all. In the paper we analyze the impact of three common exogenous structural shocks on the real output development in the new EMU member countries (Cyprus, Malta, the Slovak Republic and Slovenia) in the period 1999-2008 using SVAR (structural vector autoregression) approach. In order to meet this objective we decompose the variability of the real GDP in these countries to permanent and temporary shocks (we assume three types of shocks - nominal (liquidity), demand and supply shocks). Impulse-response functions will be also computed so that we can estimate the behaviour of the real output after structural one standard deviation innovations. The relevant outcomes of the analysis we compare with the results of the tests for the whole euro area (represented here by old EU member countries - EU-12 group). This approach helps us to understand the common as well as differing features of the real output determination in the new EMU member countries and old EU member countries.
    Keywords: exogenous shocks; real output; structural vector autoregression; variance decomposition; impulseresponse function
    JEL: C32 E52
    Date: 2009–06
  2. By: Rotfuß, Waldemar
    Abstract: This paper presents an introductory analysis of price formation and volatility in the European Union Emissions Trading Scheme using highfrequency data. The results show that there are several anomalies both in the EUA spot and EUA futures market. First, price formation seems to take place on price sets that are coarser than those offered by the exchanges. Second, price formation in the EUA spot market (BlueNext) may be strongly affected by the price formation in the EUA futures market (ICE Futures). The typical U-shaped pattern of intraday volatility, that is often observed in organized financial markets, is partly present in the EUA futures market. Similar to other classical financial markets, realized volatility estimates of daily EUA volatility seem to have a long-memory property.
    Keywords: EUA,EU ETS,Intraday Price Formation,Realized Volatility
    JEL: D43 G13 Q59
    Date: 2009
  3. By: Thomas Eichner; Rüdiger Pethig
    Abstract: The European Union fulfills its emissions reductions commitments by means of an emissions trading scheme covering some part of each member state’s economy and by national emissions control in the rest of their economies. The member states also levy energy/emissions taxes overlapping with the trading scheme. Restricting our focus on cost-effective policies, this paper investigates the distributive consequences of increasing the overlapping emissions tax that is uniform across countries. For quasi-linear utility functions and for a class of parametric utility and production functions emissions tax increases turn out to be exactly offset by permit price reductions. As a consequence permit-exporting [permit-importing] countries lose [gain] from an increase in the emissions tax. These results are not general, however. By means of a numerical example we show that export-import reversals and welfare reversals are possible.
    Keywords: emissions taxes, emissions trading, international trade
    JEL: H21 H22 Q56
    Date: 2009
  4. By: Glenda Quintini; Thomas Manfredi
    Abstract: This paper derives school-to-work transition pathways in the United States and Europe between the late 1990s and the early 2000s. To do so, it uses Optimal Matching, a technique developed to sequence DNA. The key advantage of using this technique is that, rather than focusing on a specific point in time or a single destination, such as employment, inactivity or unemployment, they convey information on all activities undertaken by youth over the transition period, their sequence and their persistence. Strong similarities are found between the United States and Europe. However, pathways in the United States are characterised by significantly more dynamism than in Europe: youth in employment tend to change jobs more frequently while inactive or unemployed youth are more likely to experience several short spells rather than a single long one. School-to-work transition pathways in the United States also involve less time spent in unemployment than in Europe. The share of school-leavers involved in pathways dominated by employment is larger in the United States than in Europe and non-employment traps are less frequent in the United States. The most successful European countries in terms of school-to-work transitions are those where apprenticeships are widespread. On the other hand, European countries with a high incidence of temporary work among youth have a significantly smaller share of youth belonging to pathways dominated by employment and a larger share of youth in pathways characterised by frequent job changes separated by long unemployment spells. At the individual level, qualifications, gender, ethnicity and motherhood are found to influence the probability of disconnecting from the labour market and education for a prolonged period of time. Overall, the analysis shows the potential of Optimal Matching as a descriptive tool for the study of school-to-work transitions. It also tentatively explores how pathways obtained through Optimal Matching could be used for further analysis to draw policy-relevant conclusions. At present, data availability appears to be the main barrier to fully exploiting this novel technique.<BR>Cet article analyse les trajectoires de transition de l’école à l’emploi aux États-Unis et en Europe entre la fin des années 1990 et le début des années 2000. Pour ce faire, il utilise « l’Optimal Matching », une technique développée pour l’analyse des séquences d’ADN. Le principal atout de cette technique est qu’au lieu de se concentrer sur un moment spécifique ou sur une seule activité, telle que l’emploi, l’inactivité ou le chômage, elles véhiculent de l’information sur toute les activités entreprises par les jeunes pendant la période de transition, leur chronologie et leur persévérance. On constante de nombreuses similarités entre les États-Unis et l’Europe. Toutefois, les trajectoires aux États-Unis sont caractérisées par beaucoup plus de dynamisme qu’en Europe : les jeunes occupés ont tendance à changer d’emploi plus fréquemment et les épisodes de chômage sont plus souvent cours et répétés que de longue durée. Les trajectoires de transition de l’école à l’emploi aux États-Unis sont aussi caractérisées par moins de temps passé au chômage qu’en Europe. La proportion de jeunes quittant l’école qui entame des trajectoires dominées par l’emploi est plus importante aux États-Unis qu’en Europe et les pièges du non-emploi sont moins fréquents aux États-Unis. Les pays européens les plus performants en termes de transitions de l’école à l’emploi sont ceux où l’apprentissage est le plus répandu. D’autre part, les pays européens à forte incidence de l’emploi temporaire parmi les jeunes, présentent une part plus faible de jeunes dans les trajectoires dominées par l’emploi et une part plus importante de jeunes dans les trajectoires marquées par plusieurs changements d’emploi séparés par de longs épisodes de chômage. Au niveau individuel, le niveau de qualification, le sexe, l’origine ethnique et la maternité influencent la probabilité de se déconnecter du marché du travail et du système éducatif pour une période prolongée. Globalement, l’analyse montre le potentiel de l’Optimal Matching comme outil descriptif dans l’étude des transitions de l’école à l’emploi. Cet article tente également d’utiliser les trajectoires obtenues avec l’application de l’Optimal Matching pour en tirer des conclusions politiques. La disponibilité de données est actuellement la principale barrière à l’exploitation à part entière de cette nouvelle technique.
    JEL: J21 J22 J64
    Date: 2009–08–20
  5. By: Oestreicher, Andreas; Reister, Timo; Spengel, Christoph
    Abstract: The article assesses the impact of a Common Corporate Tax Base (CCTB) as promoted by the European Commission and the related Working Groups on the effective tax burdens of companies in all 27 EU member states. The results shall help to evaluate the economic consequences of introducing a harmonized set of tax accounting rules for EU-based companies. The proposals for a CCTB covered here include depreciation on intangibles, machinery, buildings, furniture and fixture, simplified valuation of inventories, determination of production costs for stocks, treatment of costs for R&D as part of production costs, provisions for future pension payments, provisions for legal obligations, avoidance of double taxation regarding dividend income, and loss relief. The proposed options for a CCTB are applied for average EU-27 corporations of different size as well as for model companies belonging to different economic sectors.
    Keywords: European Taxation,Tax Harmonization,Tax Accounting,Effective Tax Burdens
    JEL: H20 H21 H25 K34
    Date: 2009
  6. By: Marcus Neureiter; Peter Nunnenkamp
    Abstract: We use data on motives of international outsourcing and location choices from a recent survey of European companies to assess the labour market repercussions at home. Employing Tobit models we differentiate between job losses as well as job creation for high and low skilled employees at the sector level in ten European home countries. Our findings are in conflict with public concerns about adverse employment effects resulting primarily from cost-oriented sourcing in low wage locations. The quantitative impact on job losses remains modest in the case of cost-saving motives. The simple divide between low and high wage locations hides substantial heterogeneity within both groups. We also find that job losses are typically compensated partly by new job creation, particularly for high skilled workers
    Keywords: outsourcing, outward FDI, motives, location choice, job loss, job creation, (un)skilled labour
    JEL: F23 J21
    Date: 2009–08
  7. By: Fiorentino, Elisabetta; Vincenzo, Alessio De; Heid, Frank; Karmann, Alexander; Koetter, Michael
    Abstract: The Italian and German banking systems shared similar characteristics early in the 1990s but have evolved in different directions since then: Italy privatized its publicly-owned banks while Germany has maintained a large share of state-owned savings banks. Contemporaneously, banks in both markets engaged heavily in mergers and acquisitions. We analyze how these activities have affected banks' productivity in the period 1994-2004, differentiating between technical change, efficiency change and scale economies. We find that privatized banks experienced a significant increase in productivity, especially if they subsequently merged with other banks. German banks were still able to increase their productivity through consolidation.
    Keywords: Banking market integration,deregulation,total factor productivity,Italy,Germany
    JEL: D24 G21 G28 L33
    Date: 2009
  8. By: Klaus Prettner; Robert M. Kunst
    Abstract: This article investigates the effects and transmission channels of shocks between two asymmetric neighboring countries. In particular, we investigate Austria and Germany which are highly integrated due to their common language and common membership of the European Monetary Union. Generalized impulse response functions reveal that there are large and significant effects of shocks to the German economy on Austria. In contrast, the effects of shocks to the Austrian economy on Germany are barely significant and if they are, their magnitude is comparatively small. Furthermore we can show that multiplier effects are present in Germany but not in Austria and we identify hysteretic properties in Austrian unemployment.
    JEL: C32 C53 F41
    Date: 2009–08
  9. By: Sofka , Wolfgang; Grimpe, Christoph
    Abstract: Searching for external knowledge has frequently been characterized as crucial for firm success. However, little is known about how the direction of search strategies influences innovation performance. In this paper, we argue that firms need to specialize their search strategy and that its effectiveness is moderated by R&D investments and potential knowledge spillovers from a firm's environment. Based on a sample of more than 5,000 firms from five European countries, our results show that being open for innovation generally pays off. However, both moderating factors have a crucial role to play: On the one hand, in-house R&D investments are most effective when combined with a market-oriented search strategy. On the other hand, a technologically advanced environment requires firms to reach out to scientific knowledge sources in order to access novel knowledge and to enhance innovation performance. We develop targeted management recommendations based on these results.
    Keywords: Open innovation,search strategies,innovation management
    JEL: L60 O32
    Date: 2009
  10. By: Raquel Vegas (FEDEA); Isabel Argimón (Banco de España); Marta Botella (Banco de España); Clara I. González (FEDEA)
    Abstract: In this paper we analyse the role that Social Security wealth and incentives play in the transition to retirement in Spain. We use the labour records and other relevant information contained in a newly released database [Muestra Continua de Vidas Laborales (2006)] to construct incentive measures stemming from the Social Security provisions in relation to retiring at old age and investigate the role played by such incentives and by other socio-economic variables on the retirement hazard. We compute the effects of the reform that took place in 2002, which made the requirements to access a pension stricter in general. We carry out a dynamic reduced-form analysis of the retirement decision using a duration model. Our results show that both the pension wealth and substitution effects have a significant role on retirement decisions, but that the latter has less relevance since the reform introduced in 2002.
    Keywords: older workers employment, retirement, public pensions
    JEL: J14 J26
    Date: 2009–07
  11. By: Anaïs Hamelin (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels and LaRGE, Institut d’Etudes Politiques, Université de Strasbourg, France.)
    Abstract: This paper uses a very large sample of French SMEs to study growth of family owned firms. Firms range from total-family to minority control. The estimated relationship accounts for firm characteristics of size and, age, sector, and financial solvency. The results show that firms with greater family control are prone to exhibit lower rates of sales growth than feasible, given financial performance. Because firm growth is limited not by financing constraints but by family-related attitudes, increasing firm growth requires policies that shape incentives in small family businesses.
    Keywords: Small Business, Family control, Growth, Sustainable growth, Capital budgeting.
    JEL: G31 G32 M13 M21
    Date: 2009–08
  12. By: Christian Keuschnigg; Mirela Keuschnigg; Christian Jaag
    Abstract: This paper studies the quantitative impact of aging on the financing of social security and the public sector in Switzerland. Demographic projections forecast a doubling of the dependency ratio until 2050 as well as an increase of 10% in total population due to longer life expectancy. We use a computational growth model with overlapping generations, including labor market adjustment on five different behavioural margins: labor market participation, hours worked, job search, retirement, and on-the-job training. Starting with a passive fiscal strategy, our simulations show that a doubling of the old age dependency ratio might reduce per capita income by more than 20 percent and necessitate a long-run increase of wage taxes and social security contributions by 21 percentage points. A comprehensive reform package, including an increase in the effective retirement age to 68 years and several other measures, may limit the increase of the tax burden to 4 percentage points of the value added tax and reduce the decline of per capita income to 6% in the long-run. firms typically have a high growth potential, need external funds to finance investment, and rely on the key effort and know-how of inside entrepreneurs. Given the limited amount of tangible assets and the non-contractible nature of entrepreneurial effort, these firms are often financially constrained. Access to external funds becomes an important factor in the expansion of innovative industries. This paper models a two sector economy of innovative and standard industries and shows how the pattern of comparative advantage is shaped by factor endowments and variables relating to corporate finance. In particular, a larger equity ratio of young entrepreneurial firms and tough corporate governance standards relax the financing constraints and create a comparative advantage in innovative industries.
    Keywords: Aging, social security, retirement, human capital, unemployment
    JEL: D58 D91 H55 J26 J64
    Date: 2009–09

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