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on European Economics |
| By: | Guglielmo Maria Caporale; Alessandro Girardi |
| Abstract: | This paper examines the process of price discovery in the MTS system, which builds on the parallel quoting of euro-denominated government securities on a number of (relatively large) domestic markets and on a (relatively small) European marketplace (EuroMTS). Using twenty-seven months of daily data for 107 pairs of bonds, we present unambiguous evidence that trades on EuroMTS have a sizeable informational content. |
| Keywords: | MTS system, price discovery |
| JEL: | C32 G10 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp977&r=eec |
| By: | James J. Heckman; Bas Jacobs |
| Abstract: | Trends in skill bias and greater turbulence in modern labor markets put wages and employment prospects of unskilled workers under pressure. Weak incentives to utilize and maintain skills over the life-cycle become manifest with the ageing of the population. Policies to promote human capital formation reduce welfare state dependency among the unskilled and offset inefficiencies in human capital formation. Skill formation features strong dynamic complementarities over the life-cycle. Investments in the human capital of children have higher returns than investments in the human capital of older workers. There is no trade-off between equity and efficiency at early ages of human development but there is a substantial trade-off at later ages. Later remediation of skill deficits acquired in early years often does not meet the cost-benefit criterion. Positive returns to active labor market and training policies are doubtful. Skill formation is impaired when the returns to skill formation are low due to low skill use and insufficient skill maintenance later on in life. High marginal tax rates and generous benefit systems reduce labor force participation rates and hours worked and thereby lower the utilization rate of human capital. Tax-benefit systems redistribute resources from outsiders to insiders in labor markets, which can be both distortionary and inequitable. Actuarially fairer early retirement and pension schemes reduce the incentives to retire early and strengthen incentives for human capital investment by increasing the time-horizon over which returns to human capital are harvested. |
| JEL: | H2 H5 I2 I3 J2 J3 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15742&r=eec |
| By: | Jan Babecky; Philip Du Caju; Theodora Kosma; Martina Lawless; Julian Messina; Tairi Room |
| Abstract: | It has been well established that the wages of individual workers react little, especially downwards, to shocks that hit their employer. This paper presents new evidence from a unique survey of firms across Europe on the prevalence of downward wage rigidity in both real and nominal terms. We analyse which firm-level and institutional factors are associated with wage rigidity. Our results indicate that wage rigidity is related to workforce composition at the establishment level in a manner that is consistent with related theoretical models (e.g. efficiency wage theory, insider-outsider theory). We also find that wage rigidity depends on the labour market institutional environment. Collective bargaining coverage is positively related with downward real wage rigidity, measured on the basis of wage indexation. Downward nominal wage rigidity is positively associated with the extent of permanent contracts and this effect is stronger in countries with stricter employment protection regulations. |
| Keywords: | Downward nominal wage rigidity, downward real wage rigidity, wage indexation, survey data, European Union. |
| JEL: | J30 J31 J32 C81 P5 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2009/4&r=eec |
| By: | Axel H. Boersch-Supan; Alexander Ludwig |
| Abstract: | The extent of the demographic changes in Europe is dramatic and will deeply affect future labor, financial and goods markets. The expected strain on public budgets and especially social security has already received prominent attention, but aging poses many other economic challenges that threaten growth and living standards if they remain unaddressed. This paper focuses on three large Continental European countries: France, Germany, and Italy. These countries have large pay-as-you-go pension systems and vulnerable labor markets. At the same time, they show remarkable resistance against pension and labor market reform. While there is no shortage of reform proposals to address population aging, most of those focused on pension and labor market reform, little is known about behavioral reactions to such reforms. This paper therefore sheds light on the potential benefits of pension and labor market reform for growth and living standards, taking into account behavioral reactions to specific reforms. Which behavioral reactions will strengthen, which will weaken reform policies? Can Old Europe maintain its standard of living even if behavioral reactions offset some of the current reform efforts? |
| JEL: | D13 E27 F16 F21 H55 J1 J21 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15744&r=eec |
| By: | Vincent Brousseau (IESEG School of Management); Alexandre Chailloux (International Monetary Fund); Alain Durré (IESEG School of Management, LEM-CNRS (UMR 8179)) |
| Abstract: | With the onset of the financial turmoil in August 2007, pricing references on the money market interest rates have been shocked. The segment of unsecured deposit transactions, which represent the cornerstone of capital markets, and is used as basis for the setting of money market benchmark essential to the indexing of trillions of derivative contracts and loans, has been particularly damaged by the surge in counterparty risk. The lack of confidence between traders and the growing fear of counterparty’s bankruptcies have led progressively to a drying out of the unsecured market turnover. After a relative improvement in early 2008, market activity in the unsecured market has again dried up with the reinforcement of the financial crisis following the collapse of Lehman Brothers. Although there are good reasons to think that the market activity in the cash unsecured segment of the money market has remained distorted, in particular for maturities beyond the very short-term, the OIS-LIBOR spreads have been declining extremely steadily since January 2009, both in major currencies and at various maturities, seemingly pointing to a normalization of the money market. On the basis of a simple econometric supported by statistical evidence applied to the euro area date, this paper analyses whether recent developments in the unsecured interest rates actually support a diagnosis of renewed market activity, and of normalization of the unsecured market. |
| Keywords: | LIBOR, EURIBOR, secured segment, fixings, market distortions, financial crisis. |
| JEL: | G14 C02 C32 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:e200910&r=eec |
| By: | Bloom, David E.; Sousa-Poza, Alfonso |
| Abstract: | This paper focuses on possible economic consequences of low fertility in Europe. It summarizes a selection of papers that were presented at a conference at the University of St. Gallen in April 2008. This introduction also reviews the history of falling fertility in Europe and the literature that explores its causes, its potential implications, and possible policy responses. It summarizes the evolution of thinking about the relationship between population growth and economic development, with attention to recent work on the mechanisms through which fertility decline can spur economic growth if the necessary supporting conditions are met. The paper also identifies some of the challenges of population aging that are associated with low fertility and suggests that there may be less reason for alarm than has been suggested by some observers. -- |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fziddp:112010&r=eec |
| By: | Martin Berka; Michael B. Devereux |
| Abstract: | We study a newly constructed panel data set of relative prices of a large number of consumer goods among 31 European countries. We find that there is a substantial and non-diminishing deviation from PPP at all levels of aggregation, even among eurozone members. However, real exchange rates are very closely tied to relative GDP per capita within Europe, both across countries and over time. This relationship is highly robust at all levels of aggregation. We construct a simple two-sector endowment economy model of real exchange rate determination. Simulating the model using the historical relative GDP per capita for each country, we find that for most (but not all) countries there is a very close fit between the actual and simulated real exchange rate. |
| JEL: | F31 F41 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15753&r=eec |
| By: | Schaik, A.B.T.M. van; Klundert, T.C.M.J. van de (Tilburg University, Center for Economic Research) |
| Abstract: | The productivity slowdown in Europe since the mid-1990s is a reason for concern. Labour market rigidity, hampering innovation, may be a cause of the slowdown. In the paper this argument is placed in a broader perspective. Labour force participation is an important factor in explaining differences in productivity and welfare over time and across regions as can be illustrated by comparing the US and the EU-15. Moreover, technological change is not entirely exogenous. Dynamic increasing returns as introduced by Kaldor and Verdoorn may boost productivity. For countries other than the US catching up appears to be of importance. The question is then to what extent labour market institutions account for productivity growth. Regression analysis on a panel of 21 OECD countries covering the period 1960-2005 reveals that employment protection is relevant but that the impact is qualitatively different before and after 1980. The reason is that in the first sub-period technological change is driven in most countries by imitation, whereas in the second sub-period innovation becomes the predominant factor everywhere. |
| Keywords: | Labour productivity growth;catching-up;labour force participation;employment protection |
| JEL: | O43 O47 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:201006&r=eec |
| By: | Karligash Kenjegalieva (Dept of Economics, Loughborough University); Richard Simper (Dept of Economics, Loughborough University) |
| Abstract: | This paper develops a new Luenberger productivity which is applied to a technology where the desirable and undesirable outputs are jointly produced and are possibly negative. The components of this Luenberger productivity index - the efficiency change and the components of the technological shift - are then decomposed into factors determined by the technology, adjusted for ‘risk and environment’, ‘risk management’ and ‘environmental effects’. The method is applied to Central and Eastern European banks operating during 1998–2003 utilising three alternative input/output methodologies (intermediation, production and profit/revenue). Additionally, the comparative analysis of the sensitivity of the productivity indices in the choice of the methodologies is undertaken using statistical and kernel density tests. It is found that the main driver of productivity change in Central and Eastern European banks is technological improvement, which, in the beginning of the analysed period, hinged on the banks’ ability to capitalise on advanced technology and successfully take into account risk and environmental factors. Whereas, in the later sampled periods, we show that one of the most important factors of technological improvement/decline is risk management. Finally, the tests employed confirm previous findings, such as Pasiouras (2008) in this journal, that different input/output methodologies produce statistically different productivity results. Indeed, we also find that external factors, such as a risk in the economy and banking production, and a ‘corruption perception’ affect the productivity of banks. |
| Keywords: | Luenberger productivity index; DEA; banking; undesirable outputs; negative data. |
| JEL: | C14 G2 L1 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:lbo:lbowps:2010_02&r=eec |
| By: | Beck, Thorsten (Tilburg University); Kibuuka, Katie (World Bank); Tiongson, Erwin R. (Asian Institute of Management) |
| Abstract: | Household credit, especially for mortgages, has doubled over the past years in the new European Union member countries, raising concerns about the economic and social consequences of household indebtedness in the event of a macroeconomic crisis. Using household survey data for 2005, 2006, and 2007 for both old and new European Union members, this paper assesses the determinants of access to mortgage finance. It also examines whether mortgage holders were more likely to suffer financial distress compared with non-mortgage holders in the period before the global financial crisis. The analysis does not find any systematic evidence that mortgage holders are financially more vulnerable than renters or outright owners; in fact, the incidence of financial vulnerability generally fell between 2005 and 2007, possibly reflecting the strong income growth experienced by these countries over this period. In addition, although tenure status is more difficult to explain in the new European Union member countries, the analysis finds that many of the same drivers of tenure status in the older member countries generally drive tenure status in the newer member countries as well. Finally, there is no evidence that access to mortgage credit is based on expected income in the old or in the new European Union member countries. |
| Keywords: | household credit, housing finance, financial vulnerability, EU accession |
| JEL: | D14 D91 G21 R21 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4758&r=eec |