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on European Economics |
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Issue of 2020‒12‒21
fifteen papers chosen by Giuseppe Marotta Università degli Studi di Modena e Reggio Emilia |
| By: | Dolls, Mathias; Fuest, Clemens; Peichl, Andreas; Wittneben, Christian |
| Abstract: | We analyze how the combined effect of automatic stabilizers and discretionary changes in tax-benefit systems have affected the cushioning of income shocks in the Euro zone and the EU-27 in the period 2007–2014. We propose a new summary measure of the combined effect of automatic stabilizers and discretionary policy changes based on micro data and counter-factual simulation. Discretionary fiscal policy supported the effects of automatic stabilizers in the years 2008 and 2009 but then became much more restrictive. For the Euro zone as a whole, the share of income shocks absorbed by the tax and transfer system declined from 48 percent in 2008 to 24 percent in 2011. For some of the countries most affected by the crisis, the stabilization effect was even negative in some years of the crisis, implying that the tax and transfer system amplified income shocks. We also compare our measure of stabilization to estimates based on macro data. |
| Date: | 2020–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em19-20&r=all |
| By: | Hamza Bennani; Matthias Neuenkirch |
| Abstract: | We estimate a logit mixture vector autoregressive model describing monetary policy transmission in the euro area over the period 2003Q1–2019Q4 with a specialemphasis on credit conditions. With the help of this model, monetary policy trans-mission can be described as mixture of two states (e.g., a normal state and a crisisstate), using an underlying logit model determining the relative weight of thesestates over time. We show that shocks to the credit spread and shocks to creditstandards directly lead to a reduction of real GDP growth, whereas shocks to thequantity of credit are less important in explaining growth fluctuations. Creditstandards and the credit spread are also the key determinants of the underlyingstate of the economy in the logit submodel. Together with a more pronouncedtransmission of monetary policy shocks in the crisis state, this provides further ev-idence for a financial accelerator in the euro area. Finally, the detrimental effect ofcredit conditions is also reflected in the labor market. |
| Keywords: | Credit growth, credit spread, credit standards, euro area, financial accelerator, mixture VAR, monetary policy transmission. |
| JEL: | E44 E52 E58 G21 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:trr:qfrawp:202008&r=all |
| By: | Thomas Blanchet (PSE - Paris School of Economics, WIL - World Inequality Lab , PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Lucas Chancel; Amory Gethin (PSE - Paris School of Economics, WIL - World Inequality Lab , PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We combine all available household surveys, income tax and national accounts data in a systematic manner to produce comparable pretax and posttax income inequality series in 38 European countries between 1980 and 2017. Our estimates are consistent with macroeconomic growth rates and comparable with US Distributional National Accounts. We find that inequalities rose in most European countries since 1980 both before and after taxes, but much less than in the US. Between 1980 and 2017, the European top 1% pretax income share rose from 8% to 11% while it rose from 11% to 21% in the US. Europe's lower inequality levels are mainly explained by a more equal distribution of pretax incomes rather than by more equalizing taxes and transfers systems. "Predistribution" is found to play a much larger role in explaining Europe's relative resistance to inequality than "redistribution": it accounts for between two-thirds and |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wilwps:halshs-03022133&r=all |
| By: | Di Nino, Virginia; Veltri, Bruno |
| Abstract: | Containment measures of COVID-19 have generated a chain of supply and demand shocks around the globe with heterogeneous fallout across industries and countries. We quantify their transmission via foreign trade with a focus on the euro area where deep firms integration within regional supply chains and strong demand linkages act as a magnification mechanism. We estimate that spillover effects in the euro area from suppression measures in one of the five main euro area countries range between 15-28% the size of the original shock; negative foreign demand shocks depress euro area aggregate activity by about a fifth the size of the external shock and a fourth of the total effect is due to indirect propagation through euro area supply chain. Last, reopening to regional tourism softened the contraction of aggregate activity due to travel and tourism bans by about a third in the euro area. Our findings suggest that enhanced coordination of recovery plans would magnify their beneficial effects. |
| Keywords: | COVID-19,supply networks,GVCs,euro area foreign trade |
| JEL: | F14 F23 F40 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwhcom:42020&r=all |
| By: | Amélie Barbier-Gauchard (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Meixing Dai (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Claire Mainguy (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jamel Saadaoui (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Moïse Sidiropoulos (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Isabelle Terraz (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jamel Trabelsi (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | The pandemic crisis constitutes an unprecedented challenge for the European Union and for the Euro Area. Indeed, European institutional architecture can be viewed as being half-way between an association of sovereign states (like the United Nations, for example) and a politically integrated federation (like the United States for example). In this original construction, competences on several matters (such as economic, political, social and health issues, etc.) are shared at the European level, but also at the national and local levels in more complex ways than in fully integrated federations. To improve the resilience of the European Union to violent external shocks, the main objective of this paper is to determine to what extent these competences have to be transferred to the federal level. In this respect, we will consider whether a federal leap is necessary in several areas namely (i) monetary and fiscal policy (rules), (ii) labor markets policy and social models, migratory flows and skill shortages, and cooperation policy and (iii) renewed industrial policy and exchange rates. Despite a highly uncertain context, we outline some perspectives for the future of the European Union. |
| Keywords: | European Union,Pandemic Crisis,Economic Policy,Resilience |
| Date: | 2020–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03008144&r=all |
| By: | Oscar Claveria |
| Abstract: | This paper examines the evolution of business and consumer uncertainty amid the coronavirus pandemic in 32 European countries and the European Union (EU).Since uncertainty is not directly observable, we approximate it using the geometric discrepancy indicator of Claveria et al. (2019).This approach allows us quantifying the proportion of disagreement in business and consumer expectations of 32 countries.We have used information from all monthly forward-looking questions contained in Joint Harmonised Programme of Business and Consumer Surveys conducted by the European Commission (the industry survey, the service survey, the retail trade survey, the building survey and the consumer survey).First, we have calculated a discrepancy indicator for each of the 17 survey questions analysed, which allows us to approximate the proportion of uncertainty about different aspects of economic activity, both form the demand and the supply sides of the economy.We then use these indicators to calculate disagreement indices at the sector level.We graphic the evolution of the degree of uncertainty in the main economic sectors of the analysed economies up to June 2020.We observe marked differences, both across variables, sectors and countries since the inception of the COVID-19 crisis.Finally, by adding the sectoral indicators, an indicator of business uncertainty is calculated and compared with that of consumers.Again, we find substantial differences in the evolution of uncertainty between managers and consumers.This analysis seeks to offer a global overview of the degree of economic uncertainty in the midst of the coronavirus crisis at the sectoral level. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2012.02091&r=all |
| By: | Amelie Barbier-Gauchard (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Kea Baret (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Alexandru Minea (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Motivated by the fiscal imbalances in the EU countries in the recent period, this paper analyzes the effect of national fiscal rules on fiscal discipline. Using a careful definition of national fiscal rules combined with a novel measure of fiscal discipline (the Global Financial Performance Index-GFPI), propensity score matching estimations that account for potential endogeneity reveal that fiscal rules significantly improve the GFPI. However, this favorable effect dramatically depends upon the type of fiscal rule and different structural factors. These two features, together with alternative measures of fiscal discipline, are found to be key ingredients that should be taken into account when assessing the effects of fiscal rules on fiscal discipline. |
| Keywords: | Fiscal Discipline,National Fiscal Rules,Propensity Score Matching |
| Date: | 2020–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02992219&r=all |
| By: | Vincenzo Alfano (Università di Napoli Federico II); Salvatore Capasso (Università di Napoli Parthenope, Institute for Studies on the Mediterranean (ISMed) - CNR and CSEF, Italy); Valerio Filoso (Università di Napoli Federico II) |
| Abstract: | This paper investigates the quality of governance in the European geographical area for the period 1995–2019 employing the six World Governance Indicators (The World Bank, 2020): control of corruption, government effectiveness, political stability and absence of violence/terrorism, rule of law, regulatory quality, voice and accountability. With regard to EU membership, we partition countries into three blocks: Historical Members, Entrants, and Outsiders. We check systematic differences, static and dynamic, between the three blocks to verify whether EU membership makes a difference. Results highlight a complex scenario: while statically Historical Members outperform Entrants and Entrants outperform Outsiders on all six dimensions, dynamically we find club convergence in growth rates for all variables across the three blocks. Historical Members stand in a high equilibrium club, except for Greece. In a single case, we even observe absolute convergence for a low club of voice and accountability. Several Outsiders stand consistently either in the high or the low club, while Entrants vary widely in their performances. The remote determinants of governance’s quality are very difficult to identify because cultures, institutions and economies interact in complex and unexpected ways; moreover, natural experiments of EU memberships do not exist, so we cannot establish causal effects in the strictest sense. Nonetheless, for the first time, we establish a clear picture of all main dimensions of government’s quality for the European area, achieving at least a number of robust empirical facts which can be used by scholars, policymakers, and European administrators. |
| Keywords: | Quality of government, The European Union, Public institutions, Club convergence analysis. |
| JEL: | H11 H77 O52 |
| Date: | 2020–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:592&r=all |
| By: | Florin O. Bilbiie; Tommaso Monacelli; Roberto Perotti |
| Abstract: | We discuss the main fiscal policy issues in the Eurozone. Our goal is pedagogical: we do not make any new proposal, but try to represent fairly the various sides of the debate. We focus on two issues that are at the core of the current debate. The first is that, right from the start, the government deficit and debt were the key objects of contention in the debate that led to the creation of the Eurozone - and they still are, although the reasons have changed. The second, obvious issue is that a currency union implies the loss of a country-specific instrument, a national monetary policy. This puts a higher burden on fiscal policy as a tool to counteract shocks., a burden that might be even heavier now that the European Central Bank has arguably reached the Zero Lower Bound. Two obvious solutions are mutual insurance between countries; and a centralized stabilization policy. Yet both have been remarkably difficult to come by. We argue that the main reason is fear of persistent, unidirectional transfers between countries, an issue that largely reflects a Northern vs. Southern Europe divide. |
| JEL: | E62 E63 F45 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28117&r=all |
| By: | Enrique López-Bazo (AQR-IREA, University of Barcelona) |
| Abstract: | Cohesion Policy is the main policy tool of the European Union and the backbone of its regional policy. Given its characteristics, it is the EU policy with the greatest impact on the daily life of European citizens and can compensate population groups and places less favoured by the European integration process. As a result, the implementation of Cohesion Policy in a region is expected to shape the degree of regional support for the process of European integration. This study tests this assumption using regional data for the EU28 in a period that includes the recent phases of expansion and recession, in a scenario characterized by growing anti-EU rhetoric. The results suggest that a greater amount of EU funds spent in the region does not stimulate regional support for the Union. However, an appropriate temporal distribution of the resources allocated to the region could have a positive effect on support. |
| Keywords: | Cohesion policy, Regional policy, Attitudes towards the EU, Structural funds, EU regions. JEL classification: H54, 018, R10, R58. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:aqr:wpaper:202008&r=all |
| By: | Gábor Márk Pellényi |
| Abstract: | This paper examines the role of Central Eastern European economies within global value chains. Occupation-level employment data are combined with an input-output model to analyse the types of jobs sustained by exporting industries. Based on its initial comparative advantage of low wages, the region remains specialised in fabrication tasks, which limits the domestic value added content of exports. Functional upgrading – the acquisition of more sophisticated service tasks within firms – could improve value capture, but it progressed slowly between 2011-2018. It could be boosted by raising the supply of high-skilled workers and improving local R&D and innovation capabilities. |
| Keywords: | value chain, Central Eastern Europe, upgrading, value capture, input-output model, The Role of Central and Eastern Europe in Global Value Chains: Evidence from Occupation-Level Employment Data, Pellényi |
| JEL: | F16 F23 F66 J24 O11 O14 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecobri:062&r=all |
| By: | Violaine Faubert |
| Abstract: | Contrary to the predictions of a traditional Phillips curve relationship, inflation in Ireland has remained subdued in recent years, regardless of improving labour market conditions before the covid-19 outbreak. To examine this apparent puzzle, we test econometrically the relevance of the Phillips curve in Ireland between 1999 and 2018. Linear regressions provide robust evidence that inflation does react to cyclical conditions both in Ireland and in its main trading partners. We also find that inflation dynamics are largely imported, in particular through imports from the UK. Low import prices have partly offset the upward pressures exerted by cyclical variables and contributed to the subdued inflation observed in recent years. We also investigate whether the Irish Phillips curve may be non-linear. We find some evidence that the Phillips curve is flatter when there are high excess capacities and turns steeper as economic slack is eliminated. However, when comparing different specifications on the basis of their pseudo out-of-sample forecasting performance, we find that non-linear specifications do not systematically outperform linear specifications. |
| JEL: | E31 E37 C22 C24 C50 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:euf:dispap:133&r=all |
| By: | Alessandro Maravalle; Łukasz Rawdanowicz |
| Abstract: | This paper proposes an approach to assess the extent of automatic fiscal stabilisation of aggregate household disposable income after a specific shock. The approach is based on the national account identity of household disposable income and elements of the OECD methodology to cyclically adjust budget balances. In a stylised scenario assuming a decline in household market income, automatic stabilisers in 23 OECD countries are found to offset on average around 60% of the shock on impact. Direct taxes provide larger stabilisation than social benefits and social security contributions. There are important differences in the effectiveness of automatic stabilisers across the OECD countries. They mainly reflect non-linear interactions among the size of a specific automatic stabiliser, the elasticity of the automatic stabiliser with respect to a relevant economic variable and the specific shock scenario analysed. |
| Keywords: | automatic fiscal stabilisers, cyclical adjustment of government budget balances, fiscal policy, household disposable income |
| JEL: | H31 H6 E63 E32 |
| Date: | 2020–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1635-en&r=all |
| By: | Assaf Razin |
| Abstract: | The paper compares migration policy and welfare state generosity between America and Europe. There is more selective skill-based migration policy in the US compared to the European Union. Policy coordination among states within the federal system on migration, taxes, and social benefits among states within the US federal system is stronger than among countries within the European Union. Fiscal externality, triggered by migration and tax competition among members of the federal system may explain in part these US-Europe differences in policies. |
| JEL: | F0 H0 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28126&r=all |
| By: | Peter Tillmann (Justus-Liebig-University Giessen) |
| Abstract: | The decision-making process in the ECB’s Governing Council remains opaque as the ECB, in contrast to many other central banks, does not publish the votes for or against a policy proposal. In this paper, we construct an index of dissent based on the ECB presidents’ answers to journalists’ questions during the press conference following each meeting. This narrative account of dissent suggests that dissenting votes are cast frequently. We show that dissent weakens the response of long-term interest rates to policy surprises and thus affects the monetary transmission mechanism. The yield response is significantly stronger under unanimity. This result becomes stronger if we exclude meetings with serial dissent or exclude the period of open-end Forward Guidance. Controlling for newspaper reporting about tensions in the Governing Council leaves the results unchanged. |
| Keywords: | event studies, monetary policy shock, monetary policy committee, disagreement |
| JEL: | E42 E43 E58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:202048&r=all |