nep-eec New Economics Papers
on European Economics
Issue of 2022‒01‒03
six papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Calamities, Common Interests, Shared Identity: What Shapes Altruism and Reciprocity? By Cevat Giray Aksoy; Antonio Cabrales; Mathias Dolls; Ruben Durante; Lisa Windsteiger
  2. European economic policy and the European Green Deal: An institutionalist analysis By Treude, Sibylle
  3. Macroprudential policies and Brexit: A welfare analysis By Margarita Rubio
  4. Sovereign Risk and Intangible Investment By Minjie Deng
  5. Unconventionally green: A monetary policy between engagement and conflicting goals By Liebich, Lena; Nöh, Lukas; Rutkowski, Felix Joachim; Schwarz, Milena
  6. The Implications of Ageing for Business Dynamics By Igor Fedotenkov; Anneleen Vandeplas

  1. By: Cevat Giray Aksoy; Antonio Cabrales; Mathias Dolls; Ruben Durante; Lisa Windsteiger
    Abstract: We conduct a large-scale survey experiment in nine European countries to study how priming a major crisis (COVID-19), common economic interests, and a shared identity influences altruism, reciprocity and trust of EU citizens. We ï¬ nd that priming the COVID-19 pandemic increases altruism and reciprocity towards compatriots, citizens of other EU countries, and non-EU citizens. Priming common European values also boosts altruism and reciprocity but only towards compatriots and fellow Europeans. Priming common economic interests has no tangible impact on behaviour. Trust in others is not affected by any treatment. Our results are consistent with the parochial altruism hypothesis, which asserts that because altruism arises out of inter-group conflict, humans show a tendency to favor members of their own groups.
    Keywords: COVID-19, Europe, altruism, reciprocity, survey experiment
    JEL: D72 H51 H53 H55 O52 P52
    Date: 2021–06
  2. By: Treude, Sibylle
    Abstract: The article deals with the influence of the European Commission in the field of economic policy in the European Union (EU) since the beginning of the 21st century. Starting from reflections on the guiding idea of supranationality the question arises if and how the Commission has increased its influence on the economic policies of the EU Member States. The role of the EU's long-term strategies like the European Green Deal are analysed by applying the approach of Evolutionary Institutionalism. Has the European Commission induced institutional change and improved its own institutional fitness? Which role does the European Green Deal play in European economic policy?
    Keywords: European integration,EU,European economic policy,European Green Deal,European integration theory/approaches,Evolutionary Institutionalism
    Date: 2022
  3. By: Margarita Rubio
    Abstract: Brexit will bring many economic and institutional consequences. Among other, Brexit will have implications on financial stability and the implementation of macroprudential policies. One immediate effect of Brexit is the fact that the United Kingdom (UK) will no longer be subject to the jurisdiction of the European Supervisory Authorities (ESAs) nor the European Systemic Risk Board (ESRB). This paper studies the welfare implications of this change of regime, both for the UK and the European Union (EU). By means of a Dynamic Stochastic General Equilibrium model (DSGE), I compare the pre-Brexit scenario with the new one, in which the UK sets macroprudential policy independently. I find that, after Brexit, the UK is better off by setting its own macroprudential policy without taking into account Europe's welfare as a whole. Given the small relative size of the UK, this implies just slight welfare loss in the EU.
    Keywords: Brexit, macroprudential policy, DSGE, welfare
    Date: 2021
  4. By: Minjie Deng (Simon Fraser University)
    Abstract: This paper measures the output and TFP costs of sovereign risk incorporating its impact on firm intangible investment. Using Italian firm-level data, we show that firms reallocated from intangible assets to tangible assets during the recent sovereign debt crisis. This asset reallocation is more pronounced among small firms and high-leverage firms. We build a sovereign default model incorporating both firm tangible and intangible investment to explain the empirical findings. In our model, sovereign risk deteriorates bank balance sheets, disrupting banks’ ability to finance firms. Firms with greater external financing needs are more exposed to sovereign risk. Facing tightening financial constraints, firms internalize that tangible assets can be used as collateral while intangibles cannot, thus reallocating resources towards tangible investment to offset tightening financial conditions. In a counterfactual analysis, we find that elevated sovereign risk explains 86% of the observed output losses and 72% of TFP losses during the 2011-2013 Italian sovereign debt crisis.
    Date: 2021–12
  5. By: Liebich, Lena; Nöh, Lukas; Rutkowski, Felix Joachim; Schwarz, Milena
    Abstract: In light of its recently completed strategy review, the ECB has presented a climate action plan, which schedules the consideration of climate criteria within the corporate sector purchase program (CSPP). We study the potential role of the ECB in supporting the transition to a low-carbon economy by decarbonizing the CSPP. We demonstrate that the carbon intensity of CSPP purchases is basically determined by three factors: First, by the CSPP-eligibility criteria as these tend to exclude bonds from low-emission sectors. Second, by the underlying structure of the bond market as this tends to be skewed towards carbon-intensive sectors. Third, among the eligible bonds, the ECB tends to select those from relatively emission-intensive sectors. Consequently, to decarbonize the CSPP, the ECB can theoretically act along these three lines. That is: Adjust the CSPP-eligibility criteria to expand the range of eligible low-carbon assets. Revise the principle of market neutrality to tilt the CSPP portfolio towards low-carbon companies. Or purchase so far neglected low-carbon bonds within the current eligibility and market neutrality framework. We analyze chances and discuss risks with regard to all three options. As we find that all approaches to decarbonize the CSPP have either very limited effects on the carbon intensity of the CSPP portfolio or are associated with significant theoretical and practical concerns, we conclude that the contributions to the success of an active green monetary policy that goes beyond the principle of market neutrality are not guaranteed, while at the same time risks arise for a monetary policy oriented towards price level stability. In contrast, by linking the CSPP to climate-related disclosures, the ECB can contribute to increased transparency and improved risk management and has an important and potentially climate-effective lever in hand that is independent of revising the principle of market neutrality.
    Date: 2021
  6. By: Igor Fedotenkov; Anneleen Vandeplas
    Abstract: This paper studies the link between the demographic structure of populations and firm entry rates in the European Union. We find that firm entry rates have a hump-shaped relationship with human demography, with the 40-54 age group having the strongest positive impact on firm entry. Potential mechanisms through which this relationship may arise include labour market participation, demand and access to entrepreneurship (linked with experience and access to finance). Perhaps more surprisingly, firm entry again picks up with generations aged 80 and over expanding. This could relate to the fact that a larger 80+ age cohort reflects greater longevity, which in turn increases savings, reduces interest rates and therefore increases availability of external financing. When controlling for life expectancy and interest rates, the coefficient corresponding to the 80+ age cohort sharply declines and becomes insignificant. Based on the results of the analysis, we assess the implications of our results for firm entry rates by 2025 and 2030, using UN population projections.
    Keywords: Firm entry rates, demographic structure, longevity
    JEL: D22 J11 J15 L29 M13
    Date: 2021

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