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on European Economics |
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Issue of 2024‒08‒19
forty-nine papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Jens Christensen; Sarah Mouabbi |
| Abstract: | The so-called equilibrium or natural rate of interest, widely known as rt*, is a key variable used to judge the stance of monetary policy. We offer a novel euro-area estimate based on a dynamic term structure model estimated directly on the prices of bonds with cash flows indexed to the euro-area harmonized index of consumer prices with adjustments for bond-specific risk and real term premia. Despite a recent increase, our estimate indicates that the natural rate in the euro area has fallen about 2 percentage points on net since 2002 and remains negative at the end of our sample. We also devise a related measure of the stance of monetary policy, which suggests that monetary policy in the euro area was not accommodative at the height of the COVID-19 pandemic. |
| Keywords: | Affine Arbitrage-free Term Structure Model, Financial Market Frictions, Convenience Premium, Monetary Policy, Rstar |
| JEL: | C32 E43 E52 G12 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:948 |
| By: | Stéphane Lhuissier; Aymeric Ortmans; Fabien Tripier |
| Abstract: | We introduce an approach to measure the risk of inflation dispersion among euro area countries. Our measure reflects the dissimilarity between the full predictive inflation distributions of member countries, and thus captures how "far" apart inflation levels are expected to be. The risk of inflation dispersion exhibits a countercyclical behavior along the business cycle. We document that the rising risk of inflation dispersion is mainly driven by a deterioration in financial conditions, while a robust anchoring of inflation expectations in each country tends to mitigate this risk. We further demonstrate that our measure has predictive power for future euro area inflation realizations as well as for variations in the monetary authority's interest rate. |
| Keywords: | Inflation Dispersion, Kullback-Leibler, Euro area, Quantile Regression, Phillips Curve |
| JEL: | D80 E31 E58 F45 G12 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:954 |
| By: | Fernando Cerezo (BANCO DE ESPAÑA); Pablo Girón (BANCO DE ESPAÑA); María T. González-Pérez (BANCO DE ESPAÑA); Roberto Pascual (BANCO DE ESPAÑA) |
| Abstract: | This paper studies the impact of the sovereign bond purchase programmes implemented by the ECB since 2014, focusing on the dynamics of Spain to Portugal’s sovereign bond yield spread. The analysis confirms that, although fundamental fiscal, macroeconomic, and financial factors effectively explain the bond yield spread dynamics for most of the period, the ECB asset purchase programmes and the stock of long-term debt outstanding in bonds in both countries contribute to explaining the bond yield spread dynamics observed since 2020. |
| Keywords: | bond yield differentials, asset purchase programmes, quantitative easing, quantitative tightening, credit risk, liquidity risk, Eurosystem |
| JEL: | E43 E51 E58 C3 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2422 |
| By: | Behn, Markus; Forletta, Marco; Reghezza, Alessio |
| Abstract: | Using granular data from the European corporate credit register, we examine how increases in macroprudential capital buffer requirements since the pandemic have affected bank lending behaviour in the euro area. Our findings reveal that, for the average bank, the buffer requirement increases did not have a statistically significant impact on lending to non-financial corporations. Furthermore, while we document relatively slower loan growth for banks with less capital headroom, also these banks did not decrease lending in absolute terms in response to higher requirements. These findings are robustin various specifications and emerge for both loan growth at the bank-firm level and the propensity to establish new bank-firm relationships. At the firm level, we document some heterogeneity depending on firm type and firm size. Firms with a single bank relationship and small and micro enterprises experienced a relative reduction in lending following buffer increases, although substitution effects mitigated real effects at the firm level. Overall, the results suggest that the pronounced macroprudential tightening since late 2021 did not exert substantial negative effects on credit supply.Hence, activating releasable capital buffers at an early stage of the cycle appears to be a robust policy strategy, since the costs of doing so are expected to be low. JEL Classification: E5, E51, G18, G21 |
| Keywords: | bank lending, capital buffers, credit supply, macroprudential policy |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242951 |
| By: | Fontagné, Lionel (Bank of France, CEPII and PSE); Yotov, Yoto V. (Drexel University, ifo Institute) |
| Abstract: | Based on new, disaggregated trade and production data and using established and cutting-edge empirical methods, we find (i) that the gains from European integration are substantial, (ii) albeit heterogeneous across member states and sectors, and (iii) that the cost of strategic autonomy of the Single Market can be offset by deeper, but comparatively modest, integration efforts within the EU |
| Keywords: | European Integration, Trade Costs, Trade Policy, Risky Suppliers |
| JEL: | F10 F14 F16 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bda:wpsmep:wp2024/25 |
| By: | Tryfonas Christou (European Commission - JRC); Abian Garcia Rodriguez (European Commission - JRC); Nicholas Lazarou (European Commission - JRC); Simone Salotti (European Commission - JRC); Georg Weiers |
| Abstract: | The European Investment Bank (EIB) is the lending arm of the European Union (EU). It finances investment contributing to EU policy goals. In 2023, the EIB Group signed new financing contracts for close to €88 billion, supporting over €280 billion of total investment in support of EU policy priorities in the EU27 economies. Every year, policy simulations are carried out using the RHOMOLO-EIB Computable General Equilibrium (CGE) model in order to assess the macroeconomic effects of the EIB Group operations. Starting from January 2024, the model has been updated to a new base year (García Rodríguez et al., 2023). This Policy Insight contains the result of the January 2024 simulations quantifying the estimated macroeconomic impact on EU GDP and employment of the EIB Group- supported operations approved in 2023. The EIB Group is contributing significantly to job creation and growth. The EIB-JRC estimates suggest that, by 2027, it will create almost 1.5 million jobs (780, 000 by 2042), with a positive contribution to GDP of +1.03% (+0.74% by 2042) over the baseline. The impact stems from the demand-side effects of the investment, as well as from the associated structural effects on GDP growth. |
| Keywords: | rhomolo, region, growth, eib |
| JEL: | C68 R13 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc138096 |
| By: | Mario Cerrato; Hormoz Ramian; Shengfeng Mei |
| Abstract: | We show that European firms, at the peak of the COVID-19 shock in 2020:Q2, went into a “panic borrowing” status and drew down €87bn in a very short period. We show that firms that drew down credit lines had less stringent solvency and liquidity constraints. Our study exploits the implications of the social distancing policies to corporate operations across Europe. The novel aspect of our study is that we focus on shocks unrelated to firms’ fundamentals and investigate how firms manage their cash flow risk. It is an important novel aspect of this study as a large part of the literature has studied cash flow risk management follow ingendogenous shocks due to bad management decisions. In doing so, we use COVID-19 infection data and proxies for social distancing policies in Europe as a natural laboratory. Finally, we show that European firms during the pandemic crisis increased drawdowns, on average, by 3.35 percentage points in response to an unexpected one percentage point fall in their cash flows, butonly when firms’earnings are negative.This result is driven by the lockdown policies introduced in Europe. |
| Keywords: | Corporate credit lines, cashholding, investment, default risk |
| JEL: | G21 G32 G33 |
| Date: | 2023–02 |
| URL: | https://d.repec.org/n?u=RePEc:gla:glaewp:2023_05 |
| By: | Lenza, Michele (ECB); Savoia, Ettore (Research Department, Central Bank of Sweden) |
| Abstract: | We study the role of heterogeneity in the revenues of individual firms for euro area macroecconomic dynamics. To this end, we specify two models: a standard aggregate vector autoregressive model (VAR) and an “heterogeneous VAR” (HVAR). The VAR model includes only aggregate data, while the HVAR model also incorporates the feedback loop between firms’ revenue distribution and aggregate variables. Our results demonstrate that the behavior of firms’ revenue distribution plays a significant role in explaining the dynamics of key euro area macroeconomic variables. |
| Keywords: | Firm-level revenues; Functional Vector Autoregressions; Heterogeneous Agent Models; Business Cycle fluctuations |
| JEL: | C11 C32 C52 C54 E22 E32 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:rbnkwp:0438 |
| By: | Janssen, Thilo; Lübker, Malte |
| Abstract: | Real wages in the European Union continued their decline in 2023-despite an acceleration in nominal wage growth and falling inflation rates. For the current year, there are tentative only signs of a slow recovery of the purchasing power of wages. A resumption of real wage growth would stabilize the functional distribution of income and Trends in negotiated wage rates in the eurozone, 2000- 2023 Change from prior year, in per cent Source: European Central Bank (Indicator of negotiated wage rates) and European Commission, AMECO Database (current as of 15 May 2024), authors' calculations. strengthen domestic demand. However, even under this benign scenario, the crisis is not over from workers' point of view: They have borne the brunt of the real income losses associated with the energy price shock resulting from the Russian invasion of Ukraine. The lingering reduction in real wage levels means that wage policy still needs to catch up to contribute to a fairer distribution of the buren between labour and capital. |
| Abstract: | Auch im Jahr 2023 sind die Reallöhne in der Europäischen Union weiter gesunken - trotz anziehenden Wachstums der Nominallöhne und fallender Inflationsraten. Erst für das laufende Jahr zeichnet sich eine langsame Erholung ab. Dies stabilisiert die Einkommensverteilung zwischen Arbeit und Kapital und stärkt die Binnennachfrage. Aus Sicht Entwicklung der Tariflöhne in der Euro-Zone, 2000-2023 Veränderungen zum Vorjahr in Prozent Quelle: Europäische Zentralbank (Tariflöhne) und AMECO-Datenbank der Europäischen Kommission (Version: 15. Mai 2024), Berechnungen des WSI. der Beschäftigten ist damit die Krise nicht überwunden: Sie haben den Großteil der realen Einkommenseinbußen getragen, die mit dem Energiepreisschock infolge des russischen Überfalls auf die Ukraine verbunden waren. Aus der nachwirkenden Absenkung des Reallohnniveaus ergibt sich für die Lohnpolitik weiterhin Aufholbedarf, um zu einer gerechteren Lastenverteilung zwischen Arbeit und Kapital beizutragen. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:wsirep:300552 |
| By: | Morgan Maneely; Mr. Lev Ratnovski |
| Abstract: | Since 2022, EU banks have been enjoying historically high profits. The profits are mostly driven by the delayed pass-through of the rapid monetary policy tightening to deposit rates and as such are likely transitory. Against this background, almost half of EU countries have introduced new taxes on banks. This paper documents the significant diversity in the design of the new bank taxes—in terms of their tax base, rate, duration, and burden. The paper discusses several trade-offs in the design of bank taxes and argues that an alternative or complementary policy response to temporarily high bank profits is to lock them in as usable bank capital, for example through an increase in countercyclical capital buffer rates. |
| Keywords: | European banks; bank profits; bank taxation; credit supply; bank capital; CCyB; European Union; the ECB |
| Date: | 2024–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/143 |
| By: | Lang, Valentin |
| Abstract: | This chapter examines the distributional effects of place-based policies in the EU. In a first step, it characterizes existing income inequalities in the EU and distinguishes between their interregional and intraregional dimensions. A key result is that inequalities within European regions make an important contribution to overall inequality in the EU. Against this background, the chapter then reviews the economic literature on the effectiveness and distributional effects of place-based policies in general and EU regional policy in particular. The evidence from this literature suggests that while place-based policies can reduce inequalities between regions, they tend to increase inequalities within regions. The chapter concludes with a discussion of policy recommendations for EU regional policy that can be derived from these findings. |
| Keywords: | place-based policies, regional inequality, intraregional inequality, European Union (EU) |
| JEL: | D31 E24 H72 R11 R23 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300264 |
| By: | Brandtjen, Roland |
| Abstract: | Europe and the EU are not the same thing. But they are often used as synonyms. Why? Are people not aware of the difference? Is it because of European identity? One possibility is that the synonymy lies in the connection between European identity and the positive image of the EU. It is indirectly assumed that the greater the correlation between European identity and the positive image of the EU, the greater the synonymy between Europe and the EU. The idea is that if you feel European, you have an image of Europe, which should be positive from a psychological point of view. If Europe is used as a synonym, then the European sense of identity results in a positive image of the EU. To this end, it will be explained how Europe can be defined. Then we will explain the EU to the reader. This paper attempts to examine and fill a scientific gap on this topic by means of the comparison of data with results of adapted quantitative surveys. From 2019 and 2023, these surveys have been conducted in all mentioned regions. They are analysed by descriptive statistics. Correlation between European Identity and positive Image of the EU is calculated and interpreted. The paper concludes with a Conclusion, the bibliography and an annex. The latter includes the data and translation of the questions and their answer options into the regional languages. |
| Keywords: | Synonymy, Concepts of Europe, European Scope, European Union, Image of the EU |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iubhbm:300239 |
| By: | SIGNORELLI Serena (European Commission - JRC); TORRECILLAS JODAR Juan (European Commission - JRC); PAPAZOGLOU Michail (European Commission - JRC) |
| Abstract: | This technical report quantifies and analyses the parts of the EU’s long-term budget which have the potential to impact the Digital Decade targets and general objectives. In doing so, we first map five key funding instruments — Recovery and Resilience Facility, Cohesion Policy, Horizon Europe, Digital Europe Programme and Connecting Europe Facility-Digital — onto each Digital Decade target. Results of this exercise indicate that, out of the EUR 957 billion planned in total across these funding instruments, EUR 177 billion could potentially impact the domains related to the Digital Decade targets and EUR 27 billion for its general objectives. The digitalisation of businesses and of public services are the main cardinal points of focus, receiving 64% of the total mapped budget with potential to impact Digital Decade targets. The online provision of key public services and the basic digitalisation of small and medium enterprises are the two targets that receive the largest allocations. We also find that the allocation by Digital Decade target is homogeneous across countries with a few, interesting exceptions. From our findings, we conclude that the fund distribution seems balanced, with the exception of some targets that receive little specific attention, like edge nodes, electronic identification or quantum computing. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc138243 |
| By: | MARQUES SANTOS Anabela (European Commission - JRC); MOLICA Francesco (European Commission - JRC); CONTE Andrea (European Commission - JRC) |
| Abstract: | This brief investigates regional economic disparities within the European Union. The analysis focuses on GDP per capita and compares each region’s performance to two benchmarks: the highest GDP per capita in the EU (EU regional gap) and the highest GDP per capita within that region’s country (in-country gap). EU regional economic gaps narrowed on average from 2000 to 2021, while intra-country disparities widened, especially in regions with emerging or moderate innovation levels. A higher innovation capacity at regional level generally correlated with smaller economic gaps, both relative to the EU and within countries. Reduction in the economic gap is positively correlated with higher value of R&D expenditure per capita in the previous year, although this relationship does not imply causation. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc136779 |
| By: | Aurélien Espic; Lisa Kerdelhué; Julien Matheron |
| Abstract: | This paper studies the role of capital requirements in a context of monetary tightening. We build a new Keynesian model featuring costly defaults for banks, households and firms, and estimate it on Euro Area data between 2002 and 2023. We first identify the sources of this unprecedented episode before studying its propagation along financial variables. We then build various counterfactuals to assess how capital requirements have affected the transmission of this shock. We find that although capital requirements reduced the post-Covid expansion, they preserved macroeconomic stability by reducing banks probability of default. More generally, we show that capital requirements do not need to be countercyclical to be efficient: in an inflationary context, they act as automatic stabilizers, by limiting the amplitude of expansionary as well as recessionary shocks. |
| Keywords: | Monetary Tightening, Financial Stability, Macroprudential Policy. |
| JEL: | E44 E52 G21 G28 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:947 |
| By: | Pierre-Alex Balland; Ron Boschma; ; ; |
| Abstract: | This paper proposes an evolutionary take on regional development traps. Our definition of regional traps centers around the structural inability of regions to develop new complex activities. We distinguish between several different traps. Using industry data, we follow European regions over time and provide evidence on which regions in the EU are trapped, and what kinds of traps they have fallen into. Our econometric analysis shows that being trapped has a negative impact on employment and wage growth in regions. We also find evidence that our development trap indicator explains well whether regions are stuck in a regional development trap, as defined by Iammarino et al. (2020). |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2420 |
| By: | AGUNDEZ GARCIA Ana (European Commission - JRC); BORNUKOVA Kateryna (European Commission - JRC); HERNANDEZ Adrian; PICOS Fidel (European Commission - JRC) |
| Abstract: | Child cash support ranges from 3.2% to 12% of GDP per capita across the 27 countries of the European Union. Different policy instruments are used through the tax and benefit systems to achieve family support objectives. Child cash support is a powerful tool in the fight against child poverty: some EU countries achieve reductions in child at-risk-of-poverty (AROP) rate by as much as 16 percentage points thanks to child cash support. Universal benefits ensure broad coverage, while means-tested benefits are better targeted. However, existing means-tested benefits alone do not provide sufficient support to lift families with children above the poverty line. A combination of universal and means-tested benefits would ensure coverage, while also directing additional resources to those most in need. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc138408 |
| By: | von Ehrlich, Maximilian |
| Abstract: | This chapter discusses factors that contributed to different economic dynamics across European regions and the prevailing disparities. The impact of EU Cohesion Policy in reducing disparities is studied based on the empirical evidence on the effects of EU regional policy. With more than thirty years of experience, several important conclusions can be drawn about the effectiveness and efficiency of place-based transfers in Europe. While EU regional policy has not completely countered market-driven processes that lead to regional disparities, it appears to have modestly alleviated them. To enhance the effectiveness of EU Cohesion Policy, this chapter advocates for an improved policy design and a shift in emphasis towards local institutions and governments in recipient regions, emphasizing that merely increasing the volume of transfers cannot compensate for these improvements. |
| Keywords: | EU Structural Policy, Place-based policies, regional inequality, economic geography |
| JEL: | R10 R50 H20 F20 D70 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300266 |
| By: | LALANNE Marie (European Commission - JRC); MEYER Niels (European Commission - JRC) |
| Abstract: | Co-patents data show that Research and Innovation (R&I) collaborations are fragmented nationally and with a strong cross-border effect in the EU. The two main EU R&I policies (Framework Programme and Interreg Europe Programme) help overcoming these effects by steering R&I collaborations across Europe. Additionally, the two EU R&I policies seem to display some synergies: participation in Interreg 2014-2020 Europe Programme is positively correlated with participation in Horizon 2020 (H2020). Finally, being well-positioned in the network of R&I collaborations created through the Framework Programme has a positive impact on the patenting activity of EU regions. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc136781 |
| By: | MOLICA Francesco (European Commission - JRC); MARQUES SANTOS Anabela (European Commission - JRC) |
| Abstract: | The EU operates at least three major instruments supporting R&I across its regions: cohesion policy, Horizon Europe, and the Recovery and Resilience Facility. Cohesion policy and Horizon 2020 combined contribute critically to the R&D expenditure in most regions of Eastern Europe (often to the extent of 20% or higher) as well as many Mediterranean regions. R&I cohesion policy and Horizon 2020 funds exhibit very different regional concentration levels along North-South and East-West lines. However, Horizon 2020 funds are much more territorially concentrated than cohesion policy ones, with the bulk going to few areas leading in R&I, which may heighten the risk of regional disparities. In Eastern Europe and some parts of the Mediterranean even middle-income and more developed regions in Eastern European countries fail to attract higher amounts of Horizon 2020 than their cohesion policy allocation. RRF Third, the RRF provide substantial support to R&I in both countries with a weak and good innovation performance, placing it in-between cohesion policy and Horizon in terms of concentration. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc136780 |
| By: | Bellani, Luna (Ulm University); Berriochoa, Kattalina (University of Konstanz); Kapteina, Mark (University of Konstanz); Schwerdt, Guido (University of Konstanz) |
| Abstract: | We study the effects of information on attitudes towards inheritance taxation using survey experiments fielded in Germany. We show that information about tax allowances increases demand for higher taxes and shifts public opinion from favoring abolition to supporting the tax. Effects are primarily due to a prevalent underestimation of tax allowances and the alteration of people's expectations of being affected by such taxes. In contrast, information highlighting the increasing proportion of inherited wealth only negligibly affects policy demand. Our results suggest that pocketbook motives and misinformation may contribute to explaining the paradox of limited demand for inheritance taxation despite growing inequality concerns. |
| Keywords: | capital taxation, equality of opportunity, inheritance tax, information, randomized experiment |
| JEL: | H20 D72 D83 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17099 |
| By: | DREONI Ilda (European Commission - JRC); MAIER Sofia (European Commission - JRC) |
| Abstract: | With the hike of global energy prices of 2022-2023 and the fairness challenges of the green transition, energy poverty is again back to the forefront of economic policy debates in Europe. However, the absence of consensus on energy poverty measurement complicates policy formulation and evaluation in this domain. This paper conducts a comprehensive analysis of the EU-wide distribution and profiles of the ‘energy poor’. We use four well-known measures of energy poverty, two subjective and two based on expenditures, coming from two different household surveys, i.e., HBS and SILC, which we statistically match. With this, we fill an important gap in the literature by measuring the extent of overlap between these indicators. Our results reveal that expenditure-based indicators cover larger shares of the population, especially in middle and high-income EU countries, with very small overlap between energy poverty measures. In the EU, only 0.3% of the population qualifies as ‘energy poor’ when considering all four indicators, while four out of ten (40%) would enter this club by at least one of these indicators. Overall, by providing a characterization of the profiles of those who would be covered or ‘left behind’ by each of these indicators, as well as their relationship with incomes and expenditures, we shed new light on the heterogeneous distributional effects from policy-targeting based on these indicators. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202405 |
| By: | Jonas Feld (Trier University) |
| Abstract: | The EU boasts the largest single labor market globally; EU citizens enjoy the freedom to take up work anywhere within the common market. Despite considerably diverse labor market regimes across the EU, little is known about how local labor market settings in |
| Date: | 2024–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:boc:fsug24:04 |
| By: | Cacciotti, Marco; Cole, Alexandre Lucas; Gabbriellini, Cecilia; Giachin Ricca, Elena; Padrini, Flavio |
| Abstract: | On the 30th of April 2024, the new EU Stability and Growth Pact (SGP) entered into force following an approach based on country-specific fiscal adjustments. This paper presents illustrative scenarios for Italy’s public finances, carried out using the DSA framework developed by the Parliamentary Budget Office and adapted to be broadly consistent with the new SGP. The scenarios are compared with those consistent with the requirements set in the initial legislative proposals put forward by the European Commission in April 2023 and with the ones that assume the convergence of the structural balance to the medium-term budgetary objective (MTO), one of the main rules of the previous SGP. These scenarios show that the multiannual fiscal consolidation, broadly consistent with the new SGP, is estimated in an annual adjustment of the structural primary balance of around 1 percentage point of GDP with a 4-year adjustment path and of around 0.5-0.6 percentage points with a 7-year adjustment path. No substantial difference emerges between the adjustment required by the final version of the new SGP and the one required by the European Commission proposal. Indeed, the paper shows that, in the case of Italy, the debt sustainability safeguard, introduced in the final version of the new SGP, is not binding, while the deficit resilience safeguard binds only after the adjustment period, although just in some scenarios and for a limited number of years. Finally, the comparison between the fiscal consolidation consistent with the previous convergence to the MTO and the one consistent with the new SGP, shows that the latter implies either the same annual adjustment or a lower one during a 7-year adjustment period, while it requires a greater one during a 4-year adjustment period. However, in the new framework, a considerably smaller correction is required after the adjustment period. |
| Keywords: | Sovereign Debt Management, Fiscal Policy Forecasts, Public Debt Sustainability |
| JEL: | H63 H68 |
| Date: | 2024–07–04 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121503 |
| By: | Carlos de Resende; Alexandra Solovyeva; Moez Souissi |
| Abstract: | The paper explores the nexus between the financial and business cycles in a semi-structural New Keynesian model with a financial accelerator, an active banking sector, and an endogenous macroprudential policy reaction function. We parametrize the model for Luxembourg through a mix of calibration and Bayesian estimation techniques. The model features dynamic properties that align with theoretical priors and empirical evidence and displays sensible data-matching and forecasting capabilities, especially for credit indicators. We find that the credit gap, which remained positive during COVID-19 amid continued favorable financial conditions and policy support, had been closing by mid-2022. Model-based forecasts using data up to 2022Q2 and conditional on the October 2022 WEO projections for the Euro area suggest that Luxembourg's business and credit cycles would deteriorate until late 2024. Based on these insights about the current and projected positions in the credit cycle, the model can guide policymakers on how to adjust the macroprudential policy stance. Policy simulations suggest that the weights given to measures of credit-to-GDP and asset price gaps in the macroprudential policy rule should be well-calibrated to avoid unwarranted volatility in the policy response. |
| Keywords: | Macroprudential policy; credit cycle; banks; forecasting and simulation; Luxembourg |
| Date: | 2024–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/140 |
| By: | TORRECILLAS JODAR Juan (European Commission - JRC); PAPAZOGLOU Michail (European Commission - JRC); SIGNORELLI Serena (European Commission - JRC) |
| Abstract: | This report outlines the proposed methodology for aggregating Digital Decade national targets from EU Member States to monitor progress toward the Digital Decade Policy Programme 2030 at collective EU level. It proposes the use of dynamic and static weighting based on demographic and enterprise data from sources such as population projections or the Eurostat’s labour force survey. The proposed methodology ensures consistency across the Digital Decade key performance indicators. The report also provides a brief analysis of the weighting data used and its practical implications on the future evolution of the Digital Decade targets at EU level. This work continues the series of reports for a rigorous assessment of the progress of the EU's digital landscape. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc138292 |
| By: | BORNUKOVA Kateryna (European Commission - JRC); PICOS Fidel (European Commission - JRC); AMORES Antonio F (European Commission - JRC); BELOUSOVA Irina (European Commission - JRC); CRUCES Hugo (European Commission - JRC); DE AGOSTINI Paola (European Commission - JRC); DE POLI Silvia (European Commission - JRC); DREONI Ilda (European Commission - JRC); GRUNBERGER Klaus (European Commission - JRC); HERNANDEZ MARTIN Adrian (European Commission - JRC); JEDRYCH VILLA Marta (European Commission - JRC); LEVENTI Chrysa (European Commission - JRC); MAIER Sofia (European Commission - JRC); MANIOS Kostas (European Commission - JRC); MANSO Luis (European Commission - JRC); MAZZON Alberto (European Commission - JRC); NAVARRO BERDEAL Silvia; PALMA FERNANDEZ Bianey (European Commission - JRC); PAPINI Andrea (European Commission - JRC); RICCI Mattia (European Commission - JRC); SERRUYS Hannes (European Commission - JRC) |
| Abstract: | This report provides a selection of baseline simulation results and headline indicators from the latest public version (I6.0+) of EUROMOD, the tax-benefit microsimulation model for the EU. We begin by presenting indicators for income inequality and at-risk-of-poverty and how they are affected by the tax-benefit system. We then provide a comparative decomposition of the redistributive effect of the tax-benefit systems across the EU. We study how Member States achieve various degrees of redistribution through different combinations of progressivity and size of their tax-benefit system and each of its components. We then analyse various work incentive indicators affecting both the decision whether to work and that of how much to work, discussing how effective marginal rates of taxation and net replacement rates of going into unemployment vary across countries. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202403 |
| By: | Thöne, Michael |
| Abstract: | In its current setup, the European Union is often characterised as slow, decision-impeding, inefficient and therefore not really ready for enlargement. The pandemic, the war in Ukraine, the energy crisis and the increasingly uncertain role in the global economy have further increased the high pressure on the EU to undergo modernisation. In this context, structural and Cohesion Policy is of double interest. With 30 per cent of the regular EU budget, it is one of its most important fields of action - one that has historically grown into a complex and opaque maze of objectives and instruments - and is therefore "part of the problem". At the same time, regional policy is traditionally a "part of the solution" whenever the need arises to pave the way for the enlargement and/or deepening of the EU through financial compensation. The paper sheds light on this dual function of Cohesion Policy by examining its fiscal architecture, which forms the underlying framework for convergence and cohesion policies. In several steps, Cohesion Policy is examined in its function as a European financial equalisation system. The history of regional policy is reconstructed as a development in which the equalisation motive always came first, before Cohesion Policy justifications were applied to instrumental or financial expansions of this policy field. The "Mezzogiorno test" shows that the function of financial equalisation - albeit hidden - continues to dominate; alongside the promotional Cohesion Policy, the equalising Cohesion Policy plays de facto a very important role. This is also illustrated quantitatively and with an in-depth look at the little-analysed mechanism that ensures the allocation of EU funds across the Member States and their regions. Not least with regard to this fiscal equalisation formula, known as the Berlin method, the paper formulates several recommendations for the modernisation of structural policy, which are based on the premise that the purpose of Cohesion Policy to act as a financial equalisation is openly recognised and used productively for the further development of this policy area. The character of vertical fiscal equalisation with a horizontal effect and a strong investment focus should be retained, but further developed in accordance with the principle of subsidiarity. In the course of this, the "luxury fiscal equalisation" can also be reduced, which is currently carried out by allocating cohesion funds even to the richest regions of the EU and which costs 27 billion euros per year. A stronger focus on subsidiarity in cohesion policy would also support Member States in implementing modern, place-based policies, which will also make it easier and more efficient to achieve climate change and broader transformation goals. |
| Keywords: | cohesion policy, European structural and investment funds, EU fiscal equalisation |
| JEL: | H70 H77 R11 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300246 |
| By: | Bellocca, Gian Pietro Enzo; Poncela Blanco, Maria Pilar; Ruiz Ortega, Esther |
| Abstract: | In this paper, we analyze the impact of temperature exposure on the earnings per share of large European firms over the 21st century. Our findings reveal that earnings are sensitive to extreme temperatures across a large proportion of sectors. Depending on the sector and quarter, exposure to extreme temperatures can have either a positive or negative impact on profitability. Our analysis shows a greater percentage of sectors affected in Europe compared to the US, likely due to Europe's broader temperature variability from the northern Baltic to the southern Mediterranean regions. We observe that most sectors experience effects during the milder seasons of spring and autumn, being positive in most cases. The lack of a clear negative effect of extreme temperatures over firm's profitability points out one of the reasons why it is so difficult to fight against climate change, while being harmful, it can be profitable. Additionally, we highlight a concerning trend regarding a steady increase in European investments in sectors that are solely negatively impacted by extreme temperatures, which grew from around 16% in 2015 to over 23% in 2022. |
| Keywords: | Climate change; Earnings per share; Firm performance; Physical risk; Temperature exposure |
| JEL: | C23 G12 G14 Q54 |
| Date: | 2024–07–24 |
| URL: | https://d.repec.org/n?u=RePEc:cte:wsrepe:44217 |
| By: | Kelsey J. O'Connor |
| Abstract: | The immigrant (foreign-born) population increased by 32 million in total across 37 European countries from 1990 to 2019. Much of this movement was from east to west. Indeed, both the total and foreign-born populations declined in the former Eastern Bloc over this period. Such demographic shifts could be expected to affect both the immigrant destination and origin countries in diverse ways. However, we find no evidence of positive or negative impacts on aggregate subjective well-being, among both the destination and origin countries. Immigrants, in contrast, experienced increased well-being, converted to monetary terms, in excess of £25, 000 per person. Previous research had reduced scopes, e.g., covering destination countries or impacts on income only. We offer more comprehensive evidence, in terms of country and period, and by assessing impacts on subjective well-being, which implicitly includes all of the factors perceived to be important to people, both economic and non-economic. |
| Keywords: | immigration, emigration, migrants, life satisfaction, happiness |
| JEL: | I31 J15 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1461 |
| By: | Enes Sunel; Robert Grundke |
| Abstract: | Weak investment has weighed on the convergence process of Latvia towards higher living standards. Limited access to finance coupled with high informality, costly insolvency procedures, skilled labour shortages and weak competition have hampered business dynamism and innovation, weighing on productivity growth. To reduce high credit costs, it is key to foster competition in financial markets by reducing information asymmetries and switching costs for bank customers and strengthening competition enforcement. As capital markets are shallow compared to other euro area countries, listing of large state-owned enterprises and facilitating greater exposure of pension funds to domestic securities could help attract investors and raise access to finance. Improving contract enforcement and fostering the reallocation of resources to more productive firms will require reducing the cost of filing insolvency, expanding the remit of the Economic Court and continuing to fight corruption. This will also help raise the low level of trust in institutions, which is key to reducing high informality. As training provided by firms is among the lowest across EU countries, better cooperation among firms and with training providers in the design and delivery of training is needed. Further strengthening the resources and investigative powers of the Competition Council would help improve the enforcement of competitive neutrality, reduce the high barriers to entry and competition, and foster business dynamism and innovation. |
| Keywords: | allocative efficiency, bank credit, capital markets, competition, digital adoption, institutional investors, Lerner index, pricing power, reputational risk |
| JEL: | E22 E26 G21 G24 J32 O16 O32 |
| Date: | 2024–07–25 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1809-en |
| By: | Kosyakova, Yuliya (Institute for Employment Research (IAB), Nuremberg, Germany ; Universität Bamberg); Gatskova, Kseniia (Institute for Employment Research (IAB), Nuremberg, Germany); Koch, Theresa (Institute for Employment Research (IAB), Nuremberg, Germany); Adunts, Davit (Institute for Employment Research (IAB), Nuremberg, Germany); Braunfels, Joseph (Institute for Employment Research (IAB), Nuremberg, Germany); Goßner, Laura (Institute for Employment Research (IAB), Nuremberg, Germany); Konle-Seidl, Regina (Institute for Employment Research (IAB), Nuremberg, Germany); Schwanhäuser, Silvia (Institute for Employment Research (IAB), Nuremberg, Germany); Vandenhirtz, Marie (IAB) |
| Abstract: | "This research report investigates the labor market integration of Ukrainian refugees across various European countries, including many EU member states as well as the UK, Switzerland, and Norway, in the period from Q4 2022 to Q1 2024. Comparing the employment rates of Ukrainian refugees across different countries presents challenges due to the absence of a uniform database, such as the European Labor Force Survey (LFS). To address this, we constructed a comprehensive database that harmonizes employment data from comparable time points and employs consistent definitions for calculating rates. Employment data were obtained from administrative records in countries where available, and from various surveys conducted at different times in other nations. Additionally, this study compiles indicators currently recognized in research as having an influence on labor market integration, using comparable data and definitions to enhance the robustness of the analysis. From the end of 2022 to early 2024, the employment rates of Ukrainian refugees in Europe showed significant variation. By the first quarter of 2024, Germany's employment rate had reached nearly 27 percent, placing it in the European midfield. At the end of 2022, countries such as the UK, the Netherlands, and Lithuania had employment rates exceeding 50 percent, while Croatia, Norway, Romania, Slovenia, Switzerland, and Spain reported rates below 15 percent. Germany also reported a mid-field rate of 20 percent at the end of 2022. Throughout 2023, Denmark, Austria, France, Poland, and Lithuania saw modest increases in employment rates. However, this upward trend did not persist; some countries experienced stagnation, while others, including Romania, saw declines. Conversely, Slovenia, Switzerland, Finland, Spain, and Estonia witnessed slight increases. The UK consistently maintained its high employment rate across the period. In Germany, beyond the influence of seasonal fluctuations, there was a steady annual increase in employment rates, culminating in 27 percent by early 2024. To investigate the reasons behind the varying employment rates of Ukrainian refugees across different European countries, this report delves into the relationships between employment rates and various socio-demographic, institutional, and economic factors. Our objective is to achieve a preliminary, yet more comprehensive understanding of the factors that drive labor market integration of refugees and to assess the impact of these factors. It is important to note that the analyses conducted are descriptive in nature, not causal. They are intended to provide an initial insight into the correlations, helping to identify potential areas for more in-depth, causal research in the future. Multivariate analyses underscore the crucial impact of the demographic composition of newcomers and the institutional and economic conditions in the destination countries on the labor market integration of Ukrainian refugees. Countries with a higher demand for low-skilled labor – measured by the size of the low-status labor market segment or employees in low-skilled occupations – tend to have higher employment rates for these individuals. This may be attributed to the fact that such jobs often have fewer language requirements and other qualifications, allowing for quicker job placements. Additionally, there is a negative correlation between strict labor market regulations, such as enhanced job security measures, and the likelihood of Ukrainian refugees finding employment. Furthermore, a negative correlation exists between the growth rate of unemployment and the employment of Ukrainian refugees, suggesting that newcomers are less likely to secure jobs in countries with increasing unemployment. Social infrastructure significantly impacts the labor market integration of Ukrainian refugees, many of whom are women with children. Consequently, our regression analysis shows that the availability of childcare is correlated with employment rate of refugees. Countries with better childcare facilities tend to see higher employment rates among refugees, as this infrastructure supports the ability of parents, particularly mothers, to enter the workforce. Similarly, comprehensive access to health services also correlates with higher employment rates, as it ensures that refugees are physically and mentally able to work. Interestingly, the relationship between social transfer payments, measured by the ratio of costs for caring for Ukrainian refugee per capita to the gross domestic product per capita of the respective host country, and employment rates is small and statistically insignificant. While it is often assumed that transfer payments play a central role in employment, this hypothesis is not confirmed in our analysis. However, social networks play a critical role in the employment integration of refugees. Countries with a larger Ukrainian community often report higher employment rates among Ukrainian refugees. Additionally, a strong command of English within the destination-country population positively corelates with employment rates, probably because it facilitates better communication and with that integration into the labor market. The integration policy strategies across EU member states and other European countries vary significantly. Some nations adopt a "work first" approach, prioritizing immediate employment without initial preparatory measures such as language courses or qualification measures. This strategy aims at quick job placement but often overlooks the need for the development of comprehensive skill. In contrast, other countries focus on the long-term, sustainable integration into the labor market. These nations implement comprehensive language programs, qualification measures, and targeted job placements that align more closely with the refugees' qualifications. Although this approach may result in so-called "lock-in" effects, where refugees might experience a delayed entry into the labor market, it is more likely to lead to stable employment relationships, jobs that match the refugees' skills, and higher earnings over time. Scandinavian studies underscore these differences in outcomes. Countries that emphasize the "work first" model tend to show higher employment rates for refugees in the short term. However, nations that invest in education and language acquisition demonstrate better integration results in the medium and long term. This success extends beyond mere employment rates and earnings to include broader aspects of social inclusion and quality of life for refugees. Such findings highlight the importance of tailored integration policies that consider both immediate employment needs and long-term societal benefits. The multivariate analyses further confirm the significant impact of demographic factors, particularly family constellation, on labor market integration. There is a statistically significant negative correlation between employment rates and older age and having more children per working-age woman. Finally, the data reveals a positive time trend: employment rates for all demographic groups tend to increase with the length of their residence. This suggests that many of the initial barriers to employment faced by refugees diminish over time, indicating that with longer stays, refugees are more likely to overcome these initial challenges and secure employment. Overall, this report underscores that Germany, with its comprehensive long-term integration strategies, is well-positioned to significantly enhance the employment rates of Ukrainian refugees over the medium to long term. Insights from refugees who arrived between 2013 and 2019 validate this potential, with employment rates reaching 68 percent eight years after arrival. These findings emphasize the necessity of continually reassessing and refining integration strategies to effectively promote the integration of refugees. Such adjustments are crucial not only for improving the immediate economic prospects of refugees but also for contributing to the broader economy, ultimately yielding substantial long-term benefits." (Author's abstract, IAB-Doku) ((en)) |
| Keywords: | IAB-Open-Access-Publikation |
| Date: | 2024–07–16 |
| URL: | https://d.repec.org/n?u=RePEc:iab:iabfob:202416 |
| By: | Mr. Nathaniel G Arnold; Guillaume Claveres; Jan Frie |
| Abstract: | Relative to the US, productivity growth and investment in R&D in lagging in the EU, where it is more difficult to finance and scale up promising, innovative startups. Many of the most successful EU startups move elsewhere for financing, causing the EU to lose out on both the direct growth benefits and positive spillovers from these innovative firms. The EU could nurture innovative startups by accelerating the development of its venture capital (VC) ecosystem. Reducing regulatory frictions, especially ones that deter pensions funds and insurers from investing in VC, combined with well-designed tax incentives for R&D investments could help accelerate the development of the VC sector. These and other key CMU initiatives, such as the consolidation of stock markets and reforming and harmonizing insolvency regimes, will take time. Given the urgency to boost innovation, giving public financial institutions like the European Investment Fund a more active and expanded role in kickstarting VC markets where needed and in familiarizing investors with the VC asset class can be a helpful interim step. |
| Keywords: | Startups; Venture capital; Productivity; Capital Markets Union |
| Date: | 2024–07–12 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/146 |
| By: | Liberati, P. |
| Abstract: | This paper discusses the applicability of the traditional classification of welfare systems described in Three Worlds of Welfare Capitalism by Esping-Andersen (1990) when applied to the health sector in Europe. To this purpose, we use a cluster analysis on 26 European countries from 2001 to 2021, to identify, if any, distinct health models. Our main findings suggest that, in Europe, the original typology of Esping-Andersen is hardly confirmed, and sometimes dismissed; second, in certain cases, only an Eastern European model emerges; third, a neat separation between the Nordic and the Continental model disappears, giving some evidence, in Europe, of a weak form of convergence of health systems driven more by economic constraints than by political and social attitudes. |
| Keywords: | Health, Welfare State, Cluster, Europe, Esping-Andersen |
| JEL: | H11 H51 I1 |
| Date: | 2024–07–11 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2441 |
| By: | Albrecht Landsberger; Albert Landsberger |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_60 |
| By: | McAdam, Peter; Meinen, Philipp; Papageorgiou, Chris; Schulte, Patrick |
| Abstract: | Using a new administrative dataset, we provide fresh micro-level evidence on firms' returns to scale (RTS). We employ a new administrative database, iBACH, which contains extensive high-quality annual balance sheet, financial, and demographic information on more than two million non-financial manufacturing, trade and service corporations for five European countries over 2008-2018. Whereas on average, we find sectoral RTS to be close to one (0.98, with a 0.74 - 1.18 range), 32 percent of firms exhibit decreasing returns, and 10 percent increasing returns to scale (IRTS). Although the RTS values have remained relatively stable, there is evidence of some tendency for them to increase over time. When we allow for imperfect competition, the RTS range tightens to 0.98 - 1.08, with a higher share of IRTS industries (15 percent) and essentially zero DRTS cases. Increasing returns are mostly a feature of manufacturing. Finally, we analyze the relationship between different industry characteristics and our RTS estimates. |
| Keywords: | Firm & sectoral production function estimation, imperfect competition, firm characteristics, Gandhi-Navarro-Rivers, iBACH database |
| JEL: | E2 D2 L1 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:300572 |
| By: | Mathias Mier |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_58 |
| By: | Amat Adarov (The World Bank); Ugo Panizza (Geneva Graduate Institute & CEPR) |
| Abstract: | This paper introduces a novel index to measure public investment quality, utilizing the World Bank’s investment project performance data from 120 countries over the period 2000-2021. After detailing the construction of the index, the paper examines how public investment quality influences the relationship between the level of public investment and sovereign risk. We find that high levels of public investment are linked to lower sovereign risk in countries with high investment quality, and conversely, to higher sovereign risk in countries with low investment quality. This relationship is especially pronounced in sub-investment grade countries. We corroborate these results by showing that when public investment quality is high, scaling up public investment enhances fiscal sustainability by reducing the debt-to-GDP ratio in the long run: high-quality public investment is self-financing. However, the opposite is true when public investment quality is low, where increased public investment results in a deterioration of fiscal fundamentals. |
| Keywords: | Public investment; Public investment quality; Sovereign risk; Debt sustainability |
| JEL: | E22 G24 H54 H63 |
| Date: | 2024–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp12-2024 |
| By: | Asatryan, Zareh; Birkholz, Carlo; Heinemann, Friedrich |
| Abstract: | Independent and high-quality evaluations of government policies are an important input for designing evidence-based policy. Lack of incentives and institutions to write such evaluations, on the other hand, carry the risk of turning the system into a costly beauty contest. We study one of the most advanced markets of policy evaluations in the world, the evaluations of EU Cohesion Policies by its Member States (MS). We use large language models quantify the findings of about 2, 300 evaluations, and complement this data with our own survey of the authors. We show that the findings of evaluations are inconsistent with those of the academic literature on the output impacts of Cohesion Policy. Using further variation across MS, our analysis suggests that the market of evaluations is rather oligopolistic within MS, that it is very fragmented across the EU, and that there is often a strong involvement of managing authorities in the work of formally independent evaluators. These factors contribute to making the findings of the evaluations overly optimistic (beautiful) risking their overall usefulness (evidence-based policy). We conclude by discussing reform options to make the evaluations of EU Cohesion Policies more unbiased and effective. |
| Keywords: | Policy Evaluation, EU Cohesion Policy, Large Language Model |
| JEL: | A11 C45 D83 H43 H54 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300241 |
| By: | Ms. Ruo Chen; Vincenzo Guzzo; Mr. Fazurin Jamaludin; Mr. Adil Mohommad; Ritong Qu; Yueshu Zhao |
| Abstract: | Slower passthrough of policy interest rate hikes to deposit rates relative to their loan rates has led to sharply wider bank net interest margins. Combined with resilient asset quality, wider net interest margins supported record profits for European banks in 2023. Drawing on historical data from the balance sheets and income statements of over 2, 500 European banks, this paper shows that abnormally high profits are expected to fade soon as interest income will decline, once policy rates start being lowered, while higher impairment costs historically have weighed on profits with a lag. Moreover, a number of structural factors that have eroded the performance of European banks in the past two decades have largely remained unaddressed and will continue being a drag on profits and capital. Therefore, policymakers should encourage banks to preserve capital buffers and build resilience to future shocks, while exercising caution when considering taxes on profits or other measures that could divert potential sources of capital from banks. |
| Keywords: | European banks; bank profits; interest rate margins; asset quality; bank capital; bank taxation. |
| Date: | 2024–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/142 |
| By: | Magnus Merkle; Geoffroy Dolphin |
| Abstract: | We analyse the consequences of carbon price heterogeneity on households in The EU from 2010 to 2020. Accounting for both heterogeneity in carbon pricing across emission sources and the indirect effects from inter-industry linkages, we obtain two key findings. First, due to widespread carbon pricing exemptions, household burdens are lower than previously estimated. Second, lower-income groups are affected disproportionately, because they spend a smaller share of their expenditure on products that benefit from exemptions than their higher-income counterparts. Therefore, imposing uniform carbon prices both within and across countries would reduce carbon pricing regressivity on household expenditure in the EU. A global price would be most effective in this regard, as it would raise carbon prices embodied in EU imports. Further, because EU economies are open and apply higher average carbon prices than their trade partners, the domestic revenues exceed the costs embodied in EU household consumptions bundles. This increases the scope for reducing the burden of carbon pricing on lower-income households through revenue redistribution. Our results imply that the ongoing extension of carbon pricing to more sectors through the EU ETS II and the introduction of the EU’s CBAM should make carbon pricing less regressive, all else equal. |
| Keywords: | Carbon pricing; tax incidence; climate policy |
| Date: | 2024–07–12 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/149 |
| By: | Jens Horbach (Technical University of Applied Sciences Augsburg, School of Business, Friedberger Straße 4, D-86161 Augsburg) |
| Abstract: | The success of a green energy transition is highly dependent on the household sector as one of the most important energy users. Private heating, electricity consumption or private transport are important key levers to reduce households´ energy use and its impacts on cli-mate change. The paper analyses the determinants of energy related attitudes and activities of households based on econometric estimations of European and German survey data. The results show that personal factors such as female gender and a high income are positively correlated to green energy behaviour. Highly qualified persons are more likely to realize green energy related measures. People having difficulties to pay their bills are significantly more likely to use energy friendly public transport, but they have a lower willingness to pay for energy saving measures compared to richer groups. |
| Keywords: | Green energy behaviour, climate change, European data, multivariate probit model |
| JEL: | C25 D12 D91 Q41 Q54 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:srt:wpaper:0224 |
| By: | Feld, Lars P.; Hassib, Joshua |
| Abstract: | Die Kohäsionspolitik in der Europäischen Union (EU) ist weithin als Instrument zur Förderung des Aufholprozesses akzeptiert, d.h. zur Unterstützung von Mitgliedstaaten mit einem niedrigeren Bruttoinlandsprodukt (BIP) pro Kopf, um ein höheres Wirtschaftswachstum zu erzielen und so ähnlich hohe Einkommensniveaus wie Mitgliedstaaten mit einem höheren BIP pro Kopf zu erreichen. Empirische Studien liefern jedoch widersprüchliche Evidenz für den Erfolg der Strukturfonds in dieser Hinsicht. Aus politökonomischer Sicht werden die EUStrukturfonds und ihre Instrumente der Kohäsionspolitik, aber auch die EU-Agrarpolitik, als Ausgleich für die Zustimmung ärmerer Mitgliedstaaten zu weiteren Schritten der europäischen Integration interpretiert. In jüngster Zeit hat die Klimapolitik Eingang in die Kohäsionsstrategie der EU gefunden, da höhere Energiekosten aufgrund der CO2-Bepreisung die Umwandlung des bestehenden kohlenstoffintensiven in einen klimaneutralen Kapitalstock erforderlich machen könnten. Die Strukturfonds sollten daher bei der Umstellung auf die CO2-Neutralität unterstützen, damit Mitgliedstaaten nicht ins Hintertreffen geraten. Ein Beispiel dafür ist Next Generation EU (NGEU), das auf den Übergang zur Klimaneutralität abzielt. In diesem Papier werden die Ziele der EU-Kohäsionspolitik den Notwendigkeiten der Klimapolitik gegenübergestellt, um den Klimawandel zu bekämpfen. Mögliche Konflikte und Synergien zwischen den Zielen der Kohäsionspolitik und der Klimapolitik werden aufgezeigt. |
| Keywords: | Kohäsionspolitik, Klimapolitik, Binnenmarkt, Währungsunion, Multi-Level-Governance, Europäische Union |
| JEL: | F42 F55 Q58 R5 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:aluord:300649 |
| By: | Stefan Hohberger |
| Abstract: | This paper estimates a three-region structural macroeconomic model to analyse the main drivers of GDP, inflation, and wage growth through the COVID-19 pandemic and recovery period in Germany. By incorporating COVID-related shocks, trade in commodities, and endogenous ELB periods, the estimation results suggest: (i) the COVID-19 pandemic in 2020-21 was mainly driven by domestic and foreign lockdown shocks (demand-driven), (ii) the inflation surge in 2021-22 was characterised by an increase in commodity prices, a recovery of global demand, and pronounced supply-side factors, and (iii) wage growth per hour was counterbalanced by competing demand and supply-side effects. Key estimated shocks in the model closely match off-model indicators, supporting its empirical plausibility. |
| Keywords: | COVID-19, business cycle, inflation, open-economy DSGE model, Bayesian estimation, Germany |
| JEL: | C51 E32 E52 F41 F45 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2024-48 |
| By: | CALZA Elisa (European Commission - JRC); SOGUERO ESCUER Jorge (European Commission - JRC); FABIANI Josefina (European Commission - JRC); DE PRATO Giuditta (European Commission - JRC) |
| Abstract: | The Advanced Manufacturing (ADMAN) study, launched in 2023, aims to support EU policymakers, industrial stakeholders, and Member States in assessing the performance of the advanced manufacturing industry in Europe and shaping EU industrial strategy. Focused on advanced technologies applied to manufacturing processes, the ADMAN study builds on the recommendations of the Industrial Forum’s Task Force on Advanced Manufacturing and aims at addressing existing data gaps by deploying a methodological approach that provides a comprehensive and comparative overview of the ADMAN industry. To do so, this report defines and discusses some preliminary metrics to map the ADMAN industry at global level, with a special emphasis on the EU's position relative to global competitors. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc137761 |
| By: | Clemens Fuest; Daniel Gros; Philipp-Leo Mengel; Giorgio Presidente; Jean Jean Tirole |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpr:_report |
| By: | CICCOLINI Giuseppe (European Commission - JRC); JOOSSENS Elisabeth (European Commission - JRC); LE BLANC Julia (European Commission - JRC); MENYHERT Balint (European Commission - JRC); PASQUALINO Roberto (European Commission - JRC); SANYE MENGUAL Esther (European Commission - JRC); WIERZGALA Piotr; ZEC Slavica (European Commission - JRC) |
| Abstract: | Detailed information on the consumption footprint of households is essential for the distributional assessment of their carbon and other environmental impacts. The analysis and monitoring of footprint inequalities helps policymakers to formulate incentives for promoting sustainable lifestyles and consumption patterns, to strengthen consumer awareness and, in turn, to support the steering of our society towards greater environmental and economic sustainability. This report introduces a methodology for a novel dataset of the distribution of the consumption footprint of households as well as its inequality, allowing users to zoom in on geographical areas and socio-demographic characteristics. This dataset is based on granular micro-data on the footprint of the individual products consumed by each individual household. Its construction relies on the product-level matching of survey data on households’ consumption expenditure with information on the related carbon and other environmental footprints. For the latter, we rely on the JRC Consumption Footprint which quantifies the environmental impacts resulting from the consumption patterns of individuals at both the EU and single country scale, accounting for both the impacts within the EU territory as well as the embedded impacts in international trade. This dataset uses the product-level environmental impact information from representative products in the areas of food, mobility, housing, household goods and appliances, which is based on process-based life cycle assessment (LCA) and has a high granularity level to allow for modelling policy scenarios. This report provides a description of the methodology for the development and of the potential use of the novel footprint inequality dataset. Starting from the data description, we outline the steps for matching different input datasets and the challenges involved in developing the data infrastructure. The compiled dataset has a good coverage of the consumption footprint at EU and Member State level and reveals large differences in the level and inequality of the consumption footprint across and within different countries in the EU. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc137520 |
| By: | DI PIETRO Giorgio (European Commission - JRC) |
| Abstract: | Skill shortage is an impediment to innovation and economic growth. It is a serious problem in the EU that may undermine its competitiveness, Data from a recent Eurobarometer survey suggest that EU companies perceive more problems in recruiting staff with adequate skills than comparable companies outside the EU. Additionally, the former are also more likely to report than the latter that they have difficulties in filling jobs for master's or PhD degree holders and in recruiting R&D experts. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc138167 |
| By: | Weitzel, Matthias (European Commission, Joint Research Centre, Calle Inca Garcilaso 3, 41092 Sevilla, Spain); Garaffa, Rafael (European Commission, Joint Research Centre, Calle Inca Garcilaso 3, 41092 Sevilla, Spain); Van der Vorst, Camille (European Commission, Joint Research Centre, Calle Inca Garcilaso 3, 41092 Sevilla, Spain) |
| Abstract: | Indirect effects can make the tourism sector sensitive to changes in energy prices, leading to relative larger losses in output than other economic sectors. The paper assess how energy price shocks can affect tourism in the EU |
| Keywords: | Tourism, energy price shock, CGE modelling |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bda:wpsmep:wp2024/26 |