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on European Economics |
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Issue of 2024‒09‒09
nine papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Nghiem, Giang; Marencak, Michal |
| Abstract: | This paper estimates the elasticity of intertemporal substitution for the euro area. It leverages the unique design of the Consumer Expectations Survey in Europe to directly infer it from the Euler equation. Our final estimates range between 0.7 and 0.8 for the euro area as a whole, which are higher than those for the US. We also observe economically sizeable heterogeneity across the member states, and over time. Belgium, Germany, and the Netherlands have lower elasticity compared to France, Spain, and Italy. The implications are discussed. |
| Keywords: | inflation, expectations, consumption, intertemporal elasticity of substitution, Euler equation, Consumer Expectations Survey |
| JEL: | D12 D15 D84 E21 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:han:dpaper:dp-725 |
| By: | Jaromir Baxa; Tomas Sestorad |
| Abstract: | This paper proposes a novel approach to decompose the Economic Policy Uncertainty indices of European countries into the common and country-specific components using the time-varying total connectedness. Then, by employing a Bayesian panel VAR model, we assess how common and country-specific uncertainty shocks influence economic activity, prices, and monetary policy, with the shocks identified using zero and sign restrictions. Our results reveal that only common shocks have significant effects on all macroeconomic variables. This result is robust across alternative samples and structural identifications. Therefore, our findings imply that policymakers should focus on uncertainty shocks that are synchronized across countries. |
| Keywords: | Common uncertainty, economic policy uncertainty, panel VAR, spillovers |
| JEL: | C32 F42 F45 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:cnb:wpaper:2024/9 |
| By: | Ludovic Panon (Directorate General Economics, Statistics and Research, Bank of Italy); Laura Lebastard (Euro Area External Sector Division, Directorate General Economics, European Central Bank); Michele Mancini (Directorate General Economics, Statistics and Research, Bank of Italy); Alessandro Borin (Directorate General Economics, Statistics and Research, Bank of Italy); Peonare Caka (Analysis and Research Department, Bank of Slovenia); Gianmarco Cariola (Regional Economic Research Unit, Bologna Branch, Bank of Italy); Dennis Essers (Economics and Research Department, National Bank of Belgium); Elena Gentili (Regional Economic Research Unit, Bologna Branch, Bank of Italy); Andrea Linarello (Directorate General Economics, Statistics and Research, Bank of Italy); Tullia Padellini (Directorate General Economics, Statistics and Research, Bank of Italy); Francisco Requena (University of Valencia.); Jacopo Timini (Directorate General Economics, Statistics and Research, Bank of Spain) |
| Abstract: | We study how disruptions to the supply of foreign critical inputs (FCIs) − that is, inputs primarily sourced from extra-EU countries with highly concentrated supply, advanced technology products, or which are key to the green transition − might affect value added at different levels of aggregation. Using firm-level customs and balance sheet data for Belgium, France, Italy, Slovenia and Spain, our framework allows us to assess how much geoeconomic fragmentation might affect European economies differently. Our baseline calibration suggests that a 50 % reduction in imports of FCIs from China and other countries with similar geopolitical orientations would result in sizable losses of value added with significant heterogeneity across firms, sectors, regions and countries, driven by the heterogeneous exposure of firms. Our findings show that the short-term costs of supply disruptions of FCIs can be substantial, especially if firms cannot easily switch away from these inputs |
| Keywords: | Geoeconomic fragmentation, global value chains, global sourcing, international trade, imported inputs. |
| JEL: | F10 F14 F50 F60 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202408-452 |
| By: | Busch, Berthold; Kauder, Björn; Sultan, Samina |
| Abstract: | Für den EU-Haushalt werden in diesem Report durch eine Gegenüberstellung der Zahlungen der Mitgliedstaaten und den Rückflüssen aus dem EU-Haushalt die Nettopositionen bestimmt. Die deutsche Nettoposition ist im Jahr 2023 leicht gegenüber dem Vorjahr zurückgegangen, von 19, 7 Milliarden Euro auf 17, 4 Milliarden Euro. Sie liegt damit aber immer noch deutlich höher als in der Vor-Brexit-Zeit. Im Durchschnitt der Jahre 2014 bis 2020, dem letzten Mehrjährigen Finanzrahmen, waren es 13, 5 Milliarden Euro. Deutschland ist damit weiterhin der größte Nettozahler in der Europäischen Union (EU) und liegt vor Frankreich, das im vergangenen Jahr knapp 9 Milliarden Euro mehr abführte als an Rückflüssen zu verzeichnen waren. Auf Platz drei reiht sich Italien mit einem Nettobeitrag von 4, 5 Milliarden Euro ein. Größter Nettoempfänger ist, wie im Vorjahr, Polen mit 8, 2 Milliarden Euro (2022: 11, 9 Milliarden Euro). Mit einigem Abstand dahinter liegen Rumänien und Ungarn mit 6, 0 und 4, 6 Milliarden Euro. |
| Abstract: | The German net position fell slightly in 2023 compared to the previous year, from 19.7 billion euros to 17.4 billion euros. However, it is still significantly higher than in the pre-Brexit period. The average for the years 2014 to 2020, the last Multiannual Financial Framework (MFF), was 13.5 billion euros. Germany is therefore still the largest net contributor in the European Union (EU), ahead of France, which last year paid out almost 9 billion euros more than it received back. Italy is in third place with a net contribution of 4.5 billion euros. As in the previous year, the largest net recipient is Poland with 8.2 billion euros (2022: 11.9 billion euros). Romania and Hungary are some way behind with 6 billion euros and 4.6 billion euros, respectively. |
| Keywords: | EU-Haushalt, EU-Finanzbeziehungen, EU-Staaten |
| JEL: | H61 H77 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwkrep:301159 |
| By: | Marco Due\~nas; Antoine Mandel |
| Abstract: | This paper investigates the effectiveness of the ``low-carbon economy'' expenditures from European Structural and Investment Funds in fostering reductions in greenhouse gas emissions within European regions, focusing on the 2007-2013 and 2014-2020 programme periods. By decomposing emissions time series into trend and cycle components and considering them within a panel data framework, our research highlights that the impacts of low-carbon economy expenditures vary, qualitatively and quantitatively, with the targeted regions' development level. We find significant emissions reductions in developed and transition regions yet less favourable outcomes in less developed areas. Further analysis into specific greenhouse gas emissions types (CO$_2$, CH$_4$, and N$_2$O) reveals inconsistent impacts, underscoring the complexity of achieving emissions reductions. Our findings emphasise the need for tailored environmental strategies that accommodate the economic disparities of regions in the European Union. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2408.01782 |
| By: | Nicola Gagliardi; Elena Grinza; François Rycx |
| Abstract: | In this paper, we investigate the impact of rising temperatures on firm productivity using longitudinal firm-level balance-sheet data from private sector firms in 14 European countries, combined with detailed weather data, including temperature. We begin by estimating firms’ total factor productivity (TFP) using control-function techniques. We then apply multiple-way fixed-effects regressions to assess how higher temperature anomalies affect firm productivity – measured via TFP, labor productivity, and capital productivity. Our findings reveal that global warming significantly and negatively impacts firms’ TFP, with the most adverse effects occurring at higher anomaly levels. Labor productivity declines markedly as temperatures rise, while capital productivity remains unaffected – indicating that TFP is primarily affected through the labor input channel. Our moderating analyses show that firms involved in outdoor activities, such as agriculture and construction, are more adversely impacted by increased warming. Manufacturing, capital-intensive, and blue-collar-intensive firms, compatible with assembly-line production settings, also experience significant productivity declines. Geographically, the negative impact is most pronounced in temperate and mediterranean climate areas, calling for widespread adaptation solutions to climate change across Europe. |
| Keywords: | Climate change; Global warming; Firm productivity; Total factor productivity (TFP); Semiparametric methods to estimate production functions |
| JEL: | D24 J24 Q54 |
| Date: | 2024–08–22 |
| URL: | https://d.repec.org/n?u=RePEc:sol:wpaper:2013/377135 |
| By: | Kohnert, Dirk |
| Abstract: | The European Union (EU) finds itself in a critical need for rare earths, particularly the refined products essential for the production of electric cars, turbines, and other technological applications. However, the refining process is not only energy-intensive but also poses significant environmental risks. Consequently, local communities, as evidenced by instances in Spain and Portugal, vehemently oppose having such operations in their vicinity, advocating a "beggar thy neighbour" policy. The EU currently relies heavily on China, which controls the majority of global processing, commanding 90% of all rare earths and 60% of lithium. In response to these challenges, the EU took a crucial step in November 2023 by reaching a preliminary agreement on the European Critical Raw Materials Act (CRMA). This legislative initiative aims to enhance and diversify the EU's supply of critical raw materials (CRM), foster the circular economy, fortify Europe's strategic autonomy, and explore alternatives to mitigate dependence. Recent transnational crises, including disruptions to supply chains during the COVID-19 pandemic and Russia's invasion of Ukraine, underscore the imperative of secure supply chains across all economic sectors. These crises also underscore the significant influence wielded by major emerging economies, notably the BRICS countries (Brazil, Russia, India, China, and South Africa), which dominate key global supply chains, including those for critical raw materials (CRMs). Russia plays a pivotal role as one of the world's largest suppliers of palladium (40% of global supply), the second-largest supplier of platinum (13%) and nickel (12%), and a substantial contributor of aluminium and copper. Furthermore, Russia possesses the potential to emerge as a major player in the rare earths market due to its extensive reserves. The country also accounts for a considerable share of the EU's acquisitions, including palladium (41%), platinum (16%), cobalt (5%), and lithium (4%). Notably, Russia serves as the primary EU source for platinum group metals processing (iridium, platinum, rhodium, ruthenium; 40%), phosphate rock extraction (20%), lithium processing (4%), and scandium processing (1%). To attain greater independence in external CRM provision, the EU must make significant investments in its mining and processing facilities. However, mining represents merely the initial phase; subsequent steps involve the separation of rare earth elements (REE) from oxides, refining, and alloy forging a complex, highly specialized, multi-stage process. In this regard, relative newcomers like Europe lag behind, as China has solidified its dominant position in each phase through a concerted, long-term industrial strategy supported by state subsidies. |
| Abstract: | Die Europäische Union (EU) hat einen dringenden Bedarf an Seltenen Erden, insbesondere an raffinierten Produkten, die für die Produktion von Elektroautos, Turbinen und anderen technischen Anwendungen unerlässlich sind. Allerdings ist der Raffinierungsprozess nicht nur energieintensiv, sondern birgt auch erhebliche Umweltrisiken. Folglich lehnen lokale Gemeinschaften, wie Beispiele in Spanien und Portugal zeigen, solche Operationen in ihrer Nähe vehement ab und befürworten eine „Beggar-thy-Neighbour“-Politik. Die EU ist derzeit stark von China abhängig, das den Großteil der weltweiten Verarbeitung kontrolliert und über 90 % aller Seltenen Erden und 60 % des Lithiums verfügt. Als Reaktion auf diese Herausforderungen hat die EU im November 2023 einen entscheidenden Schritt unternommen, indem sie eine vorläufige Einigung über den European Critical Raw Materials Act (CRMA) erzielte. Diese Gesetzesinitiative zielt darauf ab, die Versorgung der EU mit kritischen Rohstoffen (CRM) zu verbessern und zu diversifizieren, die Kreislaufwirtschaft zu fördern, die strategische Autonomie Europas zu stärken und Alternativen zur Verringerung der Abhängigkeit zu erkunden. Die jüngsten transnationalen Krisen, darunter Unterbrechungen der Lieferketten während der COVID-19-Pandemie und der russischen Invasion in der Ukraine, unterstreichen die Notwendigkeit sicherer Lieferketten in allen Wirtschaftssektoren. Diese Krisen unterstreichen auch den erheblichen Einfluss großer Schwellenländer, insbesondere der BRICS-Staaten (Brasilien, Russland, Indien, China und Südafrika), die wichtige globale Lieferketten, einschließlich derjenigen für kritische Rohstoffe (CRMs), dominieren. Russland spielt eine zentrale Rolle als einer der weltweit größten Lieferanten von Palladium (40 % des weltweiten Angebots), als zweitgrößter Lieferant von Platin (13 %) und Nickel (12 %) und als wesentlicher Lieferant von Aluminium und Kupfer. Darüber hinaus verfügt Russland aufgrund seiner umfangreichen Reserven über das Potenzial, sich zu einem wichtigen Akteur auf dem Markt für Seltene Erden zu entwickeln. Auf das Land entfällt auch ein beträchtlicher Anteil der EU-Akquisitionen, darunter Palladium (41 %), Platin (16 %), Kobalt (5 %) und Lithium (4 %). Insbesondere dient Russland als wichtigste EU-Quelle für die Verarbeitung von Metallen der Platingruppe (Iridium, Platin, Rhodium, Ruthenium; 40 %), die Gewinnung von Phosphatgestein (20 %), die Verarbeitung von Lithium (4 %) und die Verarbeitung von Scandium (1 %). Um eine größere Unabhängigkeit bei der externen CRM-Bereitstellung zu erreichen, muss die EU erhebliche Investitionen in ihre Bergbau- und Verarbeitungsanlagen tätigen. Allerdings stellt der Bergbau lediglich die Anfangsphase dar; Nachfolgende Schritte umfassen die Trennung seltener Erdelemente (REE) von Oxiden, die Raffinierung und das Schmieden von Legierungen, ein komplexer, hochspezialisierter, mehrstufiger Prozess. In dieser Hinsicht hinken relative Newcomer wie Europa hinterher, da China seine dominierende Stellung in jeder Phase durch eine konzertierte, langfristige Industriestrategie, die durch staatliche Subventionen unterstützt wird, gefestigt hat. |
| Keywords: | rare earths, climate change, energy transition, pollution, Russia, Germany, France, Italy |
| JEL: | D24 D43 D52 E23 F64 Q53 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:300882 |
| By: | Dawid, Herbert; Harting, Philipp; Hoog, Sander van der; Neugart, Michael |
| Abstract: | The Eurace@Unibi model is a multi-region macroeconomic simulation model that has been developed with the goal to provide a platform with strong micro-foundations for economic policy analysis in a variety of policy domains. The model builds on work carried out during the European project EURACE ("An agent-based software platform for European economic policy design with heterogeneous interacting agents"), which was funded from 2006 to 2009 as part of the European Union's 6th Framework Programme. Since then, it has been substantially extended and further developed. |
| Date: | 2024–08–12 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:149219 |
| By: | Axel H. Börsch-Supan; Johannes Rausch; Luca Salerno |
| Abstract: | Germany, like many other countries, has undergone a series of pension reforms since the 1980s which generally decreased benefit generosity and increased the retirement age due to demographic pressures. This paper investigates whether these reforms have increased income and wealth inequality among retirees. In order to answer this question, we employed counterfactual simulations in which we predict how the income and social security wealth distributions would have developed if these reforms had not taken place, compared to the actual development of the income and social security wealth distributions. Our analysis reveals that the pension reforms has led to an increase in inequality in terms of social security wealth between the 1990s and 2000s and decreased inequality thereafter. The decrease in inequality is mainly driven by social assistance as it represents a lower bound for benefit size and thus mitigates the effect of benefit-reducing reforms for lower income groups. We further divided the total effect of the pension reforms into two components. The first component is the mechanical effect, which keeps retirement probabilities constant and only considers changes in benefit calculation. The second component is the behavioral effect, which describes how SSW differs because of altered retirement probabilities. Our findings indicate that in the German context the behavioral effect is statistically significant but economically small. |
| JEL: | H55 J23 J26 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32796 |