|
on European Economics |
|
Issue of 2026–01–12
seventeen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Marie-Claude Beaulieu (Département de finance, assurance et immobilier, Université Laval and research fellow at CRREP (Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques), Holder of Chaire RBC en innovations financières); Marie-Hélène Gagnon (Département de finance, assurance et immobilier, Université Laval and research fellow at CRREP (Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques)); Céline Gimet (Sciences Po Aix, Aix Marseille Univ, CNRS, AMSE, Marseille, France) |
| Abstract: | This paper studies the main determinants of bilateral financial flows in the euro area to achieve sustainable and fair financing opportunities. We revisit the modern theory of the optimal currency area considering the impact of heterogeneity in inequality measures, within and across countries, on crossborder financial flows. To do so, we introduce financial and social fragmentation in gravity models of European capital flows. We use data from 19 Eurozone countries from 2000 to 2021 and show how fragmentation impacts capital flows, namely foreign direct investment, cross-border loans as well as portfolios, equity and bond flows. Since capital is, in principle, free to flow in the Eurozone, our analysis directly identifies the roles of potential sources of fragmentation: social inequalities, lack of market openness, and domestic regulations such as macroprudential controls. Overall, our results show that financial integration in Europe entails more capital flows of any type while social fragmentation across European countries is detrimental to capital flows, no matter which type. This is strong evidence of the importance of financial and social fragmentation in the Eurozone on the distribution of capital. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2531 |
| By: | Jameson, Daisy; Perez, Carina; Claeys, Irene |
| Abstract: | Between 2022 and 2023, Europe experienced an inflationary crisis driven by gas supply disruptions following Russia’s invasion of Ukraine, and compounded by postCOVID pandemic supply chain shocks. To support traditional monetary policy tools in combatting inflation, Member States of the European Union deployed a range of so-called ‘unconventional’ fiscal policies aimed at protecting consumers from the increase in energy prices and limiting the pass-through of inflation to the wider economy. These fiscal policy measures were accompanied by a set of structural resilience building measures aimed at addressing the supply disruption in gas markets by improving the EU’s capacity to act in cases of extreme shortages and reducing the risk of future supply shocks. |
| JEL: | N0 R14 J01 E6 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130738 |
| By: | Iancu, Aurel (Romanian Academy, National Institute of Economic Research) |
| Abstract: | This article is focusing on the economic literature attempting to solve the problem of the impossible trilemmas of the euro area, by reconciling the relations between the three essential pillars - supranational monetary independence, national fiscal independence and the no bail-out clause applied in the union of states with single currency. The analyses carried out show that the first countries to fall victim to the economic and financial crisis where the least developed with high levels of public debt and which did not respect the nominal convergence criteria. The wide range of measures taken following the crises aimed not only at economic recovery, but also at significant changes in the architecture of the essential pillars and the relations between them by applying a mix of policies to relax these restrictive relations and accompanied by measures to respect financial and fiscal discipline. On the other hand, in order to resolve critical moments of financial balances, including insolvency, special intervention fund and financial facilities were created. It was the transition from the no bail-out clause to the explicit bail-out regime. The last section also reveals the existence of a significant upward trend in measures and reforms which support increasing efficiency of actions and fiscal competences at the EU and member state levels. The text emphasizes the EU's contribution to simplify and modernize the fiscal system of the member states. In the new conditions, fiscal policy should no longer be seen as a state of opposition between the common fiscal policy and the sovereign fiscal policy, but rather as a state of cooperation and support given to the member states under the conditions of the wide application of the principles of subsidiarity and proportionality. |
| Keywords: | impossible trilemma, essential pillars, single currency independence, national fiscal independence, no bail-out clause, explicit bail-out regime, insolvency, compatibility, crisis, mix policies, quantitative easing, financial funds and facilities, principle of subsidiarity |
| JEL: | A12 B41 E32 E42 E63 E52 E58 F02 F6 H2 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ror:wpince:251229 |
| By: | Wagner, Joachim |
| Abstract: | The use of advanced technologies like artificial intelligence, robotics, or smart devices will go hand in hand with higher productivity, higher product quality, and lower trade costs. Therefore, it can be expected to be positively related to export activities. This paper uses firm level data for manufacturing enterprises from the 27 member countries of the European Union collected in 2025 to shed further light on this issue by investigating the link between the use of advanced technologies and extensive margins of exports. Applying a new machine-learning estimator, Kernel-Regularized Least Squares (KRLS), which does not impose any restrictive assumptions for the functional form of the relation between margins of exports, use of advanced technologies, and any control variables, we find that firms which use more advanced technologies do more often export and do export to more different destinations. |
| Keywords: | Advanced technologies, exports, firm level data, Flash Eurobarometer 559, kernel-regularized least squares (KRLS) |
| JEL: | D22 F14 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kcgwps:334537 |
| By: | Charles Yuji Horioka; Luigi Ventura |
| Abstract: | We analyze the saving motives of European households using micro-data from the Household Finance and Consumption Survey, which is conducted by the European Central Bank. We find that the rank ordering of saving motives differs greatly depending on what criterion is used to rank them. We find that the precautionary motive is the most important saving motive of European households when the proportion of households saving for each motive is used as the criterion to rank them but that the retirement motive is the most important saving motive of European households if the quantitative importance of each motive is taken into account. Moreover, the generosity of social safety nets seems to affect the importance of individual saving motives, with saving for the retirement motive being less important in countries with generous public pension benefits and saving for the precautionary motive being less important in countries with generous public health systems. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1251r |
| By: | Felbermayr, Gabriel; Hinz, Julian; Krantz, Sebastian; Mahlkow, Hendrik; Wanner, Joschka |
| Abstract: | How do adverse global trade shocks affect sub-national outcomes, and what insurance does regional integration provide? We study the EU Single Market using a large-scale quantitative trade model with regional labour mobility, calibrated to a new NUTS2- based Regionalized Inter-Country Input-Output (REICIO) database. Comparing four baselines, from a fully frag-mented Europe to deep integration, we evaluate the 2025 US tariffs. Full integration of EU goods and labour markets reduces the average regional loss in real value added per capita by about 25% and more than halves its dispersion. Further deepening barely improves the mean but compresses the distribution of regional impacts even further. |
| Keywords: | Global Trade Wars, MRIO, ICIO, European Regions, NUTS2, Global Value Chains, Sectoral Mobility Frictions, Trade Integration |
| JEL: | F15 F16 F17 R15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:334528 |
| By: | Talatchanant Tontiwachwutthikul; Kannika Thampanishvong; Kanis Saengchote; Krislert Samphantharak; Jirayu Chandrasakha |
| Abstract: | To mitigate the risk of carbon leakage, the European Union (EU) introduced the Carbon Border Adjustment Mechanism (CBAM) to impose a fair price on the carbon emissions associated with the production of carbon-intensive goods imported into the EU, thereby encouraging cleaner industrial production. This paper combines firm-level exporting activity data and financial data in a difference-in-differences regression framework to examine the impact that the CBAM policy announcement and implementation have on Thai exporting firms. We find that the announcement of the CBAM negatively affected Thai firms' ability to export impacted goods to the EU, and these adverse effects intensified following the CBAM implementation. Treated firms’ total export revenue decreased relative to the control group and were only able to partially mitigate the impact of this shock by increasing exports of non-CBAM goods to countries outside of the EU. |
| Keywords: | Carbon Border Adjustment Mechanism (CBAM); Thailand, exporting firm; International trade |
| JEL: | F14 F18 Q54 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:243 |
| By: | Despina Gavresi (DEM, University of Luxembourg); Anastasia Litina (Department of Economics, University of Macedonia) |
| Abstract: | In an era marked by repeated crises and the growing traction of populist movements, understanding the deep-rooted factors shaping EU cohesion has become increasingly urgent. This paper investigates how lifetime exposure to economic recessions influences individual attitudes toward the European Union (EU). Resorting to rich micro-data from the European Social Survey (ESS) and the Eurobarometer, we construct a detailed measure of economic hardship experienced during lifetime, capturing not just isolated downturns but the accumulated burden of multiple recessions over time. Importantly, we distinguish between various types of shocks-including output contractions, unemployment surges, consumption drops, participation in IMF adjustment programs, and the asymmetry or symmetry of crises across EU member states. We show that individuals with greater lifetime exposure to these economic shocks are more likely to distrust EU institutions, oppose further integration, vote for Eurosceptic parties, and support exiting the EU. These patterns are especially pronounced for asymmetric shocks, which disproportionately affect specific regions or countries, in contrast to symmetric shocks, which appear to foster a sense of shared fate and solidarity. A series of robustness tests-including placebo checks, heterogeneity analyses, diverse shock types and designs exploiting EU institutional structure -confirms the persistent impact of economic trauma on EU attitudes, underscoring the need to address historical recessions to safeguard cohesion and democratic legitimacy in the context of the EU. |
| Keywords: | Populism; Political attitudes; Institutional trust; OLS, Difference-in-differences |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:mcd:mcddps:2025_07 |
| By: | Mauro Lanati; Giorgia Giovannetti; Lisa Grazzini; Annalisa Luporini; Michel Rizzo |
| Abstract: | This article examines how EU structural funds affect local labor demand. Using Lightcast granular data on online-job postings in Italy, we match quarterly information on EU project disbursements with variations in labor demand at NUTS-3 provincial level. By relying on a shift-share type of instrument, we find that EU structural funds have a positive effect on the number of job postings. The resulting impact is mostly driven by the European Social Fund (ESF) and is particularly strong on jobs that require green and digital skills. Moreover, the results suggest that the effect on labor demand manifests itself only in areas with middle-high socio-economic conditions, while it is not significant in poorest areas. From a policy perspective, our findings point to a negative role played by EU structural funds in reducing geographical disparities in terms of employment opportunities across Italian provinces. |
| Keywords: | EU Structural Funds; Labor Demand; Green and Digital Skills |
| JEL: | C21 F35 H23 H77 R11 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:frz:wpaper:wp2025_17.rdf |
| By: | Olteanu, Dan Constantin (Romanian Academy, National Institute of Economic Research) |
| Abstract: | In this paper we verify and quantify the convergence trend of public social expenditure at European Union level (27 countries), as well as between Western European (WE) and Central and Eastern European (CEE) countries between 1995 and 2022, structured on the three social sectors (health care, education and social protection), and three destinations (public consumption, compensation of employees and social benefits). At the same time, we investigate the manner and extent to which the effects of the Covid-19 crisis in 2020-2022 have affected this convergence trend. |
| Keywords: | social convergence, public social expenditure, health, education, social protection, public consumption, public wages, social benefits |
| JEL: | H51 H52 H53 I18 I28 I38 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:ror:wpince:250630 |
| By: | Pierre Coster; Julian di Giovanni; Isabelle Méjean |
| Abstract: | Several countries have implemented a carbon tax or cap-and-trade system to establish high carbon prices and create a disincentive for the use of fossil fuels. Essentially, the tax encourages firms to substitute toward low carbon emission energy. Costs also rise for firms down the supply chain that use production inputs with high-emission content, so the total impact of a carbon tax can be large. In practice, however, firms also have an incentive to find an offset to a carbon tax. In this post, based on our recent work, we present evidence of one such adaptation strategy. We show that French firms increased their imports of high-emission inputs from suppliers outside the European Union’s cap-and-trade system, known as the EU Emissions Trading System (EU ETS), reducing the effectiveness of this approach to cutting carbon emissions—an adaptation strategy that leads to “carbon leakage.” To help stop this leakage, the EU is implementing a “carbon tariff” in 2026, which is the topic of a companion post. |
| Keywords: | firm sourcing; supply chain adaptation; carbon tax; carbon tariffs; carbon leakage |
| JEL: | F14 F18 F64 H23 Q56 |
| Date: | 2026–01–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102304 |
| By: | Pierre Coster; Julian di Giovanni; Isabelle Méjean |
| Abstract: | The European Union has been an early adopter of carbon policies, with the introduction of the EU Emissions Trading System (ETS) in 2005. This scheme sets a common price for carbon and is applied to the most polluting manufacturing sectors. By increasing the cost of emissions-intensive production, the system incentivizes firms to decrease their use of fossil fuels. However, as we show in a companion post, the policy’s impact was moderated by firms increasing their reliance on high-emissions imports. To eliminate this workaround, the EU will expand the ETS to imports in 2026, through the Carbon Border Adjustment Mechanism (CBAM). The CBAM will essentially put a tariff on imported goods based on their carbon content. Our recent work provides a quantitative analysis of how the ETS and CBAM affect firms’ supply choice decisions, and the resulting changes in domestic prices and emissions. |
| Keywords: | firm sourcing; supply chain adaptation; carbon tax; carbon tariffs; carbon leakage |
| JEL: | F14 F18 F64 H23 Q56 |
| Date: | 2026–01–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102305 |
| By: | Brühl, Volker; Radetzky, Marie-Therèse; Stolper, Oscar |
| Abstract: | This study evaluates the effectiveness of MiFID II's mandatory elicitation of retail investors' sustainability preferences in aligning investment advice with EU climate goals. Using comprehensive real-world data from 18, 250 advisory meetings at a German savings bank, we analyze how clients' expressed ESG preferences influence advisory recommendations and actual investment behavior. Despite regulatory intent, the share of clients stating sustainability preferences declined significantly after mandatory implementation, and expressed preferences rarely translated into changed investment decisions. Our findings reveal a gap between regulatory frameworks and client engagement, highlighting challenges in operationalizing sustainability preferences. We discuss these results alongside ESMA stakeholder feedback and propose practical improvements to enhance alignment and impact. |
| Keywords: | Financial Advice, ESG Preferences, Sustainable Investing, Household Finance, Retail Investors, MiFID II |
| JEL: | G11 G21 G40 G50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cfswop:334519 |
| By: | Joanne Lindley (King’s Business School, King’s College London, Bush House, Aldwych, London, WC2B 4B, UK); Steven McIntosh (School of Economics, University of Sheffield, Sheffield S10 2TU, UK) |
| Abstract: | This study investigates the relationship between worker-reported job quality characteristics and both work-related wellbeing and labour productivity, utilizing data from the European Working Conditions Surveys (EWCS) of 2005 and 2015, and the European Working Conditions Telephone Survey (EWCTS) of 2021. We construct composite Job Quality Scores (JQS) for wellbeing and productivity based on 24 key job quality characteristics, weighted by their correlation with each respective outcome. Our analysis reveals a divergence in trends between 2015 and 2021, with average JQS for work-related wellbeing significantly declining while the JQS for labour productivity increased. By decomposing the changes, we identify specific job quality characteristics, such as increased repetitive hand/arm movements, working at high speed, carrying heavy loads, and working to tight deadlines, as key drivers of this opposing trend. Conversely, increased computer use, reduced physically demanding postures, appropriate reward for effort, and reduced exposure to dangerous chemicals are identified as factors that could simultaneously enhance both productivity and wellbeing. Furthermore, we explore the role of occupational shifts in explaining these changes, finding that the observed increases in key job characteristics listed above are largely occurring within occupations rather than solely due to changes in occupational composition of the workforce. These findings offer valuable insights for managers seeking to balance economic performance with worker wellbeing, highlighting specific areas for intervention to foster a more harmonious and productive work environment. |
| Keywords: | Job quality, wellbeing, productivity, occupations |
| JEL: | J20 J21 J24 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:shf:wpaper:2025013 |
| By: | Hünewaldt, Victoria; Brunori, Paolo |
| Abstract: | We contribute to the growing evidence that inequality is often misperceived and that personal experience plays a more significant role than objective conditions in shaping beliefs and attitudes toward it. In this study, we examine whether people’s views about fairness and inequality align with empirical measures. Specifically, we compare individuals’ perceptions of the relative importance of various factors in determining success in life with objective estimates of how education, hard work, family wealth, and gender predict income inequality across 27 EU countries. We find little correlation between perceptions and reality. People tend to more accurately recognize the importance of education in contributing to inequality, while the role of family wealth and gender is more strongly perceived by those directly affected by it. Women, for instance, exhibit greater awareness of gender-based disparities, and individuals in disadvantaged economic conditions display perceptions that correspond more closely to the observed role of family wealth. In contrast, those who are employed, upwardly mobile, or financially stable tend to attribute outcomes more strongly to hard work. These distorted perceptions, in turn, shape attitudes toward redistribution: beliefs about the importance of hard work and the overall level of inequality of opportunity emerge as key predictors of support for redistributive policies. |
| Keywords: | inequality; perceptions; opportunity; redistribution |
| JEL: | D63 |
| Date: | 2025–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130680 |
| By: | Ambrocio, Gene; Fungáčová, Zuzana; Heikkinen, Joni; Kerola, Eeva; Korhonen, Iikka; Norring, Anni |
| Abstract: | We construct a geopolitical risk indicator for Finland using local, Finnish language news media - FinnGPR. We compare FinnGPR to global and country-specific measures of geopolitical risk derived from Anglo-Saxon media. We show that in the case of Finland, local geopolitical risk perceptions based on local news media differ from global attention on geopolitical risk in Finland as reflected in the global media. We study the effects of FinnGPR on the Finnish economy and find that the Finnish economy tends to be resilient to geopolitical risk shocks. Nevertheless, we find that geopolitical risks can represent a threat to Finnish financial market stability. |
| Keywords: | geopolitical risk, local perceptions, geopolitical attention, news-based index, macroeconomic stability, financial stability |
| JEL: | D80 E44 F50 G0 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofrdp:334518 |
| By: | Elisa Ossola; Irina Trifan |
| Abstract: | We develop an empirical application on a large dataset of European stock returns, in order to estimate the risk premia. We propose an application of the Three-Pass Estimation Method (3PEM) by Xiu and Giglio (2021) as a multipurpose tool in asset pricing. By assuming the Fama–French Five-Factor model (Fama and French (2015)) as baseline model, we show that the 3PEM yields risk premium estimates that are more economically plausible and statistically robust than those obtained using the traditional two-pass estimation method (2PEM). Moreover, we extend the results by Xiu and Giglio (2021) showing that the 3PEM is able to detect noise in tradable factors. Furthermore, the method is used to denoise the observed factors, providing purified versions that better capture the systematic components of risk. We also identify noisy factors, and yield denoised factor series that improve the estimation of stock-level exposures and expected returns. |
| Keywords: | three-pass estimator, Empirical asset pricing, PCA, large panels. |
| JEL: | G12 C58 C55 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:565 |