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on European Economics |
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Issue of 2024‒10‒14
eighteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Lambert, Claudia; Larkou, Chloe; Pancaro, Cosimo; Pellicani, Antonella; Sintonen, Meri |
| Abstract: | By applying a structural demand model to unique consumer-level survey data from the euro area, we assess how different CBDC design options, combined with individual (revealed) preferences, influence the potential demand for a digital euro. Estimating the demand for a digital euro, we find that if it were unconstrained, it could range, in steady state, between 3-28% of household liquid assets or €0.12 - €1.11 trillion, depending on whether consumers would perceive the digital euro to be more cash-like or deposit-like. With an illustrative €3, 000 holding limit per person, it could instead range between 2-9% or €0.10 -€0.38 trillion. Privacy, automatic funding, and instant settlement raise its potential demand. JEL Classification: E41, E50, E58 |
| Keywords: | Central bank digital currency, demand estimation, design attributes, structural model |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242980 |
| By: | Mosk, Benjamin; Vassallo, Danilo |
| Abstract: | This paper presents an event-study methodology that combines market data and survey-based probabilities to infer the full effect of a policy decision, as seen through the lens of financial markets. The market reaction to an event’s outcome reflects its surprise or announcement effect, and generally not its full effect. However, under certain conditions, the unobserved full effect can be derived from the observed surprise effect. Most importantly, the ex-ante probabilities of different outcomes must be known. We apply this methodology to a real-world example: the European Central Bank’s announcement of its third series of targeted longer-term refinancing operations (TLTROIII). The introduction of TLTROIII was highly anticipated, and therefore partially priced in, as market participants feared a “cliff effect” with the preceding operations under TLTROII coming due. We estimate the announcement’s full effect, focusing on its impact on a set of asset prices, as compared to a baseline wherein TLTROIII would not have been introduced. The full market impact surpasses the surprise effect by a factor of fifteen. We also find that the announcement had a highly heterogeneous impact on euro area sovereign bond yields. JEL Classification: G12, G13, G14 |
| Keywords: | event-study, targeted longer-term refinancing operations |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242982 |
| By: | Antoine Ebeling |
| Abstract: | This paper study the impact of the European Central Bank’s (ECB) climate related speeches on European stock markets. Using the database of 2594 speeches between 1997 and 2022 of the European Central Bank, we employ advanced textual analysis techniques, including keyword identification and topic modeling, to isolate speeches related to climate change. We then conduct an event study to estimate the differences in abnormal returns of a large panel of listed companies in response to the European Central Bank’s speeches on climate change. Our analysis reveals that the ECB’s communication on climate issues has intensified significantly since 2015. Using topic modelling methods, we classify climate speeches into two main themes: (i) green finance and economic policies, and (ii) climate-related risks The event study shows that financial markets tend to reallocate portfolios towards greener ones in the days following the ECB’s climate speeches. Our results show that following a climatic speech by the ECB, green financial markets are benefiting from positive abnormal returns by around 1 percentage point. More specifically, we find that climate speeches dealing with green monetary policy and other economic policy instruments have a larger effect on green stock prices than speeches dealing with different types of climate risk. |
| Keywords: | Central bank communication ; Climate change ; Event Study ; Textual Analysis. |
| JEL: | E52 G14 Q54 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2024-38 |
| By: | LEVENTI Chrysa (European Commission - JRC); MAZZON Alberto (European Commission - JRC); ORLANDI Fabrice |
| Abstract: | In 2022 inflation hit European economies in a severe way. To protect the purchasing power of households, EU Member States adopted a series of exceptional fiscal policy measures. In this paper, we turn our focus on wage indexation, a policy option that has been relatively less explored in the relevant literature. Our objective is to analyse the (first-order) fiscal and distributional impact of wage indexation and of its two main subsequent effects, fiscal drag and benefit erosion. Using EUROMOD, the tax-benefit microsimulation model for the EU, we construct three hypothetical scenarios with uniform/diversified inflation shocks and with/without compensation schemes for the income losses caused by benefit erosion. We find that the budgetary impact of wage indexation varies widely among European countries. Interestingly, we also observe that in most countries, the relative magnitude of fiscal drag and benefit erosion is not affected by the magnitude of the increase in employment income. Our estimates suggest that in almost half of the countries, fiscal drag and benefit erosion cause an implicit increase in government revenues sufficient to finance an indexation of benefits and pensions to the inflation of that year. The latter would be associated with a substantial decrease in income inequality in the vast majority of EU Member States. Finally, we discuss how the existing automatic indexation adjustments embedded in EU countries’ personal income tax schedules affect the magnitude and distributional implications of fiscal drag. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202408 |
| By: | Lara Coulier; Alessio Reghezza |
| Abstract: | We match granular supervisory and credit register data to assess the implications of banks' exposure to interest rate risk on the monetary policy transmission to bank lending supply in the euro area. We exploit the largest and swiftest increase in interest rates since the creation of the euro and find that banks with a higher exposure to interest rate risk, i.e., with a larger duration gap after accounting for hedging, curtailed corporate lending more than their peers. Ceteris paribus, greater interest rate risk entails closer supervisory scrutiny and potential capital surcharges in the short term, and lower expected profitability and capital accumulation in the medium to long term. We then proceed to dissect banks' credit allocation and find that banks with higher net duration reshuffled their loan portfolio away from long-term loans in an attempt to limit the increase in interest rate risk and targeted their lending contraction to small and micro firms. Firms exposed to banks with a larger exposure to interest rate risk were unable to fully rebalance their borrowing needs with other lenders, thus experiencing a relatively larger decrease in total borrowing during the monetary tightening episode. |
| Keywords: | interest rate risk, duration gap, bank lending channel, financial stability |
| JEL: | E51 E52 G21 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1202 |
| By: | MAIER Sofia (European Commission - JRC); DE POLI Silvia (European Commission - JRC); AMORES Antonio F (European Commission - JRC) |
| Abstract: | Carbon taxes on household consumption can simultaneously increase public funding and promote greener consumption habits, an appealing combination for the just transition plans of the European Union (EU). However, concerns about equity and public support pose challenges. This paper assesses the distributional and budgetary effects of various designs for an EU-wide hypothetical carbon tax on households consumption. To this end, we extend the EU tax-benefit microsimulation model, EUROMOD, with greenhouse gas (GHG) emissions data from input-output tables and estimate households’ carbon footprints. We show that a carbon tax on households GHG emissions would be regressive, thereby inequality-increasing. This is primarily due to the low income elasticity of highly GHG-intense necessity goods, such as food and heating, which represent larger shares of income at the bottom of the distribution. Still, we demonstrate that this inequality-increasing impact can be offset with compensatory cash transfers (though these may be challenging to implement), and at least partially reverted with more progressive (and presumably feasible) tax designs, including rate differentiation by products and tax allowances. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202409 |
| By: | Gabriel Felbermayr (Supply Chain Intelligence Institute Austria, Austrian Institute of Economic Research); Klaus Friesenbichler (Supply Chain Intelligence Institute Austria, Austrian Institute of Economic Research); Peter Klimek (Supply Chain Intelligence Institute Austria, Medical University of Vienna, Complexity Science Hub Vienna) |
| Abstract: | ASCII proposes a revision of the EU directive on supply chain due diligence, the EU Corporate Sustainable Due Diligence Directive. The directive is based on European values and is to be welcomed. ASCII suggests that the Directive should focus, where possible, on direct monitoring of suppliers rather than on bilateral relationships between buyers and sellers. The directive should be amended to allow the use of negative and positive lists of countries and suppliers. Such lists contain foreign suppliers that are prohibited (negative lists) or authorised (positive lists) to participate in EU supply chains. When contracting with companies on positive lists, EU importers do not have to carry out due diligence on the companies. They are prohibited from doing business with companies on negative lists. The Directive will continue to apply to non-listed companies. This reduces the overall cost of the regulation for EU importers, reduces the likelihood of unwanted side-effects and makes the instrument more effective, as non-compliance by a foreign supplier leads to delisting throughout the EU, not just with a single buyer. It would also increaseeffectiveness by reducing legal uncertainty and extending the scope of the regulation beyond EU-based production networks. |
| Date: | 2023–12 |
| URL: | https://d.repec.org/n?u=RePEc:bdt:asciis:002 |
| By: | Alexandra Bykova (The Vienna Institute for International Economic Studies, wiiw); Viktrória Döme; Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Francesca Guadagno (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Nadya Heger (The Vienna Institute for International Economic Studies, wiiw); Niko Korpar (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Jan Muś; Magdolna Sass; Bernd Christoph Ströhm (The Vienna Institute for International Economic Studies, wiiw); Andrea Szalavetz; Maryna Tverdostup (The Vienna Institute for International Economic Studies, wiiw); Zuzana Zavarská (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This study builds on our previous analyses of a new growth model for the EU member states of Central and Eastern European (CEE), focusing on fostering innovation-driven development. We aim to explain the types of innovation systems and policies that enhance domestic innovation capabilities, drawing on global best practices. A critical evaluation of the current innovation landscape in EU-CEE countries is conducted, particularly in the context of the green and digital transitions. The study assesses the strengths and weaknesses of both national innovation initiatives and opportunities provided by EU industrial and technology policy frameworks. Based on these insights, we offer actionable policy recommendations to promote innovation-driven growth, enhance productivity, and boost economic convergence over the medium term, taking into account the unique political and historical contexts of the EU-CEE countries. Additionally, we prepare country-specific briefing notes tailored to the individual development needs and opportunities of each nation. |
| Keywords: | Innovation policy, technological development, Central Eastern Europe, convergence |
| JEL: | O14 O31 O38 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:wii:rpaper:rr:476 |
| By: | Piotr Lewandowski; Wojciech Szymczak |
| Abstract: | We study the effect of the adoption of automation technologies – industrial robots and software and databases – on the incidence of atypical employment in 13 E.U. countries between 2006 and 2018. We combine survey microdata with sectoral information on technology use and exploit the variation at the demographic group level. Using instrumental variables estimation, we find that industrial robots significantly increase atypical employment share, mostly through involuntary part-time and involuntary fixed-term work. We find no robust effect of software and databases. We also show that the higher trade union coverage mitigates the robots’ impact on atypical employment, while employment protection legislation appears to play no role. Using historical decompositions, we attribute about 1-2 percentage points of atypical employment shares to rising robot exposure, especially in Central and Eastern European countries with low unionisation. |
| Keywords: | robots, automation, atypical employment, trade unions |
| JEL: | J23 J51 O33 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ibt:wpaper:wp022024 |
| By: | Francesco D'Alessandro (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore, Milano, Italy); Enrico Santarelli (, Department of Economics, University of Bologna, Italy - Global Labor Organization (GLO), Essen, Germany); Marco Vivarelli (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore, Milano, Italy – UNU-MERIT, Maastricht, The Netherlands – IZA, Bonn, Germany) |
| Abstract: | In this paper we integrate the insights of the Knowledge Spillover Theory of Entrepreneurship and Innovation (KSTE+I) with Schumpeter's idea that innovative entrepreneurs creatively apply available local knowledge, possibly mediated by Marshallian, Jacobian and Porter spillovers. In more detail, in this study we assess the degree of pervasiveness and the level of opportunities brought about by AI technologies by testing the possible correlation between the regional AI knowledge stock and the number of new innovative ventures (that is startups patenting in any technological field in the year of their foundation). Empirically, by focusing on 287 Nuts-2 European regions, we test whether the local AI stock of knowledge exerts an enabling role in fostering innovative entry within AI-related local industries (AI technologies as focused enablers) and within non AI-related local industries, as well (AI technologies as generalised enablers). Results from Negative Binomial fixed-effect and Poisson fixed-effect regressions (controlled for a variety of concurrent drivers of entrepreneurship) reveal that the local AI knowledge stock does promote the spread of innovative startups, so supporting both the KSTE+I approach and the enabling role of AI technologies; however, this relationship is confirmed only with regard to the sole high-tech/AI-related industries. |
| Keywords: | KSTE+I, Artificial Intelligence, innovative entry, enabling technologies |
| JEL: | O33 L26 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ctc:serie5:dipe0039 |
| By: | Anton Pichler; Jan Hurt; Tobias Reisch; Johannes Stangl; Stefan Thurner |
| Abstract: | The Russian invasion of Ukraine on February 24, 2022 entailed the threat of a drastic and sudden reduction of natural gas supply to the European Union. This paper presents a techno-economic analysis of the consequences of a sudden gas supply shock to Austria, one of the most dependent countries on imports of Russian gas. Our analysis comprises (a) a detailed assessment of supply and demand side countermeasures to mitigate the immediate shortfall in Russian gas imports, (b) a mapping of the net reduction in gas supply to industrial sectors to quantify direct economic shocks and expected relative reductions in gross output and (c) the quantification of higher-order economic impacts through using a dynamic out-of-equilibrium input-output model. Our results show that potential economic consequences can range from relatively mild to highly severe, depending on the implementation and success of counteracting mitigation measures. We find that securing alternative gas imports, storage management, and incentivizing fuel switching represent the most important short-term policy levers to mitigate the adverse impacts of a sudden import stop. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.07981 |
| By: | Buchheim, Lukas (TU Dortmund); Link, Sebastian (Ifo Institute for Economic Research); Möhrle, Sascha (Ifo Institute for Economic Research) |
| Abstract: | We study the link between expected inflation and wages using novel panel data from German firms and employees. We find that pass-through—the percentage point change in wage growth given a one percentage point change in expected inflation—is small: 0.11–0.17 for firms and 0.03–0.07 for employees. Utilizing variation in the coverage length of collective agreements, we estimate that passthrough at the intensive margin is 1.4-2 times larger than average pass-through, highlighting the importance of wage rigidities for pass-through. Pass-through also rises with the bargaining power of employees. At the extensive margin, expected inflation has little effect on additional wage negotiations. |
| Keywords: | wage expectations, inflation, pass-through, wage-price spirals, bargaining, firms, employees, survey data |
| JEL: | E24 E31 D84 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17269 |
| By: | Hernández de Rojas, Félix; Pita, Pilar Rodríguez; Pérez Martínez, Jorge Emiliano |
| Abstract: | Lately, we have seen a growing concern for competitiveness, strategic autonomy, and the rising of digital divide in the European Digital Single Market. To tackle these issues, in 2023 the EU1 set forth the Digital Decade program that "empowers businesses and people in a human-centred, sustainable and more prosperous digital future"2, with the aim of attracting investment and creating an innovative and digital ecosystem "made in Europe". However, Europe faces a set of barriers that arise from the cultural, linguistic, and societal differences that exist between the Member States and that do not exist in other largely populated countries in Asia or America. Throughout our research, we have clustered the 240 NUTS2 regions of the EU by their digitalisation, based on the Digital Economy and Society Index, and their competitiviness, based on the EU Regional Competitiviness Index, and their respective variables. we have made use of the Moran's I and Geary's C that allows us to determine the degree of clustering of EU regions and giving us a hint on which regions are more susceptible to "digital contagion", and which regions are most likely of be left behind because of lack of this phenomena. Our research identifies the above aspects and analyzes them within the heterogeneity of digitalization situations in the regions, identifying those where this "digital contagion" or "spatial spillover" works satisfactorily and where it does not, as well as considering whether national or EU policies are relevant to this end. |
| Keywords: | Digital Contagion, Spatial Autocorrelation, NUTS2, European Union, Competitivity |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:itsb24:302495 |
| By: | Ioana-Ancuta Iancu; Patrick Hendrick; Micu DDM Dan Doru; Adrian Cote |
| Abstract: | This research explores the impact of the COVID-19 pandemic on consumer behavior and preferences related to household energy consumption through actions to fight climate change in Belgium, Romania, Italy, and Sweden. Using data from two Eurobarometer surveys conducted in 2019 and 2021, the study examines shifts in climate change perception, actions to combat climate change, and the influence of socio-economic and demographic variables on these actions. Depending on the country, the findings reveal significant pandemic-induced changes in public perceptions of climate change and personal actions to combat it. Age, gender, and education level were found to influence climate change actions. Financial constraints also significantly influenced the adoption of energy-efficient behaviors. Our research enriches existing knowledge by exploring the influence of the COVID-19 pandemic on climate change perceptions and actions across diverse European countries, shedding light on the interplay between global crises and sustainability. The research methodology, including chi-square tests, logistic regression, and effect size measurements, provides a robust framework for understanding how economic factors and consumer behaviors are contributing to the development of effective energy policies. |
| Date: | 2023–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/377982 |
| By: | CHRISTOU Tryfonas (European Commission - JRC); GARCIA RODRIGUEZ Abian (European Commission - JRC); LAZAROU Nicholas (European Commission - JRC); SALOTTI Simone (European Commission - JRC); SCHOENWALD Eva |
| Abstract: | Investments in Active Labour Market Policies (ALMPs) can reduce labour market mismatches, shortages and under-representation by reducing labour market frictions. Interventions in adult learning, reskilling and upskilling can achieve higher employment, com-petitiveness and productivity through a moder-nised labour force to meet the demands of the green and digital transition? This Insight presents the impact of such invest-ments in the context of planned ESF+ invest-ments for 2021-2027, using the RHOMOLO model. The simulations suggest that investment in up-grading worker’s skills and reducing labour mar-ket frictions can lead to long-run increases in i) EU GDP of about 0.069% and ii) employment of around 0.07%. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc138499 |
| By: | Luis Ayala (UNED); Olga Canto (Universidad de Alcala); Rosa Martinez (UNED); Carolina Navarro (UNED); Marina Romaguera-de-la-Cruz (UNED) |
| Abstract: | The aim of this paper is to propose a set of dimensions and indicators to measure the incidence and trends of unmet social needs related to well-being and aggregate them into a composite index. We contribute to the current literature on the measurement of social needs through broader and more systematic indicators based on the principles of access, quality, and equity. Using different microdata sources, we take a selected sample of European countries that are representative of different welfare regimes to illustrate the possibilities of this proposal. Our results are not very sensitive to the use of different weighting schemes or aggregation methods and show that the degree of unmet needs is related to the country's type of welfare regime. |
| Keywords: | unmet social needs, composite index, Europe, welfare regimes |
| JEL: | I31 I32 I38 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2024-677 |
| By: | Peter Klimek (Supply Chain Intelligence Institute Austria; Medical University of Vienna, Section for Science of Complex Systems, CeDAS; Complexity Science Hub Vienna; Division of Insurance Medicine, Department of Clinical Neuroscience, Karolinska Institutet); Maximilian Hess (Supply Chain Intelligence Institute Austria); Markus Gerschberger (Supply Chain Intelligence Institute Austria; Josef Ressel Centre for Real-Time Value Network Visibility, Logistikum, University of Applied Sciences Upper Austria); Stefan Thurner (Supply Chain Intelligence Institute Austria; Medical University of Vienna, Section for Science of Complex Systems, CeDAS; Complexity Science Hub Vienna; Santa Fe Institute) |
| Abstract: | The steel industry is a significant contributor to global CO2 emissions, accounting for 7% of emissions. The European steel industry aims to reduce emissions by transitioning towards electric arc furnaces (EAFs), which can produce steel from scrap, a crucial step towards a circular steel economy. This paper uses trade and business intelligence data to show that this shift necessitates a profound restructuring of global and European scrap trade and a significant expansion of the business ecosystem. We find that scrap imports in European countries with major EAF installations have steadily decreased since 2007, while global scrap trade has recently increased. Statistical modeling indicates that for every 1, 000 tonnes of EAF capacity installed, annual scrap imports increase by 550 tonnes and exports decrease by 1, 000 tonnes, suggesting increased competition for scrap metal as EAF capacity expands. Furthermore, each scrap company supports around 79, 000 tonnes of EAF-based steel production per year in the EU. Extrapolating current EAF expansion plans, we estimate that an additional 730 companies may be required, creating approximately 35, 000 jobs and generating USD 35 billion in turnover. This analysis suggests that scrap metal is likely to become a strategic resource, highlighting the need for a major restructuring of the industry’s supply networks and identifying growth opportunities for companies. |
| Keywords: | Electric Arc Furnaces, Circular Economy, Trade Networks, Ferrous Waste, Steel Industry, Supply Chain, European Steel |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bdt:wpaper:003 |
| By: | Cirillo, Valeria; Divella, Marialuisa; Ferrulli, Eustachio; Greco, Lidia |
| Abstract: | Within the context of the green industrial policies debate, this paper seeks to examine the progress of policy implementation regarding the upskilling and reskilling of workers under the European Just Transition Fund (JTF) 2021-27. Specifically, it focuses on distinct regions in three countries: Italy, Spain, and Germany. Through a combination of desk research and qualitative analysis via interviews with key informants, the research aims at assessing the advancement of training and retraining interventions for workers in those regions and identifying any implementation deficiencies and critical challenges encountered by these initiatives. The paper thus aims to contribute to the ongoing debate on green industrial policies and their implications for just transition and workforce development. Although it is too early for a comprehensive assessment due to limited actions in this field based on JTF implementation so far, some relevant policy implications can be drawn. These refer in particular to the need of better integrating the active labor market policy interventions under examination with a more comprehensive regional development strategy, while taking account of regional specificities and actual workers' needs in such specific contexts. |
| Keywords: | Just transition, active labor market policies, workers' upskilling and reskilling, industrial policy |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:oefsew:303040 |