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on European Economics |
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Issue of 2025–05–19
twenty-one papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Norris Keiller, Agnes |
| Abstract: | In 2016, the UK voted to leave the European Union and growth in UK manufacturing investment ground to a halt. This paper uses administrative trade data to investigate the causal relationship between these events. We exploit firm-level customs data from 2005 on-wards to quantify firms' exposure to EU and non-EU trade in inputs and outputs. Focusing on investment as a forward-looking, dynamic outcome (since the UK did not leave the EU until 2021), we relate firms' investment to their pre-referendum EU exposure. This analysis shows firms' exposure to EU trade had a negative impact on investments post-referendum, especially in 2021. Estimated impacts are stronger for import exposure than for export exposure and there is some evidence of depressed investment from exposure to non-EU imports, likely due to the large depreciation in sterling that followed the vote. Had the UK voted to remain in the EU, these estimates imply manufacturing investment would have been over 7% higher, about £2.4 billion annually between 2016 and 2021. |
| Keywords: | firm level; investment; international trade; European Union; manufacturing; Brexit |
| JEL: | F14 L60 F50 D20 |
| Date: | 2024–08–05 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126796 |
| By: | Horioka, Charles Yuji; Ventura, Luigi |
| Abstract: | In this paper, we analyze the saving motives of European households using micro-data from the Household Finance and Consumption Survey (HFCS), 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. For example, 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 each saving motive, 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 health systems. These findings suggest that the retirement motive and the precautionary motive are the dominant motives for saving in Europe partly because social safety nets are not fully adequate. Our finding that saving motives that are consistent with the selfish life-cycle model as well as saving motives that are consistent with the altruism model are important in Europe implies that the two models coexist in Europe, as is the case in other parts of the world. However, our finding that the retirement motive, which is the saving motive that most exemplifies the selfish life-cycle model, is of dominant importance in Europe strongly suggests that this model is far more applicable in Europe than is the altruism model. Moreover, our finding that the intergenerational transfers motive, which is the saving motive that most exemplifies the altruism model, accounts for only about one-quarter of total household wealth in Europe provides further corroboration for this finding. |
| Keywords: | altruism model, bequests, European Central Bank, Household Finance and Consumption Survey, households, household saving, household wealth, inheritances, inter vivos transfers, intergenerational transfers, precautionary saving, retirement |
| JEL: | D12 D14 D15 D64 E21 J14 |
| URL: | https://d.repec.org/n?u=RePEc:agi:wpaper:02000107 |
| By: | Bernd Hayo; Matthias Neuenkirch; Manuel Walz |
| Abstract: | This documentation paper provides background information and basic descriptive statistics for a representative survey of the French, German, and Italian populations, focusing on attitudes towards and the demand for a digital euro conducted on our behalf by Dynata in November and December 2023. The survey is quota-based by gender, age, income, and region. To measure views on a digital euro, the survey controls for various characteristics, including the digitalisation of daily life, financial literacy, payment behaviour, attitudes towards European integration, and several socio-demographic characteristics. Additionally, three treatments are implemented. Treatment 1 highlights the differences between private and public money, Treatment 2 presents various hypothetical designs for a digital euro, and Treatment 3 introduces a digital euro holding limit. |
| Keywords: | Digital Euro, ECB, Monetary Policy, Money Demand, Payment Systems |
| JEL: | E41 E42 E51 E58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:trr:wpaper:202504 |
| By: | Conconi, Paola; Cucu, Florin; Gallina, Federico; Nordotto, Mattia |
| Abstract: | The European Union (EU) has long been accused of suffering from a "democratic deficit". The European Parliament (EP), the only EU institution directly elected by citizens, is seen as having limited powers. Moreover, its members (MEPs) are often portrayed as unresponsive to the interests of their constituents due to the second-order nature of European elections: instead of being shaped by EU policies, they are driven by domestic politics. In this paper, we provide evidence against these Eurosceptic arguments using data on a key policy choice made by MEPs: the approval of free trade agreements. First, we show that MEPs are responsive to the trade policy interests of their electorate, a result that is robust to controlling for a rich set of controls, fixed effects, and employing an instrumental variable strategy. Second, we carry out counterfactual exercises demonstrating that the EP's power to reject trade deals can help explain why only agreements with broad political support reach the floor. Finally, against the idea that European elections are driven solely by domestic politics, we find that the degree of congruence between MEPs' trade votes and their electorate's interests affects their re-election chances. |
| Keywords: | EU democratic deficit; European Parliament; roll-call votes; trade agreements |
| JEL: | F13 D72 |
| Date: | 2024–10–15 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126839 |
| By: | GEORGAKAS, IOANNIS |
| Abstract: | Adopting a common European digital currency seems likely to be a powerful monetary tool that will facilitate the implementation of policies such as quantitative easing and interest rate regulation. On the other hand, the risk of destabilisation of the banking system , requires careful planning and public awareness. CBDCs will strengthen the EU geopolitically and seem to have an environmental dimension. The debate within the EU and the ECB is intense both on issues of legitimacy under the European Treaties and on issues of democracy and privacy rights. In practice, this is a technological innovation with serious parallel economic, social and political consequences. |
| Keywords: | CBDCs, Eurozone policy, Monetary Sovereignty, ECB, Personal Data, Privacy |
| JEL: | E42 E52 E58 |
| Date: | 2025–04–18 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124457 |
| By: | MARTINA PARDY; Andrés Rodríguez-Pose |
| Abstract: | This paper analyses how trade influences intra-regional income inequality across Europe’s NUTS-2 regions. Drawing on newly compiled datasets capturing both inter-regional trade and local-level inequality for all EU member states plus the UK, we employ an econometric framework —complete with Instrumental Variable estimations and robust sensitivity analyses— to gauge the impact of trade on regional interpersonal inequality. In addition to examining aggregate trade, we distinguish between various trade channels, including exchanges within the EU versus those with the rest of the world, links to neighbouring regions versus non-neighbours, and domestic versus international flows. Our findings reveal that higher levels of trade are positively associated with changes in regional income inequality, as measured by the Gini coefficient. Crucially, this link depends on trading partners: trade within a single country, within the EU, and with non-neighbouring regions correlates with rising inequality, whereas international trade, trade with non-EU partners, or trade with neighbouring regions shows no statistically significant effect. These conclusions withstand a battery of robustness checks, including new control variables and a population-weighted approach, further underscoring the role that particular types of trade play in shaping regional income disparities. |
| Keywords: | Trade, interpersonal inequality, regions, Europe |
| JEL: | D63 F14 R13 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2511 |
| By: | Gil-Hernández, Carlos J.; Salas-Rojo, Pedro; Vidal, Guillem; Villani, Davide |
| Abstract: | Wealth is a central determinant of life chances and intergenerational status persistence in modern societies. Despite increasing attention, sociologists traditionally overlooked its role in class-based economic disparities, while most economists focused on the elites’ accumulation. This article combines sociological and economic perspectives to test whether big occupational classes, the most standardised and operationalisable approach, depict the wealth distribution. Drawing from the Luxembourg Wealth Study (2002–2018) in five European countries, we explore (1) how wealth is distributed and stratified by big occupational classes over time and cross-nationally and (2) to what extent classes account for aggregate wealth inequality trends compared with income. Unlike bold claims on class 'death' or 'decomposition', inequality of outcomes in wealth accumulation is firmly rooted across big occupational classes in contemporary capitalism, potentially harming social mobility in future generations. Still, occupational classes better capture between-group income inequality and stratification than wealth, emphasising the importance of economic resources beyond labour market attachment. Against the backdrop of previous research and our findings, we discuss the role of wealth in contemporary class analysis. |
| JEL: | J1 |
| Date: | 2025–02–20 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127479 |
| By: | Mario Holzner |
| Keywords: | international trade, EU, trade, customs union, geopolitics |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:wsr:pbrief:y:2025:m:05:i:67 |
| By: | Julianna Sterling; Missaka Warusawitharana; Xiangyu Zhang |
| Abstract: | This note examines the energy import dependency of the European Union over time. This issue has risen in salience following recent developments and the ongoing economic challenges faced by many European countries. |
| Date: | 2025–04–16 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:2025-04-16 |
| By: | Federico Riccio; Jacopo Staccioli; Maria Enrica Virgillito |
| Abstract: | Does labour-saving technological change pose a threat to European employment, and if so, to what extent? This study investigates the degree of employment exposure to labour-saving technological change across NUTS-2 regions in Europe. We construct a cross-walked metric between the SOC and ISCO classification systems to adapt the direct measure of occupational exposure developed by Montobbio et al. (2024) for the US economy and apply it to the European context. This methodology enables us to generate detailed insights into the exposure of European occupations by leveraging the similarity rankings between technological classifications in the USPTO (CPCs) and task descriptions. To evaluate the transmission from occupational exposure to employment outcomes, we utilise data from the European Structure of Earnings Survey (EU-SES), thereby constructing exposure indices at both sectoral and regional levels. Finally, we examine the industrial and geographical diffusion of labour-saving technological change in recent years and provide robust econometric evidence indicating that low-wage regions, as well as deindustrialising areas heavily integrated into global value chains, are disproportionately vulnerable to the threat of substitution. |
| Keywords: | regional disparities, manufacturing downgrading, automation, global value chains |
| Date: | 2025–05–07 |
| URL: | https://d.repec.org/n?u=RePEc:ssa:lemwps:2025/19 |
| By: | Tassinari, Arianna; Romo, Oscar Molina; Di Carlo, Donato |
| Abstract: | This article compares the responses of the governments and social partners in Italy and Spain to the inflation crisis of 2021–2023. Faced with a common exogenous shock and sharing a comparable institutional setting in the labour market, the two countries’ responses to the inflation crisis differed substantially with regard to the policy mode of crisis response and the types of policy intervention. First, social partners’ involvement was far more significant in Spain, where peak-level agreements were signed setting a three-year trajectory for negotiated wage increases. In contrast, Italian governments proceeded unilaterally, with no attempts at collective bargaining coordination. Secondly, while the Italian government disbursed more fiscal resources through targeted compensatory measures, the Spanish government relied primarily on energy price controls and minimum wage revaluation, with lower overall fiscal expenditure. Finally, the distribution of inflation costs across population groups differed, with inflation in Spain being lower and having less regressive distributional effects than in Italy. We attribute the differing policy responses to the different partisan compositions and ideological orientations of the two governments. |
| Keywords: | inflation; collective bargaining; crisis; social dialogue; southern Europe; unions; wages |
| JEL: | N0 E6 |
| Date: | 2025–01–23 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127196 |
| By: | Carolina Castaldi; Milad Abbasiharofteh; Sergio Petralia |
| Abstract: | The sustainability transition is high on the European agenda, with an emerging understanding that focusing on green technologies is not enough to achieve disruptive sustainability. An overall green transformation of current systems of production and consumption also requires market formation processes whereby green markets become viable economic opportunities for regions to specialize in. In this study, we draw on insights from evolutionary economic geography and geography of transitions to understand how regions develop green market specializations. To do so, we investigate two key sets of factors. First, we consider the evolutionary capability development process whereby new specializations emerge from existing related regional capabilities, in a path-dependent way. Second, we account for green public procurement initiatives to capture path-creation efforts in the form of deliberate regional policy directed towards green market formation. Our empirical analysis focuses on European regions in the period 2000-2020. We employ original trademark-based metrics to capture regional specializations in green markets and combine them with patent data to construct relatedness linkages between technologies and markets. Our results reveal that only a few regions have been able to develop specializations in green markets. We find that both prior capabilities in related technological domains and markets are positively associated with the emergence of these regional specializations. In addition, we also find that green public procurement is positively associated with the emergence of regional green market specializations. Our findings bear relevance for policy and research alike. |
| Keywords: | sustainability; regions; green markets; relatedness; public procurement; trademarks; patents |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2512 |
| By: | Celli, Viviana; Crescenzi, Riccardo; de Blasio, Guido; Giua, Mara |
| Abstract: | This paper explores the role of governance in policy implementation, using the European Union (EU) Cohesion Policy as a case study. Leveraging a quasi-natural experiment in Italy, where certain projects were shifted from EU to national management, we evaluate the impact of governance structures on financial execution. Using a non-parametric generalization of the difference-in-differences estimator, we find that otherwise identical projects achieve better financial execution under EU governance. Projects reassigned to national management experience a significant slowdown in financial execution within ten months, with delays reaching nearly 20% after 24 months. These delays are particularly pronounced when projects are managed at the sub-national level rather than by the national government. Our findings contribute to the broader policy debate on the effectiveness of multi-level governance structures in public investment programs. |
| Keywords: | institutional quality; European Union; place-based policies; regional transfers; governance |
| JEL: | C21 O40 H54 R11 |
| Date: | 2025–02–24 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127393 |
| By: | McGovern, Patrick; Thielemann, Eiko R.; Hammoud Gallego, Omar |
| Abstract: | What is the role of the market economy and of the European Union in shaping policies that limit migrants’ access to the labour market? While much of the existing research has examined the development of border policies in Europe, less attention has been given to post-entry measures regulating the employment of Third Country Nationals. We examine the role of different market economies and the European Union in devising lesser-known measures that target migrant labour market competition. Focusing on the period from 1990 to 2020, we analyse four case studies: Austria, Germany, Ireland, and the United Kingdom. We hypothesize that these migrant labour market competition measures (MCM) have emerged in ways that challenge both the marketization of migration thesis and predictions from theories of EU immigration policymaking and varieties of capitalism (VoC). While the European Union’s influence partially explains the adoption of some selective policies, the emergence of MCM transcends the VoC framework. Furthermore, contrary to marketization claims, states have sought to address labour market concerns about competition from migrants by adopting selective, rather than indiscriminate, regulatory approaches. We argue that the interplay between selectivity and measures restricting migrant labour market competition has become central to understanding how states regulate migration in the European Union. |
| Keywords: | REF fund |
| JEL: | R14 J01 |
| Date: | 2025–03–10 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127466 |
| By: | Giulia Canzian; Elena Crivellaro; Tomaso Duso; Antonella Rita Ferrara; Alessandro Sasso; Stefano Verzillo |
| Abstract: | The Covid-19 pandemic caused a global economic crisis, leading governments to provide substantial State Aid to support firms. This paper examines the effectiveness of Covid-related financial support in Spain and Italy, focusing on its impact on firm recovery. Using a difference-in-differences (DiD) approach combined with propensity score weighting, it compares outcomes of similar firms receiving aid to those without. The results show significant benefits for micro-firms, including mitigated turnover declines and increased investments in both tangible and intangible assets. The findings highlight the critical role of government support in business survival and recovery, especially for SMEs, during the pandemic. |
| Keywords: | state aid, aid effectiveness, temporary framework, Covid, firm growth, investment, difference-in-differences. |
| JEL: | D04 D22 L25 L52 P43 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11835 |
| By: | Irene Iodice; Camille Reverdy; Irene Iodice |
| Abstract: | This paper examines how EU Technical Barriers to Trade (TBTs) reshape firms’ global supply chains, extending Grossman et al. (2024) to incorporate adaptation costs between sourcing partners. To test the model’s predictions, we construct a novel dataset linking EU TBTs to French firm-level import data, trade agreement depth, and a new text-based index of regulatory dissimilarity. We find that greater regulatory distance with the EU significantly reduces both the likelihood and volume of imports. EU TBTs trigger substantial trade diversion: firms shift sourcing toward harmonised suppliers (value +4.4%, quantity +2.1%, entry +2.1pp) and away from non-EU partners (quantity –4.3%, exit +1.3pp, entry –2.6pp). This diversion is significantly weaker for products with high relationship-specific investments, underscoring the role of switching costs in supply chain reconfiguration. |
| Keywords: | NTMs, TBTs, sourcing decisions, trade diversion, economic integration. |
| JEL: | F13 F14 F15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11829 |
| By: | Bojan Shimbov (University Jaume I, Institute of International Economics & Department of Economics); Andrea Éltető (Institute of World Economics, CERS Hungarian Academy of Sciences); Maite Alguacil (University Jaume I, Institute of International Economics & Department of Economics) |
| Abstract: | Producing and incorporating technologically complex goods in the production process is a fundamental pillar to achieving long-term economic development. In this sense, integration into the global production and trade networks is viewed by many countries as a way to achieve this technological improvement. This paper examines the relationship between global value chain (GVC) integration and technology absorption through trade in high-tech products of Central and Southeast European countries over the period 1996-2019. We construct a GVC participation measure applying the latest Broad Economic Categories (BEC) classification that distinguishes between generic and specific intermediate goods. We also analyse the technology structure of exports at a country level and the sectoral level. Using panel data estimation techniques, we find that higher participation in GVCs enhances the export of high-tech products at both country and sectoral levels. This result is robust to different regression models including the use of lagged control variables and instrumental variables. |
| Keywords: | Global Value Chains, Technology Structure of Exports, Central and Southeastern European countries |
| JEL: | F14 F60 C23 C26 |
| Date: | 2024–12–15 |
| URL: | https://d.repec.org/n?u=RePEc:aoh:conpro:2024:i:5:p:95-119 |
| By: | Serebriakova, Alexandra (Sasha); Polzin, Friedemann; Sanders, Mark |
| Abstract: | A swift transition to renewable energy sources in the European Union is necessary for mitigating climate change. However, in a period of higher ECB policy rates meant to combat inflation, it is unclear how monetary policy impacts renewable energy installation. Prior research shows heterogeneous effects of policy rates on sectors with varying industrial characteristics, meaning that renewable technologies may be hit disproportionately by monetary contractions due to their investment requirements, life-cycle stage, and/or dependence on external finance. This paper uses fixed effects panel analysis of 27 European countries to look at the interactions between installed capacity of 10 utility-scale energy technologies, their characteristics, and monetary policy. Over the period of 2001-2021, fossil fuel, hydropower and nuclear technologies were positively affected by monetary contractions, while a 25 basis point rise in policy rates was associated with an 8% decrease in the new installed capacity of wind offshore plants, and a 26.5% decrease for solar PV. Significant interaction effects using measures of investment intensity and external finance dependence for energy technologies, yield evidence in favour of the interest rate and balance sheet channels of monetary policy transmission. To address endogeneity concerns, we use a two-stage least squares (2SLS) approach in an LCOE specification for the interest rate channel in the energy sector which confirms these findings. Our results suggest the existence of an unintended bias in contractionary monetary operations and central banks should consider flanking policies (such as preferred interest rates) to offset the disadvantage for renewables. |
| Keywords: | Monetary policy, renewable energy, interest rates, transmission channels, energy transition |
| JEL: | E43 Q42 O16 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:316394 |
| By: | Peter R. Berkowitz; Michael Storper; Max Herbertson |
| Abstract: | The European place-based policy framework was established in the European Treaties and has a current budget of $60-70 billion per year. This paper identifies key features and directions for its future development with respect to three place-based problems: traditionally lagging regions; contemporary distressed (or left-behind regions), including those facing the structural challenges of the energy transition; the challenge of spreading prosperity faced with the uneven geography of technological clusters and routine technology-based manufacturing. We analyze the place-based features of EU Cohesion Policy, its commonalities and differences with place-based policies in the US. We evaluate policies against a structural backdrop of long-term convergence in the two continents and the contemporary geography of spatial divergence, using both historical perspectives and recent policy evaluation evidence. Key differences are identified in policy programming, implementation, budgeting and time horizons. While there has been evidence of the reduction of disparities and regional reconversion as a result of place-based policies on both continents, there are also serious impediments to effective implementation in both. These limits have to do with how well policy is designed with respect to economic geography fundamentals as well as political economy and organizational problems in policy design, implementation and governance. The paper concludes by drawing some general lessons on the design of place based policies and examines some of the issues that are particularly relevant for Europe. |
| JEL: | H59 O18 O25 O31 R58 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33513 |
| By: | Cantore, Cristiano; Leonardi, Edoardo |
| Abstract: | How does the monetary and fiscal policy mix alter households’ saving incentives? To answer these questions, we build a heterogenous agents New Keynesian model where three different types of agents can save in assets with different liquidity profiles to insure against idiosyncratic risk. Policy mixes affect saving incentives differently according to their effect on the liquidity premium- the return difference between less liquid assets and public debt. We derive an intuitive analytical expression linking the liquidity premium with consumption differentials amongst different types of agents. This underscores the presence of a transmission mechanism through which the interaction of monetary and fiscal policy shapes economic stability via its effect on the portfolio choice of private agents. We call it the self-insurance demand channel, which moves the liquidity premium in the opposite direction to the standard policy-driven supply channel. Our analysis thus reveals the presence of two competing forces driving the liquidity premium. We show that the relative strength of the two is tightly linked to the policy mix in place and the type of business cycle shock hitting the economy. This implies that to stabilize the economy, monetary policy should consider the impact of the self-insurance on the liquidity premium. |
| Keywords: | monetary–fiscal interaction; HANK; government debt; liquidity |
| JEL: | E12 E52 E62 E58 E63 |
| Date: | 2025–04–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127221 |
| By: | Rodríguez-Pose, Andrés |
| JEL: | R11 O52 R58 |
| Date: | 2025–04–19 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127976 |