nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2010‒02‒20
fifteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Intergenerational mobility in seven European Countries. By Simona Comi
  2. Manufacturing the EU Energy Markets. The Current Dynamics of Regulatory Practice By Leigh Hancher; Adrien de Hauteclocque
  3. A lifeline for Europe's young radical innovators By Reinhilde Veugelers
  4. The Effect of Birthright Citizenship on Parental Integration Outcomes By Ciro Avitabile; Irma Clots-Figueras; Paolo Masella
  5. The Job Creation Effect of R&D Expenditures By Bogliacino, Francesco; Vivarelli, Marco
  6. Asymmetric Information and the Demand for Voluntary Health Insurance in Europe By Kristian Bolin; Daniel Hedblom; Anna Lindgren; Bjorn Lindgren
  7. Corporate social responsibility: One size does not fit all. Collecting evidence from Europe By Argandoña, Antonio; von Weltzien Hoivik, Heidi
  8. Regional Initiative: Which Appropriate Market Design? By Jan Moen
  9. Memo to the new Commissioner for Energy By Georg Zachmann
  10. Memo to the New Digital Agenda Commissioner By Bruno van Pottelsberghe; Reinhilde Veugelers
  11. Cold Start for the Green Innovation Machine By Philippe Aghion; Reinhilde Veugelers; Clément Serre
  12. Shadow wages for the EU regions By Chiara Del Bo; Massimo Florio; Carlo Fiorio
  13. Trade performances and technology in the enlarged European Union By Alessandro Antimiani; Valeria Costantini
  14. Cyclical dimensions of labour mobility after EU Enlargement By Alan Ahearne; Herbert Brücker; Zsolt Darvas; Jakob von Weizsäcker
  15. The Innovation Patterns of Firms in Low and High Technology Manufacturing Sectors in the New Member States By Ewa Balcerowicz; Marek Peczkowski; Anna Wziatek-Kubiak

  1. By: Simona Comi (DISCE, Università Cattolica)
    Abstract: This paper provides new evidence on cross-country comparison of intergenerational mobility using the eight waves of the European Community Household Panel. I estimate intergeneration earnings elasticity for sons and daughters father pairs in seven European countries. Data comparability across countries allows me to rank European countries according to their degree of intergenerational income mobility. When I consider intergenerational transmission of earnings towards daughters, it turns out that that Italy is the most immobile country in Europe. When considering sons, all the Mediterranean countries result to be more immobile than Germany.
    Keywords: Intergenerational mobility
    JEL: J62
    Date: 2009–12
  2. By: Leigh Hancher; Adrien de Hauteclocque
    Abstract: This chapter aims to analysis the new dynamics at work in EU energy regulation. Since the publication of the European Commission’s ‘Sector Inquiry Report’ in January 2007, European energy companies have felt the cold wind of competition law - many for the first time. In addition, national competition authorities (NCAs) have been actively pursuing abusive market practices - sometimes making innovative use of competition law in the process. Certain energy giants have agreed to unbundle their transmission networks - even when their national governments opposed the inclusion of ownership unbundling in the draft ‘Third Package’ of electricity and gas legislation. In parallel, the Third Package envisages the creation of a new regulatory agency - ACER - to co-ordinate technical crossborder regulatory issues in the internal market. So who will be in the driving seat in the next decade - and will co-ordinated regulatory powers be the preferred approach to market design? Will regulatory rules co-exist alongside competition based controls or will the latter gradually supersede the former? This chapter will examine these critical issues.
    Keywords: Antitrust, Third Legislative Package, ACER, European Union
    Date: 2010–01–14
  3. By: Reinhilde Veugelers
    Abstract: In this Policy Brief, Reinhilde Veugelers shows that Young Innovative Companies (YICs) in Europe achieve significantly higher innovative sales than other innovation-active firms, representing 36% of sales having market novelties. She also confirms that YICs are more affected by credit constraints than other innovation-active firms. If Europe is to exit the current crisis intact and fulfill its full growth potential in the medium term, the author therefore believes Europe must develop policies and incentives which are tailored to the needs of European young radical innovators.
    Date: 2009–03
  4. By: Ciro Avitabile (Università di Napoli Federico II and CSEF); Irma Clots-Figueras (Universidad Carlos III de Madrid); Paolo Masella (University of Mannheim)
    Abstract: This paper provides empirical evidence on whether child legal status at birth affects the level of cultural integration of immigrant parents with native community. We consider the 1999 reform of the German nationality law, which introduced birthright citizenship for children born in Germany to non-German citizen parents. Our results show that changes in the rules that regulate child citizenship have significantly increased parents’ propensity to establish contacts with German citizens and use the German language. The effect on parents’ integration varies according to the initial endowment of human capital and the level of integration in their local ethnic community.
    Keywords: Citizenship Status, Migration, Integration
    JEL: K40 J15
    Date: 2010–02–09
  5. By: Bogliacino, Francesco (Universidad EAFIT); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    Abstract: In this study we use a unique database covering 25 manufacturing and service sectors for 16 European countries over the period 1996-2005, for a total of 2,295 observations, and apply GMM-SYS panel estimations of a demand-for-labour equation augmented with technology. We find that R&D expenditures have a job-creating effect, in accordance with the previous theoretical and empirical literature discussed in the paper. Interestingly enough, the labour-friendly nature of R&D emerges in both the flow and the stock specifications. These findings provide further justification for the European Lisbon-Barcelona targets.
    Keywords: technological change, corporate R&D, employment, product innovation, GMM-SYS
    JEL: O33
    Date: 2010–01
  6. By: Kristian Bolin; Daniel Hedblom; Anna Lindgren; Bjorn Lindgren
    Abstract: Several past studies have found health risk to be negatively correlated with the probability of voluntary health insurance. This is contrary to what one would expect from standard textbook models of adverse selection and moral hazard. The two most common explanations to the counter-intuitive result are either (1) that risk-aversion is correlated with health — i.e. that healthier individuals are also more risk-averse — or (2) that insurers are able to discriminate among customers based on observable health-risk characteristics. We revisited these arguments, using data from the Survey of Health, Ageing and Retirement in Europe (SHARE). Self-assessed health served as an indicator of risk: better health, lower risk. We did, indeed, observe a negative correlation between risk and insurance but found no evidence of heterogeneous risk-preferences as an explanation to our finding.
    JEL: D82 I1
    Date: 2010–01
  7. By: Argandoña, Antonio (IESE Business School); von Weltzien Hoivik, Heidi (Norwegian School of Management)
    Abstract: This article serves as an introduction to the collection of papers in this monographic issue on "What the European tradition can teach about Corporate Social Responsibility" and presents the project's rationale and main hypotheses. We maintain that Corporate Social Responsibility (CSR) is an ethical concept, that demands for socially responsible actions have existed since before the Industrial Revolution and that companies have responded to them, especially in Europe, and that the content of CSR has evolved over time, depending on historical, cultural, political and socio-economic drivers and particular conditions in different countries and also at different points in time. Therefore, there is not - and probably cannot be - a single, precise definition of CSR: one global standard for CSR is unlikely.
    Keywords: Business ethics; corporate social responsibility; responsibility; welfare state;
    Date: 2009–11–07
  8. By: Jan Moen
    Abstract: The European Union has a long experience and many success stories when it comes both to build a borderless Europe and to ensure that benefits are fairly distributed among producers and end-use customers. In some sectors results and benefits arise quickly, but sometimes borders remain difficult to cross despite numerous initiatives. A typical example of this is the completion of the single market for electricity. The process has been ongoing since the early 1990s and major progress has been made. However, we are still far from a borderless and truly competitive electricity market across Europe. A new legislative framework, the Third Package, will enter into force shortly and yield strong expectations. However, growing concerns become apparent among policy makers and in the market place on its ability to effectively foster the completion of the internal market and tackle market power issues. This paper argues that the approach adopted in the Third Package is not adapted to the challenges the European Union faces in electricity. The current lack of focus on implementing a better market design architecture leads the EU regulatory framework to overlooks important issues such as the promotion of power exchanges. The paper reviews the current state of the art on ‘smart’ market design in the economic literature and confronts it with the concrete experiences pursued at the regional level, in the European Union and beyond. Some of the issues discussed in depth include the TSOs’ roles and institutional design, generation adequacy and the design of capacity mechanisms and the development of demand-side response programs. It shows that the EU should learn from some of the on-going initiatives pursued at the domestic and regional level and that a sound market design based on a pool/TSO central dispatch is probably the way forward.
    Keywords: Market Design, Electricity, European Union, Regional Initiatives
    Date: 2009–11–11
  9. By: Georg Zachmann
    Abstract: In this paper Resident Scholar Georg Zachmann analyses the recent developments in European energy policy and looks at the upcoming challenges in this area making a number of recommendations to the newly appointed Energy Commissioner. Zachmann notes that while liberalising energy markets and combating climate change will remain top priorities in the next term of office, securing energy supplies and energy price issues might temporarily lose some appeal due to the crisis-induced energy demand dip. He claims that mitigating climate change, directing investments in network infrastructure and creating a single energy market should be the three interlinked priorities for the Energy Commissioner.  This policy contribution is a supplement to Bruegel memos to the new Commission: Europe's economic priorities 2010-2015' published 27 August 2009 and available at tml
    Date: 2009–12
  10. By: Bruno van Pottelsberghe; Reinhilde Veugelers
    Abstract: Senior Resident Fellows Reinhilde Veugelers and Bruno van Pottelsberghe provide recommendations for the term of new Digital Agenda Commissioner Neelie Kroes in this supplement to Bruegel's Memos to the New Commission: Europe's Economic Priorities 2010-2015. They argue that Kroes should move past a focus on infrastructure and concentrate more on ICT's potential to contribute to growth in the European Union. This should include a focus on emerging ICT products and services to helpl foster an ICT single market and more public support for R&D and innovation, through tailored programmes designed to aid high-risk innovative projects conceived by new ICT companies.
    Date: 2010–01
  11. By: Philippe Aghion; Reinhilde Veugelers; Clément Serre
    Abstract: This Policy Contribution accompanies the Policy Brief, No Green Growth Without Innovation?. Written by Senior Non-Resident Fellow Philippe Aghion, Senior Resident Fellow Reinhilde Veugelers and Researcher Clément Serre, this paper discusses the state of green innovation and goes into more depth in discussing the current problems in the area. Examining research and development, patent, and venture capital data, the authors point out that there is momentum for private investment in green technologies. However, they argue that, thus far, the implicit tax rate on energy in the EU27 is too low and fragmented, the carbon price in the EU Emissions Trading System is too volatile, and the public R&D expenditures dedicated to energy and environment are too low. They conclude that immediate state intervention is necessary, at least at the onset, to ensure that the green innovation machine? gets properly started.
    Date: 2009–11
  12. By: Chiara Del Bo (Università degli Studi); Massimo Florio (University of Milan); Carlo Fiorio (University of Milan)
    Abstract: The shadow wage is the social opportunity cost of labor. After reviewing earlier theoretical and empirical literature, we define four labor market conditions: fairly socially efficient (FSE), quasi-Keynesian unemployment (QKU), urban labor dualism (ULD) and rural labor dualism (RLD). We offer, for the first time to date, an empirical estimation of the shadow wages for the EU at regional (NUTS2) level. Our estimated values are in the form of conversion factors that translate actual observed real wages into shadow wages, as required by social cost-benefit analysis of investment projects under the Structural Funds of the EU. Our results are obtained with an empirical strategy that is easy to implement with aggregate data, differently from micro-data based approaches that are costly, project specific, and often difficult to be applied because of lack of data. We find that the conversion factor for the shadow wage rate is 0.998 in 29 FSE regions (mostly capital cities); 0.943 in 135 ULD regions (mostly in rich areas); 0.8005 in 74 QKU regions, and just 0.519 in 32 RLD regions. These findings point to high variability of labor markets in the EU and have important applications for project evaluation.
    Keywords: Shadow wage, project evaluation, EU regions,
    Date: 2009–10–26
  13. By: Alessandro Antimiani; Valeria Costantini
    Abstract: We analyse the role of the enlargement process of the European Union as a factor fostering international competitiveness of EU Member States. We argue that the economic integration process has partially reduced the technological gap between old and new EU Member States, and this pattern of technological innovation can partially explain the strong impulse on the export dynamics of European countries. We have built an augmented gravity model by including the role of technological innovation, proxied by the stock of knowledge at the sector level. By using a dynamic panel data estimator we find three main empirical evidences. First, the enlargement process has produced an overall larger positive impact on export flows for new members than for old ones, and more importantly that sectors with the higher technological content have received the strongest impulse. Second, the augmented gravity model allows shaping the crucial role of technological innovation in fostering export competitiveness. Third, this impact seems to be stronger for old EU member states than for new ones. The policy implication we derive is that the more the new EU members catch up technologically as a result of the integration process, the more they will benefit in terms of economic development.
    Keywords: EU enlargement, gravity model, international trade, economic integration, technological innovation
    JEL: F14 F15 O14 O33
    Date: 2010
  14. By: Alan Ahearne; Herbert Brücker; Zsolt Darvas; Jakob von Weizsäcker
    Abstract: At a time of symmetric global slowdown, migration cannot contribute as much to absorbing economic shocks as it could if the shock were asymmetric. Early evidence suggests that the crisis has led to a drop in immigration and even net return migration from some countries. This has helped the adjustment of former EU15 host countries and has exacerbated adjustment in former source countries in the new member states. In the short run, the authors believe that the stock of new member-state migrants in the EU15 will fall owing to diminished job opportunities for migrants. In the longer run, the crisis is set to increase migration from the new member states compared to what would have been the case without the crisis.
    Date: 2009–05
  15. By: Ewa Balcerowicz; Marek Peczkowski; Anna Wziatek-Kubiak
    Abstract: For many years, analysis on innovations focused on high technology industries which were treated as synonymous with high competitiveness and growth. New research on low and medium technology industries has revealed that their growth is also based on innovations, though their sources differ from high technology industries. As the 'catching up' economies of the EU New Member States (NMS) are based on low and medium technology industries, the differences in innovativeness between high and low technology sector firms as well as within each of the sectors can play an important role in the future development of these countries. This paper aims to show the differences in innovation patterns among manufacturing firms operating in low and high technology sectors in the Czech Republic, Hungary and Poland. It is based on a survey of firms which took into account innovation inputs, cooperation among firms in R&D activities, the benefits of cooperation with business partners, innovation outputs and international competitiveness. The sample consisted of 358 firms operating in both low and medium technology industries (food and beverages and automotive) and high technology industries (pharmaceuticals and electronics). After employing cluster analysis, five types of innovation patterns were detected, characterised and compared in firms operating in the low and medium technology (LMT) sectors, and four in the high technology (HT) sector. Differences and similarities in innovation patterns between firms operating in each of the two sectors are discussed. The paper shows that external knowledge plays a crucial role in innovation activities in NMS' firms. The ability to explore cooperation with business partners and the use of external knowledge are more important for the international competitiveness of the NMS' products than in-house innovation resources.
    Keywords: Innovation of firms, Innovation patterns, Innovation sources, Diversification of innovations, Low-tech industries, High-tech industries, EU New Member States
    JEL: L25 O31 O32 O33
    Date: 2009

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