nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2010‒03‒28
sixteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. A New Concept of European Federalism. By Bruno S. Frey
  2. Services Provision and Temporary Mobility: Freedoms and Regulation in the EU. By Guiseppe Bertola; Lorenza Mola
  3. Immigration to the Land of Redistribution. By Tito Boeri
  4. Exploring educational mobility in Europe By Antonio Di Paolo; Josep Lluís Raymond; Jorge Calero
  5. Is the US Outperforming Europe in University Technology Licensing? A New Perspective on the European Paradox By Annamaria Conti; Patrick Gaulé
  6. Education and Body Mass Index: Evidence from ECHP By R Nakamura; L Siciliani
  7. Happiness and childbearing across Europe By Arnstein Aassve; Maria Sironi; Alice Goisis
  8. Understanding volatility dynamics in the EU-ETS market: lessons from the future By SANIN, Maria Eugenia; VIOLANTE, Francesco
  9. Cost-Benefit Analysis of the Community Patent By Jerôme Danguy; Bruno van Pottelsberghe de la Potterie
  10. Access Regulation, Financial Structure and Investment in Vertically Integrated Utilities:Evidence from EU Telecoms By Carlo Cambini; Laura Rondi
  11. Life expectancy, economic prosperity and retirement preferences By Arnstein Aassve; Cristina Ruggeri; Zsolt Spéder
  12. Incentive and Entrenchment Effects in European Ownership By Bennedsen, Morten; Nielsen, Kasper Meisner
  13. Factors Influencing the Entrepreneurial Engagement of Opportunity and Necessity Entrepreneurs By Roy Thurik; Ingrid Verheul; Jolanda Hessels; Peter van der Zwan
  14. The Impact of Institutions on Firms’ Rejuvenation Policies: Early Retirement with Severance Pay versus Simple Lay-Off. A Cross-European Analysis By Justina A.V. Fischer
  15. Urban Growth Drivers and Spatial Inequalities: Europe - a Case with Geographically Sticky People. By Paul C. Cheshire; Stefano Magrini
  16. The Opening Up of Eastern Europe at 20-Jobs, Skills, and ‘Reverse Maquiladoras’ in Austria and Germany By Marin, Dalia

  1. By: Bruno S. Frey
    Abstract: By opening markets the European union has been also an economic success. However, with respect to political organization the European Union is far less accomplished. The misguided concept of a successful Europe consists in mistaking integration for harmonization and homogenization. But the essence of Europe is its diversity. No steps have been taken to actively institutionalize competition between governmental units at all levels. The welfare of European citizens could be improved by promoting competition between new jurisdictions. A new type of federalism based on Functional, Overlapping Competing Jurisdictions FOCJ is here proposed. FOCJ form a federal system of governments emerging from below as a response to citizens' preferences. The lowest political units (communes) must be given the freedom to engage in forming FOCJ and must have the right to levy taxes to finance the public services they provide.
    Keywords: federalism, constitutional economics, public choice, monopoly on territory
    JEL: H11 H4 H5
    Date: 2010–01
  2. By: Guiseppe Bertola; Lorenza Mola
    Abstract: International posting of workers and mobility of self-employed service suppliers lie between outright migration and trade in goods: their regulation, for both distributional and marketcorrecting purposes, is not as difficult to harmonize as that of labour markets, but personal mobility is more visible and socially intrusive than product market interactions. This paper analyzes economic and legal tensions between national regulatory frameworks and international competition in these areas, in both the intra-EU and global contexts, highlighting how interactions between the external and internal roles of the European Commission may foster efficient integration of markets and policies in this and other fields.
    Keywords: Economic integration, Trade in services, GATS, European Union, Labour regulation, Services regulation, Harmonization, Posted workers
    Date: 2010–01
  3. By: Tito Boeri
    Abstract: Negative perceptions about migrants in Europe, the Continent with the largest social policy rogrammes, are driven by concerns that foreigners are a net fiscal burden. Increasing concerns are pressing Governments, in the midst of the recession, to reduce welfare access by migrants or further tighten migration policies. Are there politically feasible alternatives to these two hardly enforceable (and procyclical) policy options? In this paper we look at economic and cultural determinants of negative perceptions about migrants in Europe. Based on a simple model of the perceived fiscal effects of migration and on a largely unexploited database (EU-Silc), we find no evidence that legal migrants, notably skilled migrants, are net recipients of transfers from the state. However, there is evidence of “residual dependency” on contributory transfers and self-selection migrants more likely to draw on welfare in the countries with the most generous welfare state. Moreover, those favouring redistribution to the poor do not overlap with those considering migrants as part of the same community. A way out of the migration dilemma facing Europe involves i. co-ordinating safety nets across the EU, and ii. adopting explicitly selective migration policies. Other options involve restricting welfare access by migrants and subsidising voluntary return migration of lowskilled migrants during the recession.
    Keywords: Migration policy, Welfare access, Fiscal externality
    JEL: J38 J5
    Date: 2010–01
  4. By: Antonio Di Paolo (Universitat Autònoma de Barcelona & IEB); Josep Lluís Raymond (Universitat Autònoma de Barcelona & IEB); Jorge Calero (Universitat de Barcelona & IEB)
    Abstract: This paper is concerned with the investigation of the intergenerational mobility of education in several European countries and its changes across birth cohorts (1940-1980), using a new mobility index that considers the total degree of mobility as the weighted sum of mobility with respect to both parents. Moreover, this mobility index enables the analysis of the role of family characteristics as mediating factors in the statistical association between individual and parental education. We find that Nordic countries display lower levels of educational persistence but that the degree of mobility increases over time only in those countries with low initial levels. Moreover, the results suggest that the degree of mobility with respect to fathers and mothers converges to the same level and that family characteristics accounts for an important part of the statistical association between parental education and children’s schooling; a particular finding is that the most important elements of family characteristics are the family’s socio-economic status and educational assortative mating of the parents.
    Keywords: educational economics, intergenerational mobility, Europe, birth cohorts, family
    JEL: J62 I21 I29 D13
    Date: 2010
  5. By: Annamaria Conti; Patrick Gaulé
    Abstract: Europe is perceived to be lagging behind the US in converting its academic results into economic outcomes. Using new survey data on European and US Technology Transfer Offices (TTOs), we find that differences in academic research, TTO staff and experience explain to a great extent the gap between the US and Europe in terms of the number of license agreements concluded. However, these factors account for only part of the difference in license income. We relate the difference in licensing income to differences in the organization and staffing of TTOs. Our analysis reveals that US TTOs do not attach more importance to generating revenue as an objective than their European counterparts. However, they employ more staff with experience in industry which explains some of the remaining differential in license income performance.
    Date: 2010
  6. By: R Nakamura; L Siciliani
    Abstract: We study the association between education and body mass index across ten European countries (Denmark, Belgium, Greece, Spain, Ireland, Italy, Austria, Portugal, Finland and Sweden) using the European Community Household Panel. OLS and Probit estimation suggest that on average education is associated with lower BMI and a lower probability of being obese. For women, the difference of BMI between the lowest education group and the highest one ranges between -7.15% (Austria) and -2.43% (Finland). The reduction in the probability of being obese ranges between -7.18% (Spain) and -3% (Italy). For men, the reduction of BMI ranges between -4.29%(Denmark) and zero (Greece). The reduction in the probability of being obese ranges between -7.84% (Austria) and zero (Greece). Quantile regression suggests that the effect of education is larger at the upper quantiles than at the lower ones. Higher education also reduces the dispersion of the BMI distribution.
    Keywords: Obesity, Body Mass Index, Education
    JEL: I12 I20 C21
    Date: 2010–03
  7. By: Arnstein Aassve; Maria Sironi; Alice Goisis
    Abstract: In this paper we analyse the relationship between happiness and childbearing taking a comparative perspective. We argue that fertility and happiness are somewhat linked and we investigate whether there are important differences across European countries. Using happiness as a welfare measure offers important benefits over income especially when interest lies in understanding how individuals' wellbeing is associated with childbearing outcomes. We use the European Social Survey (ESS) and apply simple regression techniques, controlling for country differences, and find indeed a positive and significant association between happiness and childbearing. However, parents do not appear to be consistently happier in some countries than in others. The final set of analyses reveals a very strong interconnection between, childbearing, partnership and happiness.
    Keywords: happiness, childbearing, European social survey, ESS
    Date: 2009–07
  8. By: SANIN, Maria Eugenia; VIOLANTE, Francesco
    Keywords: EUA market, EU-ETS, carbon emission trading, Garch model, normal mixture
    JEL: C16 C32 C51 C53 Q52 Q53
    Date: 2009–04–01
  9. By: Jerôme Danguy; Bruno van Pottelsberghe de la Potterie
    Abstract: For more than 40 years, governments and professional associations have acted, voted or lobbied against the implementation of the Community Patent (COMPAT). The econometric results and simulations presented in this paper suggest that, thanks to its attractiveness in terms of market size and a sound renewal fee structure, the COMPAT would drastically reduce the relative patenting costs for applicants while generating more income for the European Patent Office and most National Patent Offices. The loss of economic rents (€400 million would be lost by patent attorneys, translators and lawyers) and the drop of controlling power by national patent offices elucidate further the observed resistance to the Community Patent.
    Keywords: Patent systems, community patent, patenting cost, renewal fees, maintenance rate.
    JEL: O34 O38 P14
    Date: 2010
  10. By: Carlo Cambini; Laura Rondi
    Abstract: We examine theoretically and empirically the relationship between access regulation, financial structure and investment decisions in network industries, analyzing if financial variables can be used as a strategic device to influence the regulator’s price setting decisions. Using a panel of 15 EU Public Telecommunication Operators (PTOs) over the period 1994-2005, we first investigate the determinants of regulated prices (both wholesale and retail), firm financial structure and investment, and then test the relationship between leverage, regulated charges and firm’s investment. However, our model suggests that if leverage influences the regulated access charges, then it will also impact competition in the downstream segment. Therefore, we also investigate the impact of the PTO’s leverage on market competition. Our results show that leverage positively affects regulated rates, as well as the PTOs’ investment rate, as predicted by Spiegel and Spulber (1994). Moreover, higher leverage also leads to higher access charges and an increase in leverage is followed by a decrease in the number of competitors and by an increase of the incumbent’s market share. This suggests that the strategic use of debt to discipline the regulator’s lack of commitment within a vertically integrated network industry may somewhat impair or delay competition in the retail segment, but has a favorable counterpart in mitigating the underinvestment problem.
    Date: 2009–12–15
  11. By: Arnstein Aassve; Cristina Ruggeri; Zsolt Spéder
    Abstract: Increasing life expectancy coupled with declining birth rates is prompting European countries to revise their current pension schemes. The key elements of pension reforms are 1) introducing funded schemes as a means to supplement the current pay-as-you-go system, and 2) a lengthening of the working careers of European citizens. The policy reforms needed constitutes perhaps the biggest challenge facing European policy makers since the introduction of the welfare state after the Second World War. The urgency of the policy reforms are reflected by the European Council Summits of Stockholm (2001) and Barcelona (2002), where the attending policy makers agreed to both increase the labour force participation among older workers and to delay the retirement period. Notwithstanding the efforts, recent changes in the employment rates and the retirement age indicate that the great majority of countries are way off the targets set for 2010. On the backdrop of the policy challenges lying ahead, we consider in this paper individuals' preferences for work and retirement in 23 European countries. A deeper understanding of these preferences helps policy makers, not only informing them about the potential success of the planned pension reforms, but also to make adjustments to its design that may lead to efficiency gains in welfare provision. We find that on average individuals prefer to retire at a younger age than the current mean retirement age. However, there is huge variation in these preferences both at the individual and country levels. We find rather robust evidence to suggest that individuals are willing to work longer as the average life expectancy is increasing.
    Keywords: life expectancy, GDP, retirement preferences, pension reforms, European Social Survey, multilevel models
    Date: 2009–12
  12. By: Bennedsen, Morten; Nielsen, Kasper Meisner
    Abstract: In a large sample of European firms we analyze the value discount associated with disproportional ownership structures first documented by Claessens et al (2002). Consistent with a theoretical model of incentives and entrenchment effects, we find higher value discount in family firms, in firms with low cash flow concentration, and in industries with higher amenity value. Furthermore, the discount is higher in countries with good investor protection and higher for dual class shares than for pyramids. We find no impact on operating performance, likelihood of bankruptcy, dividend policy, or growth. Finally, we discuss policy implications of these findings.
    Keywords: Ownership Structure, Dual Class Shares, Pyramids, EU Company Law
    JEL: G30 G32 G34 G38
    Date: 2009–11
  13. By: Roy Thurik; Ingrid Verheul; Jolanda Hessels; Peter van der Zwan
    Abstract: This paper investigates determinants of engagement in various stages of the entrepreneurial process while considering an individual's start-up motivation using 2007 survey data for 27 European countries and the US. Next to opportunity and necessity start-up motivations, we take into account individuals driven by a combination of both motivations. We observe that opportunity- and necessitydriven entrepreneurs as well as those with mixed start-up motivations have different profiles. Furthermore, they differ concerning the factors that inspire or hinder them to engage in the entrepreneurial process more fully ('to climb the entrepreneurial ladder'). For example, entrepreneurship-specific education, selfemployed parents, risk tolerance, perception of lack of financial support, and living in a metropolitan area are important variables in determining entrepreneurial engagement and failure for opportunity-driven individuals, but they are not (or less) important for necessity-driven individuals.
    Date: 2010–03–18
  14. By: Justina A.V. Fischer (University of Hamburg, Institute for Public Finance)
    Abstract: Early retirement of workers is used by firms as means to rejuvenate their workforces. In principle, workers can either simply be laid off or can be offered an early retirement option combined with a financial bonus. However, dismissing masses of older workers may be detrimental to social peace and stability and damage the firm’s reputation, while entry into early retirement with a severance pay at least maintains the semblance of a worker’s voluntary decision. Cross-national analyses of this topic using micro data are, however, widely missing. Using the SHARE (Survey of Health, Aging and Retirement in Europe) data set, this paper fills this gap by investigating to what extent institutional factors such as the generosity of the pension system and strong unions influence firms’ rejuvenation policies. Stronger unions appear to lead to a higher likelihood of receiving a severance pay, as does a more generous pension system. In contrast, a higher decrease in wealth accrual leads to a higher probability of simple lay-off. It is concluded that the current reforms which aim at lowering the replacement rate and employment protection will most probably lead to more dismissals of older workers without severance pay.
    Keywords: Early Retirement, Involuntary Early Retirement, Severance Pay, Social Security, Pensions, Employment Protection, Unions
    JEL: J14 J21 J22 J26
    Date: 2010–02–28
  15. By: Paul C. Cheshire; Stefano Magrini
    Abstract: Analysts of regional growth differences in the US tend to assume full spatial equilibrium (Glaeser et al, 1995). Flows of people thus indicate changes in the distribution of spatial welfare more effectively than differences in incomes. Research in Europe, however, shows that people tend to be immobile. Even mobility within countries is restricted compared to the US but national boundaries offer particular barriers to spatial adjustment. Thus it is less reasonable to assume full spatial equilibrium in a European context and differences in per capita incomes may persist and signal real spatial welfare differences. Furthermore, it implies that the drivers of what population movement there is, may differ from the drivers of spatial differences in productivity or output growth. This paper analyses the drivers of differential urban growth in the EU both in terms of population and output growth. The results show significant differences in the drivers as well as common ones. They also reveal the extent to which national borders still impede spatial adjustment in Europe. This has important implications for policy and may apply more generally to countries – for example China - less homogeneous than the USA.
    Date: 2010–01
  16. By: Marin, Dalia
    Abstract: Many people in the European Union fear that Eastern Enlargement leads to major job losses. More recently, these fears about job losses have extended to high skill labor and IT jobs. The paper examines with unique firm level data whether these fears are justified for the two neighboring countries of Eastern Enlargement Austria and Germany. We find that Eastern Enlargement leads to surprising small job losses of less than 0.5 percent of total employment in Germany and of 1.5 percent in Austria, because jobs in Eastern Europe do not compete with jobs in Austria and Germany. Low cost jobs of affiliates in Eastern Europe help Austrian and German firms to stay competitive in an increasingly competitive environment. However, we also find that multinational firms in Austria and Germany are outsourcing skill intensive activities to Eastern Europe taking advantage of cheap abundant skilled labor there. We find that the firms’ outsourcing activities to Eastern Europe are a response to a human capital scarcity in Austria and Germany which has become particularly severe in the 1990s. We indeed find a reverse pattern of ‘Maquiladoras’ emerging with Eastern Enlargement in Austria and Germany compared to what economists have found for the North American Free Trade Agreement. Skilled workers in Austria and Germany are losing from outsourcing. In both countries outsourcing contributes 35 percent and 41 percent, respectively, to changes in relative wages for skilled workers in Austria and Germany. To address the skill exodus to Eastern Europe we suggest liberalizing the movement of high skill labor.
    Keywords: human capital; intra-firm trade; multinationals and jobs; outsourcing to Eastern Europe; R&D policy
    JEL: F21 F23 J24 J31 L24 O3 P33
    Date: 2010–03

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