nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2010‒05‒15
sixteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Drivers of Private Equity Investment in CEE and Western European Countries By Kerstin Bernoth; Roberta Colavecchio; Magdolna Sass
  2. Adequacy of Saving for Old Age in Europe By Elsa Fornero; Annamaria Lusardi; Chiara Monticone
  3. Institutions and performance in European labour markets: taking a fresh look at evidence By Alfonso Arpaia; Gilles Mourre
  4. Schooling effects and earnings of French University graduates: school quality matters, but choice of discipline matters more By Jean-François Giret; Mathieu Goudard
  5. Really “Lost in translation”? The economic consequences of issuing an annual report in English By Thomas Jeanjean; Hervé Stolowy; Michael Erkens
  6. Assessing the short-term impact of pension reforms on older workers' participation rates in the EU: a diff-in-diff approach By Alfonso Arpaia; Kamil Dybczak; Fabiana Pierini
  7. Years of Schooling, Human Capital and the Body Mass Index of European Females By Giorgio Brunello; Daniele Fabbri; Margherita Fort
  8. Competition and Educational Quality: Evidence from The Netherlands By Elbert Dijkgraaf; Raymond H.J.M. Gradus; Matthijs de Jong
  9. Labor Market and Income Effects of a Legal Minimum Wage in Germany By Kai-Uwe Müller; Viktor Steiner
  10. The Impact of Financial Structure on Firms' Financial Constraints: A Cross-Country Analysis By Christopher F. Baum; Dorothea Schäfer; Oleksandr Talavera
  11. Foreign Investments and Institutional Convergence in Southeastern Europe By Eleni A. Kaditi
  12. Why and How the European Union Can Get a (Near To) Carbon-Free Energy System in 2050? By Christopher Jones; Jean-Michel Glachant
  13. When Foreign Direct Investment is Good for Development: Bulgaria’s accession, industrial restructuring and regional FDI By Diana Bozhilova
  14. Does university choice drive graduates’ employability? By Ciriaci, Daria; Muscio, Alessandro
  15. Skilled Migration and Economic Performances: evidence from OECD countries By Gianluca OREFICE
  16. Are We Spending Too Many Years in School? Causal Evidence of the Impact of Shortening Secondary School Duration By Bettina Büttner; Stephan Thomsen

  1. By: Kerstin Bernoth; Roberta Colavecchio; Magdolna Sass
    Abstract: A strong private equity market is a cornerstone for commercialization and innovation in modern economies. However, substantial differences exist in the relative amounts raised and invested in private equity across European countries. We investigate the macro-determinants of private equity investment in Europe, focusing on the comparison between CEE and Western European countries. Our estimations are based on a data set running from 2001 to 2008 and covers 14 Western European and three CEE countries. Applying robust estimation techniques we identify a 'robust' set of determinants of private equity activity in both regions. We find similarities as well as differences in the driving forces of private equity investments in Western European and CEE countries. Our results suggest that commercial bank lending, equity market capitalization, unit labour costs and corporate tax rates are significant determinants of private equity activity.
    Keywords: Private Equity, Extreme Bounds Analysis, Central and Eastern European Countries
    JEL: C23 C52 E22 G24
    Date: 2010
  2. By: Elsa Fornero (University of Turin and CeRP-Collegio Carlo Alberto, Turin); Annamaria Lusardi (Dartmouth College); Chiara Monticone (CeRP-Collegio Carlo Alberto, Turin)
    Abstract: This paper contributes to the ESF Forward Look project “Ageing, Health and Pensions in Europe” by providing an overview of policy questions and research literature on the adequacy of saving for old age in European countries. Given the current status and practices, the paper describes remaining knowledge gaps and the requirements in terms of research infrastructures, data, and methodologies to fill such gaps.
    Date: 2009–07
  3. By: Alfonso Arpaia; Gilles Mourre
    Abstract: This paper presents a selective survey of the recent literature on labour market institutions and performance and offers new empirical EU-based evidence on the impact of labour market reforms on employment and labour market adjustment. While the literature traditionally treats labour market institutions as exogenous, attention shifted recently towards understanding the underlying causes of specific institutional arrangements. As a consequence, the literature highlights the great importance of an efficient policy design exploiting these interactions wisely and identifies general principles for achieving an efficient policy design at both macro and micro levels. While empirical evidence does no show a major change in terms of intensity of labour market reform after the setting of the Economic and Monetary Union and the creation of the euro, the reforms aiming at strengthening the labour market attachment of vulnerable groups tend to have been successful both in raising their employment and increasing labour market adjustment.
    Keywords: 'Institutions and Performance in European Labour Markets', 'labour market functioning; political economy; endogeneity; institutions; policy design'; Arpaïa, Mourre
    JEL: J20 J50 J64 K31
    Date: 2009–11
  4. By: Jean-François Giret (IREDU - Institut de recherche sur l'éducation : Sociologie et Economie de l'Education - CNRS : UMR5225 - Université de Bourgogne, CEREQ - Centre d'études et de recherches sur les qualifications - Ministère de l'Education nationale, de l'Enseignement supérieur et de la Recherche - ministère de l'Emploi, cohésion sociale et logement); Mathieu Goudard (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: Our aim in this article is to study the relation between earnings of French universities graduates and some characteristics of their universities. We exploit data from the Céreq's "Génération 98" survey, enriched with information on university characteristics primarily from the ANETES (yearbook of French institutions of higher education). We employ multilevel modeling, enabling us to take advantage of the natural hierarchy in our separate datasets, and thus to identify, and even to measure potential effects of institutional quality. Since we take into account many individual students characteristics, we are able to obtain an income hierarchy among the different disciplines : students who graduated in science, economics or management obtain the highest earnings. Below them, we and students who graduated in law, political science, communication or language and literature, while the ones who graduated in social studies earn the lowest incomes. On the institutional level, we need two significant quality effects : the rest is from the socioeconomic composition of the university's student population, and the second effect is from the university's network in the job market. These last two results remain stable when we examine subsamples of universities according to their dominant teaching fields, except for universities that are particularly concentrated in science.
    Keywords: Demand for schooling, educational economics, human capital, salaries wage differentials, school choice
    Date: 2010–05–03
  5. By: Thomas Jeanjean (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959); Hervé Stolowy (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959); Michael Erkens (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959)
    Abstract: In this paper, we investigate the economic consequences of using English as an external reporting language for firms from non- English speaking countries. We use a difference-indifferences technique to estimate the effect of language. We use a sample of 166 firms that start publishing an annual report in English in addition to an annual report in their local language. We benchmark these firms to a sample of control firms defined via a propensity score matching procedure to control for endogeneity in the choice of the reporting language. We show that information asymmetry (measured as the bid-ask spread) is reduced, analyst following is enlarged and a greater investor base (measured as a higher number of foreign investors) is attracted. Our findings suggest that language per se may contribute to an increase in market efficiency by providing information accessible to more market participants.
    Keywords: rapport annuel, conséquences économiques, traduction, anglais, fourchette de prix, suivi des analystes, actionnariat étranger, différences dans les différences, score de propension.
    Date: 2010
  6. By: Alfonso Arpaia; Kamil Dybczak; Fabiana Pierini
    Abstract: After presenting an extensive overview of the reforms undertaken in the EU between 1990 and 2006, The paper assess with a diff-in-diff technique the short-term effects of pension reforms on the participation rates of individuals aged between 50 and 64 years. The analysis suggests that in the short-term pension reforms have different effects on the participation rate of men and women. First, reforms tightening the access to early retirement have a positive effect on female participation, but reduce somewhat male participation rates. Second, the results for non-fundamental reforms are more uncertain. Third, reforms that change the way of financing pensions or the eligibility conditions (what we dubbed fundamental reforms), usually with long phasing-in periods, may have unintended short-run effects on the female participation rate. Thus, our findings point at the importance of designing pension reforms and strategies to reform social security that reduce the risks of undesired effects on the decision to remain in the labour market. Workers' information about pension rules and uncertainties about long transition periods may influence in the short-term the retirement decision in a way which is not consistent with the intended effects of the reform
    Keywords: Diff-in-Diff, pension reforms, participation rates, Arpaia, Dybczak, Pierini
    Date: 2009–09
  7. By: Giorgio Brunello; Daniele Fabbri; Margherita Fort
    Abstract: We find that the protective effect of years of schooling on the BMI of European females is non negligible, but smaller than the one recently found for the US. By using individual standardized cognitive tests instead of years of schooling as the measure of education we show that the current focus in the literature on years of schooling is not misplaced. We also investigate whether the response to changes in compulsory education is heterogeneous, and find that the protective effect of schooling is stronger among overweight than among obese females.
    Keywords: obesity, human capital, Europe
    JEL: I12 I21
    Date: 2010–01
  8. By: Elbert Dijkgraaf (Erasmus University Rotterdam); Raymond H.J.M. Gradus (VU University Amsterdam, and Erasmus University Rotterdam); Matthijs de Jong (Erasmus University Rotterdam)
    Abstract: Ample evidence is available for the effect of competition on educational quality as only a few countries allow large scale competition. In the Netherlands free parental choice is present since the beginning of the 20th century, which can be characterized as a full voucher program with 100% funding. Based on panel data for the Netherlands we show that there is a relation between competition and educational outcomes in secondary education, but that it is negative and small. This effect is larger for small and medium sized schools and for schools which do not have a Protestant or Catholic denomination.
    Keywords: Competition; Private Schools; Scale; Quality; Secondary Education
    JEL: H70 I20
    Date: 2009–11–13
  9. By: Kai-Uwe Müller; Viktor Steiner
    Abstract: In view of rising wage and income inequality, the introduction of a legal minimum wage has recently become an important policy issue in Germany. We analyze the distributional effects of a nationwide legal minimum wage of 7.50 € per hour on the basis of a microsimulation model which accounts for the complex interactions between individual wages, the tax-benefit system and net household incomes, also taking into account potential employment effects as well as indirect effects on consumption. Simulation results show that the minimum wage would be rather ineffective in raising net household incomes and reducing income inequality, even if it led to a substantial increase in hourly wages at the bottom of the wage distribution. The ineffectiveness of a minimum wage in Germany is mainly due to the existing system of means-tested income support and the position of minimum wage earners in the income distribution.
    Keywords: minimum wage, wage distribution, employment effects, income distribution, inequality, microsimulation
    JEL: I32 H31 J32
    Date: 2010
  10. By: Christopher F. Baum (Boston College; DIW Berlin); Dorothea Schäfer (DIW Berlin); Oleksandr Talavera (School of Economics, University of East Anglia)
    Abstract: We estimate firms' cash flow sensitivity of cash to empirically test how the financial system's structure and activity level influence their financial constraints. For this purpose we merge Almeida et al. (2004), a path-breaking new design for evaluating a firm's financial constraints, with Levine (2002), who paved the way for comparative analysis of financial systems around the world. We conjecture that a country's financial system, both in terms of its structure and its level of development, influences the cash flow sensitivity of cash of constrained firms but leaves unconstrained firms unaffected. We test our hypothesis with a large international sample of 80,000 firm-years from 1989 to 2006. Our findings reveal that both the structure of the financial system and its level of development matter. Bank-based financial systems provide the constrained firms with easier access to external financing.
    Keywords: financial constraints, financial system, cash flow sensitivity of cash
    JEL: G32 G30
    Date: 2010–04–21
  11. By: Eleni A. Kaditi
    Abstract: Foreign investments are in the focus of most governments around the world. In order to be able to set a policy agenda which is successful in promoting FDI, it is necessary to understand their determinants. This paper examines whether and to what extent sound institutions and the degree of regulation deter or attract FDI flows in four economies of Southeastern Europe. In a dynamic panel analysis, a broad set of institutional and regulatory variables that may affect the decision of foreign investors to undertake investment projects in this region is examined, using firm-level data. Analysis shows that the quality of the institutional environment significantly influences foreign capital. Governments in this region should, therefore, focus primarily on creating a good legal system, having relatively stable political and economic conditions.
    Keywords: Foreign Investments, Corruption, Transition Economies
    JEL: F23 D73 P3
    Date: 2010
  12. By: Christopher Jones; Jean-Michel Glachant
    Abstract: Reducing the European Union GHG emissions by at least 80% by 2050 will require a near zero carbon electricity, road and rail transport industry, and heating and cooling in buildings. As compared to “business as usual” the amount of energy required will basically vary according to the level of energy efficiency: it is the “system scale”. Then it is the “system design” which will provide the needed carbon-free technologies consisting of renewable, nuclear and fossil fuels with carbon capture and storage. A zero carbon energy system by 2050 is then demonstrated to be feasible. However it is far from easy and requires immediate and substantial policy action. The main policy implications are addressed in this paper. The 5 years 2010-2015 will be decisive in establishing a regulatory environment whereby the EU will be in a position, by 2020, to take the next steps to achieve the 2050 goal.
    Date: 2010–03
  13. By: Diana Bozhilova
    Abstract: This article examines the dynamic between the process of Bulgaria’s European Union accession and the flow of Foreign Direct Investments to the country in its industrial base. A critical differentiation between speculative and non-speculative FDI is drawn while determining that the geographic origin of investments matters. Greek FDI, in particular, emerges as a major source of strategic regional investments in Bulgaria’s industry highlighting the significance of regional trade and cooperation for the long-term economic outlook not only for the host country but also for the region by enhancing the area of economic progress and development.
    Keywords: Bulgaria, EU Phare Fund, FDI, regional cooperation, industrial restructuring.
    Date: 2010–03
  14. By: Ciriaci, Daria; Muscio, Alessandro
    Abstract: Universities have come under increasing pressure to become key drivers of economic development in the age of the knowledge economy. Yet we know very little about the impact of university quality and scientific excellence on the probability of graduates finding jobs. This paper investigates the determinants of Italian graduates’ employability 1-year and 3-years after graduation, with special reference to university quality measured in terms of research performance. Our results confirm that the ‘better’ the university, the higher the likelihood that graduates will be employed. We also observe strong effects associated with field of study, and wide regional differences.
    Keywords: University quality; returns to education; labour market outcomes; employment
    JEL: I23 J24
    Date: 2010–05–05
  15. By: Gianluca OREFICE (University of Milano and Centro Studi Luca D Agliano)
    Abstract: This paper investigates the effects of immigration flows and their skill content on per capita GDP in 24 OECD host countries. Theoretical models concludes that the effect of immigrants in host country's income depends on the capital content of migrants (Benhabib 1996); empirically the question is still open and this paper contributes to make light on this. So we propose an empirical estimation on the effects of immigrants and their skill level on per capita GDP. Using a IV model to solve the endogeneity problem we found that high skilled migration has a positive effect on per capita GDP, but it is not enough to fully compensate the overall negative effects of migration on per capita GDP.
    Keywords: International migration, economic performances, factor mobility
    JEL: F22 F12
    Date: 2010–04–14
  16. By: Bettina Büttner (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Stephan Thomsen (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: This paper analyzes the impact of shortening the duration of secondary schooling on the accumulation of human capital. In 2003, an educational policy reform was enacted in Saxony-Anhalt, a German state, providing a natural experimental setting. The thirteenth year of schooling was eliminated for those students currently attending the ninth grade. Tenth grade students were unaffected. The academic curriculum remained almost unaltered. Primary data collected from the double cohort of 2007 Abitur graduates reveals signficantly negative effects for both genders in mathematics. Only females were negatively effected in English and the results obtained in German literature were statistically insignificant.
    Keywords: student performance, school duration, learning intensity, natural experiment
    JEL: I21 J18 C21
    Date: 2010–02

This nep-eur issue is ©2010 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.