nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2010‒06‒18
seventeen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. An applied analysis of ACE and CBIT reforms in the EU.. By Mooij, Ruud A., de; Devereux, Michael P.
  2. Economic downturn and stress testing European welfare systems By Figari F; Salvatori A; Sutherland H
  3. Knowledge diffusion and innovation policies within the European regions: Challenges based on recent empirical evidence By Corinne Autant-Bernard; Muriel Fadairo; Nadine Massard
  4. Corporate taxation and the size of new firms: Evidence from Europe. By Da Rin, M.; Di Giacomo, M.; Sembenelli, A.
  5. The Emergence of Wage Coordination in the Central Western European Metal Sector and its Relationship to European Economic Policy By Vera Glassner; Toralf Pusch
  6. The GHG Balance of Biofuels Taking into Account Land Use Change By Mareike Lange
  7. Labor Market Entry Conditions, Wages and Job Mobility By Bachmann, Ronald; Bauer, Thomas; David, Peggy
  8. Changes in the Czech Wage Structure: Does Immigration Matter? By Kamil Dybczak; Kamil Galuscak
  9. Dynamic modeling of fertility and labour market participation of married or cohabiting women By Cyriaque EDON; Thierry KAMIONKA
  10. The Self-Employment of Immigrants and Natives in Sweden By Ohlsson, Henrik; Broomé, Per; Bevelander, Pieter
  11. Looking Beyond the Bridge: How Temporary Agency Employment Affects Labor Market Outcomes By Jahn, Elke J.; Rosholm, Michael
  12. The Introduction of a Private Wealth Module in CAPP_DYN: an Overview By Carlo Mazzaferro; Marcello Morciano; Elena Pisano; Simone Tedeschi
  13. School Responsiveness to Quality Rankings: An Empirical Analysis of Secondary Education in the Netherlands By Koning, Pierre; van der Wiel, Karen
  14. Research in Economics and Management in France: A bibliometric study using the h-index By Jean-Michel Courtault; Naïla Hayek; Eric Rimbaux; Tong Zhu
  15. Female Labor Supply and Divorce: New Evidence from Ireland By Bargain, Olivier; Gonzalez, Libertad; Keane, Claire; Özcan, Berkay
  16. Airport slot allocation in Europe: economic efficiency and fairness By Lorenzo Castelli; Paola Pellegrini; Raffaele Pesenti
  17. Productivity Premia for German Manufacturing Firms Exporting to the Euro-Area and Beyond: First Evidence from Robust Fixed Effects Estimations By Verardi, Vincenzo; Wagner, Joachim

  1. By: Mooij, Ruud A., de; Devereux, Michael P.
    Abstract: We assess the quantitative impact of two reforms to corporation tax, which would eliminate the differential treatment of debt and equity: the allowance for corporate equity (ACE) and the comprehensive business income tax (CBIT).We explore the impact of these reforms on various decision margins, using an applied general equilibrium model for the EU calibrated with recent empirical estimates of elasticities. The results suggest that, if governments adjust statutory corporate tax rates to balance their budget, profit shifting and discrete location render CBIT more attractive for most individual European countries. European coordination makes a joint ACE more, and a joint CBIT less efficient. A combination of ACE and CBIT is always welfare improving.
    JEL: D58 H52
    Date: 2010
  2. By: Figari F; Salvatori A; Sutherland H
    Abstract: As unemployment rises across the European Union (EU) it is important to understand the extent to which the incomes of the new unemployed are protected by tax-benefit systems and to assess the cost pressures on the social protection systems of this increase in unemployment. This paper uses the EU tax-benefit model EUROMOD to explore these issues, comparing effects in five EU countries. It provides evidence on the differing degrees of resilience of the household incomes of the newly unemployed due to the variations in the protection offered by the tax-benefit systems, according to whether unemployment benefit is payable, the household situation of the unemployed person, and across countries.
    JEL: C81 H55 I3
    Date: 2010–06–08
  3. By: Corinne Autant-Bernard (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; Université de Saint-Etienne, Jean Monnet, F-42023 Saint Etienne, France); Muriel Fadairo (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; Université de Saint-Etienne, Jean Monnet, F-42023 Saint Etienne, France); Nadine Massard (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; Université de Saint-Etienne, Jean Monnet, F-42023 Saint Etienne, France)
    Abstract: This article builds upon empirical results concerning localised knowledge spillovers to highlight some policy implications within European regions. The analysis emphasises the role of regional innovation policies in supporting the institutions that generate knowledge and learning. However, the variety of regional features presented in the empirical literature suggests that the search for universal policy tools is unrealistic. From this perspective, we argue that original strategies must be generated to cope with the various dilemmas faced by regional innovation policies. Such specific strategies require accurate knowledge of local features. Improving data and indicators to diagnose and monitor regional innovation is therefore presented as a key issue for policy makers.
    Keywords: innovation policy, localised knowledge flows, European regions, knowledge-based economy
    JEL: O38 C12
    Date: 2010
  4. By: Da Rin, M. (Tilburg University); Di Giacomo, M.; Sembenelli, A.
    Date: 2010
  5. By: Vera Glassner; Toralf Pusch
    Abstract: In the European Monetary Union the transnational coordination of collective wage bargaining has acquired increased importance on the trade union agenda. The metal sector has been at the forefront of these developments. This paper addresses the issue of crossborder coordination of wage setting in the metal sector in the central western European region, that is, in Germany, the Netherlands and Belgium, where coordination practices have become firmly established in comparison to other sectors. When testing the interaction of wage developments in the metal sector of these three countries, relevant macroeconomic (inflation and labour productivity) and sector-related variables (employment, export-dependence) are considered with reference to the wage policy guidelines of the European Commission and the European Metalworkers’ Federation. Empirical evidence can be found for a wage coordination effect in the form of increasing compliance with the wage policy guidelines of the European Metalworkers’ Federation. The evidence for compliance with the stability-oriented wage guideline of the European Commission is weaker.
    Date: 2010–06
  6. By: Mareike Lange
    Abstract: The contribution of biofuels to the saving of greenhouse gas (GHG) emissions has recently been questioned because of emissions resulting from land use change (LUC) for the bioenergy feedstock production. We investigate how an expanding biofuel feedstock production impacts on land use dynamics if LUC is included into the biofuel carbon accounting framework as scheduled by the European Commission. We first illustrate the change in carbon balances of different biofuels, using methodology and data from the IPCC Guidelines for National Greenhouse Gas Inventories. It turns out that the conversion of natural land except for grassy savannahs impedes meeting the EU’s 35% minimum emissions reduction target for biofuels. We show that the current accounting method promotes biofuel feedstock production mainly on former cropland, thus increases the competition between food and fuel production on the currently available cropland area. We further discuss whether it is profitable to use degraded land for commercial bioenergy production as requested by the European Commission to avoid undesirable LUC and conclude that the current regulation sets little incentives to use such land. The exclusive consideration of LUC for bioenergy production minimizes direct LUC at the expense of increasing indirect LUC but a convincing approach to implement indirect LUC into the framework does not exist. To overcome this problem, we propose the inclusion of all agricultural activities into a regulatory framework for carbon accounting, thus eliminating the indirect LUC risk
    Keywords: land use change emissions, bioenergy, biofuels, European policy, land use dynamics, indirect land use change (ILUC)
    JEL: Q58 Q42 Q24 Q17
    Date: 2010–04
  7. By: Bachmann, Ronald (RWI Essen); Bauer, Thomas (RWI Essen); David, Peggy (RWI Essen)
    Abstract: Economic conditions at the time of labour market entry can induce wage differentials between workers entering the labour market at different points in time. While the existence and persistence of these entry wage differentials are well documented, little is known about their interaction with employees' mobility behaviour. This paper contributes to this research area by analyzing the interaction between job mobility and entry wage differentials using German administrative data. The results suggest that labour market entrants earning less than the average starting wage are more likely to change jobs, directly from employer to employer as well as indirectly via an unemployment spell. In addition they are more likely to change occupation. Moreover, job mobility tends to reduce the effects of labour market entry conditions, implying that job mobility operates as an adjustment mechanism that mitigates entry wage differentials. These results hold not only for high-skilled, but also for medium-skilled and unskilled workers.
    Keywords: mobility, job-to-job, wages, labour market entry, initial conditions
    JEL: E24 J31 J62 J64
    Date: 2010–05
  8. By: Kamil Dybczak; Kamil Galuscak
    Abstract: Using the Albrecht et al. (2003) version of the Machado and Mata (2005) decomposition technique along the wage distribution, we find that immigrant workers do not affect changes in the Czech wage structure between 2002 and 2006 despite their substantial inflows. Instead, changes in the wage structure are explained solely by increasing returns of native workers, while changes in the observed characteristics of native workers, particularly a rising level of education, are responsible for increasing wage dispersion. The sizeable inflows of foreign workers in the sample years are concentrated among young workers with primary and tertiary education and are primarily due to rising labour demand. The negative immigrant-native wage gaps are persistent along the wage distribution and are explained mainly by differences in observed characteristics. We provide evidence on increasing returns to education of native workers along the wage distribution. The returns are higher in 2006 than in 2002, in line with the evidence in the previous literature.
    Keywords: Immigration, matched employer-employee data, quantile regression, wage gap decomposition, wage structure.
    JEL: J31 C21
    Date: 2009–12
  9. By: Cyriaque EDON (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Thierry KAMIONKA (CNRS and CREST)
    Abstract: We jointly model fertility and participation decisions of women who live in couple using a dynamic model. In this paper we analyze the labour supply and the fertility decisions of married or cohabiting women in France, Spain, Germany, UK and Denmark. We estimate, for the period going from 1994 to 2001, a dynamic bivariate probit model with random effects using the ECHP (European Community Household Panel) and using a simulated maximum likelihood estimator. These estimates are made on an annual basis taking into account the initial conditions problem. The decisions of participation and fertility of women who live in couple depend on the individual characteristics (observed or unobserved) and are characterized by a significant state dependence. Our results suggest that the decisions of employment and fertility cannot be modeled separately. The difference of fertility across these countries is explained by individual characteristics and variations of social and fiscal policies across countries. However, the unobserved components of heterogeneity also play a central role in the observed differences across countries. We show the importance of the permanent income component in the participation decision. Random effects are negatively correlated across the equations of the model. Consequently, women who, a priori, prefer to have a higher consumption have weaker preferences for fertility.
    Keywords: Participation, Heterogeneity, Simulation based estimation, Panel data
    JEL: J21 J22 C33 C35 J13
    Date: 2010–04–30
  10. By: Ohlsson, Henrik (Lund University); Broomé, Per (Malmö University); Bevelander, Pieter (Malmö University)
    Abstract: Earlier studies on entrepreneurship and self-employment among immigrants call attention to the fact that also the "market" for self-employment or entrepreneurs consists of a supply and demand side as well as the interaction between these two. More recent research suggests that a mix of personal resources, the surrounding structural context of markets, competition and the current political and economic environment, all acting together are seen as determining factors affecting self-employment by immigrants. However, few studies have been able to quantify the importance of these different aspects that determine ethnic self-employment. The central aim of this paper is therefore, by using multilevel regression, to quantify the role the country of birth respectively labour market area plays for understanding individual differences in self-employment. Using register data on individuals for the year of 2007 for the entire Swedish population we have in this study a unique opportunity to quantify the relative importance of the self-employers embeddedness in the social and ethnic networks (country of birth) and the regional business and public regulatory framework (labour market areas) measured. Our results suggest that of the total variation in individual differences in self-employment can 14 % (men) respectively 16 % (women) be attributed to the ethnic group and the labour market area. Furthermore, the ethnical groups accounted for 70 % (men) and 78 % (women) of this higher level variance. These results show that the social and ethnical context (measured by country of birth) and the economic environment (measured by local labour market areas) played a minor role for understanding individual differences in self-employment. These results can have important implications when planning interventions or other actions focusing on self-employment. Focusing only on ethnical groups/labour market areas might be inefficient as approximately 85 % of the variation is not explained by ethnical groups/labour market areas. Instead more general approaches or interventions focusing on other groups that capture a larger part of the variation might be more efficient.
    Keywords: immigrants, self-employment, integration, entrepreneurship, multilevel logistic regression
    JEL: J15 J21 L26
    Date: 2010–05
  11. By: Jahn, Elke J. (IAB, Nürnberg); Rosholm, Michael (Aarhus School of Business)
    Abstract: We perform a comprehensive analysis of the stepping-stone effect of temporary agency employment on unemployed workers. Using the timing-of-events approach, we not only investigate whether agency employment is a bridge into regular employment but also analyze its effect on post-unemployment wages and job stability for unemployed Danish workers. We find evidence of large positive treatment effects, particularly for immigrants. There is also some indication that higher treatment intensity increases the likelihood of leaving unemployment for regular jobs. Our results show that agency employment is even more effective in tight labor markets, where firms use agency employment primarily to screen potential candidates for permanent posts. Finally, our results suggest that agency employment may improve subsequent match quality in terms of wages and job duration.
    Keywords: temporary agency employment, stepping stone, employment stability, wages
    JEL: C41 J64 J30 J40
    Date: 2010–05
  12. By: Carlo Mazzaferro; Marcello Morciano; Elena Pisano; Simone Tedeschi
    Abstract: Household saving rate in Italy declined over the last two decades.This trend still persists despite three pension reforms have been enacted since the beginning of the nineties. In this paper we search further evidence of general macroeconomic effects through the analysis of households behaviour. In the first part of the paper we use data from five surveys of the Bank of Italy Surveys of Household Income and Wealth (SHIW) to estimate the lifetime profiles of saving and wealth accumulation. Estimates show that the age profile of the propensity to save has been influenced more by cohort effects than by general trend effects; whereas the age profile of the ratios of financial assets to disposable income has been subject to relevant trend effects. In the second part of the paper we analyse the effects of pension reforms on saving behaviour of Italian Households. Firstly we use a difference-in-difference estimator in order to test whether the groups more severely hit by the reforms actually increased their saving rate relative to the other groups. Then we estimate the Social Security Net Wealth (SSWN) for each individual in the SHIW in the analysed period (1989-2000). Finally we estimate the substitution coefficient between SSWN and private wealth taking into account that the reaction of saving to a change in SSWN depends also on age of the individual. Our results show that the reduction of SSWN is unequally distributed across individuals. The cut is stronger for self employed, young workers and women. Most of the groups more severely hit by the reforms did not increase their saving rate relative to the control group: younger households, in particular, did not increase the saving rate. On the whole a reduction of one Euro in SSWN seems to induce, on the average, a compensating increase in private wealth by about fifty cents. The substitution coefficient between private and social security wealth is higher for the richest and oldest part of the sample. Finally when we split the sample observations by year we find that the more dramatised is the impact of the reform, the higher is the substitution coefficient.
    Keywords: Pension reform; household saving; social security wealth; difference-in-difference
    JEL: E21 H55
    Date: 2010–04
  13. By: Koning, Pierre (CPB Netherlands Bureau for Economic Policy Analysis); van der Wiel, Karen (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: This paper analyzes the response of secondary schools to changes in their quality ratings. The current analysis is the first to address the impact of quality scores that have been published by a newspaper (Trouw), rather than public interventions. Our research design exploits the substantial lags in the registration and publication of the Trouw scores and that takes into account all possible outcomes of the ratings, instead of the lowest category only. Overall, we find evidence that school quality performance does respond to Trouw quality scores. Both average grades increase and the number of diplomas go up after receiving a negative score. For schools that receive the most negative ranking, the short-term effects (one year after a change in the ranking of schools) of quality transparency on final exam grades equal 10% to 30% of a standard deviation compared to the average of this variable. The estimated long run impacts are roughly equal to the short-term effects that are measured.
    Keywords: school quality, school accountability
    JEL: H75 I20 D83
    Date: 2010–05
  14. By: Jean-Michel Courtault (CEPN - Centre d'Economie de l'université Paris Nord - Université Paris 13); Naïla Hayek (SAM - Statistique, Analyse, Modélisation Multidisciplinaire - Université Paris-Sorbonne - Paris IV : EA); Eric Rimbaux (LIBRE - Laboratoire interdisciplinaire bisontin de recherches économiques - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique); Tong Zhu (LIBRE - Laboratoire interdisciplinaire bisontin de recherches économiques - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique)
    Abstract: This paper presents an application of new measures of research excellence, namely Hirsch's index (2005) and derived indexes. It gives a ranking of French departments of Economics, departments of Management and Business schools based on the quality of the academic environment offered by these institutions using these measures. It argues that, since the bulk of the research is done by a very small number of researchers, a greater concentration of the best researchers seems necessary for France to achieve international visibility in Economics and Management.
    Keywords: h-index, g-index, publication activity
    Date: 2010–04–01
  15. By: Bargain, Olivier (University College Dublin); Gonzalez, Libertad (Universitat Pompeu Fabra); Keane, Claire (ESRI, Dublin); Özcan, Berkay (Yale University)
    Abstract: If participation in the labor market helps to secure women's outside options in the case of divorce/separation, an increase in the perceived risk of marital dissolution may accelerate the increase in female labor supply. This simple prediction has been tested in the literature using time and/or spatial variation in divorce legislation (e.g., across US states), leading to mixed results. In this paper, we suggest testing this hypothesis by exploiting a more radical policy change, i.e., the legalization of divorce. In Ireland, the right to divorce was introduced in 1996, followed by an acceleration of marriage breakdown rates. We use this fundamental change in the Irish society as a natural experiment. We follow a difference-in-difference approach, using families for whom the dissolution risk is small as a control group. Our results suggest that the legalization of divorce contributed to a significant increase in female labor supply, mostly at the extensive margin. Results are not driven by selection and are robust to several specification checks, including the introduction of household fixed effects and an improved match between control and treatment groups using propensity score reweighting.
    Keywords: divorce law, natural experiment, labor supply, fixed effects, propensity score
    JEL: J12 J22 D10 D13 K36
    Date: 2010–05
  16. By: Lorenzo Castelli (DEEI, University of Trieste); Paola Pellegrini (Dept. of Applied Mathematics, University of Venice); Raffaele Pesenti (Dept. of Applied Mathematics, University of Venice)
    Abstract: We propose a mechanism for solving the airport slot allocation problem in Europe. We consider the interdependence of the slots at different airports, and we maximize the efficiency of the system. Through an experimental analysis we quantitatively assess the cost imposed by grandfather rights, which constitute one of the main principles of the current slot allocation mechanism. Moreover, we introduce the possibility to fairly redistribute costs among airlines through monetary compensations. Our results suggest that it is possible to remove grandfather rights without significantly penalizing airlines.
    Keywords: Air Traffic Management; Airport slot allocation; Compensation mechanism; SESAR.
    JEL: C61 C44
    Date: 2010–06
  17. By: Verardi, Vincenzo (Free University of Brussels); Wagner, Joachim (Leuphana University Lüneburg)
    Abstract: This paper makes three contributions. (1) It summarizes in tabular form a recent literature made of 36 micro-econometric studies for 16 different countries on the relationship between export destination and firm performance. (2) It reports estimates of the productivity premium of German firms exporting to the Euro-zone and beyond, controlling for unobserved time invariant firm specific effects, and tests for self-selection of more productive firms into exporting beyond the Euro-zone. (3) It corrects a serious flaw in hitherto published studies that ignore the potentially disastrous consequences of extreme observations, or outliers. The paper shows that estimates of the exporter productivity premium by destination are driven by a small share of outliers. Using a "clean" sample without outliers the estimated productivity premium of firms that export to the Euro-zone only is no longer much smaller that the premium of firms that export beyond the Euro-zone, too, and the premium itself over firms that serve the German market only is tiny. Furthermore, an ex-ante differential that is statistically significant and large only shows up for enterprises that exported to the Euro-zone already and start to export to countries outside the Euro-zone. These conclusions differ considerably from those based on non-robust standard regression analyses.
    Keywords: robust estimation, panel data, exporter productivity premium, export destinations
    JEL: F14 C23 C81 C87
    Date: 2010–05

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