nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2010‒07‒03
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Changes in the wage structure in EU countries By Rebekka Christopoulou; Juan F. Jimeno; Ana Lamo
  2. Impacts of Climate Change on European Critical Infrastructures: The Case of the Power Sector By Dirk Rübbelke; Stefan Vögele
  3. Earnings Dynamics and Inequality among Men in Luxembourg, 1988-2004: Evidence from Administrative Data By Sologon, Denisa Maria; O'Donoghue, Cathal
  4. Environmental regulation and revealed comparative advantages in Europe: is China a pollution haven? By Daniela Marconi
  5. Some Socio-Economic Effects of Labour Migration on the Sending Country. Evidence from Romania By Roman, Monica; Voicu, Cristina
  6. Policy options for carbon taxation in the EU By Eloi Lauren; Jacques Le Cacheux
  7. Regional growth in Portugal: assessing the contribution of earnings and education inequality By Adelaide Duarte; Marta Simões
  8. Are educational mismatches responsible for the ‘inequality increasing effect’ of education? By Budria, Santiago
  9. Corruption and productivity : firm-level evidence from the BEEPS survey By De Rosa, Donato; Gooroochurn, Nishaal; Gorg, Holger
  10. Migration of Nurses in the EU, the UK, and Japan : Regulatory Bodies and Push-Pull Factors in the International Mobility of Skilled Practitioners By Inoue, Jun
  11. The Effect of Private Health Insurance on Medical Care Utilization and Self-Assessed Health in Germany By Hullegie, Patrick; Klein, Tobias J.
  12. Does Schooling Affect Health Behavior? Evidence from Educational Expansion in Western Germany By Steffen Reinhold
  13. The market integration process under different regulatory regimes: evidence from the European car sector By Jacint Balaguer Coll
  14. Getting Incentives Right: do we need ex post CBA? By Massimo Florio; Davide Sartori
  15. The cost-efficiency of French banks By Jimborean, Ramona; Brack, Estelle
  16. The Effect of Product Demand on Inequality: Evidence from the US and the UK By Leonardi, Marco
  17. An anatomy of economic inequality in the UK: report of the National Equality Panel. By Hills, John
  18. What is the growth potential of green innovation? An assessment of EU climate policy options By Andrea Conte; Ariane Labat; Janos Varga; Žiga Žarnić
  19. Scandinavian long-term care financing By Karlsson, Martin; Iversen, Tor; Øien, Henning
  20. The Euro’s Trade Effect under Cross-Sectional Heterogeneity and Stochastic Resistance By Helmut Herwartz; Henning Weber

  1. By: Rebekka Christopoulou (Cornell University); Juan F. Jimeno (Banco de España); Ana Lamo (European Central Bank)
    Abstract: We study changes in the wage structures in nine EU countries over 1995-2002 and the role of demand, supply and institutional developments in shaping these changes. Using comparable cross-country microeconomic data, we compute for each country and at each decile of the wage distribution, the part of the observed wage change that is due to changes in the composition of workers, employers, and jobs’ characteristics, and the part due to changes in the returns to these characteristics. We find that composition effects derived from changes in age, gender or education of the labour force, largely exogenous to economic developments, had a minor contribution to the observed wage dynamics. In contrast, return and composition effects from characteristics likely driven by economic developments are found most relevant to explain the observed changes. We relate wages and their various components with macroeconomic and institutional trends and find that technology and globalisation are associated with wage increases; migration is associated with declines in wages; whereas the effect of labour market institutions has been mixed.
    Keywords: Wage Structure, Quantile Regressions
    JEL: J31
    Date: 2010–06
  2. By: Dirk Rübbelke; Stefan Vögele
    Abstract: Anthropogenic emissions of greenhouse gases cause climate change and this change in turn induces various direct impacts, e.g., changes in regional weather patterns. The frequency of heat waves and droughts in Europe is likely to rise. Yet, beyond these immediate effects of climate change, there are more indirect effects: Droughts may cause water scarcity and a lack in water supply which in turn would affect further sectors and critical infrastructures. An arising lack in water supply for cooling purposes, for example, will negatively affect the electricity generation in power plants. <br /> In this paper we analyse such interplays between climate-change affected sectors. We investigate whether and to which extent power generation and supply in Europe is threatened by climate change because of the higher risk of water supply shortages due to more frequent drought and heat-wave incidences. Our proposed approach cannot only be applied to analyse the climate change effects on individual power plant sites or the overall economy but also on electricity exchanges between countries.<br />
    Keywords: adaptation, climate change, critical infrastructures, electricity trading, energy security, nuclear power plants, vulnerability
    Date: 2010–06
  3. By: Sologon, Denisa Maria (Maastricht University); O'Donoghue, Cathal (Teagasc Rural Economy Research Centre)
    Abstract: Starting with the late 1980s and intensifying after early 1990s, Luxembourg evolved from an industrial economy to an economy dominated by the tertiary sector, which relies heavily on the cross-border workforce. This paper explored the implications of these labour market structural changes for the structure of earnings inequality and earnings mobility. Using an extraordinary longitudinal dataset drawn from administrative records on professional career, we decomposed Luxembourg’s growth in earnings inequality into persistent and transitory components and explored the extent to which changes in cross-sectional earnings inequality between 1988 and 2004 reflect changes in the transitory or permanent components of earnings. Thanks to the richness of the Luxembourgish data set, we are able to estimate a much richer model that nests the various specifications used in the US, Canadian and European literature up to date, thus rejecting several restrictions commonly imposed in the literature. We find that the growth in earnings inequality reflects an increase in long-term inequality and a decrease in earnings instability, and is accompanied by a decrease in earnings mobility. Thus in 2004 compared with 1988, low wage men in Luxembourg are worst off both in terms of their relative wage and in terms of their opportunity of improving their relative income position in a lifetime perspective.
    Keywords: panel data, wage distribution, inequality, mobility
    JEL: C23 D31 J31 J60
    Date: 2010–06
  4. By: Daniela Marconi (Bank of Italy)
    Abstract: The relocation of more polluting industries in poorer countries due to gaps in environmental standards is known as the pollution haven effect, whereby the scale and the composition of output change across countries. Changes in the composition of the output mix might translate into changes of comparative advantages across countries, as revealed by trade flows. This paper focus on this issue and looks at the changes of bilateral revealed comparative advantages (RCAs) in the last decade between China and the major fourteen EU countries (EU14). Using industry level data on bilateral trade, air pollution, water pollution and several measures of environmental stringency, we find that, controlling for other factors that may have affected RCAs, such as labor costs, on average our EU14 countries have kept or improved their advantages with respect to China in both water polluting industries (such as paper and agro-based industries) and air polluting industries (such as basic metals and chemicals), while they have lost competitiveness in the more clean industries (such as machinery and fabricated metals).
    Keywords: revealed comparative advantages, environmental regulation, industrial pollution
    JEL: F14 F18
    Date: 2010–06
  5. By: Roman, Monica; Voicu, Cristina
    Abstract: The paper presents the recent labor migration flows and trends and the impacts of these movements on Romanian economic and social life. After Romania joined the EU, the travel of Romanians inside the EU is totally free and they fructified this opportunity. There are important economic consequences of this movement. In the paper we analyze the demographic consequences, since category that emigrated for economic reasons in the last years is composed of youngsters (around 30). There are also important economic consequences on financial aspects and life quality of Romanians, since the volume of remittances was about 7 billion euros in 2007. There is also a social impact particularly on the lives of migrant families. The most problematic issue is the temporary abandonment of minors by their labour migrant parents, and that forced authorities to formulate policies to monitor the situation.
    Keywords: regional labour migration; sending countries; human migration trends; migration impacts; Romania; transition economy
    JEL: J13 F22 I31 R23
    Date: 2010–02
  6. By: Eloi Lauren (Observatoire Français des Conjonctures Économiques); Jacques Le Cacheux (Observatoire Français des Conjonctures Économiques)
    Date: 2010–05
  7. By: Adelaide Duarte (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal); Marta Simões (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal)
    Abstract: Regional economic growth in Portugal has mainly been studied from the perspective of convergence with data ending by the early 2000’s. The country as a whole has stopped converging to the output levels of the richest European countries by this period and has also become one of the most unequal EU member-states in terms of income distribution in the meantime. It is thus important to analyze the growth performance at the regional level in a more recent period, 1995-2007, emphasizing regional disparities in inequality as explanatory factors. This study examines the relationship between inequality and regional growth in Portugal at NUTS III level exploring the explanatory power of earnings and education inequality measures computed with data from the Quadros de Pessoal database. The results point to a positive relationship between initial inequality and regional growth, stronger for education than for earnings inequality, but with earnings inequality measures revealing a higher explanatory power. Moreover, there is evidence that it is inequality at the top of the distribution that is the relevant to explain regional growth, a result that reinforces the higher propensities to save of the richer and the incentives mechanisms of transmission from inequality to growth. Additionally, the evidence does not support the existence of convergence among Portuguese NUTS III regions during the period under analysis. These findings are robust to the introduction of most additional control variables and the consideration of alternative measures of earnings and education inequality.
    Keywords: regional growth, Portugal, earnings inequality, education inequality
    Date: 2010–06
  8. By: Budria, Santiago
    Abstract: This paper asks whether educational mismatches can account for the positive association between education and wage inequality found in the data. We use two different data sources, the European Community Household Panel and the Portuguese Labour Force Survey, and consider several types of mismatch, including overqualification, underqualification and skills mismatch. We test our hypothesis using two different measurement methods, the ‘statistical’ and the ‘subjective’ approach. The results are robust to the different choices and unambiguously show that the positive effect of education on wage inequality is not due to the prevalence of educational mismatches in the labour market.
    Keywords: Overeducation; returns to education; educational mismatch; within-groups wage inequality
    JEL: D31 J31
    Date: 2010–06–01
  9. By: De Rosa, Donato; Gooroochurn, Nishaal; Gorg, Holger
    Abstract: Using enterprise data for the economies of Central and Eastern Europe and the Commonwealth of Independent States, this study examines the effects of corruption on productivity. Corruption is defined as a"bribe tax"and is compared with another form of institutional inefficiency, which is often believed to be closely linked with corruption: the"time tax"imposed on firms by red tape. When testing their effects in thefull sample, only the bribe tax appears to have a negative effect on firm-level productivity, while the effect of the time tax is insignificant. At the same time, there is no evidence of a trade-off between the time and the bribe taxes, implying that bribing does not emerge as a second-best option to achieve higher productivity by helping circumvent cumbersome bureaucratic requirements. When the sample is split between European Union and non-European Union countries, the time tax turns out to have a negative effect only in European Union countries and the bribe tax only in non-European Union countries. This suggests that the institutional environment influences the way in which firm behavior affects firm performance. In particular, the impact of bribing for individual firms appears to vary depending on overall institutional quality: in countries where corruption is more prevalent and the legal framework is weaker, bribery is more harmful for firm-level productivity.
    Keywords: Environmental Economics&Policies,Public Sector Corruption&Anticorruption Measures,Economic Theory&Research,Political Economy,Emerging Markets
    Date: 2010–06–01
  10. By: Inoue, Jun
    Abstract: This paper examines the regulatory characteristics of the EU, the UK, and Japan concerning the accepting of nurses from overseas, by focusing on the interests of regulatory bodies and policies to promote or mitigate the impact of push-pull factors on the inflow of nurses. These cases show that verifying qualifications, assessing language skills, and admitting work permits are important, instant, and effective measures through which regulatory bodies can promote or mitigate the impact of push-pull factors on the inflow of nurses into their territories. The EU and the UK studies revealed that further research is required concerning the discrimination which is prohibited under EU law. Compared to Europe, Japan's Economic Partnership Agreement (EPA) is a full-course regulatory arrangement that covers issues ranging from quantitative restriction, refusal of mutual recognition, refusal of verification of qualification valid in other countries, and language proficiency to work permit, due to ambivalent interests in a single regulatory framework.
    Keywords: migration of nurses, the EU, the UK, Japan's EPA, regulatory bodies
    Date: 2010–02
  11. By: Hullegie, Patrick (Tilburg University); Klein, Tobias J. (Tilburg University)
    Abstract: In Germany, employees are generally obliged to participate in the public health insurance system, where coverage is universal, co-payments and deductibles are moderate, and premia are based on income. However, they may buy private insurance instead if their income exceeds the compulsory insurance threshold. Here, premia are based on age and health, individuals may choose to what extent they are covered, and deductibles and co-payments are common. In this paper, we estimate the effect of private insurance coverage on the number of doctor visits, the number of nights spent in a hospital and self-assessed health. Variation in income around the compulsory insurance threshold provides a natural experiment that we exploit to control for selection into private insurance. We document that income is measured with error and suggest an approach to take this into account. We find negative effects of private insurance coverage on the number of doctor visits, no effects on the number of nights spent in a hospital, and positive effects on health.
    Keywords: private health insurance, medical care utilization, selection into insurance, measurement error, natural experiment, regression discontinuity design
    JEL: I11 I12 C31
    Date: 2010–06
  12. By: Steffen Reinhold (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: During the postwar period German states pursued policies to increase the share of young Germans obtaining a university entrance diploma (Abitur) by building more academic track schools, but the timing of educational expansion differed between states. This creates exogenous variation in the availability of higher education, which allows estimating the causal effect of education on health behaviors. Using the number of academic track schools in a state as an instrumental variable for years of schooling, we investigate the causal effect of schooling on health behavior such as smoking and related outcomes such as obesity. We find large negative effects of education on smoking. These effects can mostly be attributed to reductions in starting rates rather than increases in quitting rates. We find no causal effect of education on reduced overweight and obesity.
    JEL: I12 I20
    Date: 2009–08–21
  13. By: Jacint Balaguer Coll (Universitat Jaume I)
    Abstract: In this paper we investigate the European car market integration process by analyzing the evolution of cross-country differences in the degree of Pricing-to-Market. The study takes into account the pricing behavior of United Kingdom exporters from 1999m1 to 2009m1. Our preliminary results indicate that international price discrimination is a source of price dispersion within the euro area, and this implies the presence of market segmentation and significant divergences in the market structures perceived by exporter firms. Nevertheless, a dynamic analysis shows that differences in cross-country Pricing-to-Market are significantly unstable and support variations in market structures perceived by exporters. When we include data generated since the Block Exemption Regulation (1400/2002) came fully into force, results support convergence in cross-country pricing behavior. This outcome clearly contrasts with the evidence obtained for some control products and the previous period. These findings are consistent with the fact that the corresponding liberalization of the car distribution system has played an important role in progressing toward market integration. En este trabajo investigamos el proceso de integración del mercado europeo de automóviles analizando la evolución en las divergencias del "Pricing-to-Market" a través de distintos países de destino de las exportaciones. El estudio toma en consideración el comportamiento de precios de los exportares de Reino Unido durante el período 1999m1-2009m1. Los resultados preliminares indican la presencia de discriminación internacional de precios como fuente de dispersión de precios en el área euro, lo que implica la presencia de segmentación de mercados y divergencias significativas en las estructuras de mercado percibidas por las empresas exportadoras. No obstante, el análisis dinámico muestra que las divergencias en el "Pricing-to-Market" son inestables lo que implica variaciones relativas en las estructuras de mercado percibidas por los exportadores. Cuando en el análisis incluimos información estadística a partir de la implantación completa de las Exenciones en Bloque (1400/2002), obtenemos convergencia en el comportamiento de precios a través de los países. Este resultado contrasta claramente con la evidencia obtenida a partir de algunos productos de control y el período anterior. Los resultados son consistentes con que la liberalización del sistema de distribución haya jugado un papel relevante en el proceso de integración del mercado.
    Keywords: ¿Pricing-to-Market¿, integración de mercado, exportadores de automóviles, cláusulas de localización Pricing-to-Market, market integration, automobile exporters, location clauses.
    JEL: F13 F14 F15
    Date: 2009–12
  14. By: Massimo Florio (DEAS, Universit di Milano); Davide Sartori (Centre for Industrial Studies (CSIL))
    Abstract: This paper, presented at the Sixth European Conference on Evaluation of Cohesion Policy (Warsaw, 30 November-1 December 2009), discusses why there is a strong need of ex-post Cost-Benefit analysis and which conditions should be met for a proper ex-post exercise to be carried out in the framework of Cohesion Policy major projects. After an introduction about the objectives and instruments of the 2007-2013 EU Cohesion Policy, and in particular the legal framework for co-financing environmental and transport projects, the paper illustrates and discusses some methodological choices which have been made by the authors of the EC CBA Guide. It is showed that, without an ex-post Cost-Benefit analysis, the ex-ante exercise is also weakened as a decision making tool. In particular, in the light of evidence from literature about the most common mistakes and pitfalls in ex-ante project appraisal, it is explained how systematic ex-post evaluation is important in particular linked to ex-ante incentives to reveal true information about the projects characteristics (especially on investment costs and demand forecast which are often respectively under and overestimated due to an optimism bias) and ex-post performance assessment. The EC has a unique role to play in this context, and recommendations are given about how to improve the use of CBA for investment decisions and how to contract co-funding of major projects in the framework of incentive theory.
    Keywords: CBA, Cohesion Policy, Incentives
    JEL: D61 H43 R58
    Date: 2010–01–12
  15. By: Jimborean, Ramona; Brack, Estelle
    Abstract: The paper addresses the issue of French banks efficiency, compared to their homologous from Europe and the United States. The analysis is realized on a sample formed by the ten biggest banks from France, Germany, Italy, Spain, the United Kingdom and the United States, over the period 1994-2006. The Data Envelopment Analysis (DEA) method is employed. The results show an improvement in cost-efficiency of French and Spanish banks, while in the other countries a decline in cost-efficiency is noted. We proceed to several tests of convergence, showing that inefficient banks have reduced the gap during the period 1994-2006. In a second step analysis, we focus on the factors standing behind the efficiency scores obtained through DEA methodology. These are bank-specific variables, the macro environment, the regulatory regime and the non-bank financial sector development. We use a standard censured Tobit model and show that capitalized, newly established banks, with tighter ratios of Tier 1 capital and operating in a country with a lower GDP per capita record the highest cost-efficiency scores.
    Keywords: Cost-efficiency; Banking systems; Data envelopment analysis
    JEL: C6 L25 C14 D24 G21
    Date: 2010–03
  16. By: Leonardi, Marco (University of Milan)
    Abstract: This paper examines the relationship between product demand and the pattern of rising skill premia and rising employment of skilled workers in the US and the UK since the 1980s. If more skilled workers demand more skill-intensive goods, then an increase in relative skill supply will also induce a shift in relative skill demand. This channel reduces the need to rely on technology and trade to explain the patterns in the data. This paper shows that in the US more educated and richer workers demand more low skill-intensive services (such as cleaning and personal services) but also more skill-intensive services (such as education and professional services). The parametrization of a simple model suggests that this induced demand shift can explain around 7% of the total relative demand shift in the US between 1984 and 2002. Similar results are provided for the UK.
    Keywords: wage inequality, product demand, income elasticity
    JEL: J21 J31
    Date: 2010–06
  17. By: Hills, John
    Abstract: Britain is an unequal country, more so than many other industrial countries and more so than a generation ago. This is manifest in many ways - most obviously in the gap between those who are well off and those who are less well off. But inequalities in people's economic positions are also related to their characteristics - whether they are men or women, their ages, ethnic backgrounds, and so on. The independent National Equality Panel, was established at the invitation of the Rt. Hon. Harriet Harman, Minister for Equality to report on the relationships between inequalities in economic outcomes and differences related to people's characteristics.
    Date: 2010
  18. By: Andrea Conte; Ariane Labat; Janos Varga; Žiga Žarnić
    Abstract: The aim of this paper is to analyse options for reforming the fragmented Chinese pension system that covers only 55 % of urban employees and a very small part of the rural population. After a brief history of pensions in China we present recent reform proposals and then discuss principles of pension reforms, with particular attention to reducing the pension contribution rates so that compliance could improve and coverage increase. As the Chinese population is ageing fast, we are presenting transition to a notional defined contribution (NDC) system as a model for adjusting the pension rules for increasing longevity. Transforming the accrued pension rights into NDC accounts and starting to apply the new NDC-inspired rules on indexation is not necessarily a jump into the unknown for the Chinese pensions system. Rather, it could be a useful and long-awaited clarification to the rules and a way to move towards a more uniform system nationwide. With the help of a simulation model based on Chinese data we produce scenarios for a range of pension reforms and assess their properties.
    Keywords: Oksanen,China, population ageing, pension reforms, notional defined contribution scheme,NDC
    JEL: H11 H55
    Date: 2010–06
  19. By: Karlsson, Martin (Technische Universität Darmstadt); Iversen, Tor (Institute of Health Management and Health Economics); Øien, Henning (Institute of Health Management and Health Economics)
    Abstract: In this paper, we compare and analyse the systems for financing long-term care for older people in the Scandinavian countries – Denmark, Norway and Sweden. The three countries share common political traditions of local autonomy and universalism, and these common roots are very apparent when the financing of long-term care is concerned. Nevertheless, the Scandinavian systems for long- term care (LTC) exhibit some important deviations from the idealized “universal welfare state” to which these countries are normally ascribed. For example, user charges tend to be strongly dependent on earnings, which is incoherent with the general norm of flat-rate public services. Also, there is significant regional variation in the level of services provided, which is in direct contrast with the universalist ambitions. Overall, the Scandinavian countries distinguish themselves through their very high reliance on public spending in long-term care. It is unclear to what extent the Scandinavian model for financing of long term care will be sustainable as demographic change progresses in the next few decades.
    Keywords: long term care; financing; welfare state; Scandinavia
    JEL: H42 H51 I11 I18 J14
    Date: 2010–06–22
  20. By: Helmut Herwartz; Henning Weber
    Abstract: This paper investigates if the euro's effect on euro-area trade differs across trade sectors and across country pairs, and to what degree heterogeneity matters for estimating the aggregate euro effect. Time-varying latent variables, which are specific to each sector in each country pair, control for omitted trade costs and mismeasured resistance terms. Parameter heterogeneity and time-varying latent variables are both strongly supported by the data. Due to decreasing trade costs, aggregate exports within the euro area increase between 2000 and 2002 by 15 to 25 percent compared with aggregate exports between European economies which are not members of the euro area. Adjustment within individual sectors is rapid whereas aggregate adjustment is more spread out and gradual since different sectors adjust at distinct times
    Keywords: Euro's trade effect, parameter heterogeneity, smooth-transition model
    JEL: C31 C33 F13 F15 F33 F42
    Date: 2010–06

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