nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2010‒07‒10
fourteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Crime and Immigration: Evidence from Large Immigrant Waves By Brian Bell; Francesco Fasani; Stephen Machin
  2. Slip Sliding Away: Further Union Decline in Germany and Britain By John T. Addison; Alex Bryson; André Pahnke; Paulino Teixeira
  3. Inequality of opportunity in Europe: Economic and policy facts By Gustavo A. Marrero; Juan Gabriel Rodríguez
  4. Terrorism Risk Concern in Europe By Konstantinos Drakos; Cathérine Müller
  5. An Economic Approach to Abuse of Dominance By Federico Etro; Ioannis Kokkoris
  6. Boosting innovation in Europe By André Sapir; Bruno van Pottelsberghe; Reinhilde Veugelers; Mathias Dewatripont
  7. Completing the EU Customs Union. The Effects of Trade Procedure Harmonization By Bourdet, Yves; Persson, Maria
  8. Fair and unfair income inequalities in Europe By Daniele Checchi; Vito Peragine; Laura Serlenga
  9. An analysis of the efficiency of public spending and national policies in the area of R&D By Conte, Andrea; Schweizer, Philip; Dierx , Adriaan; Ilzkovitz, Fabienne
  10. Security of supply in the European Gas Market A model-based analysis By Ibrahim Abada; Olivier Massol
  11. Pecuniary Knowledge Externalities across European Countries – are there leading Sectors? By Agnieszka Gehringer
  12. Body size and wages in Europe: A semi-parametric analysis By Vincent A. Hildebrand; Philippe Van Kerm
  13. Cohesion policy in the European Union: Growth, geography, institutions By Thomas Farole; Andrés Rodríguez-Pose; Michael Storper
  14. Does Hospital Competition Improve Efficiency? An Analysis of the Recent Market-Based Reforms to the English NHS By Zack Cooper; Stephen Gibbons; Simon Jones; Alistair McGuire

  1. By: Brian Bell; Francesco Fasani; Stephen Machin
    Abstract: This paper examines the relationship between immigration and crime in a setting where largemigration flows offer an opportunity to carefully appraise whether the populist view thatimmigrants cause crime is borne out by rigorous evidence. We consider possible crimeeffects from two large waves of immigration that recently occurred in the UK. The first ofthese was the late 1990s/early 2000s wave of asylum seekers, and the second the large inflowof workers from EU accession countries that took place from 2004. A simple economics ofcrime model, when dovetailed with facts about the relative labour market position of thesemigrant groups, suggests net returns to criminal activity are likely to be very different for thetwo waves. In fact, we show that the first wave led to a small rise in property crime, whilstthe second wave had no such impact. There was no observable effect on violent crime foreither wave. Nor were immigrant arrest rates different to natives. Evidence fromvictimization data also suggests that the changes in crime rates during the immigrant wavescannot be ascribed to crimes against immigrants. Overall, our findings suggest that focusingon the limited labour market opportunities of asylum seekers could have beneficial effects oncrime rates.
    Keywords: Crime, immigration
    JEL: F22 K42
    Date: 2010–06
  2. By: John T. Addison; Alex Bryson; André Pahnke; Paulino Teixeira
    Abstract: This paper presents the first comparative analysis of the decline in collective bargaining in twoEuropean countries where that decline has been most pronounced. Using workplace-level data and acommon model, we present decompositions of changes in collective bargaining and workerrepresentation in the private sector in Germany and Britain over the period 1998-2004. In bothcountries within-effects dominate compositional changes as the source of the recent decline inunionism. Overall, the decline in collective bargaining is more pronounced in Britain than inGermany, thus continuing a trend apparent since the 1980s. Although workplace characteristics differmarkedly across the two countries, assuming counterfactual values of these characteristics makes littledifference to unionization levels. Expressed differently, the German dummy looms large.
    Keywords: union recognition, union coverage, worker representation in works councils/ joint consultative committees, patterns of erosion, behavioural and composition effects, shift share analysis
    JEL: J50 J51
    Date: 2010–03
  3. By: Gustavo A. Marrero (Universidad de La Laguna); Juan Gabriel Rodríguez (Instituto de Estudios Fiscales and Universidad Rey Juan Carlos)
    Abstract: In this paper we consider the main factors that have influenced inequality of opportunity (IO) in Europe. Based on the EU-SILC database, we find that the various levels of development, education and social protection expenditure in 23 European countries significantly affect IO. Dropping out from school, reaching at least secondary levels of education, social spending to promote social integration and child care are the most important variables of those analyzed. The functioning of the labor market and the tax structure, on the other hand, do not have a significant bearing on IO. Lastly, we note that IO and total inequality exhibit differentiated explanatory patterns, which signifies that means of redistribution that serve to reduce overall inequality do not necessarily reduce IO.
    Keywords: inequality of opportunity; growth; education; public expenditure; labor market.
    JEL: D63 E24 O15 O40
    Date: 2010
  4. By: Konstantinos Drakos; Cathérine Müller
    Abstract: We explore whether differences of terrorism risk perception across all European countries reflect their underlying differences in terrorism risk, which we decompose into a long term and innovation component. We employ longitudinal country-level data on terrorism risk concern and our modeling approach is motivated by the Bayesian framework. We conclude that the observed risk perception variation is significantly explained by the long term terrorism countries face, while the cyclical part of terrorism activity does not affect risk perception.
    Date: 2010
  5. By: Federico Etro; Ioannis Kokkoris
    Abstract: The European debate on abuse of dominance issues in antitrust has been recently characterized by an emphasis on purely economic aspects, and by an emerging consensus on the merits of taking an “effects-based approach” aimed at the maximization of consumer welfare and the protection of competition. The European Commission has recently issued a Guidance Paper on exclusionary abuses which purports to move EU enforcement on abuse of dominance in this direction. In spite of these developments, we are still far from reaching any consensus on the best way to apply competition policy to specific issues such as predatory pricing, bundling, vertical restraints, exclusive dealing and so on. We analyze the genesis of the European approach to antitrust and discuss the leading economic theories on competition policy and abuse of dominance, as developed by the Chicago School, the post-Chicago approach and the endogenous market structures approach. Finally, we use these economic foundations to analyze the EU approach to abuse of dominance, we examine the Guidance Paper, we provide a comparison with the American approach, and we discuss the implications of some recent important cases.
    Date: 2010–06
  6. By: André Sapir; Bruno van Pottelsberghe; Reinhilde Veugelers; Mathias Dewatripont
    Abstract: Innovation is key to the future of Europe. This Policy Contribution, written together by Mathias Dewatripont, Solvay Brussels School of Economics and Management; Bruno van Pottelsberghe and Andre Sapir, Senior Fellows at Bruegel and professors at ULB; and Reinhilde Veugelers, senior fellow at Bruegel and professor at Katholieke Universiteit Leuven, makes suggestions based on three principles: to give primacy to merit-based selection of projects at the European level, to strengthen the single market to make it conducive for research and innovation and to remove barriers that hinder dynamic restructuring. This paper is addressed to the July 2010 informal Competitiveness Council (Research) under the Belgian Presidency.
    Date: 2010–06
  7. By: Bourdet, Yves (Department of Economics, Lund University); Persson, Maria (Department of Economics, Lund University)
    Abstract: A main component of customs unions is a common trade policy on imports from non-member countries. Trade policy covers both tariff and non-tariff barriers like trade procedures. We argue that since trade procedures vary markedly across EU countries, the EU is not, strictly speaking, a customs union. To illustrate this, we estimate the impact of trade procedures on exports from non-EU countries and find a highly statistically significant and negative effect. Simulating what the effects would be of harmonizing trade procedures, i.e. to actually complete the EU customs union, we find that aggregated exports to the EU would increase by 20 percent for the average exporter.
    Keywords: Customs Union; European Union; Time Delays; Trade Facilitation; Trade Procedures
    JEL: C23 F15 O24
    Date: 2010–06–24
  8. By: Daniele Checchi (University of Milan); Vito Peragine (University of Bari); Laura Serlenga (University of Bari)
    Abstract: This paper analyses the extent of income inequality and opportunity inequality in 25 European countries. The present work contributes to understanding the origin of standard income inequality, helping to identify potential institutional setups that are associated to opportunity inequality. We distinguish between ex-ante and ex-post opportunity inequality. We find that ex-ante equality of opportunity exhibits positive correlation with public expenditure in education, whereas ex-post equality of opportunity is also positively associated to union presence and to fiscal redistribution.
    Keywords: Inequality of opportunity, income inequality.
    JEL: D31 D63 J62
    Date: 2010
  9. By: Conte, Andrea; Schweizer, Philip; Dierx , Adriaan; Ilzkovitz, Fabienne
    Abstract: Improving the quality of public finances is a major challenge for European policy makers. The economic crisis has increased budgetary pressures and accentuated the tension between the need to sustain public spending aimed at raising the EU growth potential and the increased scarcity of public resources. Rising the efficiency and effectiveness of public spending in growth-enhancing areas such as education, R&D and innovation has become, therefore, even more important. This paper reviews the innovation performance of the different EU Member States and provides estimates of the relative efficiency of their R&D spending. In doing so, it aims at moving the policy discussion from mere volume-based policy targets towards a better assessment of the quality and effects of public R&D spending. The main contribution of this paper is therefore the identification of both (1) a suitable methodology for the evaluation of efficiency levels across Member States and (2) structural and policy determinants which may contribute to raise efficiency levels of R&D spending across countries and over time. Results indicate that there exist large cross-country differences in terms of measured efficiency, which is an indication that in many Member States there remains a significant potential for further improvement. Currently, there appears to be a divide in efficiency levels between old and new Member States. However, there is some evidence that the new Member States are catching up. The estimated efficiency scores indicate that all EU Member States have improved their efficiency levels over time. There is evidence that the efficiency of R&D spending is higher in countries with a strong knowledge base which, in turn, implies that increases in R&D spending do not necessarily lead to reductions in efficiency levels. Other factors that positively affect efficiency levels include the high-tech specialisation of the economy, the level of investment in education, the employment share in science and technology, and the degree of protection of intellectual property rights. Finally, a R&D tax treatment more oriented towards fiscal incentives rather than direct subsidies appears to have a positive effect on the efficiency level of R&D spending across EU Member States. This work is based on both a quantitative measurement of efficiency levels and a qualitative analysis of the policy instruments used in the Member States to promote R&D efficiency and effectiveness. Efficiency scores are calculated by means of the Stochastic Frontier Analysis for a set of input and output indicators in order to overcome the limitations associated with each individual indicator. A complementary survey of national governments highlights some further policy instruments that could contribute to increase the efficiency of R&D and innovation policies, in particular at the national level. The results of the survey argue in favour of adopting a systemic approach to R&D, education and innovation policies, including three main elements: (i) adapting educational programmes and the research infrastructure to the needs of science and industry; (ii) making a sustained commitment to knowledge investment by adopting medium-term funding programmes; and (iii) evaluating existing R&D programmes in order to determine which policy tools are the most effective and in which areas R&D investments offer the highest returns. More recently, Member States have introduced R&D spending measures specifically targeted to deal with the consequences of the economic crisis. A closer look at these measures reveals that Member States consider direct grants and offers of tax relief as appropriate instruments to counteract the effects of the crisis. It should be clear that such policy measures should be tailored to the specific needs and strengths of every Member State.
    Keywords: Public Finance; Efficiency; R&D spending; patents; innovation policy.
    JEL: H50 C23 O33
    Date: 2009–09
  10. By: Ibrahim Abada; Olivier Massol
    Abstract: This paper introduces a general static Cournot-game model to study the Natural Gas market, taking into account disruption risks from suppliers. In order to most realistically describe the economical situation, our representation divides the market into two stages: the upstream market that links -by means of long-term contracts- local producers in exporting countries (Russia, Algeria, etc.) to foreign retailers who bring gas to the consuming countries to satisfy local demands in the downstream market. Thanks to short-run demand functions, we are able to introduce disruption costs to be paid to the consumers should disruption occur. First we mathematically develop our general model and write the associated KKT conditions, then we propose some case studies -under iso-elasticity assumptions- for the long-short-run inverse-demand curves in order to predict qualitatively and quantitatively the impacts of supply disruptions on Western European gas trade. In the second part, we study in detail the German gas market of the 80 to explain the supply choices of Germany, and we derive interesting conclusions and insights concerning the amounts and prices of Natural Gas brought to the market. The last part of the paper is dedicated to a study of the Bulgarian gas market, which is greatly dependent on the Russian gas supplies and hence very sensitive to interruption risks. Some thought-provoking conclusions are derived concerning the necessity to economically regulate the market, by means of gas amounts control, if the disruption probability is high enough.
    Date: 2010
  11. By: Agnieszka Gehringer
    Abstract: This paper investigates empirically the occurrence of pecuniary knowledge externalities at the sectoral level across European economies. The main results suggest that, although some sectors can be considered as playing a particularly important role as a source of pecuniary knowledge externalities in the majority of examined countries, there exist significant national differences in the occurrence of these effects. Moreover, such external effects influence the dynamics of total factor productivity in downstream sectors and appear as a relevant source of growth in modern economies. As such, the concept of pecuniary knowledge externalities, as opposed to pure knowledge externalities postulated in the new growth theory, provides a new clue to understanding of the growth process.
    Keywords: pecuniary knowledge externalities, pure knowledge externalities, knowledge production function, intermediate goods transactions
    Date: 2010–06–20
  12. By: Vincent A. Hildebrand; Philippe Van Kerm
    Abstract: Evidence of the association between wages and body size –typically measured by the body mass index– appears to be sensitive to estimation methods and samples, and varies across gender and ethnic groups. One factor that may contribute to this sensitivity is the non-linearity of the relationship. This paper analyzes data from the European Community Household Panel survey and uses semi-parametric techniques to avoid functional form assumptions and assess the relevance of standard models. If a linear model for women and a quadratic model for men fit the data relatively well, they are not entirely satisfactory and are statistically rejected in favour of semiparametric models which identify patterns that none of the parametric specifications capture. Furthermore, when we use height and weight in the models directly, rather than equating body size with the body mass index, the semi-parametric models reveal a more complex picture with height having additional effects on wages. We interpret our results as consistent with the existence of a wage premium for physical attractiveness rather than a penalty for unhealthy weight.
    Keywords: Body Mass Index; obesity; wages; partial linear models; ECHP
    JEL: C14 J31 J71
    Date: 2010–06
  13. By: Thomas Farole (The World Bank); Andrés Rodríguez-Pose (IMDEA Ciencias Sociales); Michael Storper (London School of Economics)
    Abstract: Since the reform of the Structural Funds in 1989, the EU has made the principle of cohesion one of its key policies. Much of the language of European cohesion policy eschews the idea of tradeoffs between efficiency and equity, suggesting it is possible to maximise overall growth whilst also achieving continuous convergence in outcomes and productivity across Europe’s regions. Yet, given the rise in inter-regional disparities, it is unclear that cohesion policy has altered the pathway of development from what would have occurred in the absence of intervention. This paper draws on geographical economics, institutionalist social science, and endogenous growth theory, with the aim of providing a fresh look at cohesion policy. By highlighting a complex set of potential tradeoffs and inter-relations – overall growth and efficiency; inter-territorial equity; territorial democracy and governance capacities; and social equity within places – it revisits the rationale of cohesion policy, with particular attention to the geographical dynamics of economic development.
    Date: 2010–06–25
  14. By: Zack Cooper; Stephen Gibbons; Simon Jones; Alistair McGuire
    Abstract: This paper uses a difference-in-difference estimator to test whether the introduction of patientchoice and hospital competition in the English NHS in January 2006 has prompted hospitalsto become more efficient. Efficiency was measured using hospitals' average length of stay(LOS) for patients undergoing elective hip replacement. LOS was broken down into its twokey components: the time from a patient's admission until their surgery and the time fromtheir surgery until their discharge. Our results illustrate that hospitals exposed to competitionafter a wave of market-based reforms took steps to shorten the time patients were in thehospital prior to their surgery, which resulted in a decrease in overall LOS. We find thathospitals shortened patients' LOS without compromising patient outcomes or by operating onhealthier, wealthier or younger patients. Our results suggest that hospital competition withinmarkets with fixed prices can increase hospital efficiency.
    Keywords: Hospital Competition, Market Structure, Prospective Payment, Incentive Structure
    JEL: C21 I18 L1 R0
    Date: 2010–06

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