nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2010‒09‒18
fifteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Completing the EU Customs Union. The Effects of Trade Procedure Harmonization By Persson, Maria; Bourdet, Yves
  2. Self-selection into export markets by business services firms – Evidence from France, Germany and the United Kingdom By Yama Temouri; Alexander Vogel; Joachim Wagner
  3. Exploring the Duration of EU Imports By Hess, Wolfgang; Persson, Maria
  4. Gender unemployment dynamics in six European countries By Franciscos Koutentakis
  5. Can Bankruptcy Codes Create Value? Evidence from Creditors’ Recoveries in France, Germany, and the UK# By Régis Blazy; Joël Petey; Laurent Weill
  6. Size Metrics and Dynamics of Firms Expansion in the European Pharmaceutical Industry By Franco Mariuzzo; Xiaoheng Zhang
  7. Bubbles and incentives: A post-mortem of the Neuer Markt in Germany By von Kalckreuth, Ulf; Silbermann, Leonid
  8. Enduring Inequality: Labor market outcomes of the immigrant second generation in Germany By Luthra R
  9. Stimulating Local Public Employment: Do General Grants Work? By Lundqvist, Heléne; Dahlberg, Matz; Mörk, Eva
  10. The Introduction of a Short-Term Earnings-Related Parental Leave Benefit System and Differential Employment Effects By Annette Bergemann; Regina T. Riphahn
  11. Rapid demographic change and the allocation of public education resources: Evidence from East Germany By Kempkes, Gerhard
  12. The price stabilization effects of the EU entry price scheme for fruits and vegetables By Cioffi, Antonio; Santeramo, Fabio Gaetano; Vitale, Cosimo
  13. CO2 Highways for Europe: Modeling a Carbon Capture, Transport and Storage Infrastructure for Europe By Roman Mendelevitch; Johannes Herold; Pao-Yu Oei; Andreas Tissen
  14. The Post-Entry Performance of Cohorts of Export Starters in German Manufacturing Industries By Wagner, Joachim
  15. The Gender Pay Gap in Informal Employment in Poland By Anna Ruzik; Magdalena Rokicka

  1. By: Persson, Maria (Research Institute of Industrial Economics (IFN)); Bourdet, Yves (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; Economic Integration; European Union; Time Delays; Trade Facilitation; Trade Procedures
    JEL: C23 F15 O24
    Date: 2010–08–24
  2. By: Yama Temouri (Aston Business School); Alexander Vogel (Institute of Economics, Leuphana University of Lüneburg, Germany); Joachim Wagner (Institute of Economics, Leuphana University of Lüneburg, Germany)
    Abstract: This study reports results from an empirical investigation of business services sector firms that (start to) export, comparing exporters to firms that serve the national market only. We estimate identically specified empirical models using comparable enterprise level data from France, Germany, and the United Kingdom. Exporters are more productive and pay higher wages on average in all three countries. Results for profitability differ across borders – profitability of exporters is significantly smaller in Germany, significantly larger in France, and does not differ significantly in the UK. The results for wages and productivity hold in the years before the export start, which indicates self-selection into exporting of more productive services firms that pay higher wages. The surprising finding of self-selection of less profitable German business services firms into exporting does not show up among firms from France and the UK where no statistically significant relationship between profitability and starting to export is found.
    Keywords: Business services firms, exports, self-selection, France, Germany, UK
    JEL: F14 D21 L80
    Date: 2010–08
  3. By: Hess, Wolfgang (Lund Unversity); Persson, Maria (Research Institute of Industrial Economics (IFN))
    Abstract: The objective of this paper is twofold. First, against the background of an existing empirical literature on the duration of trade which has found that international trade is often of strikingly short duration, we aim to establish whether or not EU imports from the rest of the world also are short-lived. Second, since there is at this point no clear commonly accepted theoretical explanation for these short trade durations, we seek to provide a thorough empirical description and analysis of the phenomenon, with the intention of thereby facilitating theoretical developments on the subject. We employ a rich data set of detailed imports to the EU15 countries from 140 exporters, covering the time period 1962-2006. Using these data, we begin by conducting a thorough descriptive analysis of the duration of EU imports. Thereafter, we perform a regression analysis using discrete-time duration models with proper controls for unobserved heterogeneity. We draw the conclusion that EU imports are indeed very short-lived – in fact, possibly more so than, for example, US imports. The median duration of EU imports is for example merely one year, and almost 60 percent of all spells cease during the first year of service. Among our empirical findings are (i) that the duration of trade remains stable across the long time period that we study; (ii) that short trade durations are the result of at least two processes: countries shifting between different suppliers but continuing to import a given product, and countries ceasing to import the product altogether; and (iii) that countries with a diversified export structure also will tend to have more long-lived export flows. In our formal regression, we are also able to find a set of explanatory variables that have statistically significant effects on the probability that trade flows die.
    Keywords: Duration of Trade; Survival; European Union; Discrete-Time Hazard Models
    JEL: C41 F10 F14
    Date: 2010–08–24
  4. By: Franciscos Koutentakis (University of Crete)
    Abstract: The paper investigates unemployment dynamics in six European countries with a particular focus on the gender dimension. Applying a recently established methodology on widely available LFS annual data it calculates the job finding and separation rates and estimates their relative contributions to the fluctuations of male and female unemployment rates. It finds that gender differences in the separation rate explain both the determination and the evolution of the gender unemployment gap. It attributes these differences to female attachment to the labour force.
    Keywords: Gender unemployment gap, labour market flows
    JEL: J16 J6 E23
    Date: 2010–08–30
  5. By: Régis Blazy (LaRGE Research Center, Université de Strasbourg); Joël Petey (LaRGE Research Center, Université de Strasbourg); Laurent Weill (LaRGE Research Center, Université de Strasbourg)
    Abstract: The aim of this paper is to provide new evidence on the value-creation process taking place in bankruptcy procedures that belong to different legal systems (French civil law, German civil law, and common law): to do so, we assess to which extent the debtor’s value can be preserved under bankruptcy by analyzing the recovery rates in France, Germany, and the United Kingdom. We use a unique European sample of 900 corporate bankruptcy files that were manually collected in commercial courts on the period 1993-2005. We also contribute to the literature by considering the recovery rates on the various classes of claimants (senior claims, junior claims, and new money) for each bankruptcy procedure. Our main conclusions are: (a) France and Germany show quite similar global recovery rates which are greater than in the UK, (b) when controlling for the quality of assets at the beginning of the procedure and for the structure of claims, we observe that recovery rates are not significantly different between France and the UK, while they remain greater for German companies, (c) Germany has the greatest recovery rates for senior and junior creditors, (d) the reorganization procedure and the liquidation procedure leading to the highest global recovery rate are, respectively, the French continuation and the German liquidation.
    Keywords: Bankruptcy, Recovery Rates.
    JEL: G33
    Date: 2010
  6. By: Franco Mariuzzo (Geary Institute, University College Dublin, Ireland); Xiaoheng Zhang (Economic and Social Research Institute, Dublin, Ireland)
    Abstract: We generalize the growth-of-firm literature by linking alternative metrics of size via a Copula approach. We look at the result of the fitted Copula and justify the metric we base our analysis upon. We employ the Amadeus dataset and investigate the growth dynamics of the European pharmaceutical industry in the Single Market Programme era, 1990–2004. Relying on a set of dynamic panel Probit methods that deal with unobserved heterogeneity and initial conditions, we analyze how our units of investigation, multinationals, capture opportunities over time. We find strong evidence of state dependence and mean reversion, as predicated by the theory of maturation — firms face a period of rapid growth, followed by a slow down, or even a stop, in growth. We finish off our exercise by conditioning the fitted Copula on the predicted measure of size and simulate the remaining measures.
    Keywords: Copula, Dynamic Nonlinear Panel Data Models, Entry, Firms Growth, Lower Bound, Pharmaceutical Industry, Single Market Programme, Unobserved Heterogeneity
    JEL: C10 C11 C23 L11 L65
    Date: 2010–09–07
  7. By: von Kalckreuth, Ulf; Silbermann, Leonid
    Abstract: This paper aims to shed light on some of the major allocative consequences of financial market bubbles. In March 1997, the Neuer Markt in Germany opened. Six years later, in June 2003, it closed forever. In the interim period lay the spectacular rise and fall of the first and most important European market for hi-tech stocks. Given investors' frenzy, the Neuer Markt was a special kind of natural experiment. For some time, financing constraints were virtually non-existent. Our model of corporate financing shows that bubbles on financial markets will induce entrepreneurs and providers of external finance to enter the 'wrong' contract. Incentive compatibility constraints designed to guarantee that corporate decision-makers behave constructively turn out to be invalid, and managers will know this before shareholders do. Thus, faulty valuation by stock markets may directly induce destructive corporate behaviour: slack, empire building, excessive risk-taking, and fraud. At the time of the IPO, a huge amount of liquidity is injected into the companies, and a dynamic analysis of the balance sheet ratios and income statement items in the following years can teach us the ways in which this liquidity is diffused. We analyse the corresponding dynamics of total assets, tangible assets and equity, as well as the evolution of sales and profits for 204 German non-financial companies out of a total of 326 companies that had their IPO at the Neuer Markt. On the basis of consecutive annual accounts, we retrace the events using a dynamic flow of funds analysis. We assess the explanatory power of our model using non-parametric methods [Median tests, Wilcoxon-Mann-Whitney tests, Kolmogorov-Smirnov tests] and quantile regressions. Our results indicate that valuation has strong and systematic effects on incentives. Experience, as proxied by age at IPO, is shown to have a beneficial effect, whereas support by VC and PE firms does not seem to matter for the success of the enterprises considered. --
    Keywords: Bubbles,corporate governance,quantile regressions,nonparametric statistics
    JEL: G32 D82 D83 D92 C14 C21
    Date: 2010
  8. By: Luthra R (Institute for Social and Economic Research)
    Abstract: Exploiting the 2005 Mikrozensus, the first dataset to allow the full disaggregation of different immigrant origin groups in Germany, this paper examines the effect of context of reception, citizenship, and intermarriage on the labor force participation, employment, and occupational status of the children of immigrants in Germany. Most second generation men have much higher unemployment than native Germans, even after controlling for human capital. Disadvantage is less pronounced among second generation women, and among the employed. There is considerable heterogeneity across immigrant origins, but citizenship and intermarriage have only modest impacts.
    Date: 2010–09–09
  9. By: Lundqvist, Heléne (Uppsala University); Dahlberg, Matz (Uppsala University); Mörk, Eva (IFAU)
    Abstract: The effectiveness of public funds in increasing public employment has long been a question on public and labor economists’ minds. In most federal countries local governments employ large fractions of the working population, meaning that a tool for stimulating local public employment can substantially affect the overall unemployment level. This paper asks whether general grants to lower-level governments have the potential of doing so. Applying the regression kink design to the Swedish grant system, we are able to estimate causal effects of intergovernmental grants on personnel in different local government sectors. Our robust conclusion is that personnel in the central administration increased substantially after a marginal increase in grants, but that such an effect was lacking both for total personnel and personnel in child care, schools, elderly care, social welfare and in technical services. We suggest several potential reasons for these results, such as heterogeneous treatment effects and bureaucratic influence in the local decision-making process.
    Keywords: fiscal federalism, intergovernmental grants, public employment, regression kink design, instrumental variables
    JEL: C33 H11 H70 J45
    Date: 2010–09
  10. By: Annette Bergemann; Regina T. Riphahn
    Abstract: German family policy underwent a reform in 2007, when the new instrument of "Elterngeld" replaced the previous "Erziehungsgeld". The transfer programs differ in various dimensions. We study the effects on the labor supply of young mothers, by comparing behavior before and after the reform. We separately consider women of high and low incomes, which were treated differently under the old "Erziehungsgeld"-regime, and differentiate the periods before and after the expiration of transfer receipt. Our results mainly confirm expectations based on a labor supply framework.
    Keywords: Female labor supply, fertility, child subsidy, parents money
    JEL: J13 J21
    Date: 2010
  11. By: Kempkes, Gerhard
    Abstract: We analyse the adjustment of public education spending in response to rapidly decreasing student cohorts in East Germany where birth rates collapsed after German reunification. Previous results from the literature based on data from more stable demographic periods suggest that public resources are incompletely adjusted, and that large reductions in the student population would thus translate into major increases in spending per student. Our empirical analysis suggests, however, that resource adjustments in East Germany have been considerable, especially in the years when student cohorts actually decreased. Adjustments were less tight when student numbers began to stagnate. Although our results are restricted to public education, they may be interpreted as early evidence on fiscal adjustments during strong demographic change, which will play a growing role in the years to come. --
    Keywords: Subnational government spending,demographic change,public education
    JEL: I22 J18 H72
    Date: 2010
  12. By: Cioffi, Antonio; Santeramo, Fabio Gaetano; Vitale, Cosimo
    Abstract: The paper assesses the stabilization effects of the EU import regime for fresh fruit and vegetables based on the entry price system. The analysis is carried out on the EU prices of tomatoes and lemons and those of imports from some of the main competing countries on the EU domestic markets: Morocco, Argentina and Turkey. It is based on the estimation of a threshold vector autoregressive econometric model that is shown capable of taking the workings of the import regime into account. The model shows that prices behave differently when import prices are above/below the trigger entry price. This paper allowed to highlight the cases for which the isolation effect of EPS seems reached and the resulting stabilization effects.
    Keywords: Fruit and vegetables; Entry price system; stabilisation effects; TVAR
    JEL: F13 Q17 Q18
    Date: 2010–07
  13. By: Roman Mendelevitch; Johannes Herold; Pao-Yu Oei; Andreas Tissen
    Abstract: We present a mixed integer, multi-period, cost-minimizing carbon capture, transport and storage (CCTS) network model for Europe. The model incorporates endogenous decisions about carbon capture, pipeline and storage investments; capture, flow and injection quantities based on given costs, certificate prices, storage capacities and point source emissions. The results indicate that CCTS can theoretically contribute to the decarbonization of Europe's energy and industry sectors. This requires a CO2 certificate price rising to 55 € in 2050, and sufficient CO2 storage capacity available for both on and offshore sites. However, CCTS deployment is highest in CO2-intensive industries where emissions cannot be avoided by fuel switching or alternative production processes. In all scenarios, the importance of the industrial sector as a first mover to induce the deployment of CCTS is highlighted. By contrast, a decrease of available storage capacity or a more moderate increase in CO2 prices will significantly reduce the role of CCTS as a CO2 mitigation technology, especially in the energy sector. Continued public resistance to onshore CO2 storage can only be overcome by constructing expensive offshore storage. Under this restriction, to reach the same levels of CCTS penetration will require doubling of CO2 certificate prices.
    Keywords: carbon capture and storage, pipeline, infrastructure, optimization
    JEL: C61 H54 O33
    Date: 2010
  14. By: Wagner, Joachim (Leuphana University Lüneburg)
    Abstract: This paper investigates four cohorts of firms from German manufacturing industries that started to export in the years between 1998 and 2002 and follows them over the five years after the start. Export starters are a rare species and they are small on average compared to incumbent exporters. Between 30 percent and 40 percent of the starters became continuous exporters; some starters stepped out and back into exporting, many of them more than once. The share of total exports contributed by export starters of a cohort is tiny in the start year, and it remains so over the years to follow, although those starters that were exporters in year t+5 had a share of exports in total sales that was more than twice as high as the average share of exports in total sales among the export starters of the same cohort in year t. Contrary to the market selection hypothesis there is no evidence that productivity in the start year is systematically related to survival in the export market. There is no evidence for a negative impact of a smaller firm size in the start year on the chance to survive on the export market. Starting with a higher share of exports in total sales, however, tends to increase the probability to stay on the export market.
    Keywords: export starters, post-entry performance, Germany, enterprise panel data
    JEL: F14
    Date: 2010–09
  15. By: Anna Ruzik; Magdalena Rokicka
    Abstract: This paper addresses the issue of the gender pay gap in the formal and informal labour markets in Poland. The authors verify the hypothesis of the existence of a gender pay gap in informal work and compare this gap with the one observed in the formal (registered) labour market. Various analyses of available data show that size and characteristics of gender pay gap differ depending on the level of earnings. The inequality of earnings among unregistered women and men is more pronounced at the bottom tail of the earnings distribution. In the case of formal employees, inequality at the top of the distribution tends to be larger, confirming the existence of a ‘glass ceiling’. The decomposition of the gender pay gap for selected quintiles indicates that it would be even higher if women had men’s characteristics. A possible explanation of the results is the lack of minimum wage regulations in the informal market and the greater flexibility in agreement on wages in the higher quantiles.
    Keywords: gender pay gap, informal employment, quantile regression
    JEL: J31 O17 J71
    Date: 2010

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