nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒02‒26
nineteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The Transition from Work to Retirement By Eichhorst, Werner
  2. Self-Employment around Retirement Age By Stefan Hochguertel
  3. The Wage Effects of Immigration and Emigration By Frederic DOCQUIER; Çaglar OZDEN; Giovanni PERI
  4. Immigrant Welfare Receipt across Europe By Barrett, Alan; Maitre, Bertrand
  6. Inventory investment and production in Europe: Is there a pattern? By Yngve Abrahamsen; Jochen Hartwig
  7. Does Anti-Competitive Regulation Matter for Productivity? Evidence from European Firms By Arnold, Jens; Nicoletti, Giuseppe; Scarpetta, Stefano
  8. Job Search Requirements for Older Unemployed: Transitions to Employment, Early Retirement and Disability Benefits By Hans Bloemen; Stefan Hochguertel; Marloes Lammers
  9. Regional Clusters of Innovative Activity in Europe: Are Social Capital and Geographical Proximity the Key Determinants? By Laura de Dominicis; Raymond J.G.M. Florax; Henri L.F. de Groot
  10. Tracing the Origins of Successful Aging: The Role of Childhood Conditions and Societal Context By Brandt, Martina; Deindl, Christian; Hank, Karsten
  11. The Threat Effect of Participation in Active Labor Market Programs on Job Search Behavior of Migrants in Germany By Bergemann, Annette; Caliendo, Marco; van den Berg, Gerard J.; Zimmermann, Klaus F.
  12. Unemployment hysteresis, structural changes, non-linearities and fractional integration in European transition economies By Juan Carlos Cuestas; Luis A. Gil-Alana
  13. The Spanish Labor Market in a Cross-Country Perspective By Florence Jaumotte
  14. The intergenerational transmission of educational attainment in East and West Germany By Riphahn, Regina T.; Trübswetter, Parvati
  16. Private wealth and planned early retirement: A panel data analysis for the Netherlands 1994-2009 By Mauro Mastrogiacomo; Rob Euwals
  17. Micro-Evidence on the Determinants of Innovation in The Netherlands: The Relative Importance of Absorptive Capacity and Agglomeration Externalities By Martijn J. Smit; Maria A. Abreu; Henri L.F. de Groot
  18. Retirement Choices in Italy: What an Option Value Model tells us By Michele Belloni; Rob Alessie
  19. Corporate Ownership and Initial Training in Britain, Germany and Switzerland By Paul Ryan; Karin Wagner; Silvia Teuber; Uschi Backes-Gellner

  1. By: Eichhorst, Werner (IZA)
    Abstract: The European Employment Strategy has set the goal of raising the retirement age of workers in the EU through a strategy of "active ageing". Yet despite some progress over the last decade, empirical data show persistent diversity across EU member states. Institutional arrangements of social and labor market policies can be seen as the core factors behind cross-national diversity. Hence, institutional change is crucial to explain structural changes. The paper tries to assess the role of supranational policy initiatives and national politico-economic factors in shaping the transition from work to retirement in EU member states which is still governed by the national political economy. Taking the German case as an example in point, the paper shows the dynamic interaction between policy changes, in particular in benefit systems and activation, and changes in the approach of firms and workers to early retirement. Policy changes influence actors’ behavior in the medium run and open up opportunities for subsequent reforms.
    Keywords: early retirement, older workers, Germany, European Employment Strategy
    JEL: J14 J26
    Date: 2011–02
  2. By: Stefan Hochguertel (VU University Amsterdam, and Netspar)
    Abstract: This paper uses panel data from the pan-European SHARE survey to study labor market behavior of older male self-employed vis-a-vis wage employed workers. We find the self-employed to work longer hours, to be more flexible in their hours allocation, and to retire later in all countries. We relate these differences in observed behavior to individual characteristics, economic resources, and to documented cross-national variation in labor market and social security institutions. Differential incentives matter for the retirement behavior of the self-employed. We also provide evidence of the self-employed not wanting to retire as early as possible, and contrast these expectation data with realized retirement transitions. The overall picture that emerges is that older self-employed have a very strong labor market attachment and they use their degrees of freedom to work more and retire later accordingly.
    Keywords: self-employment; labor supply; retirement; pensions; Europe; institutions
    JEL: J14 J22 J26 L26
    Date: 2010–07–13
  3. By: Frederic DOCQUIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and FNRS); Çaglar OZDEN (The World Bank, Development Research Group); Giovanni PERI (University of California, Davis)
    Abstract: In this paper, we simulate the long-run effects of migrant flows on wages of high-skilled and low-skilled non-migrants in a set of countries using an aggregate representation of national economies. We focus on Europe and compare the outcomes for large Western European countries with those of other key destination countries both in the OECD and outside the OECD. Our analysis builds on an improved database of bilateral stocks and net migration flows of immigrants and emigrants by education level for the years 1990 through 2000. We find that all European countries experienced a decrease in their average wages and a worsening of their wage inequality because of emigration. Whereas, immigration had nearly equal but opposite effects. These patterns hold true using a range of parameters for our simulations, accounting for the estimates of undocumented immigrants, and correcting for the quality of schooling and/or labor-market downgrading of skills. In terms of economic outcomes, it follows that prevalent public fears in European countries are misplaced; immigration has had a positive average wage effect on native workers. These concerns would be more properly focused on the wage effect of emigration.
    Keywords: Immigration, Emigration, Complementarity, Schooling Externalities, Average Wage, Wage inequality
    JEL: F22 J61 J31
    Date: 2010–12–14
  4. By: Barrett, Alan (ESRI, Dublin); Maitre, Bertrand (ESRI, Dublin)
    Abstract: The issue of welfare receipt by immigrants is highly controversial across Europe. In this paper, we assess whether immigrants are more likely to receive welfare payments relative to natives across a range of European countries. Using the European Union Survey on Income and Living Conditions for 2007, we find very little evidence that immigrants are indeed more likely to receive such payments when all payments are considered together. This is true whether we use raw data or regression analysis in which we control for relevant characteristics. We do find evidence of higher rates of poverty among immigrants. When combined with the results on welfare receipt, this raises a question over the effectiveness of welfare systems in protecting immigrants from poverty across Europe.
    Keywords: welfare, immigrants, Europe
    JEL: I38 J61
    Date: 2011–02
  5. By: Brandt, Martina (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: The comparative analysis of intergenerational support patterns based on SHARE, the Survey of Health, Ageing, and Retirement in Europe, with about 30.000 respondents from eleven European countries reveals a distinct geographical distribution of private support patterns: In Northern Europe help between parents and children is very common, but typically little time-consuming. The contrary is true for Southern Europe, where comparably few support relations are very intense in terms of time. Central Western Europe lies in-between with average transfer rates and intensities. Using multilevel modeling, these different support patterns can be explained by the prevalence of public assistance according to the specialization hypothesis: With increased public transfers and social services, sporadic help is more likely (crowding in), and less time consuming support between generations (crowding out) occurs. Accordingly, most support is provided voluntarily in Northern Europe, whereas it is more often perceived as obligatory in Continental and Mediterranean countries.
    Date: 2011–02–15
  6. By: Yngve Abrahamsen (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Jochen Hartwig (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: The paper investigates the nexus between inventory investment and the change in aggregate production for 29 European countries over the period 2000-2009. A special interest is taken in the “Great Recession” of 2008/09. For most countries, a fairly uniform pattern emerges. Inventory investment is positively correlated with changes in production and follows the latter with a time-lag of two to three quarters. Therefore, there is no evidence that inventory investment either drives or smoothes the business cycle. Very few countries – Austria, Greece, Spain, and Switzerland – diverge from the typical pattern. This might hint to problems with respect to data quality.
    Keywords: Inventory investment, production, business cycle, “Great Recession” in Europe
    JEL: E22 E32 O52
    Date: 2011–02
  7. By: Arnold, Jens (OECD); Nicoletti, Giuseppe (OECD); Scarpetta, Stefano (OECD)
    Abstract: Using firm-level data for a sample of European countries, we focus on the effects that product-market regulations have on firm-level TFP growth. We proxy regulatory burdens using the OECD indicators of sectoral non-manufacturing regulations. These allow accounting for both the direct effects of sectoral regulation on within-sector performance and the indirect effects of sectoral regulation on firms in other sectors through intersectoral input-output linkages. Our econometric specification of TFP is based on a "neo-Schumpeterian" empirical specification in which productivity improvements depend on growth at the global technological frontier and a catch up term. We assume that regulation can affect productivity growth both directly and by slowing down the rate of catch up. We find that product market regulations that curb competitive pressures tend to reduce the productivity performance of firms. The negative effect is particularly strong on firms characterised by an above-average productivity growth. Domestic regulations that affect all regulated firms in the same way seem to be more important than border regulations in this context.
    Keywords: total factor productivity, firm-level data, product market regulation
    JEL: D24 L11 L51
    Date: 2011–02
  8. By: Hans Bloemen (VU University Amsterdam); Stefan Hochguertel (VU University Amsterdam); Marloes Lammers (VU University Amsterdam)
    Abstract: In this paper, we use a recent policy change in the Netherlands to study how changes in search requirements for the older unemployed affect their transition rates to employment, early retirement and sickness/disability benefits. The reform, becoming effective on January 1st 2004, required the elderly to formally report their job search efforts to the employment office in order to avoid a (temporary) cut in benefits. Before the new law was passed, unemployed were allowed to stop all search activity at the moment they turned 57.5. Estimating various duration models using difference-in-difference and regression discontinuity approaches, we find that for several groups of individuals that were affected by the policy change, the stricter search requirements did significantly increase their entry rate into employment. However, we also find evidence of a higher outflow to sickness/disability insurance schemes, a presumably unwanted side-effect of the policy change.
    Keywords: Duration Analysis; Policy Evaluation; Search effort; Substitution
    JEL: C31 J26 J64 J68
    Date: 2011–01–13
  9. By: Laura de Dominicis (European Commission, Seville); Raymond J.G.M. Florax (Purdue University, W. Lafayette, and VU University Amsterdam); Henri L.F. de Groot (VU University Amsterdam)
    Abstract: Finding proper policy instruments to promote productivity growth features prominently on the Lisbon agenda and is central in many national as well as European policy debates. In view of the increased mobility of high-skilled workers in Europe, ongoing globalization and increased interregional and international co-operation, location patterns of innovative activity may be subject to drastic changes. A proper understanding of location patterns of innovative outputs can enhance the effectiveness and efficiency of national and European innovation policies. Building on the literature on the knowledge production function the aim of this paper is to explain the observed differences in the production of innovative output across European regions. Our main research question is whether geographical proximity and social capital are important vehicles of knowledge transmission for the production of innovative output in Europe. Several other variables are used to control for structural differences across European regions. We find support for the hypothesis that both social capital and geographical proximity are important factors in explaining the differences in the production of innovative output across European regions.
    Keywords: innovation; knowledge production function; social capital; spatial econometrics; European regions
    JEL: C21 I23 O18 O31
    Date: 2011–01–13
  10. By: Brandt, Martina; Deindl, Christian; Hank, Karsten (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: This study investigates the role of childhood conditions and societal context in older Europeans’ propensity to age successfully, controlling for later life risk factors. Successful aging was assessed following Rowe and Kahn’s conceptualization, using baseline interviews from the first two waves of the Survey of Health, Ageing and Retirement in Europe (SHARE). These data were merged with retrospective life-histories of participants from 13 Continental European countries, collected in 2008-09 as part of the SHARELIFE project. Our sample consists of 22,474 men and women, who are representative of the non-institutionalized population aged 50 or older (mean age: 63.3) in their respective country. Estimating multilevel logistic models, we controlled for demographics (age, sex), childhood conditions (SES, health, cognition), later life risk factors (various dimensions of SES and health behaviors), as well as country-level measures of public social expenditures and social inequality. There is an dependent association of childhood living conditions with elders’ odds of aging well. Higher parental SES, better math and reading skills, as well as self-reports of good childhood health were positively associated with successful aging, even if contemporary characteristics were controlled for. Later-life SES and health behaviors exhibited the expected correlations with our dependent variable. Moreover, higher levels of public social expenditures and lower levels of income inequality were associated with a greater probability to meet Rowe and Kahn’s successful aging criterion. We conclude that unfavorable childhood conditions exhibit a harmful influence on individuals’ chances to age well across all European welfare states considered in this study. Policy interventions should thus aim at improving the conditions for successful aging throughout the entire life-course.
    Date: 2011–02–15
  11. By: Bergemann, Annette (University of Mannheim); Caliendo, Marco (IZA); van den Berg, Gerard J. (University of Mannheim); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: Labor market programs may affect unemployed individuals' behavior before they enroll. Such ex ante effects may differ according to ethnic origin. We apply a novel method that relates self-reported perceived treatment rates and job search behavioral outcomes, such as the reservation wage or search intensity, to each other. We compare German native workers with migrants with a Turkish origin or Central and Eastern European (including Russian) background. Job search theory is used to derive theoretical predictions. We examine the omnibus ex ante effect of the German ALMP system, using the novel IZA Evaluation Data Set, which includes self-reported assessments of the variables of interest as well as an unusually detailed amount of information on behavior, attitudes and past outcomes. We find that the ex ante threat effect on the reservation wage and search effort varies considerably among the groups considered.
    Keywords: immigrants, policy evaluation, reservation wage, search effort, expectations, unemployment duration, program evaluation, active labor market policy
    JEL: J64 J61 C21 D83 D84
    Date: 2011–02
  12. By: Juan Carlos Cuestas (Department of Economics, The University of Sheffield); Luis A. Gil-Alana
    Abstract: In this paper we aim to analyse the dynamics of unemployment in a group of Central and Eastern European Countries (CEECs). The CEECs are of special importance for the future of the European Union, given that most of them have recently become member states, and labour flows have been seen to rise with their accession. By means of unit root tests incorporating structural changes and nonlinearities, as well as fractional integration, we find that the unemployment rates for the CEECs are mean reverting processes, which is consistent with the NAIRU hypothesis, although shocks tend to be highly persistent.
    Keywords: Unemployment, NAIRU, hysteresis, unit roots, fractional integration
    JEL: C32 E24
    Date: 2011–02
  13. By: Florence Jaumotte
    Abstract: The Spanish labor market is not working: the unemployment rate is structurally very high; wages are not very responsive to labor market conditions, causing a high cyclicality of unemployment; and the labor market is highly dual. Compared with the EU15, Spanish labor market institutions and policies stand out by the structure of its collective bargaining, which occurs mostly at an intermediate level, and by very high severance payments for permanent workers. Based on a quantitative analysis, the paper shows that moving away from the intermediate level of bargaining would go a long way toward bringing the unemployment rate closer to the EU15 average. The key reform needed to reduce the share of temporary workers is reducing employment protection of permanent workers. Substantially reforming the collective bargaining system and reducing the protection of permanent workers are likely to be highly complementary to secure a substantial reduction in the unemployment rate. The recent 2010 labor market reform attempts to address these issues, although its effects are still to materialize.
    Keywords: Cross country analysis , Economic models , European Economic and Monetary Union , Labor costs , Labor markets , Spain , Unemployment , Wage bargaining , Wages ,
    Date: 2011–01–12
  14. By: Riphahn, Regina T.; Trübswetter, Parvati (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Socialist societies often emphasized the abolition of traditional social classes. To achieve this objective, educational opportunities were at times 'actively managed' and allocated to children of less educated parents. What happened to these patterns after the demise of socialist rule in Eastern Europe? We study the development of educational mobility after the fall of the iron curtain in East Germany and compare the relevance of parental educational background for secondary schooling outcomes in East and West Germany. Based on data from the German Mikrozensus we find that educational mobility is lower in East than in West Germany and that it has been falling in East Germany after unification. While the educational advantage of girls declined over time, having many siblings presents a more substantial disadvantage in East than in West Germany." (author's abstract, IAB-Doku) ((en))
    Keywords: Bildungsmobilität, Intergenerationsmobilität, Eltern, Kinder, Qualifikationsniveau, Schullaufbahnwahl, Gymnasium, Ostdeutschland, Westdeutschland, Bundesrepublik Deutschland
    JEL: I21 I28 J11
    Date: 2011–02–15
  15. By: Aminata SISSOKO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper attempts to provide a new insight into the relationship between R&D subsidies and firm-level productivity. The empirical analysis evaluates the productivity of firms involved in a European program of public R&D grants called Eureka. The findings suggest that the Eureka firms on average experience productivity gains towards the end of the 3-years grant period. However, the average increase in productivity hides substantial firm heterogeneity. Namely it hides that low productive firms gain more from an R&D subsidy than high productive firms. The empirical analysis is conducted by using propensity score matching and a difference-in-differences estimation method to control for potential endogeneity issues.
    Keywords: R&D subsidies, Collaborative Research, Total Factors Productivity and Firm Heterogeneity
    Date: 2011–01–28
  16. By: Mauro Mastrogiacomo; Rob Euwals
    Abstract: We study the causal relation between private wealth and retirement age. We propose two estimation strategies based on expected retirement age.
    JEL: C23 J26
    Date: 2010–11
  17. By: Martijn J. Smit (VU University Amsterdam); Maria A. Abreu (University of Groningen, University of Cambridge); Henri L.F. de Groot (VU University)
    Abstract: This paper employs firm-level data to analyze the relative importance of firm characteristics and agglomeration externalities in explaining variation in innovation rates across firms. More specifically, we combine micro-data and census data to estimate the probability that a firm will introduce a goods, service or process innovation. We consider internal firm-level characteristics as well as externalities, using information on the regional production structure to test for Marshall-Arrow-Romer, Porter and Jacobs effects. Our results show that most firm-specific variables are highly statistically significant, whereas agglomeration variables are only significant for a few specific sectors, and even then only for some types of innovation.
    Keywords: innovation; absorptive capacity; agglomeration externalities; Community Innovation Survey; micro-data; firm behavior
    JEL: L20 O30 R11
    Date: 2010–06–21
  18. By: Michele Belloni (CeRP, Collegio Carlo Alberto, Italy); Rob Alessie (University of Groningen, Netspar, the Netherlands)
    Abstract: Using Italian data, we estimate an option value model to quantify the effect
    Keywords: retirement; option value model; dynamic self-selection; unobserved preference heterogeneity
    JEL: J26 H55 C33 C34 C35
    Date: 2010–10–14
  19. By: Paul Ryan (King's College Cambridge); Karin Wagner (Hochschule für Technik und Wirtschaft Berlin); Silvia Teuber (Department of Business Administration, University of Zurich); Uschi Backes-Gellner (Department of Business Administration, University of Zurich)
    Abstract: This paper considers whether listed companies with dispersed ownership invest less in training than do other firms, as part of a short-termist stance caused by pressure from the stock market. An analytical framework that supports the proposition involves three factors: high agency costs between the shareholders and managers of listed firms that have dispersed ownership; the use of highly geared performance-related pay to reward top managers; and accounting conventions that distort performance measures by requiring that spending on intangible assets be expensed not amortised. Managers then have the incentive and ability to restrict spending on training in order to increase their remuneration. Countervailing factors, including institutions of corporate governance, may however weaken or destroy such effects. Evidence is presented concerning the initial training programmes of 56 companies in engineering and retailing in Britain, Germany and Switzerland. The evidence is consistent with ownership effects in both sectors, but those effects are at most moderate in both incidence and strength. The skill requirements of competitive success in product markets appear more important than ownership.
    Date: 2011–02

This nep-eur issue is ©2011 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.