nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒04‒09
sixteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Regional Growth in Europe: The Role of European and National Policies By Fernanda Llussa; Jose Mario Lopes
  2. What are the causes of educational inequalities and of their evolution over time in Europe? Evidence from Pisa By Veruska Oppedisano; Gilberto Turati
  3. Portugal and Spain: catching up and falling behind. A comparative analysis of productivity trends and their causes, 1980-2007 By Ester Gomes da Silva
  4. Measuring the Extent of European State Aid Control: An Econometric Analysis of the European Commission Decisions By Brouwer, E.; Ozbugday, F.C.
  5. The Relative Efficiency of Active Labour Market Policies: Evidence from a Social Experiment and Non-Parametric Methods By Vikström, Johan; Rosholm, Michael; Svarer, Michael
  6. Luxemburg's corporatist Scandinavian welfare system and incorporation of migrants By HARTMANN HIRSCH Claudia; AMETEPE Kossi
  7. International Sports League Comparisons By Helmut Dietl; Rodney Fort; Markus Lang
  8. Housing Tenure and Job Search Behaviour. A Different Analysis of the Impact of the UK Jobseeker’s Allowance By Francesco Arzilli; Andrea Morescalchi
  9. Model Simulations for Trade Policy Analysis: the impact of potential trade agreements on Austria By Joseph Francois; Olga Pindyuk
  10. Tax Evasion, Welfare Fraud, and ”The Broken Windows” Effect: An Experiment in Belgium, France and the Netherlands By Mathieu Lefebvre; Pierre Pestieau; Arno Riedl; Marie Claire Villeval
  11. Shaping the formation of university-industry research collaborations: what type of proximity does really matter? By Pablo D'Este; Frederick Guy; Simona Iammarino
  12. The Selection of Migrants and Returnees: Evidence from Romania and Implications By J. William Ambrosini; Karin Mayr; Giovanni Peri; Dragos Radu
  13. Extensive and intensive margins of labour supply: working hours in the US, UK and France By Richard Blundell; Antoine Bozio; Guy Laroque
  14. Do universities affect firms’ location decisions? Evidence from Spain By Néstor Duch-Brown; Javier García-Estévez
  15. Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands By Rob Alessie; Maarten van Rooij; Annamaria Lusardi
  16. Austrian Linkages to the European Economy and the Transmission Mechanisms of Economic Crisis By Joseph Francois; Mario Holzner; Olga Pindyuk

  1. By: Fernanda Llussa; Jose Mario Lopes
    Abstract: We conduct a systematic study of the impact of European Union (EU) regional policies on regional economic growth that controls for national policies and geographic characteristics. Special care is taken in distinguishing between the impact of EU policies and of national policies on economic growth. Our empirical study tries to answer two different questions. First, is there convergence across EU regions, and if so, do regions converge to a common European steady-state or to a national one? Second, how do European and national policies affect regional growth? We find evidence of regional convergence at the national level but not at the European level. In addition we find that trade openness at the national level is associated with regional convergence while European regional policies contribute, though weakly, to regional convergence. Our results suggest that policies that foster market integration – and convergence to a common steady-state - such as the promotion of labour and capital movements across countries and common regulatory policies are as important for European-wide regional convergence as regional structural funds. JEL codes: D30, R11
    Keywords: National Policies, European Union Policies, regional growth
    Date: 2011
  2. By: Veruska Oppedisano (Marie Curie Research Fellow); Gilberto Turati (University of Torino & HERMES)
    Abstract: This paper provides evidence on the sources of differences in inequalities in educational scores in European Union member states, by decomposing them into their determining factors. Using PISA data from the 2000 and 2006 waves, the paper shows that inequalities emerge in all countries and in both period, but decreased in Germany, whilst they increased in France and Italy. Decomposition shows that educational inequalities do not only reflect background related inequality, but especially schools’ characteristics. The findings allow policy makers to target areas that may make a contribution in reducing educational inequalities. However, they appear to exert a remarkable impact on excess spending.
    Keywords: Education expenditures, educational inequalities, Oaxaca decomposition.
    JEL: I2 I38
    Date: 2011
  3. By: Ester Gomes da Silva (Faculdade de Letras/ISFLUP, CEF.UP, Universidade do Porto)
    Abstract: A number of studies in the literature have recently explored the causes behind the European productivity slowdown from the mid-1990s onwards and the correlative increase in the productivity gap between Europe and the United States (e.g., van Ark et al, 2008; Maudos et al, 2008; van Ark and Inklaar, 2005). Much less attention has been given, however, to the specific role of the EU peripheral countries in the process. In this paper we focus on the growth performances of two of such countries: Portugal and Spain. After a period of successful catch-up relative to the EU core, the two countries, which have a number of historical and economic features in common, have recently faced increasing difficulties in closing the gap to the EU. In the last decade, Spain has shown one of the worst productivity growth records among EU-members, whereas Portugal remained quite distant from European average productivity levels, and has increased the gap in per capita income levels. In this paper an attempt is made to shed light on the causes behind the overall disappointing performance of both countries, by focusing on the role of structural change on the process. An extensive literature, from both mainstream and more heterodox streams of research, suggests that sectoral specialization may have a major impact on productivity growth, by influencing the extent to which innovation and technological progress can be achieved. In order to account for these effects, an analysis of productivity trends both at the macroeconomic and industry levels of analysis is undertaken, using growth accounting and shiftshare techniques. The analysis is based on data from the EU-KLEMS database for Spain and the EU-core, and on an update and refinement of Silva´s (2010) labor and multifactor productivity estimates for Portugal. By investigating the different sources of productivity growth between 1980 and 2007, it is argued that an important factor explaining the growth difficulties in both countries is related to their difficulties in promoting important changes in their economic structures. In particular, the recent deterioration of economic growth may be seen as reflecting their incapacity in making a strong leap towards a more ‘modern’ industry structure.
    Keywords: Productivity, Economic growth, Structural change, Technology
    JEL: O47 O14 O57
    Date: 2011–03
  4. By: Brouwer, E.; Ozbugday, F.C. (Tilburg University, Center for Economic Research)
    Abstract: This paper provides an analysis of the European Commission (EC) decisions on state aid control using data on 550 state aid cases approved by the EC between 1998 and 2009. More specifically, we measure the determinants of the duration of state aid, total budget of state aid and daily budget of state aid. By using these imperfect proxies, we try to identify the extent of European state aid control. Our results suggest that aid with multiple objectives to achieve has both longer durations and higher amounts of budget. We also find that for some aid objectives or industries, the EC approves cases of aid with both longer durations and higher levels of budget. On the other hand, for some class of aid objectives and industries, there is a trade-off between duration and the level of budget so as to counter-balance the undesired effects. The interpretation of the results imply that the European state aid control, which once was originally intended to address concerns about export subsidies and strategic trade, recently puts more emphasis on market failures mostly associated with externalities and public goods.
    Keywords: European competition policy;state aid;survival analysis;quantile regression analysis
    JEL: L49 L59 K21
    Date: 2011
  5. By: Vikström, Johan (Uppsala University); Rosholm, Michael (Aarhus School of Business); Svarer, Michael (University of Aarhus)
    Abstract: We re-analyze the effects of a Danish active labour market program social experiment that included a range of sub-treatments, including monitoring, job search assistance and training. Previous studies have shown that the overall effect of the experiment is positive. We apply newly developed non-parametric methods to determine which of the individual policies that explains the positive effect. The use of non-parametric methods to separate sub-treatment effects is important from a methodological point of view, since the alternative, namely parametric/distributional assumptions, is in conflict with the concept of experimental evidence. Our results are highly relevant in a policy perspective, as optimal labour market policy design requires knowledge on the effectiveness of specific policy measures.
    Keywords: active labour market policy, treatment effect, non-parametric bounds
    JEL: C14 C41 C93
    Date: 2011–03
    Abstract: Luxembourg is the EU and OECD member state (MS) with a permanently increasing immigra-tion and the highest share of immigrants and cross border commuters within the labour force and more so within the competitive sector. Luxembourg has a typical Bismarckian corporatist welfare system, which has developed a gener-ous and broad welfare regime over the last 100 years with a further important push during the last two decades. Since then, benefits offered muted steadily to middle class standards and providers were merged to universalistic national bodies, leaving behind the different former corporatist providers. Due to a higher dependency on welfare benefits due to the economic downturn, nearly all MS modified from the 1970s onwards their original systems, mostly in the sense of a liberalization with cutbacks in comparison to the former more generous provisions. There has been a shift in responsibility from the state to the individual citizen via different means such as a non-increase of benefits, restricting eligibility (re-commodification), restructuring schemes in a radical way (recalibration) and cost containment measures (Pierson, 2001). Luxembourg however expanded and improved its system. What is the link between immigration and the outstanding evolution of the welfare system? The steady increase of young foreign contributors (immigrants and crossers) provided Luxem-bourg with the means to develop from a corporatist model to a Scandinavian with highest provi-sions, an emerging service sector and no significant retrenchment policy. Immigrants contribute, on average, more to the different welfare insurances than they use them, given their on average younger age, given a predominantly economic immigration and given higher employment rates than those of nationals.
    Keywords: Migrants' incorporation; corporatist; universalistic welfare regime; Luxembourg; migrants' contribution
    JEL: I38
    Date: 2011–03
  7. By: Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Rodney Fort (Institute for Strategy and Business Economics, University of Zurich); Markus Lang (Sport Management, University of Michigan)
    Abstract: Comparisons between European and North American sports leagues have occurred over the years. In this paper, we attempt to bring these comparisons down to the essential elements -what has come to be called Rottenberg's (1956) invariance principle and theoretical insights into attempts to alter competitive balance using revenue sharing, talent drafts, and payroll caps. We also examine player reserve systems (the reserve clause in North American leagues and transfer restrictions in European leagues) and differences in objective functions (North American leagues are treated under profit maximization while European leagues are treated under utility maximization and win maximization). The focus is on model predictions compared to actual outcomes, and any differences between North America and Europe.
    Keywords: Sports league, invariance principle, revenue sharing, talent draft, payroll cap
    JEL: L83
    Date: 2011–03
  8. By: Francesco Arzilli; Andrea Morescalchi
    Abstract: This paper investigates the relation between job search effort and hous-ing tenure by focussing on the impact of the UK Jobseeker's Allowance reform introduced in the UK in 1996. Theory suggests that a tight-ening in job search requirements, as implied by this reform, raises movements off benefit of non-employed with low search intensity and this effect adjusts in size depending on the different housing tenure. Average Treatment Effect estimates confirm that the impact of the reform on the claimant outflow rate is related to housing tenure.
    Keywords: Jobseeker's Allowance, Unemployment Benefit, Job Search,Housing Tenure, Oswald Effect
    JEL: J68 R2
    Date: 2011–10–02
  9. By: Joseph Francois; Olga Pindyuk
    Abstract: In this paper, we examine possible medium-term changes in EU trade policy, including the negotiation and implementation of Free Trade Agreements (FTAs) with regional entities like ASEAN and the NAFTA countries. We also examine the possible conclusion of the Doha Round of multilateral trade negotiations. Such changes in policy at the regional and global level imply changes in trade policy and industrial structure that affect Austria as part of the network of European industry. To accomplish this, we work with a computable general equilibrium model (CGE) of the Austrian economy and its major global trading partners. This model is benchmarked to 2020 macroeconomic projections. The modeling scenarios are based on a mix of tariff reductions for goods and non-tariff barriers (NTB) reductions for services. The services liberalization scenario is based on protection with an “actionability” assumption. The results include estimated changes in GDP, welfare, as well as in the value added contained in Austrian exports. The focus on value added provides important insight to the overall impact on the Austrian economy. In all policy cases examined, the striking messages is the importance of high technology services (ICT and other business services) to the total growth in Austrian exports, on a value added basis. This reflects both the high value added content of trade in this sector, and the apparent comparative advantage of Austria in this sector in the 2020 baseline.
    Keywords: trade agreements, ASEAN, NAFTA, Doha Round, Austria, CGE
    JEL: F15 F17 C68
    Date: 2011–04
  10. By: Mathieu Lefebvre; Pierre Pestieau; Arno Riedl; Marie Claire Villeval
    Abstract: In a series of experiments conducted in Belgium (Wallonia and Flanders), France and the Netherlands, we compare behavior regarding tax evasion and welfare dodging, with and without information about others’ behavior. Subjects have to decide between a ‘registered’ income, the realization of which will be known to the tax authority for sure, and an ‘unregistered’ income that will only be known with some probability. This unregistered income comes from self-employment in the Tax treatment and from black labor supplementing some unemployment compensation in the Welfare treatment. Subjects have then to decide on whether reporting their income or not, knowing the risk of detection. The results show that (i) individuals evade more in the Welfare treatment than in the Tax treatment; (ii) many subjects choose an option that allows for tax evasion or welfare fraud but report their income honestly anyway; (iii) examples of low compliance tend to increase tax evasion while examples of high compliance exert no influence; (iv) tax evasion is more frequent in France and the Netherlands; Walloons evade taxes less than the Flemish. There is no cross-country difference in welfare dodging.
    Date: 2011
  11. By: Pablo D'Este; Frederick Guy; Simona Iammarino
    Abstract: Research collaborations between universities and industry (U-I) are considered to be one important channel of potential localised knowledge spillovers. These collaborations favour both intended and unintended flows of knowledge and facilitate learning processes between partners from different organisations. Despite the copious literature on localised knowledge spillovers, still little is known about the factors driving the formation of U-I research collaborations and, in particular, about the role that geographical proximity plays in the establishment of such relationships. Using collaborative research grants between universities and business firms awarded by the UK Engineering and Physical Sciences Research Council (EPSRC), in this paper we disentangle some of the conditions under which different kinds of proximity contribute to the formation of U-I research collaborations, focussing in particular on technological complementarity among the firms participating in such partnerships.
    Keywords: university-industry research collaborations, proximity, geography, industrial clustering, technological complementarity
    JEL: O31 O32 O33 R10
    Date: 2011–03
  12. By: J. William Ambrosini; Karin Mayr; Giovanni Peri; Dragos Radu
    Abstract: This paper uses census and survey data to identify the wage earning ability and the selectivity of recent Romanian migrants and returnees. We construct measures of selection across skill groups and estimate the average and the skills-specific premium for migration and return for three typical destinations of Romanian migrants after 1990. We find evidence for a sorting of migrants consistent with skill compensation in destination countries. The premium to return migration increases with migrants' skills and drives the positive selection of returnees. Based on the rationality of these migration decisions, a model of education, migration and return predicts positive long-run effects of increased migration for average skills and wages in Romania.
    JEL: F22 J61 O15
    Date: 2011–03
  13. By: Richard Blundell (Institute for Fiscal Studies and University College London); Antoine Bozio (Institute for Fiscal Studies and UCL); Guy Laroque (Institute for Fiscal Studies and INSEE - CREST)
    Abstract: <p><p>This paper documents the key stylised facts underlying the evolution of labour supply at the extensive and intensive margins in the last forty years in three countries: United-States, United-Kingdom and France. We develop a statistical decomposition that provides bounds on changes at the extensive and intensive margins. This decomposition is also shown to be coherent with the analysis of labour supply elasticities at these margins. We use detailed representative micro-datasets to examine the relative importance of the extensive and intensive margins in explaining the overall changes in total hours worked. We also present some initial estimates of the broad distribution of implied elasticities and their implication for the overall aggregate hours elasticity. </p></p>
    Date: 2011–02
  14. By: Néstor Duch-Brown (University of Barcelona & IEB); Javier García-Estévez (University of Barcelona & IEB)
    Abstract: Human capital, scientific research, and technology are the three chief mechanisms promoting knowledge spillovers from universities to firms. Based on a study of the impact of Spain’s 1983 University Reform Act (LRU), which opened the door to the foundation of new universities and faculties, this paper examines whether university (or faculty) location affects the creation of new firms within a given province. We conclude that the foundation of science and social science faculties has had a marked impact on the creation of firms.
    Keywords: universities, firm location, spillovers, poisson regression
    JEL: I23 O31 R12 R39 C23
    Date: 2011
  15. By: Rob Alessie; Maarten van Rooij; Annamaria Lusardi
    Abstract: We present new evidence on financial literacy and retirement preparation in the Netherlands based on two surveys conducted before and after the onset of the financial crisis. We document that while financial knowledge did not increase from 2005 to 2010, significantly more individuals planned for their retirement in 2010. At the same time, employees’ expectations about the level of their pension income are high compared to what retirement plans may realistically provide. However, financially knowledgeable employees report lower expected replacement rates and acknowledge higher levels of uncertainty. Moreover using instrumental variation for financial conditions and financial knowledge of relatives, we find a positive effect of financial literacy on retirement preparation. Employing the panel feature of our dataset, we show that financial knowledge has a causal impact on retirement planning. Our findings suggest that the formation of pension expectations might be an important mechanism contributing to the impact of financial literacy on planning.
    Keywords: Financial Sophistication; Retirement Planning; Retirement Expectations
    JEL: D91 G11 D80
    Date: 2011–03
  16. By: Joseph Francois; Mario Holzner; Olga Pindyuk
    Abstract: Like most of the global economy, Austria suffered from recession in 2008-2009. In this paper we deconstruct the pattern of recession, and the transmission of the global recession to Austria’s economy. We provide a new a new breakdown of the value added in Austrian exports, tracing both upstream and downstream linkages and their role in the recession. We also employ a multi-region computable general equilibrium (CGE) model, focused on Austria and its major trading partners. We estimate the combined impacts of the crisis, as implemented through stylized shocks to investment and household demand across major trading partners. These are based on the actual global demand shocks that occurred in 2008-2009. As we are focused on recession, we work with a short-run version of the model, where labor markers are modeled with unemployment and sticky wages, and where industry structure (number of varieties and allocation of capital stock across industries) is fixed. We introduce demand shocks (changes) to global investment demand calibrated from actual investment demand changes during the recession. We also calibrate output shocks based on actual changes in GDP in this period. The focus on backward and forward linkages provides new insight into the transmission channels for focused demand shocks at the border into more diffuse shocks within the broader Austrian economy. While the drop in global demand during the recent recession was focused on sectors producing heavy investment goods, the actual pressure this placed on the Austrian economy also hinged on the linkages of these sectors to other elements of the Austrian economy.
    Keywords: economic crisis, transmission mechanisms, Austria, Europe, CGE
    JEL: F14 F47 C68
    Date: 2011–04

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