nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒04‒23
fifteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Voting Power in the EU Council of Ministers and Fair Decision Making in Distributive Politics By Michel Le Breton; Maria Montero; Vera Zaporozhets
  2. Intangible capital and wages: An analysis of wage gaps across occupations and genders in Czech Republic, Finland and Norway By Rita Asplund; Sami Napari
  3. Decentralization, happiness and the perception of institutions By Luis Diaz-Serrano; Andrés Rodríguez-Pose
  4. How Effective is European Merger Control? By Tomaso Duso; Klaus Gugler; Burcin B. Yurtoglu
  5. Regional and Sectoral Estimates of the Social Cost of Carbon: An Application of FUND By Anthoff, David; Rose, Steven K.; Tol, Richard S. J.; Waldhoff, Stephanie
  6. Short-Time Work Benefits Revisited: Some Lessons from the Great Recession By Boeri, Tito; Brücker, Herbert
  7. A Gravity Model Approach to Estimating Prospective Trade Gains in the EU Accession and Associated Countries By Marie Stack; Eric Pentecost
  8. Worktime Regulations and Spousal Labour Supply By Goux, Dominique; Maurin, Eric; Petrongolo, Barbara
  9. Profiting from Regulation: An Event Study of the EU Carbon Market By Bushnell, James; Mansur, Erin T.; Chong, Howard G.
  10. Labour status and involuntary employment: family ties and part-time work in Spain By María Dolores Guilló Fuentes; Alfonsa Denia Cuesta
  11. Should Sweden Join the EMU? An Analysis of General Equilibrium Effects through Trade By Kari E.O. Alho
  12. The Impact of Active Labour Market Policy on Post-Unemployment Outcomes: Evidence from a Social Experiment in Denmark By Blasco, Sylvie; Rosholm, Michael
  13. The effect of decoupled direct payments on farm exit behaviour: quasi-experimental evidence from Europe By Andrius Kazukauskas; Carol Newman; Daragh Clancy; Johannes Sauer
  14. The Performance of German Water Utilities: A (Semi)-Parametric Analysis By Michael Zschille; Matthias Walter
  15. Does Formal Education for Older Workers Increase Earnings? Analyzing Annual Data Stretching Over 25 Years By Stenberg, Anders; de Luna, Xavier; Westerlund, Olle

  1. By: Michel Le Breton; Maria Montero; Vera Zaporozhets
    Abstract: We analyze and evaluate the different decision rules describing the Council of Ministers of the EU starting from 1958 up to date. All the existing studies use the Banzhaf index (for binary voting) or the Shapley-Shubik index (for distributive politics). We argue that the nucleolus can be considered an appropriate power measure in distributive situations and an alternative to the Shapley-Shubik index. We then calculate the nucleolus and compare the results of our calculations with the conventional measures. In the second part, we analyze the power of the European citizens as measured by the nucleolus under the egalitarian criterion proposed by Felsenthal and Machover (1998), and characterize the first best situation. Based on these results we propose a methodology for the design of the optimal (fair) decision rules. We perform the optimization exercise for the earlier stages of the EU within a restricted domain of voting rules, and conclude that Germany should receive more than the other three large countries under the optimal voting rule.
    Date: 2011–03
  2. By: Rita Asplund; Sami Napari
    Abstract: This paper compares the effects of intangible capital on wage formation among white-collar manufacturing workers using comparative data from three European countries : the Czech Republic, Finland and Norway. The analysis is undertaken in two steps. First, we explore the wage differentials and the underlying sources for two occupation groups : innovation and non-innovation workers. In a second step, this analysis is broken down by gender. We apply a decomposition method based on unconditional quantile regression techniques to examine the factors underlying the wage gaps observed along the whole wage distribution. The use of comparative cross-country data and a more elaborated wage decomposition method provides important new insights. We find, for example, that although innovation workers earn more than non-innovation workers in all three countries under scrutiny, there is considerable variation across the countries both in the levels and profiles of these wage differentials. Also the sources underlying these wage differentials vary between the countries. The levels and profiles of the gender wage gaps prevailing among innovation and non-innovation workers also reveal conspicuous cross-country differences. However, when it comes to the major sources contributing to these gender wage gaps, the results are strikingly similar across countries : what matters is marked gender differences in the rewards to similar basic human capital characteristics, not gender differences in these endowments.
    Keywords: gender wage gap, decomposition, human capital, intangible capital, manufacturing, quantile regression, wage formation, cross-country comparison
    JEL: J16 J31
    Date: 2011–04–12
  3. By: Luis Diaz-Serrano (Universitat Rovira i Virgili and CREIP); Andrés Rodríguez-Pose (London School of Economics and IMDEA Social Sciences Institute)
    Abstract: This paper analyses whether the different powers and resources at the disposal of local and regional governments across Europe deliver greater satisfaction with political institutions and lead to greater personal happiness. The analysis uses microdata from the four available waves of the European social survey (2002, 2004, 2006 and 2008), including more than 160,000 observations of individuals living in 29 European countries. Our results reveal that political and fiscal decentralization have a positive and significant effect on individuals' overall happiness. Fiscal decentralization also exerts a significant effect on the level of satisfaction with political and economic institutions and with the education and health systems, whereas the effect of political decentralization on these variables is more limited. The results show that citizens seem to be happier with the actual capacity of their local governments to deliver than with the general principle that they can have a say on their daily politics and policies.
    Keywords: Happiness; well-being; satisfaction; fiscal and political decentralization; Europe
    JEL: H11 H77
    Date: 2011–04–12
  4. By: Tomaso Duso (Duesseldorf Institute for Competition Economics (DICE)); Klaus Gugler (Vienna University of Economics and Business); Burcin B. Yurtoglu (WHU - Otto Beisheim School of Management)
    Abstract: This paper applies an intuitive approach based on stock market data to a unique dataset of large concentrations during the period 1990-2002 to assess the effectiveness of European merger control. The basic idea is to relate announcement and decision abnormal returns. Under a set of four maintained assumptions, merger control might be interpreted to be effective if rents accruing due to the increased market power observed around the merger announcement are reversed by the antitrust decision, i.e. if there is a negative relation between announcement and decision abnormal returns. To clearly identify the events’ competitive effects, we explicitly control for the market expectation about the outcome of the merger control procedure and run several robustness checks to assess the role of our maintained assumptions. We find that only outright prohibitions completely reverse the rents measured around a merger’s announcement. On average, remedies seem to be only partially capable of reverting announcement abnormal returns. Yet they seem to be more effective when applied during the first rather than the second investigation phase and in subsamples where our assumptions are more likely to hold. Moreover, the European Commission appears to learn over time.
    Keywords: Merger Control, Remedies, European Commission, Event Studies
    JEL: L4 K21 G34 C2 L2
    Date: 2011–04
  5. By: Anthoff, David; Rose, Steven K.; Tol, Richard S. J.; Waldhoff, Stephanie
    Abstract: The social cost of carbon is an estimate of the benefit of reducing CO2 emissions by one ton today. As such it is a key input into cost-benefit analysis of climate policy and regulation. We provide a set of new estimates of the social cost of carbon from the integrated assessment model FUND 3.5 and present a regional and sectoral decomposition of our new estimate. China, Western Europe and the United States have the highest share of harmful impacts, with the precise order depending on the discount rate. The most important sectors in terms of impacts are agriculture and increased energy use for cooling. We present an extensive sensitivity analysis with respect to the discount rate, equity weights, different socio economic scenarios and values for the climate sensitivity parameter.
    Keywords: cost/Social cost of carbon/cost-benefit analysis/Climate policy/Policy/regulation/decomposition/europe/impacts/discount rate/energy use/equity/scenarios
    Date: 2011–02
  6. By: Boeri, Tito (Bocconi University); Brücker, Herbert (Institute for Employment Research (IAB), Nuremberg)
    Abstract: The Great Recession triggered a resurgence of short-time work (STW) throughout the OECD. Several countries introduced from scratch STW or significantly expanded the scope of the programmes already in place. In some countries like Italy, Japan and Germany between 2.5 and 5 per cent of the workforce participated in short-time work schemes at the trough of the recession. In this paper we analyse the rationale for short time work benefits and their effects on labour adjustment from both a cross-country and a time-series perspective. We find that STW actually contributed to reduce job losses during the Great Recession. However, the number of jobs saved, according to our macroeconomic estimates, is smaller than the full-time equivalents jobs involved by these programmes, pointing in some cases to sizeable deadweight costs. Other institutions, like plant-level bargaining over hours, wages and employment levels may be more effective than STW in encouraging adjustment along the intensive margins in presence of temporary shocks. Our results also suggest that STW cannot be readily extended to countries having much different institutional configurations as the demand for STW is very much affected by other institutions such as employment protection legislation and the degree of centralization of collective bargaining. The micro evidence from firm-level data in Germany is more encouraging as to the effectiveness of STW, pointing to rather moderate deadweight losses. We interpret this result as due to specific design features of the German STW that could make it more effective in addressing the moral hazard problems related to reliance on subsidised hour reductions. The German Kurzarbeit scheme is indeed discouraging 100 per cent hours reductions and is experience-rated.
    Keywords: intensive margin, short-time
    JEL: J63 J65
    Date: 2011–04
  7. By: Marie Stack; Eric Pentecost
    Abstract: Examining the trade prospects for the new European Union (EU) member states and the EU associated partner countries is an important issue in the context of European eastward enlargement and greater economic integration with its immediate neighbours. An out-ofsample approach to projecting trade volumes for twenty countries of interest is adopted using a gravity equation for a panel data set of bilateral export flows from twelve EU countries to twenty OECD trading partners over the 1992-2003 period. The potential trade volumes are calculated from a gravity model of new trade theory (NTT) determinants. The selected twenty countries’ prospects for further trade integration vis-à-vis the EU can be gauged by expressing the trade volume projections as a ratio of actual trade volumes for each pair of countries. The projected trade ratios for the ten new member states are found to be multiples of actual 2003 levels, indicating that trade expansion looks set to continue. Near unity values, however, are more frequent among the Mediterranean countries, indicating fewer opportunities for further trade integration with the EU.
    Keywords: Panel data, Gravity model, Trade integration
    JEL: F14 F15 C23
    Date: 2011–03
  8. By: Goux, Dominique (CREST-INSEE); Maurin, Eric (Paris School of Economics); Petrongolo, Barbara (London School of Economics)
    Abstract: We investigate spillovers in spousal labour supply exploiting independent variation in hours worked generated by the introduction of the shorter workweek in France in the late 1990s. We find that female and male employees treated by the shorter legal workweek reduce their weekly labour supply by about 2 hours, and do not experience any reduction in their monthly earnings. While wives of treated men do not seem to adjust their working time at either the intensive or extensive margins, husbands of treated wives respond by cutting their workweek by about half an hour to one hour, according to specifications and samples. In particular, managers and professionals respond much more strongly to the shorter legal workweek in their wives’ firms than men in lower occupations. These effects are consistent with the presence of significant cross-hour effects on labour supply for husbands, though not for wives.
    Keywords: spill-over effects, labour supply, workweek reduction
    JEL: J22
    Date: 2011–04
  9. By: Bushnell, James; Mansur, Erin T.; Chong, Howard G.
    Abstract: We investigate the effect of cap-and-trade regulation of CO2 on firm profits by performing an event study of a CO2 price crash in the EU market. We examine returns for 90 stocks from carbon intensive industries and 600 stocks in the broad EUROSTOXX index. Firms in carbon intensive, or electricity intensive industries, but not involved in international trade were most hurt by the event.  This implies investors were focused on product price impacts, rather than compliance costs. We find evidence that firms’ net allowance positions also strongly influenced the share price response to the decline in allowance prices.
    Keywords: Emissions Markets; Incidence of Taxation; Event Study
    JEL: G14 H22 H23 Q50 Q54
    Date: 2010–12–15
  10. By: María Dolores Guilló Fuentes (Universidad de Alicante); Alfonsa Denia Cuesta (Universidad de Alicante)
    Abstract: The aim of the paper is a gender analysis of the extent to which parttime work represents an individual’s preferred labor market situation. The work includes a theoretical model that delivers some predictions about the household’s preferences over non-chosen employment states. Furthermore, it explores the impact of individual, family and job related variables on the probabilities of involuntary and voluntary part-time employment in Spain. The main empirical findings of the paper are: first, the model is sensitive to the chosen definition of (voluntary) part-time employment; second, there exist important gender asymmetries in labour market behaviour concerning the importance of the individual’s education and family characteristics; third, the marital status and having small children are important determinants of a woman’s probability of being voluntary part-time employed, whereas having grown up children or a temporary contract increases significantly a woman’s probability of involuntary part-time employment.
    Keywords: part-time work, involuntary employment, family ties and labour supply.
    JEL: C13 C25 J16
    Date: 2011–03
  11. By: Kari E.O. Alho
    Abstract: The paper considers whether Sweden should join the EMU as based on general equilibrium (GE) effects through reduced trade barriers linked to the single cur-rency. We use in this evaluation a gravity model for trade in Europe derived and estimated in the paper, and the estimates of trade barriers linked to EMU reached in the literature. First, we present an alternative derivation of the gravity equation for foreign trade, which is explicitly based on monopolistic competition in the export markets. In contrast to the usual specification, our model allows for the realistic assumption of asymmetry in mutual trade flows. We then present a straightforward methodology how to carry out a simulation, based on the estimated model, of GE effects related to a change in a trade barrier. Numeri-cally, we apply this to analyse the effects of a possible Swedish entrance into EMU. The effects are quite clearly in favour of EMU enlargement, and do not indicate a trade diver-sion effect either for the incumbent EMU countries or the rest of the European countries. However, a stochastic simulation of the effects reveals that there is a substantial uncer-tainty related to the effects of such a change in policies.
    Keywords: EMU, Sweden, gravity model, general equilibrium effects, trade barriers
    JEL: F12 F15
    Date: 2011–04–13
  12. By: Blasco, Sylvie (Aarhus School of Business); Rosholm, Michael (Aarhus School of Business)
    Abstract: While job search theory predicts that active labour market policies (ALMPs) can affect post-unemployment outcomes, empirical evaluations investigating transition rates have mostly focused on the impact of ALMPs on exit rates from the current unemployment spell. We use a social experiment, which was conducted in Denmark in 2005-6, to investigate the effects of a dramatic intensification of ALMPs on reemployment stability. We investigate the nature of this impact. We estimate a duration model with lagged duration dependence to separately identify "indirect" (via shorter unemployment duration) and "direct" (through a more efficient matching process) effects of ALMPs on subsequent employment duration. We find that overall intensive activation significantly reduces unemployment recurrence for men, but not for women. When we control for dynamic selection into employment and lagged duration dependence, the positive impact of the treatment becomes smaller but remains significant. 80% of the global impact of intensification acts through the direct channel for men.
    Keywords: social experiment, labour market policy regime, treatment effect, post-unemployment outcome, duration model, lagged duration dependence, dynamic selection
    JEL: J64 C21 C41 J68
    Date: 2011–04
  13. By: Andrius Kazukauskas (Department of Economics, Trinity College Dublin); Carol Newman (Department of Economics and Institute for International Integration Studies, Trinity College Dublin); Daragh Clancy (Rural Eocnomy Research Centre, Teagasc, Ireland); Johannes Sauer (Department of Economics, University of Manchester)
    Abstract: As a consequence of the recent reform of the Common Agricultural Policy the agricultural sector throughout the EU is undergoing a process of major structural change. The removal of direct payments and price support policies are expected to change farmers' behaviour and force them to reconsider their participation in agricultural production. In this paper we perform an ex-post cross-country farm level empirical analysis of farmers' market exit behaviour in response to these reforms. Using a panel dataset for the EU15 countries for the period 2001-2005, we apply quasi-experimental empirical methods to identify the causal relationship between the decoupling policy and farm market exit. Our analysis shows that, contrary to a priori expectations, the probability of farm exit decreased due to the policy change, particularly for farms where payments are only partially decoupled. We also find, however, that the reform facilitated exit for farms that had already made the decision to leave the sector.
    Keywords: Common Agricultural Policy, subsidy decoupling, farm exit, difference-in-differences
    JEL: Q12 Q18
    Date: 2011–04
  14. By: Michael Zschille; Matthias Walter
    Abstract: Germany's water supply industry is characterized by a multitude of utilities and widely diverging prices, possibly resulting from structural differences beyond the control of firms' management, but also from inefficiencies. In this article we use Data Envelopment Analysis and Stochastic Frontier Analysis to determine the utilities' technical efficiency scores based on cross-sectional data from 373 public and private water utilities in 2006. We find large differences in technical efficiency scores even after accounting for significant structural variables like network density, share of groundwater usage and water losses.
    Keywords: Water supply, technical efficiency, data envelopment analysis, stochastic frontier analysis, structural variables, bootstrapped truncated regression
    JEL: L95 C14 Q25
    Date: 2011
  15. By: Stenberg, Anders (Swedish Institute for Social Research, Stockholm University); de Luna, Xavier (Department of Statistics, Umeå University); Westerlund, Olle (Department of Economics, Umeå University)
    Abstract: Governments in the US, Canada and Europe have expressed an ambition to stimulate education of older. In this paper, we analyze if there are effects on annual earnings of formal education for participants aged 42-55 at the time of enrolment in 1994-1995. The analysis explores longitudinal population register data stretching from 1982 to 2007. The method used is difference-in-differences propensity score matching based on a rich set of covariates, including indicators of health and labor market marginalization. Results differ from earlier studies, implying no significant average earnings effects for males, positive effects for females, although insufficient to cover total costs.
    Keywords: Adult education; Earnings; Government Expenditures; Human capital
    JEL: C21 H52 H75 I28
    Date: 2011–04–07

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