nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒05‒14
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Efficiency, Productivity and Environmental Policy: A Case Study of Power Generation in the EU By Jurate Jaraite; Corrado Di Maria
  2. Has Europe Been Catching Up? An Industry Level Analysis of Venture Capital Success over 1985 - 2009 By Kraeussl, R.; Krause, S.
  3. Capital Flows to EU New Member States: Does Sector Destination Matter? By Pritha Mitra
  4. Worker flows, job flows and establishment wage differentials : analyzing the case of France. By Richard Duhautois; Fabrice Gilles; Héloïse Petit
  5. Does Globalization affect Regional Growth? Evidence for NUTS-2 Regions in EU-27 By Wolfgang Polasek; Richard Sellner
  6. The impact of science and technology parks on firms´ product innovation: empirical evidence from Spain By Vásquez Urriago, Ángela Rocio; Barge-Gil, Andrés; Modrego Rico, Aurelia; Paraskevopoulou, Evita
  7. The consumer empowerment index. A measure of skills, awareness and engagement of European consumers By Nardo, Michela; Loi, Massimo; Rosati, Rossana; Manca, Anna Rita
  8. Immigration and Innovation in European Regions By Ozgen, Ceren; Nijkamp, Peter; Poot, Jacques
  9. Unemployment duration of spouses: Evidence from France By Stefania Marcassa
  10. Labor Disputes and Labor Flows By Fraisse, Henri; Kramarz, Francis; Prost, Corinne
  11. Does Job Satisfaction Adapt to Working Conditions? An Empirical Analysis for Rotating Shift Work, Flextime,and Temporary Employment in UK By Dominik Hanglberger
  12. Flexible Wage Contracts, Temporary Jobs and Worker Performance: Evidence from Italian Firms By Michele Battisti; Giovanna Vallanti
  13. Measuring and Interpreting Trends in the Division of Labour in the Netherlands By Akçomak, I. Semih; Borghans, Lex; ter Weel, Bas
  14. Unintended Media Effects in a Conflict Environment: Serbian Radio and Croatian Nationalism By Stefano DellaVigna; Ruben Enikolopov; Vera Mironova; Maria Petrova; Ekaterina Zhuravskaya
  15. Your Place or Mine? On the Residence Choice of Young Couples in Norway By Loken, Katrine V.; Lommerud, Kjell Erik; Lundberg, Shelly
  16. Structural reforms and macroeconomic performance in the euro area countries: a model-based assessment By Sandra Gomes; P. Jacquinot; M. Mohr; M. Pisani
  17. Does the housing market reflect cultural heritage? A case study of Greater Dublin By Lyons, Seán; Mayor, Karen; Moro, Mirko; Tol, Richard S. J.
  18. To assemble to resemble? A study of tax disparities among French municipalities By Marie-Laure Breuille; Pascale Duran-Vigneron; Anne-Laure Samson
  19. Incentive Schemes for Local Government : Theory and Evidence from Comprehensive Performance Assessment in England By Lockwood, Ben; Porcelli, Francesco
  20. The influence of social capital on CEO dismissal in Germany: an empirical analysis By Wrage, Markus; Tuschke, Anja; Bresser, Rudi K. F.

  1. By: Jurate Jaraite (CERE, Umeå University); Corrado Di Maria (Queen’s University Belfast)
    Abstract: This study uses the EU public power generating sector as a case study to investigate the environmental efficiency and productivity enhancing performance of the European Union’s CO2 Emissions Trading Scheme (EU ETS) in its pilot phase. Using Data Envelopment Analysis methods, we measure the environmental efficiency and the productivity growth registered in public power generation across the EU over the 1996-2007 period. In the second stage of our analysis we attempt to explain changes in productivity and efficiency over time using state-of-the-art econometric techniques. Our analysis suggests two conclusions: on the one hand carbon pricing led to an increase in environmental efficiency and to a shift outwards of the technological frontier; on the other hand, the overly generous allocation of emission permits had a negative impact on both measures. These results are shown to be robust to changes in controls and specifications.
    Keywords: Emissions Trading, EU ETS, Environmental Efficiency, Productivity Growth, Data Envelopment Analysis
    JEL: O38 Q48 Q58
    Date: 2011–02
  2. By: Kraeussl, R.; Krause, S.
    Abstract: After nearly two decades of U.S. leadership in the 1980s and 1990s, are Europe's venture capital markets in the 2000s finally catching up regarding the provision of financing and successful exits, or is the performance gap as wide as ever? Are we amidst overall dismal performance of the venture capital experience without any encouraging news? We attempt to answer these questions by tracking down over 40,000 venture capital--backed firms of six industries in 13 European countries and the U.S., and determine which type of exit - if any - each particular firm's investors have chosen between 1985 and 2009. Our empirical findings suggest that: (i) in terms of the number of venture capital-backed firms successfully going public, European venture capitalists have closed the gap with respect to the U.S., albeit as a result of a worse initial public offering performance overall; (ii) Europe continues to lag behind the U.S. by means of mergers and acquisitions, and in successful exits of seed/start-up and early stage firms, (iii) average investment and R&D are important determinants of venture capital success, but only have a positive impact after 2000; and (iv) idiosyncratic differences across industries seem to be more relevant than country-specific characteristics in explaining differences in performance.
    Keywords: Venture capital, private equity, success rates, performance, IPOs.
    JEL: G24 G3
    Date: 2011
  3. By: Pritha Mitra
    Abstract: The recent boom-bust episode in Emerging Europe was largely the product of surges and sudden stops in capital inflows. This paper empirically argues that the sectors into which capital flows determines their impact on GDP growth. Applying data from EU New Member States, it is found that capital flows into real estate have a greater impact on swings in GDP than other sectors, irrespective of a country's exchange rate or fiscal policy. Consequently, as new waves of capital inflows spread to emerging markets, policies may usefully focus on supporting capital inflows towards economic sectors that minimize large swings in GDP.
    Keywords: Bank credit , Capital flows , Capital inflows , Eastern Europe , Economic growth , Emerging markets , European Economic and Monetary Union , Foreign direct investment , Real estate prices ,
    Date: 2011–03–28
  4. By: Richard Duhautois (CEE et Université Paris-Est - ERUDITE, TEPP); Fabrice Gilles (Université de Lille - EQUIPPE et CEE); Héloïse Petit (CEE et Centre d'Economie de la Sorbonne)
    Abstract: We address the relation between establishment wage differentials and worker flows, i.e. the churning rate and the quit rate. Our analysis is based on a linked employer-employee dataset covering the French private non-farm sector from 2002 to 2005. Our estimations support the hypothesis that wage premium is an efficient human resource management tool to stabilize workers : churning rates are lower in high-paying firms due to lower quit rates. We further show that the relation is not linear, and it differs among skill groups and according to establishment size : it is strongest for low-wage levels, for low-skilled workers and in large establishments.
    Keywords: Establishment wage effects, worker flows, churming rate, quit rate, linked employer-employee panel data, France.
    JEL: J31 J63 C23
    Date: 2011–04
  5. By: Wolfgang Polasek (Institute for Advanced Studies, Austria; The Rimini Centre for Economic Analysis (RCEA), Italy); Richard Sellner (Institute for Advanced Studies, Austria)
    Abstract: We analyze the influence of newly constructed globalization measures on regional growth for the EU-27 countries between 2001 and 2006. The spatial Chow-Lin procedure, a method constructed by the authors, was used to construct on a NUTS-2 level a complete regional data for exports, imports and FDI inward stocks, which serve as indicators for the in uence of globalization, integration and technology transfers on European regions. The results suggest that most regions have significantly benefited from globalization measured by increasing trade openness and FDI. In a non-linear growth convergence model the growth elasticities for globalization and technology transfers decrease with increasing GDP per capita. Furthermore, the estimated elasticity for FDI decreases when the model includes a higher human capital premium for CEE countries and a small significant growth enhancing effect accrues from the structural funds expenditures in the EU.
    Keywords: Regional Globalization Measures, EU Integration (Structural Funds), Regional Growth Convergence Models, Foreign Direct Investment (FDI)
    JEL: C11 C15 C51 R12
    Date: 2011–05
  6. By: Vásquez Urriago, Ángela Rocio; Barge-Gil, Andrés; Modrego Rico, Aurelia; Paraskevopoulou, Evita
    Abstract: Science and Technology Parks (STP) are one of the most important and extensive innovation policy initiatives introduced in recent years. This work evaluates the impact of STP on firm product innovation in the Spanish context. Spain is less developed than most of the advanced countries, and regional and national governments are prioritizing STP initiatives. The large firm sample for our study is from the Spanish Technological Innovation Survey, provided by the National Statistical Institute. We focus on average treatment effects for firms located in 22 Spanish STP. Our results show that Spanish STP have a strong and positive impact on the probability and amount of product innovation achieved by STP located firms. These results hold for different assumptions about the mechanisms underlying location in a STP.
    Keywords: Science and Technology Parks; product innovation; treatment effects; regional development policies.
    JEL: R53 L25 O25 O18 L38 O30 H76
    Date: 2011–02–25
  7. By: Nardo, Michela; Loi, Massimo; Rosati, Rossana; Manca, Anna Rita
    Abstract: The Consumer Empowerment Index is a pilot exercise, aimed at obtaining a first snapshot of the state of consumer empowerment as measured by the Eurobarometer survey (Special Eurobarometer n. 342). It is neither a final answer on empowerment nor a comprehensive study on all the different facets of consumer empowerment, but instead it is meant to foster the debate on the determinants of empowerment and their importance for protecting consumers. This report describes the steps followed in the construction of the Index of consumer Empowerment. In particular the definition of the theoretical framework, the quantification of categorical survey questions, the univariate and multivariate analysis of the dataset, and the set of weight used for calculating the scores and ranks of the Index. The report also discusses the robustness of the results and the relationship between the Index and the socio-economic characteristics of the respondents in order to identify the features of the most vulnerable consumers. The Consumer Empowerment Index identifies Norway as the leading country followed by Finland, the Netherlands and Germany and Denmark. The middle of the ranking is dominated by western countries such as Belgium, France, and UK, with an average score 13% lower than the top five. At the bottom of the Index are some Eastern and Baltic countries like Bulgaria, Lithuania, Poland, and Romania with a score 31% lower on average (this gap reaches 40% and 38% in Awareness of consumer legislation and Consumer skills). A group of southern countries, Italy, Portugal, and Spain score poorly in the Index, especially in the pillar Consumer skills where the gap with the top performers reaches 30%.
    Keywords: Consumer empowerment; composite indicators
    JEL: D18 D1
    Date: 2011–04
  8. By: Ozgen, Ceren (VU University Amsterdam); Nijkamp, Peter (VU University Amsterdam); Poot, Jacques (University of Waikato)
    Abstract: The concentration of people with diverse socio-cultural backgrounds in particular geographic areas may boost the creation of new ideas, knowledge spillovers, entrepreneurship, and economic growth. In this paper we measure the impact of the size, skills, and diversity of immigration on the innovativeness of host regions. For this purpose we construct a panel of data on 170 regions in Europe (NUTS 2 level) for the periods 1991-1995 and 2001-2005. Innovation outcomes are measured by means of the number of patent applications per million inhabitants. Given the geographical concentration and subsequent diffusion of innovation activity, and the spatial selectivity of immigrants' location choices, we take account of spatial dependence and of the endogeneity of immigrant settlement in our econometric modelling. We use the location of McDonald's restaurants as a novel instrument for immigration. The results confirm that innovation is clearly a function of regional accessibility, industrial structure, human capital, and GDP growth. In addition, patent applications are positively affected by the diversity of the immigrant community beyond a critical minimum level. An increase in the fractionalization index by 0.1 from the regional mean of 0.5 increases patent applications per million inhabitants by about 0.2 percent. Moreover, the average skill level of immigrants (proxied by global regions of origin) also affects patent applications. In contrast, an increasing share of foreigners in the population does not conclusively impact on patent applications. Therefore, a distinct composition of immigrants from different backgrounds is a more important driving force for innovation than the sheer size of the immigrant population in a certain locality.
    Keywords: innovation, economic growth, cultural diversity, immigration, spatial autocorrelation
    JEL: J61 O31 R23
    Date: 2011–04
  9. By: Stefania Marcassa (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper presents the results of an econometric analysis of the conditional probability of leaving unemployment for four waves of French married men and women entering unemployment from 1991 to 2002. The effect of spouse's hourly earnings on unemployment duration is found to be asymmetric for men and women. In particular, an elasticity of 0.38 for men and -0.15 for women are found to be significant for the entire sample. Individual data from the French Labor Force Survey are used with accurate information on spell durations, and labor earnings of the spouses. Parametric estimation techniques are used.
    Keywords: unemployment duration ; hazard models ; labor earnings ; marriage ; France
    Date: 2011–04
  10. By: Fraisse, Henri (Bank of France); Kramarz, Francis (CREST-INSEE); Prost, Corinne (CREST-INSEE)
    Abstract: About one in four workers challenges her dismissal in front of a labor court in France. Using a data set of individual labor disputes brought to French courts over the years 1996 to 2003, we examine the impact of labor court activity on labor market flows. First, we present a simple theoretical model showing the links between judicial costs and judicial case outcomes. Second, we exploit our model as well as the French institutional setting to generate instruments for these endogenous outcomes. In particular, we use shocks in the supply of lawyers who resettle close to their university of origin. Using these instruments, we show that labor court decisions have a causal effect on labor flows. More trials and more cases won by the workers cause more job destructions. More settlements, higher filing rates, and a larger fraction of workers represented by a lawyer dampen job destructions. Various robustness checks confirm these findings.
    Keywords: labor judges, labor flows, employment protection legislation, unfair dismissal, France
    JEL: J32 J53 J63 K31
    Date: 2011–04
  11. By: Dominik Hanglberger (LEUPHANA University Lüneburg,Department of Economic, Behaviour and Law Sciences, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)))
    Abstract: The hedonic treadmill model for subjective well-being was subject to several recent empirical analyses based on individual panel data. Most of this adaptation literature is concentrated on how life events affect measures of life satisfaction and happiness, whereas adaptation processes of domain satisfactions like job satisfaction are largely unstudied. The aim of this paper is to test empirically adaptation processes of self-reported job satisfaction. For this purpose we consider flexibility characteristics of a job and derive hypotheses about which flexibility measures allow for or impede adaptation processes. Hypotheses are tested using data from up to 18 waves of the British Household Panel Survey (BHPS). We estimate fixed-effects panel models to test adaptation processes based on intra-individual changes in job satisfaction. Our results show no adaptation to rotating shift work, little adaptation to temporary employment, but full adaptation to flextime regulations.
    Keywords: job satisfaction, adaptation, hedonic treadmill model, rotating shift work, temporary employment, flextime, British Household Panel Study, fixed-effects panel estimation
    JEL: J28 J81
    Date: 2011–03
  12. By: Michele Battisti (University of Palermo); Giovanna Vallanti (LUISS "Guido Carli" University)
    Abstract: This paper focuses on the effects of decentralized wage schemes and temporary forms of employment on worker/firm performance. The effect of monetary incentives on worker effort and firm performance is a central topic in economics. According to the principal-agent paradigm, firms (the principal) have to link employees’ remuneration scheme to any verifiable indicator of performance in order to avoid opportunistic behaviours. The effectiveness of incentives on workers’ behaviour may vary significantly accordingly to the institutional/economic context in which the firms operate but in general the empirical evidence shows that financial incentives have the potential to exert strong effects on indicators of firm performance, such as productivity and worker absenteeism. Both from a theoretical and empirical point of view, the prediction on the effects of temporary forms of employment on effort and productivity is less neat. In light of these considerations, the aim of this paper is to provide further empirical evidence on whether and to what extent the performance related pay and the contract flexibility affect workers effort and in turn firm productivity for different type of workers (white collar vs. blue collar), working in workplaces characterized by different degree of uncertainty and risk and in firms operating in different economic and institutional settings using a sample of Italian firms. According to our results, wage flexibility appears to have a significant effect on effort and then on firm’s productivity and white collars are more responsive to monetary incentives than blue collars. Moreover, the presence of a large share of temporary contracts implies a lower dismissal probability for permanent workers and a deterioration in the working environment and then it reduces workers’ motivation and effort.
    Keywords: Productivity, Effort, Performance-related-pay, Temporary contracts.
    JEL: J22 J33 J38
    Date: 2011
  13. By: Akçomak, I. Semih (Maastricht University); Borghans, Lex (Maastricht University); ter Weel, Bas (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: This paper introduces indicators about the division of labour to measure and interpret recent trends in the structure of employment in the Netherlands. Changes in the division of labour occur at three different levels: the level of the individual worker, the level of the industry and the spatial level. At each level the organisation of work is determined by an equilibrium of forces that glue tasks together or unbundle them. Communication costs are the main force for clustering or gluing together tasks; comparative advantage stimulates unbundling and specialisation. The estimates suggest that on average the Netherlands has witnessed unbundling in the period 1996-2005, which implies that advantages of specialisation have increased. These developments explain to a considerable extent changes in the structure of employment. Especially at the spatial level it explains a substantial part of the increase in offshoring tasks abroad.
    Keywords: division of labour, tasks, technological change, the Netherlands
    JEL: J23 J24 O33
    Date: 2011–04
  14. By: Stefano DellaVigna; Ruben Enikolopov; Vera Mironova; Maria Petrova; Ekaterina Zhuravskaya
    Abstract: Do media broadcasts matter when they reach audiences that are not their target? In a conflict, the media may have an unintended effect of increasing ethnic animosity. We consider radio signals travelling across country borders in the region that witnessed one of Europe’s deadliest conflicts since WWII: the Serbo-Croatian conflict in the Yugoslavian wars. Using survey data, we find that a large fraction of Croats listen to Serbian radio (intended for Serbian listeners across the border) whenever signal is available. Then, using official election results, we document that residents of Croatian villages with good-quality signal of Serbian public radio were more likely to vote for extreme nationalist parties, even after several years of peace time. Finally, ethnically-offensive graffiti are more likely to be exposed openly in the center of villages with Serbian radio reception. The effect is identified from the variation in the availability of the signal mostly due to topography and forestation. The results of a laboratory experiment confirm that Serbian radio exposure causes an increase in anti-Serbian sentiment among Croats.
    JEL: H41 H56 H77
    Date: 2011–04
  15. By: Loken, Katrine V. (University of Bergen); Lommerud, Kjell Erik (University of Bergen); Lundberg, Shelly (University of California, Santa Barbara)
    Abstract: Norwegian registry data is used to investigate the location decisions of a full population cohort of young adults as they complete their education, establish separate households and form their own families. We find that the labor market opportunities and family ties of both partners affect these location choices. Surprisingly, married men live significantly closer to their own parents than do married women, even if they have children, and this difference cannot be explained by differences in observed characteristics. The principal source of excess female distance from parents in this population is the relatively low mobility of men without a college degree, particularly in rural areas. Despite evidence that intergenerational resource flows, such as childcare and eldercare, are particularly important between women and their parents, the family connections of husbands appear to dominate the location decisions of less-educated married couples.
    Keywords: intergenerational proximity, marriage, location decisions
    JEL: J12 J16 J61
    Date: 2011–04
  16. By: Sandra Gomes; P. Jacquinot; M. Mohr; M. Pisani
    Abstract: We quantitatively assess the macroeconomic effects of country-specific supply-side reforms in the euro area by simulating a large scale multi-country dynamic general equilibrium model. We consider reforms in the labor and services markets of Germany (or, alternatively, Portugal) and the rest of the euro area. Our main results are as follows. First, there are benefits from implementing unilateral structural reforms. A reduction of markup by 15 percentage points in the German (Portuguese) labor and services market would induce an increase in the long-run German (Portuguese) output equal to 8.8 (7.8) percent. As reforms are implemented gradually over a period of five years, output would smoothly reach its new long-run level in seven years. Second, cross-country coordination of reforms would add extra benefits to each region in the euro area, by limiting the deterioration of relative prices and purchasing power that a country faces when implementing reforms unilaterally. This is true in particular for a small and open economy such as Portugal. Specifically, in the long run German output would increase by 9.2 percent, Portuguese output by 8.6 percent. Third, cross-country coordination would make the macroeconomic performance of the different regions belonging to the euro area more homogeneous, both in terms of price competitiveness and real activity. Overall, our results suggest that reforms implemented apart by each country in the euro area produce positive effects, cross-country coordination produces larger and more evenly distributed (positive) effects.
    JEL: C53 E52 F47
    Date: 2011
  17. By: Lyons, Seán; Mayor, Karen; Moro, Mirko; Tol, Richard S. J.
    Abstract: Does the housing market reflect cultural heritage? We estimate several specifications of a hedonic price equation to establish whether distance to cultural heritage site is capitalised into housing prices in Greater Dublin, Ireland. The results show that distance to the nearest historic building has a significant and robust effect on housing prices. To our knowledge this is the first application of the hedonic price method to cultural heritage.
    Keywords: non-market valuation; hedonic price; hedonic regression; cultural heritage; cultural economics
    Date: 2011–05
  18. By: Marie-Laure Breuille (INRA, UMR1041 CESAER); Pascale Duran-Vigneron (Department of Economics, University of Exeter); Anne-Laure Samson (LEDA-LEGOS, University Paris Dauphine)
    Abstract: The purpose of this paper is to analyze the effect of inter-municipal cooperation on local taxation. Municipalities that join/create an inter-municipal jurisdiction choose between three tax regimes, which may induce both horizontal and vertical tax externalities. Using the differences in differences method with a quasi-exhaustive panel for French municipalities over the 1994-2010 period, we show a positive causal effect of cooperation on the level of cumulative tax rates (i.e. the sum of municipal and inter-municipal tax rates). In addition, we show that cooperation leads to a convergence of tax rates within an inter-municipal structure, which thus reduces tax disparities among municipalities.
    Keywords: Inter-municipal cooperation, tax competition, ?scal disparities.
    JEL: H23 H7
    Date: 2011
  19. By: Lockwood, Ben (University of Warwick); Porcelli, Francesco (University of Warwick)
    Abstract: This paper studies Comprehensive Performance Assessment, an explicit incentive scheme for local government in England. Motivated by a simple theoretical political agency model, we predict that CPA should increase service quality and local taxation, but have an ambiguous e¤ect on the e¢ ciency of service provision. We test these predictions using a difference in difference approach, using Welsh local authorities as a control group, exploiting the fact that local authorities in Wales were not subject to the same CPA regime. To do this, we construct original indices of service quality and e¢ ciency, using Best Value Performance Indicators. We estimate that CPA increased the effective band D council tax rate in England relative to Wales by 4%, and increased our index of service quality output also by about 4%, but had no signifcant effect on our efficiency indices. There is evidence of heterogenous effects of CPA on efficiency, with some evidence that CPA impacted more on less efficient councils, and the "harder test" from 2005-8 having a much bigger effect. Key words: local government ; incentives ; efficiency ; difference in difference ; DEA JEL classification: H10 ; H70 ; H77 ; C21
    Date: 2011
  20. By: Wrage, Markus; Tuschke, Anja; Bresser, Rudi K. F.
    Abstract: In this study, we address the question of why some CEOs stay in office during a performance downturn while others don't. Based on a social capital perspective we assume that (1) the social capital endowment of an underperforming CEO may reduce the risk of getting dismissed and that (2) the tendency of board members to dismiss the CEO is moderated by their own social capital. Using data of large German corporations, we find support for our assumptions regarding the influence of a CEO's social capital on the risk of getting dismissed. We find partial evidence for a moderating effect of the social capital of board members. Our findings' implications for the literatures on social capital and CEO turnover are discussed. --
    Keywords: CEO turnover,board interlocks,social capital
    Date: 2011

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