nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒06‒11
seventeen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  2. Explaining Job Polarization in Europe: The Roles of Technology, Globalization and Institutions By Maarten Goos; Alan Manning; Anna Salomons
  3. The distribution of employees’ labour earnings in the European Union: Data, concepts and first results By Andrea Brandolini; Alfonso Rosolia; Roberto Torrini
  4. Forecasting the European Carbon Market By Gary Koop; Lise Tole
  5. Intangible capital and Productivity Growth in European Countries By Cecilia Iona Lasinio; Massimiliano Iommi; Stefano Manzocchi
  6. Does Globalization Affect Regional Growth? Evidence for NUTS-2 Regions in EU-27 By Polasek, Wolfgang; Sellner, Richard
  7. Cross-country polarisation in CO2 emissions per capita in the European Union: changes and explanatory factors By Juan Antonio Duro Moreno; Emilio Padilla Rosa
  8. The relative efficiency of active labour market policy: evidence from a social experiment and non-parametric methods By Vikström, Johan; Rosholm, Michael; Svarer, Michael
  9. Spatial clustering and nonlinearities in the location of multinational firms By Roberto Basile; Luigi Benfratello; Davide Castellani
  10. Scores, Bets and Abnormal Returns: Evidence from the European Soccer Teams By Massimiliano Castellani; Enrico Maria Cervellati; Pierpaolo Pattitoni
  11. Reforms, labour market functioning and productivity dynamics: a sectoral analysis for Italy. By Cceilia Iona Lasino; Giovanna Vallanti
  12. The impact of higher education institution-firm knowledge links on establishment-level productivity in British regions By Richard Harris; Qian Cher Li; John Moffat
  13. Uncertainty and the export decisions of Dutch firms By Harold Creusen; Arjan Lejour
  14. Compensation and Incentives in german Corporations By Moritz Heimes; Steffen Seemann
  15. 1.6 million children in the UK live in severe poverty: the government must do more to target areas of high deprivation, poverty and worklessness. By Jenkins, Gareth
  16. Applying conditional DEA to measure football clubs’ performance: Evidence from the top 25 European clubs By Halkos, George; Tzeremes, Nickolaos
  17. The State of Collective Bargaining and Worker Representation in Germany: The Erosion Continues By John T. Addison; Alex Bryson; Paulino Teixeira; André Pahnke; Lutz Bellmann

  1. By: Emilio Padilla Rosa (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Juan Antonio Duro Moreno (Department of Economics and CREIP, Univ. Rovira i Virgili)
    Abstract: The design of European mitigation policies requires a detailed examination of the factors explaining the unequal emissions in the different countries. This research analyzes the evolution of inequality in CO2 per capita emissions in the European Union (EU-27) in the 1990–2006 period and its explanatory factors. For this purpose, we decompose the Theil index of inequality into the contributions of the different Kaya factors. The decomposition is also applied to the inequality between and within groups of countries (North Europe, South Europe, and East Europe). The analysis shows an important reduction in inequality, to a large extent due to the smaller differences between groups and because of the lower contribution of the energy intensity factor. The importance of the GDP per capita factor increases and becomes the main explanatory factor. However, within the different groups of countries the carbonization index appears to be the most relevant factor in explaining inequalities.
    Keywords: CO2 emissions, emission inequality, European Union, Kaya factors, Theil index.
    Date: 2011–05
  2. By: Maarten Goos; Alan Manning; Anna Salomons
    Abstract: This paper shows the employment structure of 16 European countries has been polarizing in recent years with the employment shares of managers, professionals and low-paid personal services workers increasing at the expense of the employment shares of middling manufacturing and routine office workers. To explain this job polarization, the paper develops and estimates a simple model to capture the effects of technology, globalization, institutions and product demand effects on the demand for different occupations. The results suggest that the routinization hypothesis of Autor, Levy and Murnane (2003) is the single most important factor behind the observed shifts in employment structure. We find some evidence for offshoring to explain job polarization although its impact is much smaller. We also find that shifts in product demand are acting to attenuate the polarizing impact of routinization and that differences or changes in wage-setting institutions play little role in explaining job polarization in Europe.
    Keywords: Labor Demand, Technology, Globalization, Institutions
    JEL: J21 J23 J24
    Date: 2010–11
  3. By: Andrea Brandolini (Bank of Italy, Department for Structural Economic Analysis); Alfonso Rosolia (Bank of Italy, Department for Structural Economic Analysis); Roberto Torrini (Bank of Italy, Department for Structural Economic Analysis)
    Abstract: This paper studies the distribution of labour earnings among employees within the EU using data from Wave 2007-1 of the Community Statistics on Income and Living Conditions (EUSILC). The review of available information and the comparisons with external sources show that the EU-SILC data are not exempt from problems, particularly in some countries, yet can be fruitfully used to study the distribution of earnings in the EU; they also allow researchers to assess the sensitivity of results to various concepts of labour earnings. The ranking of countries by median full-time equivalent monthly gross earnings shows Eastern European nations at the bottom and Luxembourg at the top; earnings differences are sizeable, both across and within countries. Taking the euro area and the EU-25 (excluding Malta, for which data are unavailable) as a whole, inequality is higher when earnings are measured in euro at market rates rather than at purchasing power parities. The wage distribution is wider in the EU-25 than in the euro area, which is not surprising given that the former includes the poorer Eastern European countries that joined the Union in 2004. The higher inequality observed in the EU-25 is largely attributable to differences between countries, which are essentially due to the returns to individual attributes rather than to a different composition of the workforce with respect to these attributes.
    Keywords: wage inequality, EU and euro area labour markets.
    JEL: J31 D33
    Date: 2011
  4. By: Gary Koop (Department of Economics, University of Strathclyde); Lise Tole (Edinburgh University, Business School)
    Abstract: In an effort to meet its obligations under the Kyoto Protocol, in 2005 the European Union introduced a cap-and-trade scheme where mandated installations are allocated permits to emit CO2. Financial markets have developed that allow companies to trade these carbon permits. For the EU to achieve reductions in CO2 emissions at a minimum cost, it is necessary that companies make appropriate investments and policymakers design optimal policies. In an effort to clarify the workings of the carbon market, several recent papers have attempted to statistically model it. However, the European carbon market (EU ETS) has many institutional features that potentially impact on daily carbon prices (and associated ?nancial futures). As a consequence, the carbon market has properties that are quite different from conventional financial assets traded in mature markets. In this paper, we use dynamic modelaveraging (DMA) in order to forecast in this newly-developing market. DMA is a recently-developed statistical method which has three advantages over conventional approaches. First, it allows the coe¢ cients on the predictors in a forecasting model to change over time. Second, it allows for the entire forecasting model to change over time. Third, it surmounts statistical problems which arise from the large number of potential predictors that can explain carbon prices. Our empirical results indicate that there are both important policy and statistical benefits with our approach. Statistically, we present strong evidence that there is substantial turbulence and change in the EU ETS market, and that DMA can model these features and forecast accurately compared to conventional approaches. From a policy perspective, we discuss the relative and changing role of different price drivers in the EU ETS. Finally, we document the forecast performance of DMA and discuss how this relates to the efficiency and maturity of this market.
    Keywords: Bayesian, carbon permit trading, financial markets, state space model, model averaging
    JEL: C53 C24
    Date: 2011–04
  5. By: Cecilia Iona Lasinio (Istat and Luiss Lab); Massimiliano Iommi (ISTAT); Stefano Manzocchi (Università Luiss "Guido Carli")
    Abstract: This paper provides evidence about the diffusion of intangible investment across the EU27 member countries and investigates the role of intangible capital as a source of growth to improve our understanding of the international differences in the mix of drivers of productivity growth across Europe. Our study shows that the capitalization of intangible assets, allow identifying additional sources of long-run growth. We show that intangibles have been a relevant source of growth across European countries and that they cannot be omitted from national accounts. In particular, the ?unexplained? component of macro-economic dynamics, the Total Factor Productivity, becomes less important, while physical capital turns out to be strongly complementary with intangible capital.
    Keywords: Intangible capital, Productivity Growth, European countries
    JEL: O3 O4 O5
    Date: 2011
  6. By: Polasek, Wolfgang (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Sellner, Richard (Department of Economics and Finance, Institute for Advanced Studies, Vienna, 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 influence 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
  7. By: Juan Antonio Duro Moreno (Department of Economics and CREIP, Univ. Rovira i Virgili); Emilio Padilla Rosa (Department of Applied Economics, Univ. Autónoma de Barcelona)
    Abstract: In this study, we analyse the degree of polarisation—a concept fundamentally different from that of inequality—in the international distribution of CO2 emissions per capita in the European Union. It is analytically relevant to examine the degree of instability inherent to a distribution and, in the analysed case, the likelihood that the distribution and its evolution will increase or decrease the chances of reaching an agreement. Two approaches were used to measure polarisation: the endogenous approach, in which countries are grouped according to their similarity in terms of emissions, and the exogenous approach, in which countries are grouped geographically. Our findings indicate a clear decrease in polarisation since the mid-1990s, which can essentially be explained by the fact that the different groups of countries have converged (i.e. antagonism among the CO2 emitters has decreased) as the contribution of energy intensity to between-group differences has decreased. This lower degree of polarisation in CO2 distribution suggests a situation more conducive to the possibility of reaching EU-wide agreements on the mitigation of CO2 emissions.
    Keywords: CO2 emissions, distribution of emissions, European Union, mitigation agreements, polarisation.
    Date: 2011–05
  8. By: Vikström, Johan (IFAU - Institute for Labour Market Policy Evaluation); Rosholm, Michael (Department of Economics and Business, Aarhus University); Svarer, Michael (Department of Economics and Business, Aarhus University)
    Abstract: We reanalyze 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: 2011–06–27
  9. By: Roberto Basile; Luigi Benfratello; Davide Castellani
    Abstract: We propose a semiparametric geoadditive negative binomial model of industrial location which allows to simultaneously address some important methodological issues, such as spatial clustering and nonlinearities, which have been only partly addressed in previous studies. We apply this model to analyze location determinants of inward greenfield investments occurred over the 2003-2007 period in 249 European regions. The inclusion of a geoadditive component (a smooth spatial trend surface) allows to control for omitted variables which induce spatial clustering, and suggests that such unobserved factors may be related to regional policies towards foreign investors Allowing for nonlinearities reveals, in line with theoretical predictions, that the positive effect of agglomeration economies fades as the density of economic activities reaches some limit value.
    Keywords: industrial location, negative binomial models, geoadditive models, european union.
    JEL: C14 C21 F14 F23
    Date: 2011–05–02
  10. By: Massimiliano Castellani (Department of Economics, University of Bologna, Bologna, Italy; The Rimini Centre for Economic Analysis (RCEA), Rimini, Italy); Enrico Maria Cervellati (Department of Management, University of Bologna, Bologna, Italy; Luiss Guido Carli, Rome, Italy); Pierpaolo Pattitoni (Department of Management, University of Bologna, Italy; The Rimini Centre for Economic Analysis (RCEA), Rimini, Italy)
    Abstract: Given the relevance of the soccer industry in the economies of several European coun-tries, we analyze the links between soccer match scores, bets and stock returns of all listed European soccer teams. Through an event study methodology, we measure ab-normal returns following wins, ties and losses. Using a Seemingly Unrelated Regres-sion (SUR) model to setup our event study, we find positive abnormal returns follow-ing wins and negative abnormal returns following both ties and losses. Furthermore, using the information of pre-match betting odds, we show that abnormal returns are magnified by unexpected scores.
    Keywords: Information and Market Efficiency; Event Studies; Sports; Gambling; Seemingly Unrelated Regression Equation (SUR)
    JEL: G14 L83 C30
    Date: 2011–05
  11. By: Cceilia Iona Lasino (Istat and Luiss Lab); Giovanna Vallanti (Università Luiss "Guido Carli")
    Abstract: Over the last two decades Italy registered notable improvements in the functioning of labour market. However, such improvements have been accompanied by a deterioration in terms of productivity and competitiveness. This paper provides some evidence in this respect evaluating to what extent labour market reforms might have influenced the poor productivity performance of the Italian economy over the period 1980-2008. We show that labour market deregulation had a negative effect on aggregate labour productivity through both the within and the reallocative components. Our results show that the increased flexibility in the use of temporary contract has led to a lower productivity (level and to a lesser extent growth rate) in all sectors, with a higher impact on those industries with a higher flexibility need. Conversely, the use of temporary contracts has a significant lower effect in industries with higher skill content. The negative effect of the reforms on the reallocative capacity is stronger in those industries with a higher flexibility need that are also the relatively lower productivity sectors in the period 1993-2008.
    Keywords: Productivity, Growth, Labour Market Institutions
    JEL: J08 J23 J24
    Date: 2011
  12. By: Richard Harris (Department of Economics, University of Glasgow); Qian Cher Li (Imperial College, London); John Moffat (University of Strathclyde)
    Abstract: This paper estimates whether sourcing knowledge from and/or cooperating on innovation with higher education institutions impacts on establishment-level TFP and whether this impact differs across domestically-owned and foreign-owned establishments and across the regions of Great Britain. Using propensity score matching, the results show overall a positive and statistically significant impact although there are differences in the strength of this impact across production and non-production industries, across domestically-owned and foreign-owned firms, and across regions. These results highlight the importance of absorptive capacity in determining the extent to which establishments can benefit from linkages with higher education institutions.
    Keywords: Universities; University-Industry knowledge links; Firm-level productivity
    JEL: D24 I23
    Date: 2010–09
  13. By: Harold Creusen; Arjan Lejour
    Abstract: This paper analyses the export market entry decisions of Dutch firms and their subsequent growth or market exit. Exporters, particularly when entering new markets, have to learn about market conditions and to search for new trade relations under uncertainty. In that sense the paper also investigates the role of economic diplomacy and knowledge spillovers from colleague-exporters. We combine detailed international trade data by firm and destination between 2002 and 2008 with firm data and export market haracteristics in order to disentangle the firm and country determinants of successful and less successful export behaviour. First, we find that about 5% of all Dutch exporters have just started in their first market and a similar share of exporters ceases all exports. Still, the starting exporters increase their exports very fast. In each market their export growth in their third year as exporter is about twice as high as for established exporters. Many starters also increase their exports by expanding their number of destinations, but they will retreat swiftly if they are not successful. For all exporters we find that more productive and larger firms are more inclined to enter (additional) export markets, and that larger firms are less likely to leave a market. Market characteristics are important as well. Distance and import tariffs reduce the probability to enter the market and increase the probability to exit. Not only distance to the home country matters, but also the distance to export markets already accessed. Firms seem to follow a stepping stone approach for reaching markets further away (physically and culturally). They first enter more nearby markets before moving to more distant markets. Finally, we find that the presence of support offices abroad and trade missions in destination countries, particularly middle income countries, stimulate the entry of new exporters and the growth of export volume. Knowledge spillovers from exporters with the same destinations have also positive effects on market entry.
    Keywords: strategic export decisions, sequential export market entry and exit, export growth, economic
    JEL: F10 F13
    Date: 2011–05
  14. By: Moritz Heimes (Department of Economics, University of Konstanz, Germany); Steffen Seemann (Department of Economics, University of Konstanz, Germany)
    Abstract: In this paper we analyze executive compensation in Germany for the period 2005-2009. We use a self-collected dataset on compensation arrangements in German corporations to estimate the impact of firm performance and firm risk on executive pay. To be in line with earlier studies in this literature, we first measure firm performance and firm risk based on stock market returns. Our findings support the prediction from agency theory that incentive pay decreases with firm risk. We find, however, that stock market returns have no explanatory power in the presence of accounting based performance measures. Based on accounting data we also find a positive impact of firm performance on executive pay and a negative relationship between firm risk and incentive pay for our sample period. We conclude that shareholders use accounting measures rather than stock market data to evaluate and pay for manager performance. We also find that with accounting data we can explain short-term bonus payments but not long-term oriented compensation in German corporations.
    Keywords: Pay for Performance, Executive Compensation, Incentives
    JEL: G30 J33 M12
    Date: 2010–05–31
  15. By: Jenkins, Gareth
    Abstract: Child poverty in the UK is not unique to times of recession or austerity, but may be made worse by expected job losses, inflation and increases in VAT. Gareth Jenkins of Save the Children UK discusses new research which finds that in some areas of high deprivation there are as many as one in four children in severe poverty, and that government must do more to tackle worklessness and increase financial support to families in desperate need.
    Date: 2011–03–15
  16. By: Halkos, George; Tzeremes, Nickolaos
    Abstract: This paper applies a probabilistic approach to investigate how the top European football clubs’ current value and debt levels influence their performance. Specifically, a bootstrapped conditional data envelopment analysis (DEA) is used in order to measure the effect of football clubs’ current value and debt levels on their obtained efficiency performances. The results indicate that football clubs’ current value levels have a positive influence up to a certain point. But as the current value increases the effect is neutral to football clubs’ performance. At the same time, the empirical evidence suggests that there is no influence on football clubs’ efficiencies associated with lower and medium football clubs’ debt levels while higher debt levels appear to have a direct negative effect.
    Keywords: European football clubs; Data Envelopment Analysis; Nonparametric regression; Bootstrapping; Probabilistic approach
    JEL: C69 C14 L83
    Date: 2011–06
  17. By: John T. Addison (Moore School of Business, University of South Carolina, GEMF, and IZA); Alex Bryson (National Institute of Economic and Social Research and CEP); Paulino Teixeira (Faculdade de Economia/GEMF, University of Coimbra, and IZA); André Pahnke (Institut für Arbeitsmarkt- und Berufsforschung, Bundesagentur für Arbeit); Lutz Bellmann (Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Arbeitsmarkt- und Berufsforschung, Bundesagentur für Arbeit, and IZA)
    Abstract: This paper investigates trends in collective bargaining and worker representation in the German private sector from 2000 to 2008. It seeks to update and widen earlier analyses pointing to a decline in collective bargaining, while providing more information on the dual system as a whole. Using data from the IAB Employment Panel and the German Employment Register, we report evidence of a systematic and continuing erosion of the dual system. Not unnaturally the decline is led by developments in western Germany. One conjecture is that the path of erosion will continue until rough and ready convergence is reached with eastern Germany in a sharp reversal of other post-unification trends.
    Keywords: Trends in collective bargaining and worker representation; Transitions, establishment data.
    JEL: J51 J53
    Date: 2011–05

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