nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒06‒25
eighteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Immigration, Jobs and Employment Protection: Evidence from Europe By Francesco D'Amuri; Giovanni Peri
  2. The impact of reforms on labour market exit probabilities By Rob Euwals; Daniel van Vuuren; Annemiek van Vuren
  3. Use of Time and Value of Unpaid Family Care Work: A Comparison between Italy and Poland By Francavilla, Francesca; Giannelli, Gianna Claudia; Grotkowska, Gabriela; Socha, Mieczyslaw
  4. Assessing gas transit risks: Russia vs. the EU By Le Coq, Chloé; Paltseva, Elena
  5. Labor supply and government programs: A cross-country analysis By Andrés Erosa; Luisa Fuster; Gueorgui Kambourov
  6. Inequality and Public Policy: A Country Study for Bulgaria By Silviya Nikolova; Nikolay Markov; Boyko Nikolov; Nasko Dochev
  7. College Degree Supply, Productivity Spillovers and Occupational Allocation of Graduates in Central European Countries By Anna Lovasz; Barbara Pertold-Gebicka
  8. Welfare Magnets, Taxation and the Location Decisions of Migrants to the EU By Klaus Nowotny
  9. Human capital, social capital and scientific research in Europe: an application of linear hierarchical models By Mathieu Goudard; Michel Lubrano
  10. The Role of Worker Flows in the Dynamics and Distribution of UK Unemployment By Elsby, Michael; Smith, Jennifer C.; Wadsworth, Jonathan
  11. Survey of Photovoltaic Industry and Policy in Germany and China By Thilo Grau; Molin Huo; Karsten Neuhoff
  12. The Effects of Flat Tax on Inequality and Informal Employment: The Case of Albania By Isilda Mara; Edlira Narazani
  13. Are England’s Academies More Inclusive or More ‘Exclusive’? The Impact of Institutional Change on the Pupil Profile of Schools By Joan Wilson
  14. Wage adjustment by Italian firms: any difference during the crisis? A survey-based analysis By Silvia Fabiani; Roberto Sabbatini
  15. Changes in the French defence innovation system: New roles and capabilities for the Government Agency for Defence By Nathalie Lazaric; Valérie Mérindol; Sylvie Rochhia
  16. Working Paper 07-11 - The determinants of industry-level total factor productivity in Belgium By Bernadette Biatour; Michel Dumont; Chantal Kegels
  17. A Contribution to the Public-Private Wage Inequality Debate: The Iconic Case of Romania By Liviu Voinea; Flaviu Mihaescu
  18. Social Contacts and the Economic Performance of Immigrants: A Panel Study of Immigrants in Germany By Kanas, Agnieszka; Chiswick, Barry R.; van der Lippe, Tanja; van Tubergen, Frank

  1. By: Francesco D'Amuri; Giovanni Peri
    Abstract: In this paper we analyze the effect of immigrants on native jobs in fourteen Western European countries. We test whether the inflow of immigrants in the period 1996-2007 decreased employment rates and/or if it altered the occupational distribution of natives with similar education and age. We find no evidence of the first but significant evidence of the second: immigrants took "simple" (manual-routine) type of occupations and natives moved, in response, toward more "complex" (abstract-communication) jobs. The results are robust to the use of an IV strategy based on past settlement of different nationalities of immigrants across European countries. We also document the labor market flows through which such a positive reallocation took place: immigration stimulated job creation, and the complexity of jobs offered to new native hires was higher relative to the complexity of destructed native jobs. Finally, we find evidence that the occupation reallocation of natives was significantly larger in countries with more flexible labor laws. This tendency was particularly strong for less educated workers.
    JEL: J24 J61 J62
    Date: 2011–06
  2. By: Rob Euwals; Daniel van Vuuren; Annemiek van Vuren
    Abstract: <p>Early retirement schemes and disability insurance in the Netherlands have both been reformed during the past decades. The reforms have increased incentives to continue working and have decreased the substitution between early retirement and disability. This study investigates the impact of the reforms on labour market exit probabilities</p><p>We use administrative data for workers in the Dutch health care sector between 1999 and 2006. We estimate a multinomial Logit model for transitions out of the labour force.</p><p>The empirical results suggest that the reforms have been effective, as the labour market participation rate of the elderly has increased. The concept of substitute pathways into retirement seems less relevant today as the results confirm that disability insurance is closed off as an early retirement exit route.</p><p><em>Key words: early retirement, disability insurance, labour supply</em></p><p> </p>
    JEL: C35 J26
    Date: 2011–06
  3. By: Francavilla, Francesca (University of Westminster); Giannelli, Gianna Claudia (University of Florence); Grotkowska, Gabriela (Warsaw University); Socha, Mieczyslaw (Warsaw University)
    Abstract: This study provides a comparison of the size and value of unpaid family care work in two European member States, Italy and Poland. Using the Italian and Polish time use surveys, both the opportunity cost and the market replacement approaches are employed to separately estimate the value of family childcare and care of the elderly. The results show that, overall, in Italy the number of people performing family care work is higher, also due to the larger population. Italians participate somewhat less than Poles in child care, but substantially more in care of the elderly because of demographic factors. However, the huge difference in the value of unpaid family care work, which in Italy exceeds the value of Poland by about eight times, is largely to be attributed to the discrepancy in hourly earnings, average earnings of Poles being about one fifth of those of Italians. In GDP terms, instead, the value of unpaid family care work is more similar, ranging between 3.7 and 4.4 per cent of the Polish GDP and 4.1 and 5 per cent of the Italian GDP, depending on the estimation approach. The national values of these activities are discussed and an interpretation of the country differentials in the family care-taking gender gaps is given in terms of differences in culture, economic development and institutions.
    Keywords: unpaid work, time use, child care, care of the elderly, adult care, Poland, Italy, satellite accounts
    JEL: E01 E26 J13 J14 J16 J22
    Date: 2011–06
  4. By: Le Coq, Chloé (Stockholm Institute of Transition Economics); Paltseva, Elena (Department of Economics, University of Copenhagen)
    Abstract: This paper proposes a Transit Risk Index (TRI) designed to assess the riskiness of pipeline gas imports and to study the effect of introducing new gas routes. TRI controls for gas dependency, transit route diversification, political risks of transit, pipeline rupture probability, and the balance of power between supplying and consuming countries along the transit route. Evaluating TRI for the EU-Russia gas trade, we show that the introduction of the Nord Stream pipeline would further widen already large disparities in gas risk exposure across the EU Member States. The gas risk exposure of the Member States served by Nord Stream would decline. In contrast, EU countries not connected to Nord Stream, but sharing other Russian gas transit routes with the Nord Stream countries, would face greater gas risk exposure. We discuss the implications of our analysis for the design of the common energy policy in the EU.
    Keywords: Gas transit risk; Index; Security of supply; Nord Stream; Common Energy Policy
    JEL: C80 Q40 Q48
    Date: 2011–06–03
  5. By: Andrés Erosa (IMDEA Social Sciences Institute); Luisa Fuster (IMDEA Social Sciences Institute); Gueorgui Kambourov (University of Toronto)
    Abstract: There are substantial cross-country differences in labor supply late in the life cycle (age 50+). A theory of labor supply and retirement decisions is developed to quantitatively assess the role of social security, disability insurance, and taxation for understanding differences in labor supply late in the life cycle across European countries and the United States. The findings support the view that government policies can go a long way towards accounting for the low labor supply late in the life cycle in the European countries relatively to the United States, with social security rules accounting for the bulk of these effects.
    Keywords: social security; disability insurance; labor supply; heterogeneity; life cycle
    JEL: D9 E2 E6 H2 H3 H5 J2
    Date: 2011–06–16
  6. By: Silviya Nikolova; Nikolay Markov; Boyko Nikolov; Nasko Dochev
    Abstract: This paper is an attempt for measuring the impact of public policy on the inequality in Bulgaria. An analysis based on the Bulgarian Household Budget Surveys shows that the tax burden in Bulgaria, nevertheless increasing in the upper quintiles, declined between the beginning of the transition period and the year before the EU accession. Using different inequality measures we have found that despite the limited possibilities of the data, taxation policies also contribute to some extend to inequality reduction in Bulgaria. As regards the social transfers, unemployment benefits and child allowances are found to be the main social payments reducing the inequality among Bulgarian households. Using quantile regression is found that the coefficients of the effective tax rates increase across the quintiles for the entire period. The coefficients associated with the share of VAT expenditures in the total income decrease as one moves from the lowest to the highest quintile of the consumption distribution.
    Date: 2011–05
  7. By: Anna Lovasz (Institute of Economics of the Hungarian Academy of Sciences); Barbara Pertold-Gebicka (School of Economics and Management Aarhus University)
    Abstract: Public funding drives much of the recent growth of college degree supply in Europe, but few indicators are available to assess its optimal level. In this paper, we investigate an indicator of college skills usage - the fraction of college graduates employed in "college" occupations. Gottschalk and Hansen (2003) propose to identify "college" occupations based on withinoccupation college wage premia; we build on their strategy to study the local-labor-market relationship between the share of college graduates in the population and the use of college skills. Empirical results based on worker-level data from NUTS-4 districts in the Czech Republic, Hungary and Slovakia suggest a positive relationship, thus supporting the presence of an endogenous influence of the number of skilled workers on the demand for them.
    Keywords: education, labor demand, college degree supply, occupational allocation, productivity spillovers
    JEL: I28 J24
    Date: 2011–04
  8. By: Klaus Nowotny (WIFO)
    Abstract: Migrants are among the groups most vulnerable to economic fluctuations. As predicted by the "welfare magnet" hypothesis, migrants can therefore be expected to – ceteris paribus – prefer countries with more generous welfare provisions to insure themselves against labour market risks. This paper analyses the role of the welfare magnet hypothesis for migrants to the EU 15 at the regional level. The empirical analysis based on a random parameters logit model shows that the regional location decisions of migrants are mostly governed by income opportunities, labour market conditions, ethnic networks and a common language. There is no strong evidence for the welfare magnet hypothesis in the EU, but the empirical model shows that the income tax system has a large and consistent effect on locational choice.
    Keywords: welfare magnet hypothesis, migration, random parameters logit model
    Date: 2011–04–04
  9. By: Mathieu Goudard (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Michel Lubrano (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: The theory of human capital is one way to explain individual decisions to produce scientific research. However, this theory, even if it reckons the importance of time in science, is too short for explaining the existing diversity of scientific output. The present paper introduces the social capital of Bourdieu (1980), Coleman (1988) and Putnam (1995) as a necessary complement to explain the creation of scientific human capital. This paper connects these two concepts by means of a hierarchical econometric model which makes the distinction between the individual level (human capital) and the cluster level of departments (social capital). The paper shows how a collection of variables can be built from a bibliographic data base indicating both individual behaviour including mobility and collective characteristics of the department housing individual researchers. The two level hierarchical model is estimated on fourteen European countries using bibliometric data in the fields of economics.
    Keywords: Economics of science; human capital; social capital; hierarchical models; European science
    Date: 2011–06–16
  10. By: Elsby, Michael (University of Edinburgh); Smith, Jennifer C. (University of Warwick); Wadsworth, Jonathan (Royal Holloway, University of London)
    Abstract: Unemployment varies substantially over time and across subgroups of the labour market. Worker flows among labour market states act as key determinants of this. We examine how the structure of unemployment across groups and its cyclical movements across time are shaped by changes in labour market flows. Using novel estimates of flow transition rates for the UK over the last 35 years, we decompose unemployment variation into parts accounted for by changes in rates of job loss, job finding and flows via non-participation. Close to two-thirds of the volatility of unemployment in the UK over this period can be traced to rises in rates of job loss that accompany recessions. The share of this inflow contribution has been broadly the same in each of the past three recessions. Decreased job-finding rates account for around one-quarter of unemployment cyclicality and the remaining variation can be attributed to flows via non-participation. Digging deeper into the structure of unemployment by gender, age and education, the flow-approach is shown to provide a richer understanding of the unemployment experiences across population subgroups.
    Keywords: labour market, unemployment, worker flows
    JEL: E24 J6
    Date: 2011–06
  11. By: Thilo Grau; Molin Huo; Karsten Neuhoff
    Abstract: As building-integrated photovoltaic (PV) solutions can meet around one-third of electricity demand in Germany and China, both countries are interested in exploring this potential. PV technologies have demonstrated significant price reductions, but large-scale global application of PV requires further technology improvements and cost reductions along the value chain. We analyze policies in Germany and China, including deployment support, investment support for manufacturing plants and R&D support measures, and we survey the industrial actors they can encourage to pursue innovation. While deployment support has been successful, investment support for manufacturing in these nations has not been sufficiently tied to innovation incentives, and R&D support has been comparatively weak. The paper concludes with a discussion of the opportunities for global policy coordination.
    Keywords: Photovoltaics, Technology Policy, Innovation, Investment Support
    JEL: O31 Q42 Q48
    Date: 2011
  12. By: Isilda Mara; Edlira Narazani
    Abstract: In this study we perform the first econometric attempt to estimate the trade-off between equity and efficiency of tax systems counting for the tax evasion option in a developing country such as Albania. Using the Albanian Living Srandard Measurement Survey (2005, 2008) we estimate a micro-econometric model of labour supply and incorporate the option of participation in regular and irregular labour markets. Swapping the tax rules of 2005 with 2008, we find that the flat tax has not contributed in the reduction of labour informality but rather the increases in regular wages have played an important role in convincing the individuals to move to regular market. Furthermore, we find that controls and audits are more efficient than fines in inducing people to switch from the informal to formal labour market. A similar effect is achieved also when “honest” individuals are endowed with a universal benefit. In distributional terms, calculations of Gini inequality index and Sen’s welfare index demonstrate that the only scenario that would improve welfare index is a progressive tax rule as before 2007. Finally, these results suggest that a kind of progressivity should be reinserted to the taxation system without affecting the attractiveness of the simplicity exercised by the flat tax.
    Date: 2011–05
  13. By: Joan Wilson
    Abstract: In 2002 the former Labour government launched the Academies Programme of school improvement. This scheme has targeted entrenched issues of pupil underachievement within state secondary schools located in deprived areas, by enabling private sponsors to run the renewed schools and by granting Academies independence from local authority control. A total of 203 institutions were established by the end of Labour's time in power (April 2010). This paper considers the efficacy of the scheme in delivering on an objective determined at its inception - that requiring Academies to feature a more inclusive and mixed-ability background of pupils. Administrative information in the National Pupil Database is combined with school-level data to assess how the academic quality and composition of pupils entering year 7 of Academies and how their whole school composition has compared to those in predecessor and non-Academy schools. Difference-in-differences regression analysis is applied to a sample of 33 Academies and 326 control schools over the period 1997-2007. Findings reveal an immediate boost to intake quality among Academies once the policy came into effect and a fall in entry by pupils of weaker prior ability, while sampled Academies have also taken in fewer pupils from underprivileged backgrounds. Thus Academies have actually featured a more 'exclusive' pupil profile. The Coalition government - formed since May 2010 - has extended the policy to allow all state schools to become Academies. Newer Academies, like the original ones, may adapt their admissions in a performance-favouring way, implying a worsening of educational opportunity under both policy versions.
    Keywords: Academies, school improvement, school renewal, institutional change, pupil profile, pupil intake, pupil composition
    JEL: I2 I21 I28
    Date: 2011–05
  14. By: Silvia Fabiani (Banca d'Italia); Roberto Sabbatini (Banca d'Italia)
    Abstract: The study analyses wage adjustment by Italian firms on the basis of information collected through a coordinated survey carried out in 17 European countries in two waves (at the beginning of 2008 and in the summer of 2009). The pre-crisis evidence indicates that the degree of wage rigidity is relatively high in Italy: wages remain unchanged on average for about two years, against an average of just over one year in the other countries. Italian firms hardly cut nominal wages, reflecting not only institutional constraints, but also an attempt to avoid a negative impact on their productivity. During the economic recession the firms most severely affected by the fall in demand reduced their costs mainly by adjusting the input of labour (in terms of both employment and hours worked). A higher incidence of skilled and white-collar workers was accompanied by greater recourse to strategies aimed at containing non-labour costs, presumably in order to preserve the human capital accumulated.
    Keywords: survey, wage rigidity, economic recession
    JEL: D21 E30 J31
    Date: 2011–06
  15. By: Nathalie Lazaric (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis); Valérie Mérindol (IMRI - Université Paris Dauphine - Paris IX); Sylvie Rochhia (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis)
    Abstract: Defence innovation systems are structured around two main groups of players that interact in the development of complex programmes: the state (the client and the government agency) and the systems integrators. Technological and institutional changes since the 1990s have affected the division of labour and knowledge in the industry. In this paper we show the origins of these changes based on information derived from 45 qualitative interviews conducted between 2000 and 2008, which demonstrate the new capabilities that have been created within the national innovation system (NIS). We explain how the role and the capabilities of the French Government Agency for Defence (Direction Générale de l'Armement - DGA) have developed from " project architect " to " project manager ". These new capabilities create new interactions in the French Defence innovation system and new roles for the DGA.
    Keywords: Technological systems, Capabilities, Knowledge, Government agency, Co-evolution, National Innovation System, Defence, Institutional Change.
    Date: 2011
  16. By: Bernadette Biatour; Michel Dumont; Chantal Kegels
    Abstract: In this Working Paper the impact of potential determinants of total factor productivity, i.e. the part of output that cannot be explained by the quantity of production factors, is estimated for Belgium using industry-level data for the period 1988-2007.
    JEL: C82 D24 F43 O47
    Date: 2011–04–26
  17. By: Liviu Voinea; Flaviu Mihaescu
    Abstract: This paper studies the public-private wage inequality in Romania. Although public sector employment is perceived as safer and offers more benefits, we find that in Romania it also offers higher wages, after controlling for experience, education, and gender. Decomposing the public-private wage premium into the effect of personal characteristics, coefficients, and residuals, we show that only about half of this premium can be attributed to personal characteristics. The premium is increasing across the wage distribution, leading to more inequality in the public sector. We also find the effects of self-selection are negligible, the premium being still positive and significant after controlling for this.
    Keywords: Romania, wage premium, public sector
    JEL: J45 J31 J24
    Date: 2011–05
  18. By: Kanas, Agnieszka (Utrecht University); Chiswick, Barry R. (George Washington University); van der Lippe, Tanja (Utrecht University); van Tubergen, Frank (Utrecht University)
    Abstract: Using data from the German Socio-Economic Panel, we examined the impact of social contacts on immigrant occupational status and income. In addition to general social contacts, we also analyzed the effects of bonding (i.e., co-ethnic) and bridging (i.e., interethnic) ties on economic outcomes. Results show that general social contacts have a positive effect on the occupational status and, in particular, annual income of immigrants. We also find that bridging ties with Germans lead to higher occupational status, but not to increased income. These effects remain visible even when social contacts are measured (at least) one year prior to the economic outcomes, as well as when earlier investments in German human capital are considered. Finally, we show that co-ethnic concentration in the region of residence weakly affects economic returns to German language proficiency and schooling.
    Keywords: occupational status, social contacts, immigrants, income, panel data
    JEL: F22 J61 Z13
    Date: 2011–06

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