nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒08‒02
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Migration Restrictions and Criminal Behavior: Evidence from a Natural Experiment By Giovanni Mastrobuoni; Paolo Pinotti
  2. Smart specialisation, regional growth and applications to EU cohesion policy By Philip McCann; Raquel Ortega-Argilés
  3. Removing Cross-Border Capacity Bottlenecks in the European Natural Gas Market: A Proposed Merchant-Regulatory Mechanism By Anne Neumann; Juan Rosellón; Hannes Weigt
  4. Changes in taxation and their impact on economic growth in the European Union. By Szarowska, Irena
  5. A Metafrontier Analysis of Technical Efficiency of Selected European Agricultures By Barnes, Andrew; Revoredo-Giha, Cesar
  6. Regional wage differences in the Netherlands: Micro-evidence on agglomeration externalities By Stefan Groot; Henri de Groot
  7. How have Europeans Grown so Tall? By Hatton, Timothy J.
  8. Regulatory federalism and industrial policy in broadband telecommunications By Daniel Montolio; Francesc Trillas
  9. To assemble to resemble? A study of tax disparities among French municipalities By Marie-Laure Breuillé; Pascale Duran-Vigneron; Anne-Laure Samson
  10. Graduate labor mismatch in Central and Eastern Europe By Aleksander Kucel; Montserrat Vilalta-Bufi; Peter Robert
  11. Socio-Spatial Mobility in British Society By Clark, William A.V.; van Ham, Maarten; Coulter, Rory
  12. Wage inequality in the Netherlands: Evidence, trends and explanations By Stefan Groot; Henri de Groot
  13. Beyond Ideological Battles: A Strategic Analysis of Hedge Fund Regulation in Europe By Cornelia Woll
  14. Does Raising the Retirement Age Increase Employment of Older Workers? By Staubli, Stefan; Zweimüller, Josef
  15. Population Aging and Individual Attitudes toward Immigration: Disentangling Age, Cohort and Time Effects By Lena Calahorrano
  16. Linear and non linear growth models using mixed modeling: An application on European Import volumes By Markianidou P.; Weeren A.
  17. Where to Put the Kids? Effects of Type of Non-parental Child Care on Pre-teen Skills and Risky Behavior By Datta Gupta, Nabanita; Simonsen, Marianne
  18. The NRU and the Evolution of Regional Disparities in Spanish Unemployment By Roberto Bande; Marika Karanassou
  19. Immigration, Unemployment and Growth in the Host Country: Bootstrap Panel Granger Causality Analysis on OECD Countries By Boubtane, Ekrame; Coulibaly, Dramane; Rault, Christophe
  20. The effectiveness of English secondary schools for pupils of different ability levels By Lorraine Dearden; John Micklewright; Anna Vignoles

  1. By: Giovanni Mastrobuoni (Collegio Carlo Alberto); Paolo Pinotti (Bank of Italy)
    Abstract: We estimate the causal effect of immigrants' legal status on criminal behavior exploiting exogenous variation in migration restrictions across nationalities driven by the last round of the European Union enlargement. Unique individual-level data on a collective clemency bill enacted in Italy five months before the enlargement allow us to compare the post-release criminal record of inmates from new EU member countries with a control group of pardoned inmates from candidate EU member countries. Difference-in-differences in the probability of re-arrest between the two groups before and after the enlargement show that obtaining legal status lowers the recidivism of economically motivated offenders, but only in areas that provide relatively better labor market opportunities to legal immigrants. We provide a search-theoretic model of criminal behavior that is consistent with these results.
    Keywords: Immigration, Crime, Legal Status
    JEL: F22 K42 C41
    Date: 2011–07
  2. By: Philip McCann (University of Groningen); Raquel Ortega-Argilés (Instituto Superior Técnico)
    Abstract: This paper examines the arguments underpinning the smart specialisation concept, an idea which originally emerged from the sectoral growth literature, and one which has recently been applied with to the regional policy context. The shift from a sectoral to a regional context appears prima facie to be quite straightforward but this paper explains that translating the idea to a regional policy context is rather more complex that it at first appears and implies some changes in both interpretation and implications. The outcomes of this are that in a regional policy setting the smart specialisation logic is seen to be broadly consistent with the overall reforms of EU Cohesion Policy. However, in a regional policy setting there is no reason why ICTs should be prioritised over many forms of intangible capital, and the promotion of technological diversification via entrepreneurship may need to be related to specific sectors or activities.
    Keywords: Smart, specialisation, EU, cohesion policy, innovation, sector, place-based
    JEL: O31 O33 R11 R58
    Date: 2011
  3. By: Anne Neumann; Juan Rosellón; Hannes Weigt
    Abstract: We propose a merchant-regulatory framework to promote investment in the European natural gas network infrastructure based on a price cap over two-part tariffs. As suggested by Vogelsang (2001) and Hogan et al. (2010), a profit maximizing network operator facing this regulatory constraint will intertemporally rebalance the variable and fixed part of its two-part tariff so as to expand the congested pipelines, and converge to the Ramsey-Boiteaux equilibrium. We confirm this with actual data from the European natural gas market by comparing the bi-level price-cap model with a base case, a no-regulation case, and a welfare benchmark case, and by performing sensitivity analyses. In all cases, the incentive model is the best decentralized regulatory alternative that efficiently develops the European pipeline system.
    Keywords: regulation, transportation network, investment
    Date: 2011
  4. By: Szarowska, Irena
    Abstract: The aim of the paper is to analyze changes in taxation and their impact on economic growth in the European Union. The analysis is performed on adjusted annual panel data of 24 European Union countries in a period 1995–2008. Panel regression with fixed effects is used as a basic method of research. The panel regression is based on analysis the effect of total tax quota changes on GDP growth in model 1, of changes in its components (social contribution, direct and indirect tax quotas) in model 2 and of personal and corporate income tax quota changes in model 3. Results of empirical tests verify statistically significant negative effect of tax burden on GDP growth. Total tax quota increased by 1% decreases the GDP growth rate by 0.29% in the same year. Estimations confirm a statistically significant negative effect of direct taxes on GDP growth as well. A cut in the direct tax quota by 1% raises the GDP growth rate by 0.43%. The model also presents a high negative impact of an increase in the corporate income tax quota on GDP growth (a value of the regression coefficient is minus 1.28%) expresses the high negative. The effect of social contribution quota on GDP growth is not statistically significant in any estimation.
    Keywords: taxation; tax burden; economic growth; panel regression
    JEL: E62 C23 H25
    Date: 2010–12–17
  5. By: Barnes, Andrew; Revoredo-Giha, Cesar
    Abstract: Technical efficiency refers to the situation where it is impossible for a firm to produce, with the given know-how, (1) a larger output from the same inputs or (2) the same output with less of one or more inputs without increasing the amount of other inputs. In practice, the interest is on the relative position in terms of efficiency of a particular firm with respect to others. Therefore, technical efficiency is characterised by the relationship between observed production and some ideal or potential production (Greene, 1993). Although the beginning of the efficiency work can be traced to the 1950s (Farrell, 1957), there have been a growing interest on its use in benchmarking performance, predominantly as a means of identifying best practice and improving the efficiency of resource use within the agricultural industry (e.g., Defra 2004, SAC 2009). This paper deals with the estimation of technical efficiency for the agricultural sectors in several European countries and moreover, it aims to compare the efficiency amongst them using a metafrontier analysis. The use of this type of analysis is justified because a frontier, which represents the best available technology within a particular region/country cannot be strictly compared across other regions/countries, unless they operate under the same production set. The metafrontier analysis has been developed in a number of studies (Battese and Rao, 2002; Nkamleu et al., 2006; Chen and Song, 2006; OâDonnell et al., 2008.) The metafrontier analysis in this paper, which uses data from the Farm Accountancy data Network (FADN), was focused on four farm types: two specialised farming types (i.e., specialist cereals, oilseed and protein crops and specialist dairying) and two more mixed farming sets (i.e., general field cropping and mixed farms), and was applied to a total of 11 countries namely Belgium, Denmark, France, Germany, Hungary, Ireland, Italy, Netherlands, Poland, Spain and the UK. For most of the countries the information was available from 1995 until 2007, excepting Hungary and Poland, for which it was available only since 2004. Also note that not all the farm types were available for all the countries. The structure of the paper is as follows: it starts presenting an overview of the metafrontier analysis used to compare technical efficiency amongst the European countries. It is followed by the empirical work, which comprises a description of the data used, the estimation and discussion of the results. Finally we present conclusions.
    Keywords: Research and Development/Tech Change/Emerging Technologies,
    Date: 2010–11
  6. By: Stefan Groot; Henri de Groot
    Abstract: <p>Based on micro-data on individual workers for the period 2000–2005, we show that regional wage differentials in the Netherlands are small but present. </p><p>A large part of these differentials can be attributed to individual characteristics of workers. Remaining effects are partially explained by variations in employment density, with an elasticity of about 3.8 percent and by Marshall-Arrow-Romer externalities, where doubling the share of a (2-digit NACE) industry results in a 2.4 percent higher productivity.</p><p>We find evidence for a negative effect of competition (associated with Porter externalities) and diversity (associated with Jacobs externalities).</p>
    JEL: J24 O12 R11 R23
    Date: 2011–07
  7. By: Hatton, Timothy J.
    Abstract: Increases in human stature are seen as a key indicator of improvement in the average health of populations. The literature associates stature with a variety of socioeconomic variables, and much of the focus is on the nineteenth century and on the last 50 years. In this paper I present and analyse a new dataset for the average height of adult male cohorts, from the mid-nineteenth century to 1980, in fifteen European countries. In little more than a century average height increased by 11cm--representing a dramatic improvement in health. Interestingly, there was a distinct acceleration in the period spanning the two World Wars and the Great Depression. I examine the influence of socioeconomic variables on height through the two key channels: nutrition and the disease environment. The evidence suggests that the most important single cause of increasing height was the improving disease environment as reflected by the fall in infant mortality. Rising income and education and falling family size had more modest effects. Improvements in health care are hard to identify and the effects of the welfare state spending seem to have been small.
    Keywords: Health; Human Stature; Twentieth Century Europe
    JEL: I12 I38 N24
    Date: 2011–07
  8. By: Daniel Montolio (Universitat de Barcelona & IEB); Francesc Trillas (Universitat Autònoma de Barcelona, SP-SP Center (IESE) & IEB)
    Abstract: We analyse the impact of regulation, industrial policy and jurisdictional allocation on broadband deployment using a theoretical model and an empirical estimation. Although central powers may be more focused and internalize interjurisdictional externalities, decentralized powers may internalize local horizontal policy spillovers and use a diversity of objectives as a commitment device in the presence of sunk investments. The latter may, for instance, alleviate the collective action problem of the joint use of rights of way and other physical infrastructures. In the empirical exercise, using data for OECD and EU countries for the period 1999-2006, we examine whether centralization promotes new telecommunications markets, in particular the broadband access market. The existing literature, in the main, claims it does, but we find no support for this claim in our data. Our results show that indicators of national industrial policy are a weakly positive determinant of broadband deployment and that different measures of centralization are either irrelevant or have a negative impact on broadband penetration.
    Keywords: Regulation, industrial policy, decentralization, broadband
    JEL: L50 L96 K23 H77
    Date: 2011
  9. By: Marie-Laure Breuillé (INRA); Pascale Duran-Vigneron (University of Exeter); Anne-Laure Samson (Université 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). Moreover, 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, fiscal disparities
    JEL: H23 H7
    Date: 2011
  10. By: Aleksander Kucel; Montserrat Vilalta-Bufi; Peter Robert (Universitat de Barcelona)
    Abstract: Using crosssection data from the REFLEX/HEGESCO surveys, this paper explores the likelihood of educationjob mismatch in Central and Eastern Europe. We classify countries in two groups according to the signaling strength of their educational credentials: the occupational labor market group (Poland, Czech Republic and Slovenia) and the internal labor market group (Hungary, Lithuania and Estonia). We analyze three types of mismatch: the vertical mismatch (under/overeducation), horizontal mismatch (inadequacy of the field of study) and, finally, skills mismatch. We are particularly interested in studying how fields of study and individual competencies affect mismatch in the labor market in these economies. Results indicate that fields of study and individual competencies both significantly affect the likelihood of various types of mismatch. There are important differences between occupational and internal labor market structures in terms of mismatch determinants.
    Keywords: competencies, educationlabor mismatch, occupational labor market, fields of study, eastern europe, internal labor market, overeducation
    JEL: I28 J44 I23 J24
    Date: 2011
  11. By: Clark, William A.V. (University of California, Los Angeles); van Ham, Maarten (Delft University of Technology); Coulter, Rory (University of St. Andrews)
    Abstract: The research reported in this paper examines the nature and extent of socio-spatial mobility in the United Kingdom. In contrast with previous studies, we do not only investigate who moves out of deprived neighbourhoods, but our models cover the entire spectrum of neighbourhoods and provide a more complete interpretation of the process of mobility across socio-spatial structures. We use the Index of Multiple Deprivation (IMD) to classify neighbourhoods defined as small areas containing approximately 1500 people. We use the data from all available waves of the British Household Panel Survey (BHPS) to trace moves between these neighbourhoods, classified into deprivation deciles. We define upward socio-spatial mobility as moving to neighbourhoods with lower levels of deprivation. The focus on residential choices and the outcomes – residential sorting – allows us to measure the fluidity of the British social structure. We show that restricted ability to compete for the better neighbourhoods combines with residence in neighbourhoods with relatively high degrees of deprivation to limit opportunities for social mobility. The analysis shows that education and income play critical roles in the ability of individuals to make neighbourhood and decile gains when they move. There are also powerful roles of being unemployed and being (and becoming) a social renter. Both these latter effects combine to seriously restrict the possibilities for socio-spatial movement for certain groups. The results suggest serious structural barriers to socio-spatial mobility in British society, barriers which are directly related to the organisation of the housing market.
    Keywords: residential sorting, residential mobility, socio-economic status, deprivation, neighbourhoods
    JEL: J61 R23
    Date: 2011–07
  12. By: Stefan Groot; Henri de Groot
    Abstract: <p>Using detailed micro data on the entire wage distribution in the Netherlands, this paper examines trends in Dutch (real pre-tax) wage inequality between 2000 and 2008. </p><p>For many years, the Netherlands has been considered an exception to the general trend of growing wage inequality that most OECD countries have experienced since the 1980s. This OECD trend is generally explained by increasing relative demand for skilled labour due to skill biased technological progress and – to a lesser extent – by globalization.</p><p>Using detailed micro data on the entire wage distribution in the Netherlands, this paper examines trends in Dutch (real pre-tax) wage inequality between 2000 and 2008. We show that the aggregate flatness of the distribution hides dynamics between different groups and regions. We find that inequality, after correcting for observed worker characteristics, decreased somewhat at the lower half of the wage distribution, while increasing slightly at most of the upper half (both before and after correcting for differences in human capital). Residual wage inequality is high and increasing in most larger cities, which is in line with recent evidence on the increasing importance of agglomeration externalities.</p>
    JEL: D31 E24 J31 O15 R23
    Date: 2011–07
  13. By: Cornelia Woll
    Abstract: The highly politicized debate about the recent Alternative Investment Fund Manager (AIFM) Directive of the European Union led many observers to suspect an ideological battle between countries seeking to impose transnational regulation on financial service industries such as hedge funds and liberal market economies insisting on the benefits of market discipline in order to protect their financial centers. The battle that appeared to particularly pit France against the United Kingdom can thus be interpreted as an example of a regulatory paradigm shift in the aftermath of the crisis. This article cautions against such an ideas-centered account of financial regulation and points to the economic interests that drove the French and German agendas. However, contrary to the assumptions of traditional political economy approaches, national preferences were not simply defined by the aggregate of a country’s economic interests. Rather, industry success in shaping government positions on alternative investment regulation crucially depended on how a given industry fit into the government’s overarching geo-political agenda. By highlighting this feedback loop between government strategy and industry lobbying, the paper proposes a strategic analysis of financial regulation, as opposed to accounts that consider positions to be pre-determined by ideas or socio-economic structures.
    Keywords: economic policy; financial markets; ideas; liberalization; regulation
    Date: 2011–07–22
  14. By: Staubli, Stefan (University of St. Gallen); Zweimüller, Josef (University of Zurich)
    Abstract: This paper studies how an increase in the minimum retirement age affects the labor market behavior of older workers. Between 2000 and 2006 the Austrian government gradually increased the early retirement age from 60 to 62.2 for men and from 55 to 57.2 for women. Using administrative data on the universe of Austrian private-sector employees, the results from the empirical analysis suggest that this policy change reduced retirement by 19 percentage points among affected men and by 25 percentage points among affected women. The decline in retirement was accompanied by a sizeable increase in employment of 7 percentage points among men and 10 percentage points among women, but had also important spillover effects into the unemployment insurance program. Specifically, the unemployment rate increased by 10 percentage points among men and 11 percentage points among women. In contrast, the policy change had only a small impact on the share of individuals claiming disability or partial retirement benefits.
    Keywords: early retirement, retirement age, labor supply, policy reform
    JEL: J14 J26
    Date: 2011–07
  15. By: Lena Calahorrano
    Abstract: In the face of rising old-age dependency ratios in industrialized countries like Germany, politicians and their electorates discuss the loosening of immigration policies as one policy option to ensure the sustainability of public social security systems. The question arises whether this policy option is feasible in aging countries: older individuals are typically found to be more averse to immigration. However, cross-sectional investigations may confound age with cohort effects. This investigation uses the 1999-2008 waves of the German Socio-Economic Panel to separate the effect of age on immigration attitudes from cohort and also from time effects. Over the life cycle stated immigration concerns are predicted to increase well into retirement and decrease afterward. Relative to other issues, immigration concerns are found to actually decrease over the life cycle.
    Keywords: Immigration, demographic change, political economy
    JEL: D78 F22 J10
    Date: 2011
  16. By: Markianidou P.; Weeren A.
    Abstract: The purpose of this paper is the identification of appropriate growth models for trade volumes as a policy tool. The methodology utilized is based on linear and nonlinear mixed modeling. The specifications tested are the linear, the exponential, the logarithmic and the logistic model. The focus lies on the imports of Europe from the world. We present two pilot cases corresponding to different levels of aggregation in terms of country groups and product categories, thus emphasizing the differences between aggregate and disaggregate approaches. The core econometric finding suggests that no clear superiority can be attributed to a single growth model specification on either level of aggregation. Therefore, the implications of each specification on policy decision making is discussed and a recommendation on the use of such models for policy making is made. The growth models are further employed for the purpose of trend extrapolation, to initiate a discussion on the role and responsibility of transport policies implemented today based on alternative future scenarios 20 years ahead.
    Date: 2011–07
  17. By: Datta Gupta, Nabanita (Aarhus School of Business); Simonsen, Marianne (University of Aarhus)
    Abstract: This paper investigates pre-teenage effects of the choice of type of non-parental child care at age three (preschool relative to more informal family day care). We exploit a Danish panel data child survey merged with administrative records along with a pseudo-experiment that generates variation in the take-up of preschool across municipalities. As outcomes, we consider measures of overall and risky behavior in addition to objective and self-evaluated abilities. We find no strong evidence that one type of non-parental care outperforms the other, though children who have been placed in preschool tend to like school better.
    Keywords: child care, skills, risky behaviors, evaluation
    JEL: J13
    Date: 2011–07
  18. By: Roberto Bande (University of Santiago and IDEGA); Marika Karanassou (Queen Mary, University of London and IZA)
    Abstract: On both theoretical and empirical grounds, this paper provides evidence that refutes the natural rate of unemployment (NRU) hypothesis as an explanation of the evolution of regional disparities in the unemployment rate. We first present our analytical framework, which follows the chain reaction theory (CRT) of unemployment and argues that (i) a system of interactive labour market equations, rather than a single-equation unemployment rate model, is better equipped to accommodate unemployment dynamics, and (ii) due to the interplay of frictions and growth in labour markets, the NRU ceases to be an attractor of the unemployment rate time path. We then provide evidence that the Spanish economy is characterised by large and persistent disparities in the regional unemployment rates. Through standard kernel density tecnhiques, we demonstrate the existence of marked differences between two groups of high and low unemployment regions that remain stable in their composition through time. Finally, we review our empirical labour market model for each group of regions and evaluate the corresponding natural rates. Our findings confirm that the evolution of regional disparities cannot be attributed to disparities in the natural rates, given that these, although different, do not act as an attractor of unemployment. Thus, the NRUs offer little help in the formulation of labour market policies.
    Keywords: Regional unemployment, Disparities, Kernel, Natural rate, Frictional growth
    JEL: R23 J64
    Date: 2011–07
  19. By: Boubtane, Ekrame (University Paris 1); Coulibaly, Dramane (CEPII, Paris); Rault, Christophe (University of Orléans)
    Abstract: This paper examines the causality relationship between immigration, unemployment and economic growth of the host country. We employ the bootstrap panel Granger causality testing approach of Kónya (2006) that allows to test for causality on each individual country separably by accounting for dependence across countries. Using annual data over the period 1980-2005 for 22 OECD countries, we find that, only in Portugal, unemployment negatively causes immigration, while in any country, immigration does not cause unemployment. We also find that, in France, Iceland, Norway and United Kingdom, growth positively causes immigration, while in any country, immigration does not cause growth.
    Keywords: immigration, growth, unemployment, Granger causality
    JEL: E20 F22 J61
    Date: 2011–07
  20. By: Lorraine Dearden (Institute for Fiscal Studies, 7 Ridgmount Street, London, WC1E 7AE; Institute of Education, University of London, 20 Bedford Way, London WC1H 0AL, UK.); John Micklewright (Depatment of Quantitative Social Science - Institute of Education, University of London.); Anna Vignoles (Department of Quantitative Social Science, Institute of Education, University of London. 20 Bedford Way, London WC1H 0AL, UK.)
    Abstract: 'League table' information on school effectiveness in England generally relies on either a comparison of the average outcomes of pupils by school, e.g. mean exam scores, or on estimates of the average value added by each school. These approaches assume that the information parents and policy-makers need most to judge school effectiveness is the average achievement level or gain in a particular school. Yet schools can be differentially effective for children with differing levels of prior attainment. We present evidence on the extent of differential effectiveness in English secondary schools, and find that even the most conservative estimate suggests that around one quarter of schools in England are differentially effective for students of differing prior ability levels. This affects an even larger proportion of children as larger schools are more likely to be differentially effective.
    Keywords: school effectiveness, school choice, value added, England
    JEL: I2
    Date: 2011–07–22

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