nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒08‒09
sixteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Why should support schemes for renewable electricity complement the EU emissions trading scheme? By Lehmann, Paul; Gawel, Erik
  2. What Explains Prevalence of Informal Employment in European Countries: The Role of Labor Institutions, Governance, Immigrants, and Growth By Hazans, Mihails
  3. Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency By Bargain, Olivier; Dolls, Mathias; Neumann, Dirk; Peichl, Andreas; Siegloch, Sebastian
  4. Les femmes et le travail à temps partiel en Europe By Salladarré, Frédéric; Hlaimi, Boubaker
  5. Labor Supply Elasticities in Europe and the US By Olivier Bargain; Kristian Orsini; Andreas Peichl
  6. Emigration Triggers: International Migration of Polish Workers between 1994 and 2009 By Katarzyna Budnik
  7. Analysis of Regional Innovation Performance in Portugal - Results from an External Logistic Biplot Method By Purificacion Vicente Galindo; Teresa de Noronha Vaz; Peter Nijkamp; Eric de Noronha Vaz
  8. The Double German Transformation: Changing Male Employment Patterns in East and West Germany By Julia Simonson; Laura Romeu Gordo; Nadiya Kelle
  9. Which households use consumer credit in Europe? By Silvia Magri; Raffaella Pico; Cristiana Rampazzi
  10. Incentives of Retirement Transition for Elderly Workers: An Analysis of Actual and Simulated Replacement Rates in Ireland By Li, Jinjing; O'Donoghue, Cathal
  11. Estimation of a Health Production Function: Evidence from East-European Countries. By Bichaka Fayissa; Anca Traian
  12. Informal Caring and Labour Market Outcomes Within England and Wales By Drinkwater, Stephen
  13. Exploring the factors driving automotive exports in OECD countries By Jochem, Patrick; Schleich, Joachim
  14. Disability, health and retirement in the United Kingdom By James Banks; Richard Blundell; Antoine Bozio; Carl Emmerson
  15. Assessment of the Labour Market in Serbia By Vladimir Gligorov; Hermine Vidovic; Kosovka Ognjenović
  16. Attracting FDI in Business Services to Improve Manufacturing Performance and Competitiveness: Evidence from the Italian Provinces By Massimo Armenise; Giorgia Giovannetti; Gianluca Santoni

  1. By: Lehmann, Paul; Gawel, Erik
    Abstract: In virtually all EU Member States, the EU Emissions Trading Scheme (EU ETS) is complemented by support schemes for electricity generation from renewable energy sources (RES-E). This policy mix has been subject to strong criticism. It is mainly argued that RES-E schemes contribute nothing to emissions reduction and undermine the cost-effectiveness of the EU ETS. Consequently, many scholars suggest the abolition of RES-E schemes. However, this conclusion rests on quite narrow and unrealistic assumptions about the design and performance of markets and policies. This article provides a systematic and comprehensive review and discussion of possible rationales for combining the EU ETS with RES-E support schemes. The first and most important reason may be restrictions to technology development and adoption. These may be attributed to the failure of markets as well as policies, and more generally to the path dependency in socio-technical systems. Under these conditions, RES-E schemes are required to reach sufficient levels of technology development. In addition, it is highlighted that in contrast to the EU ETS RES-E support schemes may provide benefits beyond mitigating climate change. --
    Keywords: EU Emissions Trading System,market failure,path dependency,policy failure,policy mix,renewable energies,subsidies
    Date: 2011
  2. By: Hazans, Mihails (University of Latvia)
    Abstract: European Social Survey data on 30 countries, covering years 2004-2009, are used to look into joint institutional [and other macro] determinants of the rates of dependent employment without a contract, informal self-employment, and unemployment (secondary jobs are not accounted for). Consistently with theoretical predictions, quality of business environment has a significant negative impact on prevalence of both types of informal employment. The share of non-contracted employees is negatively affected by perceived quality of public services and is positively related to economic growth. GDP per capita has a positive impact on informality in Europe at large and within Eastern and Southern Europe. Other things equal, the share of non-contracted employees in the labor force across all European countries increases with the minimum-to-average wage ratio, with union density, with the share of first and second generation immigrants, and with income inequality, but falls with stricter employment protection legislation (EPL) and higher tax wedge on labor. Thus it appears that in Europe at large, labor cost effects of EPL and taxes are weaker than their impact via perceptions of job security and law enforcement, along with tax morale and the income effect. Yet the EPL effect on informality is positive (i.e., cost-related) when either Eastern and Southern Europe or Western and Northern Europe are considered separately. Furthermore, within Western and Northern Europe, the minimum wage effect is negative, whilst within Eastern and Southern Europe, the union effect is negative. Various panel data methods are used to confirm the robustness of the results.
    Keywords: labor market institutions, informal employment, immigrants, ethnic minorities
    JEL: J08 J21 J51 J61 K31
    Date: 2011–07
  3. By: Bargain, Olivier; Dolls, Mathias; Neumann, Dirk; Peichl, Andreas; Siegloch, Sebastian
    Abstract: Whether observed differences in redistributive policies across countries are the result of differences in social preferences or efficiency constraints is an important question that paves the debate about the optimality of welfare regimes. To shed new light on this question, we estimate labor supply elasticities on microdata and adopt an inverted optimal tax approach to characterize the redistributive preferences embodied in the welfare systems of 17 EU countries and the US. Implicit social welfare functions are broadly compatible with the fiction of an optimizing Paretian social planner. Some exceptions due to generous demogrant transfers are consistent with the ignorance of behavioral responses by some European governments and are partly corrected by recent policy developments. Heterogeneity in leisure-consumption preferences somewhat affect the international comparison in degrees of revealed inequality aversion, but differences in social preferences are significant only between broad groups of countries.
    Date: 2011–08–01
  4. By: Salladarré, Frédéric; Hlaimi, Boubaker
    Abstract: This study provides an analysis of the determinants of female part-time employment in 18 European countries. The distinction between short and long part-time allowed us to highlight some differences. Female part-timers are often married mothers and hold less secure jobs within the public sector. In addition, long part-time seems to stand out by economic conditions more favorable in terms of security. Our decomposition of the working time suggests that the differences between long part-time and short part-time appear to be stronger than differences between full-time and short part-time and working conditions of both long part-time and full-time may justify these differences.
    Keywords: female part time work; full time work; working time; decomposition
    JEL: J41 J21 J22
    Date: 2011–08–01
  5. By: Olivier Bargain (University College Dublin); Kristian Orsini (University of Leuven); Andreas Peichl (University of Cologne)
    Abstract: Despite numerous studies on labor supply, the size of elasticities is rarely com- parable across countries. In this paper, we suggest the first large-scale international comparison of elasticities, while netting out possible differences due to methods, data selection and the period of investigation. We rely on comparable data for 17 Euro- pean countries and the US, a common empirical approach and a complete simulation of tax-benefit policies affecting household budgets. We find that wage-elasticities are small and vary less across countries than previously thought, e.g., between .2 and .6 for married women. Results are robust to several modeling assumptions. We show that differences in tax-benefit systems or demographic compositions explain little of the cross-country variation, leaving room for other interpretations, notably in terms of heterogeneous work preferences. We derive important implications for research on optimal taxation.
    Keywords: household labor supply, elasticity, taxation, Europe, US
    Date: 2011–07–27
  6. By: Katarzyna Budnik (National Bank of Poland, Economic Institute; Warsaw School of Economics)
    Abstract: This paper analyzes the emigration propensity of Polish workers between 1994 and 2009. Particular attention is paid to a labour market situation of prospective temporary emigrants, the role of developments on host labour markets and the importance of an open-door policy. The Polish household survey data suggest that temporary emigrants are generally young, more frequently male than female, well educated but with less labour market experience, and have less family commitments than stayers. Other things equal, non-employed are twice that likely to emigrate as employed. The propensity to emigrate varies substantially among the employed. Farmers and employees employed on permanent contracts or in jobs with a high social prestige (managerial or specialist positions) are least probable to leave Poland. The highest propensity to emigrate is observed among temporarily employed or helping family members. The introduction of an open-door policy by majority of the European Economic Area countries after 2004 significantly facilitated emigration from Poland and increased the share of workers leaving to countries with the more liberal immigration regime. The open-door policy within the European Economic Areas amplifies responses of Polish workers to cyclical fluctuations in employment opportunities abroad. Similar changes in the unemployment rate (real wages) abroad lead to more pronounced reaction of temporary emigration or return migration flows, then before the European Union enlargement.
    Keywords: emigration, EU enlargement, open-door policy, labour market flexibility
    JEL: C34 C35 J61
    Date: 2011
  7. By: Purificacion Vicente Galindo (University of Salamanca, Spain, and CIEO, University of the Algarve, Faro, Portugal); Teresa de Noronha Vaz (CIEO, University of the Algarve, Faro, Portugal); Peter Nijkamp (VU University Amsterdam, The Netherlands); Eric de Noronha Vaz (Institute of Statistics and Information Management, Universidade Nova de Lisboa, and CIEO, University of the Algarve, Faro, Portugal)
    Abstract: Portuguese strategic choices regarding innovation and R&D policy have, over the past two decades, produced various positive achievements, in which the regions of Lisbon and Algarve have taken the lead, and are the only ones in the country to converge towards the European average growth rate. Regarding the other Portuguese regions - despite significant national growth rates in the 1990s as well as a successful attempt to cope with the EMU -, these are lagging behind the EU average with respect to gross production, investment or employment generation. Meanwhile, one of the greatest public policy efforts was to diffuse much of the European funds across the entrepreneurial sector. After a long pathway, it is now timely to evaluate the firms' contribution to national and regional growth, their obstacles and impacts. For the purpose of this paper, innovation is used here as a major contributor to the policy evaluation process referred to above. Our investigation aims to explain the present performance of Portuguese firms located throughout the country and to explore those innovation determinants that have a region-specific connotation. To provide a thorough investigation, our analysis defines, on a regional basis, a set of firmsâ?T behavioural patterns regarding innovation. In our modelling, we employ a new methodology, viz. the External Logistic Biplot method, which is applied to an extensive sample of innovative institutions in Portugal. Variables such as 'Promoting knowledge', 'Management skills', 'Promoting R&D', 'Knowledge transfer', 'Promoting partnership & cooperation', and 'Orientation of public measures' have been identified as crucial determinants in earlier studies and are now used to describe regional institutional profiles. Such profiles exhibit a great variety in the way they combine these determinants to promote regional innovation. The creation of a <I>gradient of capacity to dynamically innovate</I> associated with each firm makes it possible to analyse the innovation gradient of each region in Portugal. Our paper presents and systematically investigates these findings and then reaches some policy conclusions.
    Keywords: Innovation; Firms' Performance; Regional Innovation Systems; Principal Coordinates Analysis; External Logistic Biplot; Voronoi Diagram; Dissimilarity Matrix
    JEL: O31 R11
    Date: 2011–07–28
  8. By: Julia Simonson; Laura Romeu Gordo; Nadiya Kelle
    Abstract: Before the 90s, men’s employment careers in East and West Germany were quite similar, despite their widely differing institutional settings. Before reunification, employment biographies were mainly dominated by full-time employment in both East and West. After 1989 the GDR was incorporated into the Federal Republic of Germany and almost all East German institutions were supplanted by adapted West German institutions. In the present paper we use SOEP data to analyse whether the East German labour market has converged completely with that of West Germany, following the same pattern of flexibilization and de-standardization, or if East Germany has even overtaken the West in this regard. We observe evidence of inhomogenization and pluralization in employment biographies in both regions. However, these trends are more pronounced in East Germany. As a result, employment biographies of younger men are more pluralised and less homogeneous in East Germany than in the West.
    Keywords: Cohort comparison; Cluster analysis; German transformation; Inhomogenization of employment biographies; Optimal matching; Pluralization of employment biographies; Sequence analysis; SOEP
    Date: 2011
  9. By: Silvia Magri (Banca d'Italia); Raffaella Pico (Banca d'Italia); Cristiana Rampazzi (Banca d'Italia)
    Abstract: Which households use consumer credit? This paper addresses the question using harmonized data from Eurostat&#x2019;s EU-SILC survey for nine European countries in the period 2005-08. There is wide heterogeneity in participation in the consumer credit market, ranging from 15 to 46 per cent across countries. Most households relying on consumer credit are those whose head is young and well educated; they are large in size, revealing more pronounced consumption needs. According to life cycle theory, they use credit to increase their welfare by consumption smoothing. Moreover, they frequently have a current medium-high income as lenders prefer to grant loans to less risky borrowers. Nonetheless, a not negligible portion of those using credit, ranging between 8 and 16 per cent across countries, are poor. Consumer credit can also help in improving their welfare. However, poor households are more frequently delinquent. In 2008, between 2 and 11 per cent of all borrowers were in arrears; the same percentage among the poor is much higher, ranging from 7 to 25 per cent.
    Keywords: consumer credit, repayment arrears, consumption smoothing
    JEL: D12 D91
    Date: 2011–07
  10. By: Li, Jinjing (Maastricht University); O'Donoghue, Cathal (Teagasc Rural Economy Research Centre)
    Abstract: Retirement behaviours and elderly poverty issues have been the subject of much attention and discussion in recent years as most countries are facing a rapidly ageing society. Ireland enjoys a relatively young population compared with other European countries, but is also struggling with increasing fiscal pressures. This paper analyses the retirement pattern and the replacement rate observed in Ireland using the Living in Ireland panel dataset. Since traditional empirical estimations may have selection bias issues as people with low replacement rates may not choose to retire, the paper adopts a combined method with both synthetic household simulation and empirical estimates. The study reveals the social economic attributes patterns associated with the replacement rates and retirement behaviours, and explores the heterogeneities of replacement rates among retirees.
    Keywords: retirement, replacement rates, microsimulation
    JEL: J14
    Date: 2011–07
  11. By: Bichaka Fayissa; Anca Traian
    Abstract: The purpose of this study is to estimate a health production function for the 13 East European countries including Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Ukraine. Using panel data from 1997 to 2005 on a diverse array of economic, demographic, environmental, and lifestyles factors as inputs, we analyze a health production function at the macro level in order to determine the most efficient way of allocating limited resources for improving the overall health status of countries in the sample. To control for individual country heterogeneity, we employ panel analytic methods of fixed effects, random effects, and Arellano – Bond estimator. The results indicate that economic growth as measured by GDP per capita growth, investment in human capital formation, and residence in urban areas significantly reduce infant mortality and thus improve the health status of countries in the sample. These findings are useful, not only for serving as background for health care policy decisions, but also for a better understanding of the factors that affect the health condition of the region.
    Keywords: Health Status, Eastern European Countries, Fixed-Effects, Random-Effects, Arellano-Bond estimator
    JEL: I12 I20
    Date: 2011–07
  12. By: Drinkwater, Stephen (Swansea University)
    Abstract: This paper focuses on the links between informal care provision and labour market activity at the sub-national level. Within-country analysis of this issue has been very limited to date despite the wide regional variations in informal care provision that often exist. This issue is important in the context of policy decisions in Wales and other parts of the UK because of relatively high levels of informal caring in certain areas, especially in the South Wales Valleys. In particular, given that these areas typically have the lowest economic activity and employment rates, labour market differences can be exacerbated by the provision of informal caring by people of working age. Despite the wide variations in informal care provision, it is found that labour market outcomes do not differ markedly by different care categories across spatial areas within England and Wales. However, the analysis reveals that labour market outcomes for males as well as females are heavily influenced for those who provide high levels of caring, especially in the South Wales Valleys. For example, the largest impact of caring on the probability of not working for males and for part-time work for females is seen in this area.
    Keywords: informal care provision, labour market outcomes, area variations
    JEL: J22 R23
    Date: 2011–07
  13. By: Jochem, Patrick; Schleich, Joachim
    Abstract: Based on data for eight OECD countries this paper empirically explores the factors driving exports in the automotive sector between 1991 and 2008. The factors considered explicitly account for possible lead market effects which have recently been identified in the literature as relevant factors in studying the export potentials of certain technologies. Econometric results suggest that exports in the automotive sector are positively related to the general strength of a country in terms of exports, to higher GDP per capita and to a lower labour cost share in the automotive sector. However, domestic market size and R&D in the automotive sector appear to have no effect on exports. Hence, the results provide only limited rationale for policy intervention. --
    Keywords: Lead markets,export potentials,automotive industry
    Date: 2011
  14. By: James Banks (Institute for Fiscal Studies and University of Manchester); Richard Blundell (Institute for Fiscal Studies and University College London); Antoine Bozio (Institute for Fiscal Studies); Carl Emmerson (Institute for Fiscal Studies)
    Abstract: <p>This paper examines changes in health and disability related transfers in the UK over the last thirty years, and describes how they are related to changes in labour force participation. The objective is to present a comprehensive description of the reforms to the institutional setting, along with available time series coming from administrative data on benefit receipt, cross-section or panel data on self-reported health and their interactions with labour force status. By providing systematic evidence on institutions and data, we hope to help future research providing a fuller picture of the trends over this period. We also present evidence on the impact of two large reforms to disability benefits in the UK.</p>
    Date: 2011–07
  15. By: Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw); Kosovka Ognjenović
    Abstract: In the period after the political changes in the year 2000, GDP growth in Serbia was rather rapid and compares favourably with other transition countries in Southeastern Europe. It was driven mainly by the expansion of services, with industrial production and agriculture basically stagnating over the whole period. The labour market effects were similar to those in other countries going through transition: employment declined in the public sector and increased in the private sector, with the overall number of employed declining and those unemployed increasing, and also with strong increases in the number of pensioners. The Serbian labour market is characterized by low employment and activity rates, particularly for women and young people. This indicates the weaknesses of the secondary educational system in adapting to the needs of the labour market, but also the obsolete skills of the high percentage of long-term unemployed. In general, the educational attainments of the workforce have changed only marginally over recent years. Labour mobility, as everywhere in Europe, is very low in Serbia. By contrast, Serbia’s (outward) migration is very high and remittances constitute an important share of income. Brain drain has become an important issue in recent years though it is hardly a new phenomenon. However, for highly educated people, the relevant labour market is the world labour market. Informal sector employment, which has been traditionally high in Serbia, even increased during the past decade, with a rising share of older workers, better educated persons with secondary education or more, self-employed persons and unpaid family workers. During the current crisis there has been a marked decline in the number of self-employed persons, which is where most informally employed people are to be found. Serbia has not relied on consistent labour market policies to address the low level of employment and high level of unemployment. Some changes are being introduced in the crisis and post-crisis periods, but the effects are uncertain and are yet to be determined in any case. Although spending on passive and active labour market policy measures in Serbia has been growing in the past couple of years, it is still low compared to the EU average but higher than in most other Western Balkan countries. The lion’s share of the available budget is spent on passive measures. An important step in order to improve the efficiency of labour market policy measures was made in 2007, when the administration of health insurance was separated from the NES which absorbed much time and efforts in the past. Transition and the current crisis have led to the development of significant structural problems in the labour markets in Serbia. The policies so far have been inadequate as they have been targeting cyclical rather than structural problems. This needs to be changed in the future with significant improvements in the policy design and the institutional support for implementation.
    Keywords: labour market, wage developments, skill mismatch, informal economy, labour market policies
    JEL: J08 J21 J24 J31 J43 J64
    Date: 2011–05
  16. By: Massimo Armenise (Fondazione Manlio Masi); Giorgia Giovannetti (Università degli Studi di Firenze, Dipartimento di Scienze Economiche); Gianluca Santoni
    Abstract: Foreign Direct Investment (FDI) increase the productivity of domestic firms through spillovers and incentives to innovate. Hence, the capacity of local firms to absorb new technological knowledge emerges as a crucial factor for a country to benefit from FDI. This process might take time, especially if firms are small and medium as those prevailing in Italy. Between 2001 and 2007 the number of foreign firms in Italy has decreased, showing a particularly negative dynamic. However, in the same period, FDI in business services increased. The number of foreign firms investing in professional business services in Italy passed from 1277 in 2001 to 1700 in 2007, with a concurrent increase in the average dimension of firms. The aim of this paper is to test the effect of FDI in Business Services on the efficiency (Total Factor Productivity and Labor Productivity). Hence, the paper tests whether firms located in provinces better equipped to attract FDI in business services have received a premium in terms of productivity, profitability and other dimensions. Preliminary results show that while it is important to attract FDIs to improve the performance of domestic firms, the capacity of a province to keep the foreign direct inflows has an even more relevant effect. This relationship becomes even more evident for the traditional "Made in Italy" firms.
    JEL: C23 D24 F23
    Date: 2011

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