nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒09‒05
fourteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Employed or inactive? Cross-national differences in coding parental leave beneficiaries in Labour Force Survey data By MIKUCKA Malgorzata; VALENTOVA Marie
  2. Is Market-Oriented Reform Producing a “Two-Track” Europe? Evidence from Electricity and Telecommunications By Clifton, Judith; Díaz-Fuentes, Daniel; Fernández Gutiérrez, Marcos; Revuelta, Julio
  3. Efficiency and Its Impact on the Performance of European Commercial Banks By Mohsen Afsharian; Anna Kryvko; Peter Reichling
  4. Gender Gaps across Countries and Skills: Supply, Demand and the Industry Structure By Olivetti, Claudia; Petrongolo, Barbara
  5. Economic Conditions at the Time of Birth and Cognitive Abilities Late in Life: Evidence from Eleven European Countries By Doblhammer, Gabriele; van den Berg, Gerard J.; Fritze, Thomas
  6. Incentive pay and gender gaps in the Nordic countries By Westling, Tatu
  7. Foreign Ownership and Firm Performance in German Services: First Evidence based on Official Statistics By John P. Weche Geluebcke
  8. The Trend over Time of the Gender Wage Gap in Italy By Mussida, Chiara; Picchio, Matteo
  9. Major lessons for the CAP reform from the New Member States' perspective By Möllers, Judith; Csaki, Csaba; Buchenrieder, Gertrud
  10. Downward wage rigidity in Hungary By Gábor Kátay
  11. Income volatility and insecurity in the U.S., Germany and Britain By Nicholas Rohde; Kam Ki Tang; Prasada Rao
  12. Exploring the Impacts of Public Childcare on Mothers and Children in Italy: Does Rationing Play a Role? By Brilli, Ylenia; Del Boca, Daniela; Pronzato, Chiara
  13. Economic Vulnerability and Severity of Debt Problems: An Analysis of the Irish EU-SILC 2008 By Russell, Helen; Maître, Bertrand; Whelan, Christopher T.
  14. Why Europe has become environmentally cleaner: Decomposing the roles of fiscal, trade and environmental policies By Lopez, Ramón; Palacios, Amparo

  1. By: MIKUCKA Malgorzata; VALENTOVA Marie
    Abstract: In survey research the parental leave beneficiaries are usually coded as either employed or inactive. One of the exceptions is the European Labor Force Survey (EU-LFS), which (from 2006) includes parental leave among other forms of being employed but temporarily not working. This paper explores classification of parental leave takers in EU-LFS, focusing on cross-country discrepancies and their consequences. Our results show that classification rules differ cross-nationally: in some countries parental leave takers are considered inactive, in others – employed but temporarily not working. In particular in the Czech Republic, Estonia, Hungary and Slovakia the EU-LFS data do not reflect the actual use of parental leaves because beneficiaries are coded as inactive. We estimate the actual number of mothers on parental leave in these countries and show that EU-LFS employment rates of women aged 18-40 are biased downwards 2-7 percentage points; for mothers of children aged 0-2 the bias reaches 12-45 percentage points . Our study shows the limited comparability of EU-LFS employment rates, warns about possible bias in cross-national studies and shows the importance of transparent and consistent survey measurement of employment status.
    Keywords: parental leave; labor market status; employment status; cross-country comparability; Labour Force Survey; Czech Republic; Estonia; Hungary; Slovakia
    JEL: J21 J28 J48
    Date: 2011–08
  2. By: Clifton, Judith; Díaz-Fuentes, Daniel; Fernández Gutiérrez, Marcos; Revuelta, Julio
    Abstract: The European Commission has formally recognised that adequate provision of basic household services, including energy, communications, water and transport, is key to ensuring equity, social cohesion and solidarity. Yet little research has been done on the impact of the reform of these services in this regard. This article offers an innovative way to explore such questions by analysing and contrasting stated and revealed preferences on citizen satisfaction with and expenditure on two services, electricity and telecommunications, in two large countries, Spain and the United Kingdom. In telecommunications, but to a much lesser extent in electricity, we find evidence that reform has led to a “two-track” Europe, where citizens who are elderly, not working or the less-educated behave differently in the market, with the result that they are less satisfied with these services than their younger, working, better-educated, counterparts.
    Keywords: Public Service; Electricity; Telecommunications; Revealed preferences; Consumer Behaviour; Vulnerable Consumers. European Union. Regulation
    JEL: L96 D18 L51 D12 L94 L98
    Date: 2011
  3. By: Mohsen Afsharian (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Anna Kryvko (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Peter Reichling (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: The paper empirically analyzes the impact of the degree of efficiency on key performance fig-ures of publicly traded European banks in the period from 2005 to 2009. Efficiency is meas-ured by constructing non-parametric frontiers using the technique of data envelopment analysis on the cost, revenue, and profit sides. Decomposition of overall efficiency provides a detailed insight into effective risk and performance drivers in the banking industry. The results of our paper suggest that an increase in pure technical efficiency is related to more volatile assets, which is reflected in lower market values. Allocative and scale efficiency, however, boost capi-tal market performance.
    Keywords: Data Envelopment Analysis (DEA), Efficiency, European Banks, Bank Performance
    JEL: C33 C61 D24 G21
    Date: 2011–08
  4. By: Olivetti, Claudia (Boston University); Petrongolo, Barbara (London School of Economics)
    Abstract: The gender wage gap varies widely across countries and across skill groups within countries. Interestingly, there is a positive cross-country correlation between the unskilled-to-skilled gender wage gap and the corresponding gap in hours worked. Based on a canonical supply and demand framework, this positive correlation would reveal the presence of net demand forces shaping gender differences in labor market outcomes across skills and countries. We use a simple multi-sector framework to illustrate how differences in labor demand for different inputs can be driven by both within-industry and between-industry factors. The main idea is that, if the service sector is more developed in the US than in continental Europe, and unskilled women tend to be over-represented in this sector, we expect unskilled women to suffer a relatively large wage and/or employment penalty in the latter than in the former. We find that, overall, the between-industry component of labor demand explains more than half of the total variation in labor demand between the US and the majority of countries in our sample, as well as one-third of the correlation between wage and hours gaps. The between-industry component is relatively more important in countries where the relative demand for unskilled females is lowest.
    Keywords: gender gaps, education, demand and supply, industry structure
    JEL: E24 J16 J31
    Date: 2011–08
  5. By: Doblhammer, Gabriele (University of Rostock); van den Berg, Gerard J. (University of Mannheim); Fritze, Thomas (Rostock Center for the Study of Demographic Change)
    Abstract: With ageing populations and a stronger reliance on individual financial decision-making concerning asset portfolios, retirement schemes, pensions and insurances, it becomes increasingly important to understand the determinants of cognitive ability among the elderly. Macro-economic recession and boom periods provide a unique opportunity to study the effect of changes in the early life economic environment on late life cognition. In European countries, about three to four economic recession and boom periods can be identified between 1900 and 1945. The timing of these periods differs between the countries, which makes a cross-country study design particularly powerful, as it is insensitive to country-specific confounding factors. We use data from the Survey of Health, Aging and Retirement in Europe (SHARE) among elderly individuals. This survey is homogeneous across countries. We use almost 20,000 respondents from 11 countries. We examine several domains of cognitive functioning at ages 60+ and link them to the macro-economic deviations in the year of birth, controlling for current demographic, socioeconomic and health status. We find that being born during a recession or boom period significantly influences cognitive functioning late in life in various domains. The effects are particularly pronounced among the less educated. Boom periods positively influence numeracy and verbal fluency as well as the score on the omnibus cognitive indicator. The results are robust; controlling for current characteristics does not change effect sizes and significance. We conclude that cognitive functioning late in life is influenced by economic conditions in the year of birth, and we discuss possible causal pathways.
    Keywords: dementia, long-run effects, health, developmental origins, economic business cycle, cognition, numeracy, memory, decision-making
    JEL: I12 I18 J14 N14 N34 J26
    Date: 2011–08
  6. By: Westling, Tatu
    Abstract: This paper explores the effect of incentive pay on gender pay gaps in Finland, Norway and Sweden among professionals and managers within MNCs. Mercer 2009 Total Remuneration Survey data is utilised. Uniform job ladder, occupation, industry and wage definitions enable consistent cross-country comparisons. In addition to the between-country variation, the within-country variation of gender gap with respect to incentive pay is analysed. The results indicate that gender pay gaps differ among the Nordics and that occupation and industry controls have dissimilar effects across countries. Irrespective of wage element, Finland and Norway are characterised by higher gender gaps than Sweden. Incentives tend to accentuate gender pay gaps. In intention to alleviate the absence of job performance data, this study utilises a rudimentary, promotion-based measure for job performance. In Finland it does affect the gender gap. However, irrespective of gender, high-performers are penalised in Sweden but not in Finland or Norway. The Finnish data also allows the identification of low-performers. Low job performance is rewarded in Finland. Nonetheless, the job performance findings should be interpreted with cautions.
    Keywords: Wage differential; incentive pay; job ladder; gender; job performance
    JEL: J31 J70
    Date: 2011–08–31
  7. By: John P. Weche Geluebcke (Institute of Economics, Leuphana University Lueneburg, Germany)
    Abstract: This study provides first comprehensive analyses of foreign-controlled enterprises in the German service sector based on new micro data from official statistics. Various performance measures were examined by comparing unconditional and conditional means and quantile regression techniques were applied. Results reveal persistently superior performance for foreign-controlled affiliates when compared to German-owned affiliates. In contrast, the relationship for profitability is exactly the opposite. Labor productivity becomes insignificant when the comparison group consists of domestically-owned affiliates with a high degree of internationalization. A breakdown by country of origin shows that European affiliates pay lower wages and export less compared to other foreign affiliates and that there is no productivity advantage in favor of US firms like in manufacturing.
    Keywords: foreign ownership, firm performance, inward FDI, service sector, multinational enterprise
    JEL: F15 F21 F23
    Date: 2011–08
  8. By: Mussida, Chiara (University of Milan); Picchio, Matteo (Tilburg University)
    Abstract: We analyse gender wage inequalities in Italy in the mid-1990s and in the mid-2000s. In this period important labour market developments occurred: institutional changes have loosened the use of flexible and atypical contracts; the female employment rates and educational levels have substantially increased. We identify the time trends of different components of the gender wage gap by estimating wage distributions in the presence of covariates and sample selection and by counterfactual microsimulations. We find that women swam against the tide: whilst the trend in female qualifications slightly reduced the gender wage gap, the gender relative trends in the wage structure significantly increased it.
    Keywords: gender wage gap, counterfactual distributions, decompositions, hazard function, labour market reforms
    JEL: C21 C41 J16 J31 J71
    Date: 2011–08
  9. By: Möllers, Judith; Csaki, Csaba; Buchenrieder, Gertrud
    Abstract: The current discussion regarding the reform of the Common Agricultural Policy (CAP) is challenging due to the varying needs and interests of the old and new member states (NMS) of the European Union (EU). The NMS still display tremendous disparities in most structural and socio-economic indicators compared to the EU15 average, implying that further sectoral restructuring is needed. The Structural Change in Agriculture and Rural Livelihoods (SCARLED) project, which ran from 2007 until 2010, offers rich empirical insights with a specific focus on these processes in the NMS. This policy brief summarises the projectʼs main policyrelevant results. SCARLED offers three key lessons for CAP reform. First, it claims that the current, uniform CAP only partially addresses the needs of NMS. Second, the regionʼs agriculture still requires support to enhance competitiveness, albeit for a limited time. Third, the issue of small, subsistence-based farms in the region needs to be recognised. However, approaches aiming at poverty alleviation in such subsistence-based households, but also in landless rural households, need to look beyond the agricultural sector. The wider rural economy and improving education, as well as rural-urban linkages, need to be included in any povertyrelated policy approach, be it at the national or the EU level. --
    Date: 2011
  10. By: Gábor Kátay (Magyar Nemzeti Bank, Department of Economics, 1850 Budapest, Szabadság tér 8-9, Hungary.)
    Abstract: Following the approach recently developed for the International Wage Flexibility Project (IWFP), the paper presents new estimates of downward real and nominal wage rigidity for Hungary. Results suggest that nominal rigidity is more prominent in Hungary than real rigidity. When compared to other countries participating in the IWFP, Hungary ranks among the countries with the lowest degree of downward real rigidity. The estimated downward nominal rigidity for Hungary is higher, the measure is close to but still below the overall cross-country average. Using the same methodology, the paper also con…firms the widespread view that the wage growth bargained at the national level has little compulsory power in Hungary. On the other hand, the minimum wage remains an important source of potential downward wage rigidity in Hungary. JEL Classification: C23, E24, J3, J5.
    Keywords: Downward nominal and real wage rigidity, wage change distributions, wage flexibility.
    Date: 2011–08
  11. By: Nicholas Rohde (Griffith University); Kam Ki Tang (School of Economics, The University of Queensland); Prasada Rao (School of Economics, The University of Queensland)
    Abstract: Income volatility is studied as a component of economic insecurity using recent data from the Cross National Equivalence File (CNEF). Techniques from the inequality literature are applied to longitudinal household incomes and we refer to the results as measurements of income insecurity. Using this method we examine (i) cross national differences in average insecurity levels, (ii) the effects of taxes and transfers on the insecurity of different income groups and (iii) the relationships between income insecurity and long-run household income. We find that for pre-government incomes Britain exhibits the highest levels of income insecurity, with the U.S. the lowest. However estimates of insecurity in post-government incomes are highest in the U.S. It is shown that insecurity in market incomes is primarily concentrated around low income families and that this pattern is strongest in Germany and weakest in the U.S. Insecurity in post-government incomes is for the most part found to be unrelated to household income.
    Date: 2011
  12. By: Brilli, Ylenia (Catholic University Milan); Del Boca, Daniela (University of Turin); Pronzato, Chiara (University of Essex)
    Abstract: This paper investigates the effects of public childcare availability in Italy on mothers' working status and children's scholastic achievements. We use a newly available dataset containing individual standardized test scores of pupils attending second grade of primary school in 2008-09 in conjunction with data on public childcare availability. Public childcare coverage in Italy is scarce (12.7 percent versus the OECD average of 30 percent) and the service is “rationed”: each municipality allocates the available slots according to eligibility criteria. We contribute to the existing literature taking into account rationing in public childcare access and the functioning of the childcare market. Our estimates indicate that childcare availability has positive and significant effects on both mothers' working status and children's language test scores. The effects are stronger when the degree of rationing is high and for low educated mothers and children living in lower income areas of the country.
    Keywords: childcare, female employment, child cognitive outcomes
    JEL: J13 D1 H75
    Date: 2011–08
  13. By: Russell, Helen; Maître, Bertrand; Whelan, Christopher T.
    Abstract: In this paper, using Ireland, where debt issues are of particular salience as a test case, we seek to understand the extent to which the measures currently employed as national indicators of poverty and social exclusion succeed in capturing over-indebtedness and, more broadly, severity of debt problems. Our analysis reveals a clear gradient with predictive ability increasing sharply as one moves from 'at risk of poverty' to consistent poverty and finally economic vulnerability indicators. In relation to debt problems, the key distinction is between the just under one in five households defined as economically vulnerable and all others. Financial exclusion, relating to access to a bank account and a credit card, was found to increase debt levels. However, such effects were modest. The impact of economic vulnerability seems to be largely a consequence of its relationship to a wide range of socio-economic attributes and circumstances. The manner in which a potential debt crisis unfolds will be shaped by the broader socio-economic structuring of life-chances. Any attempt to respond to such problems by concentrating on household behaviour or, indeed, triggering factors without taking the wider social structuring of economic vulnerability is likely to be both seriously misguided and largely ineffective.
    Keywords: EU-SILC/Financial Exclusion/Ireland/Over-indebtedness/poverty/risk/social exclusion
    Date: 2011–08
  14. By: Lopez, Ramón; Palacios, Amparo
    Abstract: This paper systematically examines the role of fiscal policy, trade and energy taxes on environmental quality in Europe using disaggregated data for 12 European countries over the 1995-2008 period. It uses a methodology that obtains estimates mostly free of time-varying omitted variable biases. Controlling for the scale effect, our estimations show that fiscal policies and energy taxes are effective in reducing the concentration of certain pollutants through different mechanisms. We also find that trade has a direct effect on production pollutants, which is most likely due to an output composition effect, but not on consumption pollutants. Increasing the share of fiscal spending and shifting the emphasis of fiscal spending towards public goods and against non-social subsidies has a surprising and unintended beneficial effect on the concentrations of ozone, perhaps the most difficult to control pollutant. Finally, energy taxes appear to have an important effect in reducing nitrogen dioxide pollution but it has no effect on ozone and sulfur dioxide.
    Keywords: government spending; pollutions; public goods; taxes
    JEL: H40 H50 O13
    Date: 2011–08

This nep-eur issue is ©2011 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.