nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒09‒16
nineteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. GINI DP 2: Are European Social Safety Nets Tight Enough? Coverage and adequacy of minimum income schemes in 14 EU countries By Francesco Figari; Matsaganis, M.; Holly Sutherland
  2. Innovation subsidies: Does the funding source matter for innovation intensity and performance? Empirical evidence from Germany By Czarnitzki, Dirk; Lopes Bento, Cindy
  3. Coordinating cross‐border congestion management through auctions: An experimental approach to European solutions By Céline Jullien; Virginie Pignon; Stéphane Robin; Carine Staropoli
  4. GINI DP 6: Income Inequality and Participation: A Comparison of 24 European Countries By Bram Lancee; Herman Werfhorst
  5. GINI DP 5: Household Joblessness and its Impacts on Poverty and Deprivation in Europe By Marloes Graaf-zijl; Brian Nolan
  6. Bank Competition in the EU: How Has It Evolved? By Laurent Weill
  7. R&D Offshoring and the Productivity Growth of European Regions By Davide Castellani; Fabio Pieri
  8. Vertical Economies and the Costs of Separating Electricity Supply – A Review of Theoretical and Empirical Literature By Roland Meyer
  9. The Immigrant/Native Wealth Gap in Germany, Italy and Luxembourg By Thomas Y. Mathä; Alessandro Porpiglia; Eva Sierminska
  10. GINI DP 7: Income Distributions, Inequality Perceptions and Redistributive Claims in European Societies By István György Tóth; Keller, T.
  11. Educational Achievement of Second Generation Immigrants: An International Comparison By Christian Dustmann; Tommaso Frattini; Gianadrea Lanzara
  12. Importance of the Non-financial Value Added of Government and Independent Venture Capitalists By Terttu – Deschryvere Luukkonen
  13. Viewing tax policy through party-colored glasses: What German politicians believe By Janeba, Eckhard; Heinemann, Friedrich
  14. Reaping the Benefits of Deeper Euro-Med Integration Through Trade Facilitation By Bourdet, Yves; Persson, Maria
  15. Lower and upper bounds of unfair inequality: Theory and evidence for Germany and the US By Judith Niehues; Andreas Peichl
  16. Immigration and Distribution of Wages in Austria By Gerard Thomas Horvath
  17. Does Better Disease Management in Primary Care Reduce Hospital Costs? By Mark Dusheiko; Hugh Gravelle; Stephen Martin; Nigel Rice; Peter C Smith
  18. Mothers Do Matter: New Evidence on the Effect of Parents' Schooling on Children's Schooling Using Swedish Twin Data By Amin, Vikesh; Lundborg, Petter; Rooth, Dan-Olof
  19. The paradox of liberalization – Understanding dualism and the recovery of the German political economy By Anke Hassel

  1. By: Francesco Figari (University of Insubria); Matsaganis, M.; Holly Sutherland (Dept. of Applied Economics, University of Cambridge)
    Abstract: This paper explores and compares the effectiveness of Minimum Income (MI) schemes in protecting persons of working age from poverty in the European Union. Using the European microsimulation model EUROMOD we estimate indicators of coverage and adequacy of MI schemes in 14 EU countries. In terms of coverage, we find that in several countries a significant number of individuals are ineligible for MI even when they fall below a poverty line set at 40 per cent of median income. With respect to adequacy, we show that in certain countries a large fraction of those entitled to MI remain at very low levels of income even when MI benefit is added. Overall, our findings suggest that the clustering of MI schemes in Europe may be more complex than previous literature has hitherto allowed for.
    Date: 2011–06
  2. By: Czarnitzki, Dirk; Lopes Bento, Cindy
    Abstract: Applying a variant of a non-parametric matching estimator, we consider European funding and national funding as heterogeneous treatments, distinguishing and simultaneously analyzing the effect these treatments have on innovation input and performance. In terms of input, getting funding from both sources yields the highest impact. If funding from only one source is received, EU grants have higher effects. In terms of output, holding innovation expenditures constant, funding from both sources display higher sales of market novelties and future patent applications at the firm level. If only one grant is obtained, we find superiority for national funding. --
    Keywords: Subsidies,Innovation,Policy Evaluation,Treatment Effects,Nonparametric matching estimation
    JEL: C14 H50 O38
    Date: 2011
  3. By: Céline Jullien (GAEL - Economie Appliquée de Grenoble - INRA : UR1215 - Université Pierre Mendès-France - Grenoble II); Virginie Pignon (EDF R&D Division - EDF Recherche et Développement); Stéphane Robin (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Carine Staropoli (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: Competition among producers within an integrated electricity system is impeded by any limited transmission capacity there may be at its borders. Two alternative market mechanisms have recently been designed to organize the allocation of scarce transmission capacity at cross-border level: (i) the "implicit auction", already used in some countries, and (ii) the "coordinated explicit auction", proposed by the European Transmission System Operators (ETSO) but not implemented yet. The main advantage of the explicit auction is that it allows each country to keep its own power exchange running. In the European institutional context, this is seen as a factor of success of a market reform, although the explicit auction (not coordinated) is known to be less efficient than the implicit mechanism. The addition of a coordination dimension in the explicit auction is intended to solve problems of international flows. We use an experimental methodology to identify and compare in a laboratory setting the efficiency properties of these two market mechanisms, given a market structure similar to the existing one in continental Europe, i.e. a competitive oligopoly. Our main result highlights the inefficiency of the coordinated explicit auction compared to the performance of the implicit auction, measured in terms of both energy prices and transmission capacity allocation. We suggest that the poor performance of the coordinated explicit auction in the laboratory is due to the level of individual expectations about both energy and transmission prices that the mechanism demands. One solution to resolve this problem when the mechanism is implemented in the field would be to design an additional and secondary market for "used" transmission capacity.
    Keywords: auctions; congestion management; electricity markets; experimental economics
    Date: 2011–08–25
  4. By: Bram Lancee (AIAS, Universiteit van Amsterdam); Herman Werfhorst (FMG / AIAS, Universiteit van Amsterdam)
    Abstract: Previous research suggests that where inequality is high, participation is low. Two arguments are generally put forward to explain this finding: First, inequality depresses participation because people have diverging statuses and therefore fewer opportunities to share common goals. Second, people may participate more in social and civic life when they have more resources to do so. However, up till now, these explanations have been lumped together in empirical analyses. Using EU-SILC data for 24 European countries, we analyse how inequality in different parts of the income distribution is related to civic, cultural and social participation. Results indicate that a substantial part of the impact of inequality manifests itself through resources at the individual and societal level. However, independent of resources, it is still the case that higher inequality magnifies the relationship between income and participation. This is in line with a view that inter-individual processes explain why inequality diminishes participation.
    Date: 2011–01
  5. By: Marloes Graaf-zijl (AIAS, Universiteit van Amsterdam); Brian Nolan (School of Applied Social Science, University College Dublin)
    Abstract: Working-age households where no-one is in work have become an increasing focus of policy concern even before the economic crisis, and the EU has included household joblessness in its new poverty reduction target for 2020. This paper focuses on the variation across EU countries in the prevalence of household joblessness and its impact on income poverty and deprivation, and on the implications for the new EU poverty reduction target. It brings out fi rst that there are some divergences across key data sources in the extent of joblessness. The prevalence of household joblessness varies substantially across EU countries, but there is little evidence of a consistent pattern among groupings of countries often categorised together in terms of welfare regime or geographically. In aggregate there is little association between the overall extent of household joblessness in a country and the percentage in relative income poverty or above a material deprivation threshold. At micro level, being in a jobless household has a substantial impact on the likelihood of being in relative income poverty or deprived, but the scale of these impacts is shown to be very much greater in some countries than in others, and to vary between single-adult and multiple-adult households. In most EU countries little more than half the working age adults in jobless households are either income poor or deprived, so including joblessness in the poverty reduction target does make a difference, without a clearly-articulated rationale.
    Date: 2011–01
  6. By: Laurent Weill (LaRGE Research Center, Université de Strasbourg)
    Abstract: Economic integration on the EU banking markets is expected to favor competition, which should provide economic gains. However, even if there is a commonly accepted view in favor of enhanced bank competition during the last decade, no study has been performed in the 2000s showing this trend. In this paper, we aim to fill this gap by measuring the evolution of bank competition in all EU countries during the 2000s. We estimate the Lerner index and the H-statistic for a sample of banks from all EU countries. We provide evidence of a general improvement in bank competition in the EU, even if cross-country differences are observed in the pattern of the evolution of bank competition. We check whether convergence in bank competition has taken place on the EU banking markets, by applying ? and ? convergence tests for panel data. We show convergence in bank competition. These findings are also observed with standard competition measures (Herfindahl index, profitability indicators). We thus support the view th at bank integration has taken place in the European Union.
    Keywords: banking, competition, European integration
    JEL: G21 F36 L16
    Date: 2011
  7. By: Davide Castellani (Department of Economics, Finance and Statistics, University of Perugia and Centro Studi Luca D'Agliano, Milan); Fabio Pieri (Department of Economics, Finance and Statistics, University of Perugia)
    Abstract: The recent increase in R&D oshoring have raised fears that knowledge and competitive- ness in advanced countries may be at risk of `hollowing out'. At the same time, economic research has stressed that this process is also likely to allow some reverse technology transfer and foster growth at home. This paper addresses this issue by investigating the extent to which R&D oshoring is associated with productivity dynamics of European (NUTS2) regions. In particular, we explore whether R&D investments abroad have a dierent impact from those in manufacturing and other business activities. We nd that oshoring regions have higher productivity growth, but this positive eect fades down with the number of investment projects carried out abroad. However, a large and positive correlation emerge between the extent of R&D oshoring and the home region produc- tivity growth, supporting the idea that carrying out R&D abroad strengthen European competitiveness.
    Keywords: Regional Productivity, Foreign Investments, Europe, R&D Offshoring
    JEL: C23 F23 O47 O52 R11
    Date: 2011–08
  8. By: Roland Meyer
    Abstract: Motivated by the European movement towards a separation of electricity networks from the competitive functions generation and supply this paper reviews theoretical and empirical literature on vertical synergies in electricity supply. In the analysis a clear distinction is made between four different unbundling options leading to different forms and magnitudes of synergy losses. Apart from coordination economies a main source of scope economies seems to result from a market risk effect if generation and retail are separated. Accordingly, the European policy of network unbundling (either transmission or distribution) results in synergy losses between 2 and 5 percent due to coordination losses, while an unbundling option that includes a separation between retail and generation, as observed in some U.S. states, may lead to a permanent cost increase of 15 percent and more due to a significant risk increase.
    Keywords: ownership unbundling, vertical integration, economies of scope
    Date: 2011–04
  9. By: Thomas Y. Mathä; Alessandro Porpiglia; Eva Sierminska
    Abstract: This paper analyses the existence of an immigrant/native wealth gap by using household survey data for Luxembourg, Germany and Italy. The results show that, in all three countries, a sizeable wealth gap exists between natives and immigrants. Towards the upper tail of the wealth distribution the gap narrows to a small extent. This gap persists even after controlling for demographic characteristics, country of origin, cohort and age at migration although cross-country differences exist in the immigration penalty.
    Keywords: household, survey data, wealth gap, immigrants, distribution
    JEL: D31 F22
    Date: 2011–02
  10. By: István György Tóth (TÁRKI Social Research Institute); Keller, T.
    Abstract: In this paper we analyse how redistributive preference relates to actual income and to its distribution. For measuring the relationship on macro level, we defi ne distance based measures of income inequality (P-ratios, based on data from LIS) and test them for their direct and for their contextual effects on aggregate (country level) and on individual redistributive claims. For measuring redistributive preference we develop a composite index using available public opinion (Eurobarometer) data for the European Union member states. On macro level there is a continued and high support of state redistribution in many European countries but the cross-country variance is also high. Preferences for redistribution correspond to various aspects of inequality (most notably, to the extent and depth of relative poverty). On micro level the redistributive preference, while mostly derived from rational self interest (material position, labour market status, expected mobility), is also driven by general attitudes about the role of personal responsibility in one’s own fate and by general beliefs about causes of poverty and the like. While the affl uent, the middle and the poor have different appetite for redistribution everywhere, the distance between their attitudes also seems to be determined by the distance between their relative positions (ranks in the distribution). In countries having larger level of aggregate inequalities the general redistributive preference (of the rich, of the middle and of the poor) is higher, however in countries with very high levels of inequalities the difference in redistribution preference begins to decrease, which is a hint for a curvilinear relationship. The slope of this socioeconomic gradient seems, however, steeper in countries with middle inequality levels. The results of the paper can contribute to a refi nement of the predictions developed in the frame of the median voter theorem and, via this, to a better understanding of political processes. JEL Classification: D31, D63, H3
    Date: 2011–02
  11. By: Christian Dustmann (University College London and CReAM); Tommaso Frattini (University of Milan, CReAM, IZA and Centro Studi Luca d’Agliano); Gianadrea Lanzara (University College London and CReAM)
    Abstract: This paper investigates the educational achievements of second generation immigrants in several OECD countries in a comparative perspective. We first show that the educational achievement (measured as test scores in PISA achievement tests) of children of immigrants is quite heterogeneous across countries, and strongly related to achievements of the parent generation. The disadvantage considerably reduces, and even disappears for some countries, once we condition on parental background characteristics. Second, we provide novel analysis of cross-country comparisons of test scores of children from the same country of origin, and compare (conditional) achievement scores in home and host countries. The focus is on Turkish immigrants, whom we observe in several destination countries. We investigate both mathematics and reading test scores, and show that the results vary according to the type of skills tested. For mathematics, in most countries and even if the test scores achievement of the children of Turkish immigrants is lower than that of their native peers, it is still higher than that of children of their cohort in the home country - conditional and unconditional on parental background characteristics. The analysis suggests that higher school quality relative to that in the home country is important to explain immigrant children’s educational advantage
    Keywords: Education, Second-Generation Immigrants
    JEL: J61 J62 I2
    Date: 2011–09–06
  12. By: Terttu – Deschryvere Luukkonen
    Abstract: This paper compares the post-investment value-added activities performed by governmental venture capital (GVC) and independent venture capital (IVC) for their portfolio companies, and controls for the selection effect that the different investment profiles of these investors might have on the forms of value added. The study uses a unique data set based on a survey addressed to new VC-backed, technology-based firms from seven European countries. The study focused on the importance of the contribution by the first lead investor in a variety of activity areas, as assessed by the investee companies. The study also pays attention to potential adverse effects of the post-investment engagement of the investors on the firm. Using a composite indicator of the extent of the value added, we find no statistically significant difference between the two types of investors. However, the type of value added differs across investor type and, in particular, IVC’s contribution proves to be significantly higher than that of GVCs in a number of areas, including the development of the business idea, professionalisation and exit orientation.
    Keywords: venture capital
    JEL: G24 G32 O16
    Date: 2011–09–02
  13. By: Janeba, Eckhard; Heinemann, Friedrich
    Abstract: Abstract: The process of globalization has an important impact on national tax policies. Most of the literature does not focus directly on the political decision making process and assumes that the desired tax policy is responding to objective underlying tradeoffs. Based on an original survey of members of German national parliament (Bundestag) in 2006/7 we document a strong ideological bias among policy makers with respect to the perceived mobility of international tax bases (real capital and paper profits). Ideology influences also directly and indirectly the perceived national autonomy in tax setting and preferences for a EU minimum tax for companies. There seems little consensus as to what the efficiency costs of capital taxation in open economies are, even though our survey falls in a period of extensive debate about and actual adoption of a company tax reform bill in Germany.
    Keywords: Globalization; business taxation; beliefs; member of parliament; profit shifting; party discipline; yardstick competition
    JEL: H25 D83 D78
    Date: 2011–08
  14. By: Bourdet, Yves (Lund University); Persson, Maria (Research Institute of Industrial Economics (IFN))
    Abstract: The current political turmoil in the Arab world has contributed to renewed interest in the Barcelona Process. This paper explores whether deeper integration in the form of trade facilitation – i.e. improved and simplified trade procedures – could be an important part of a reform agenda. Adopting a Southern perspective by focusing on exports from non-EU Mediterranean countries to the EU, we test whether the efficiency of trade procedures affects (i) bilateral volumes of exports, and (ii) the number of products exported. Our findings suggest that trade facilitation could lead to substantially increased export volumes and export diversification.
    Keywords: Barcelona Process; Mediterranean Union; European Union; Deeper Integration; Trade Facilitation; Export volumes; Export Diversification
    JEL: F15 O19 O24
    Date: 2011–08–23
  15. By: Judith Niehues (SOCLIFE, University of Cologne and IZA); Andreas Peichl (IZA, University of Cologne (FiFo), ISER and CESifo)
    Abstract: Previous estimates of unfair inequality of opportunity (IOp) are only lower bounds because of the unobservability of the full set of endowed circumstances beyond the sphere of individual responsibility. In this paper, we suggest a new estimator based on a fixed effects panel model which additionally allows identifying an upper bound. We illustrate our approach by comparing Germany and the US based on harmonized micro data. We find significant and robust differences between lower and upper bound estimates – both for gross and net earnings based either on periodical or permanent income – for both countries. We discuss the cross-country differences and similarities in IOp in the light of differences in social mobility and persistence.
    Keywords: poverty, growth, pro-poorness, income distribution.
    JEL: D31 D63 H24 J62
    Date: 2011
  16. By: Gerard Thomas Horvath
    Abstract: Using detailed micro data on earnings and employment, I analyze the effects of immigration on the wage distribution of native male workers in Austria. I find that immigration has heterogeneous effects on wages, differing by type of work as well as the wage level. While there are small , but insignificant, negative effects for blue collar workers at the lower end of the wage distribution there are positive effects on wages at higher percentiles. For white collar workers positive effects occur at most percentiles. The estimated effects of immigration are relatively small in size and not significant for most workers. Overall it seems that most of potentially adverse effects of immigration on natives' wages are offset by complementarities stemming from immigration of workers with different skill levels.
    Keywords: Immigration, Labor market, Wage distribution
    JEL: J31 J61
    Date: 2011–09
  17. By: Mark Dusheiko (Centre for Health Economics, University of York, UK); Hugh Gravelle (Centre for Health Economics, University of York, UK); Stephen Martin (Department of Economics, University of York, UK); Nigel Rice (Centre for Health Economics, University of York, UK); Peter C Smith (Imperial College Buisiness School, UK)
    Abstract: We apply cross-sectional and panel data methods to a database of 5 million patients in 8,000 English general practices to examine whether better primary care management of 10 chronic diseases is associated with reduced hospital costs. We find that only primary care performance in stroke care is associated with lower hospital costs. Our results suggest that the 10% improvement in the general practice quality of stroke care between 2004/5 and 2007/8 reduced 2007/8 hospital expenditure by about £130 million in England. The cost savings are due mainly to reductions in emergency admissions and outpatient visits, rather than to lower costs for patients treated in hospital or to reductions in elective admissions.
    Keywords: Quality; disease management; primary care; hospital costs; ambulatory care sensitive conditions; preventative care.
    JEL: I12 I18
    Date: 2011–08
  18. By: Amin, Vikesh (Binghamton University, New York); Lundborg, Petter (Lund University); Rooth, Dan-Olof (Linneaus University)
    Abstract: Behrman and Rosenzweig (2002) used data on a small sample of MZ (monozygotic, identical) twin parents and their children to show that father's schooling is more important than mother's schooling for children's schooling in the U.S. Recent studies based on much larger samples of twins from registry data in Scandinavian countries reach similar conclusions. Most of these studies, however, are unable to distinguish between MZ and DZ (dizygotic, fraternal) twins. Using data from the Swedish Twin Registry, we replicate the finding that father's schooling matters more than mother's schooling in a combined sample of MZ and DZ twin parents. In contrast, results based on MZ twin parents show that mother's schooling matters at least as much as father's schooling for children's schooling. We also estimate the effect of parents' schooling separately by child gender and find this effect to be entirely driven by the impact of mother's schooling on daughter's schooling. Our results show that (1) it is vital to have zygosity information to estimate causal intergenerational effects and (2) the conclusions reached by Behrman and Rosenzweig (2002) for the U.S. do not apply in Sweden.
    Keywords: twins, twin-fixed effects, schooling, intergenerational mobility
    JEL: J0 I0 J1
    Date: 2011–08
  19. By: Anke Hassel
    Abstract: What do the recent trends in German economic development convey about the trajectory of change? Has liberalization prepared the German economy to deal with new challenges? What effects will liberalization have on the coordinating capacities of economic institutions? This paper argues that coordination and liberalization are two sides of the same coin in the process of corporate restructuring in the face of economic shocks. Firms seek labour cooperation in the face of tighter competitive pressures and exploit institutional advantages of coordination. However, tighter cooperation with core workers sharpened insider-outsider divisions and were built upon service sector cost cutting through liberalization. The combination of plant-level restructuring and social policy change forms a trajectory of institutional adjustment of forming complementary economic segments which work under different rules. The process is driven by producer coalitions of export-oriented firms and core workers’ representatives rather than by firms per se.
    Keywords: Varieties of Capitalism, institutional change, labour market, industrial relations
    Date: 2011–09

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