nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒11‒28
sixteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The Remittances Behaviour of the Second Generation in Europe: Altruism or Self-Interest? By Elena AMBROSETTI; Eralba CELA; Tineke FOKKEMA
  2. Welfare, Labor Supply and Heterogeneous Preferences: Evidence for Europe and the US By Bargain, Olivier; Decoster, André; Dolls, Mathias; Neumann, Dirk; Peichl, Andreas; Siegloch, Sebastian
  3. Labor Supply and Government Programs: A Cross-Country Analysis By Andres Erosa; Luisa Fuster; Gueorgui Kambourov
  4. Determinants of regional productivity growth in Europe: an empirical analysis By Gert-Jan Linders; Tatyana Bulavskaya; Henri De Groot; Ferdinand Paraguas
  5. Low Cost Carriers and Airports Performance: Empirical Evidence from a Panel of UK Airports By Anna Bottasso; Maurizio Conti; Claudio A. Piga
  6. How R&D and tax incentives influence economic growth: Econometric study for the period between 1995 and 2008 of EU-15 By Paula Faria; Francisco Vitorino da Silva Martins; Elísio Fernando Moreira Brandão
  7. Airline Pricing under Different Market Conditions: Evidence from European Low-Cost Carriers By Volodymyr Bilotkach; Alberto A. Gaggero; Claudio A. Piga
  8. Do immigrant students succeed? Evidence from Italy and France based on PISA 2006 By Marina Murat
  9. Still Unequal at Birth - Birth Weight, Socioeconomic Status and Outcomes at Age 9 By Mark E McGovern
  10. Measuring the impact of market coupling on the Italian electricity market using ELFO++ By Elisabetta Pellini
  11. Taxing the financial sector in the European Union By Danuše Nerudová
  12. Land Markets in the EU Candidate Countries of Croatia, Former Yugoslav Republic of Macedonia and Turkey By Bojnec, Stefan
  13. Firm growth and the spatial impact of geolocated external factors: Empirical evidence for German manufacturing firms By Duschl, Matthias; Schimke, Antje; Brenner, Thomas; Luxen, Dennis
  14. Does Raising the Retirement Age Increase Employment of Older Workers? By Stefan Staubli; Josef Zweimüller
  15. Worktime Regulations and Spousal Labor Supply By Dominique Goux; Eric Maurin; Barbara Petrongolo
  16. The impact of immigration on international trade: a meta-analysis By Murat Genc; Masood Gheasi; Peter Nijkamp; Jacques Poot

  1. By: Elena AMBROSETTI (Universir… La Sapienza, Roma); Eralba CELA (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Tineke FOKKEMA (Netherlands Interdisciplinary Demographic Institute (NIDI))
    Abstract: Whereas most research on remittances focuses on first-generation migrants, the aim of this paper is to investigate the remitting behaviour of the host country-born children of migrants - the second generation - in various European cities. Some important studies found that migrant transnationalism is not only a phenomenon for the first generation, but also apply to the second and higher generations, through, among other things, family visits, elder care, and remittances. At the same time, the maintenance of a strong ethnic identity in the 'host' society does not necessarily mean that second-generation migrants have strong transnational ties to their 'home' country. ;;The data used in this paper is from "The Integration of the European Second Generation" (TIES) project. The survey collected information on approximately 6,250 individuals aged 18-35 with at least one migrant parent from Morocco, Turkey or former Yugoslavia, in 15 European cities, regrouped in 8 'countries'. For the purpose of this paper, only analyses for Austria (Linz and Vienna) Switzerland (Basle and Zurich); Germany (Berlin and Frankfurt); France (Paris and Strasbourg); the Netherlands (Amsterdam and Rotterdam) Spain (Barcelona and Madrid); and Sweden (Stockholm) will be presented.;;To study the remitting behaviour of the second-generation Moroccans, Turks and former Yugoslavs residing in these 13 European cities, we will start with descriptive analyses (prevalence, amount), followed by logistic (multinomial) regression on the likelihood and amount of remittance. We are particularly interested in the following question: Are the second-generation remitters more driven by altruism or by self-interest? If altruism is the main driving force, we can expect that 'emotional attachment' factors (e.g., presence of parents in 'home' country, strong feelings to the country of origin or ethnic group of the parents, high intensity of cultural orientation towards the country of origin of the parents) will be the main predictors of the remitting behaviour, while factors like 'investment in parents' country of birth' and 'return intention' will be more central if second-generation migrants remit for self-interested reasons.
    Keywords: European countries, migration, remittances, second generation
    JEL: F22 F24
    Date: 2011–11
  2. By: Bargain, Olivier (University of Aix-Marseille II); Decoster, André (K.U.Leuven); Dolls, Mathias (IZA); Neumann, Dirk (IZA); Peichl, Andreas (IZA); Siegloch, Sebastian (IZA)
    Abstract: Following the report of the Stiglitz Commission, measuring and comparing well-being across countries has gained renewed interest. Yet, analyses that go beyond income and incorporate non-market dimensions of welfare most often rely on the assumption of identical preferences to avoid the difficulties related to interpersonal comparisons. In this paper, we suggest an international comparison based on individual welfare rankings that fully retain preference heterogeneity. Focusing on the consumption-leisure trade-off, we estimate discrete choice labor supply models using harmonized microdata for 11 European countries and the US. We retrieve preference heterogeneity within and across countries and analyze several welfare criteria which take into account that differences in income are partly due to differences in tastes. The resulting welfare rankings clearly depend on the normative treatment of preference heterogeneity with alternative metrics. We show that these differences can indeed be explained by estimated preference heterogeneity across countries – rather than demographic composition.
    Keywords: welfare measures, preference heterogeneity, labor supply, Beyond GDP
    JEL: C35 D63 H24 H31 J22
    Date: 2011–11
  3. By: Andres Erosa; Luisa Fuster; Gueorgui Kambourov
    Abstract: There are substantial cross-country differences in labor supply late in the life cycle (age 50+). A theory of labor supply and retirement decisions is developed to quantitatively assess the role of social security, disability insurance, and taxation for understanding differences in labor supply late in the life cycle across European countries and the United States. The findings support the view that government policies can go a long way towards accounting for the low labor supply late in the life cycle in the European countries relative to the United States, with social security rules accounting for the bulk of these effects.
    Keywords: Social security, disability insurance, labor supply, heterogeneity, life cycle
    JEL: D9 E2 E6 H2 H55 J2
    Date: 2011–11–15
  4. By: Gert-Jan Linders; Tatyana Bulavskaya; Henri De Groot; Ferdinand Paraguas
    Abstract: Discussion on the possibilities for and barriers to income convergence and catch-up growth is at the heart of the debate on European regional economic policy. This study presents an empirical analysis of the determinants of regional productivity growth in Europe, using the most recent Cambridge Econometrics regional database, EU KLEMS growth and productivity accounts and EuroStat R&D data. We apply a reduced-form empirical specification for semi-endogenous productivity growth that allows for differences in steady state income levels and long-run growth rates. Productivity growth in a region depends on its level of human capital, the investments in R&D, and the productivity gap with the technology frontier. Empirical findings show that these factors are interrelated. Apart from a technology gap, absorptive capacity is important to realize catch-up. Both convergence and divergence of productivity across regions are possible. Results show that all considered factors have significant effect on disparity in regional productivity growth, although effects across manufacturing and service sectors are different. The estimated model also features stable dynamic properties in response to an exogenous shock. Keywords: Semi-endogenous Growth, Regional Convergence, International Transfer of Technology, human capital, R&D.
    Date: 2011–09
  5. By: Anna Bottasso (University of Genoa); Maurizio Conti (University of Genoa); Claudio A. Piga (Loughborough University; RCEA)
    Abstract: During the last decade, the proliferation of Low Cost Carriers and the related huge increase in traffic has been the most visible effect of the deregulation of the airline market in Europe. Little attention has been paid to how airports were affected by the changes in the new institutional environment. In this study we model the total factor productivity (TFP) for a panel of the UK largest airports over the 2002-2005 period and investigate whether the presence of LCCs has some impact on airports' TFP. Empirical results are consistent with the hypothesis that conspicuous entry of LCCs on European markets has impacted positively on the vertical chain by facilitating airports' productivity improvements. This result is robust to reverse causality issues associated with the possibility that most efficient airports are those that are more likely to attract LCCs. Different possible arguments may explain our results: traffic increases brought about by LCCs for a given installed capacity might have generated higher TFP; more efficient organizational models might have been adopted to meet LCCs operational requirements (short turnaround times); cost reductions might have been realized in order to lower charges and attract LCCs; competition from a larger number of airports induced by LCCs' wider catchment areas (with respect to full service airlines) might have exerted further pressure toward TFP improvements.
    Keywords: Total Factor Productivity, Airports, LCCs
    Date: 2011–11
  6. By: Paula Faria (Faculdade de Economia, Universidade do Porto); Francisco Vitorino da Silva Martins (Faculdade de Economia, Universidade do Porto); Elísio Fernando Moreira Brandão (Faculdade de Economia, Universidade do Porto)
    Abstract: Setting targets to increase the levels of R&D, a component that is present in the political and economic agendas of the European Member States with the promotion of active tax policies, suggests that it is possible for R&D to cause an impact on economic growth. This research work aims at understanding the influence of the evolution of R&D expenditures, as well as the influence of tax incentives on economic growth. For that, a panel data of 15 European countries, during the period between 1995 and 2008, was used. The econometric study confirms the foreseen importance, both in this study and in the literature, of the countries’ R&D efforts and their impact on economic growth. The positive effect of tax incentives on economic growth, combined with R&D levels, is highlighted and demonstrated, thus confirming a strategic orientation towards tax policies followed by the national institutions.
    Keywords: R&D, tax incentives, economic growth, econometric analysis in panel data
    JEL: C23 H20 H3
    Date: 2011–11
  7. By: Volodymyr Bilotkach (University of California, Irvine); Alberto A. Gaggero (University of Pavia); Claudio A. Piga (Loughborough University; RCEA)
    Abstract: Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats remain available on a flight. A fortiori, this implies a monotonically increasing temporal profile of fares. In this paper, we exploit the presence of drops in offered fares over time as an indicator of an active yield management intervention by two main European Low-Cost Carriers observed daily during the period June 2002 - June 2003. Our results indicate that yield management is effective in raising a flight's load factor. Furthermore, yield management interventions are more intense, and generate a stronger impact, on more competitive routes: one possible interpretation is that a reduction in competitive pressure allows the carriers to adopt a more standardized approach to pricing. Similarly, we find that yield management interventions are more effective in raising the load factor on routes where the customer mix is more heterogenous (i.e., it includes passengers traveling for leisure, business and for family matters). On markets with homogeneous customer base, no robust yield management effect was observed.
    Keywords: Easyjet, Intertemporal Pricing, Panel Data, Ryanair, Yield Management
    JEL: L11 L93
    Date: 2011–11
  8. By: Marina Murat
    Abstract: This paper uses data from PISA 2006 on science, mathematics and reading to analyse immigrant school gaps – negative difference between immigrants’ and natives’ scores - and the structural features of educational systems in two adjacent countries, Italy and France, with similar migration inflows and with similar schooling institutions, based on tracking. Our results show that tracking and school specific programs matter; in both countries, the school system upholds a separation between students with different backgrounds and ethnicities. Residential segregation or discrimination seem also to be at work, especially in France. Given the existing school model, a teaching support in mathematics and science in France and in reading in Italy would help immigrant students to converge to natives’ standards.
    Keywords: International migration; educational systems; PISA
    JEL: F22 I21
    Date: 2011–11
  9. By: Mark E McGovern (University College Dublin)
    Abstract: Birth weight is an important aspect of public health which has been linked to increased risk of infant death, increased cost of care, and a range of later life outcomes. Using data from a new Irish cohort study, I document the relationship between birth weight and socioeconomic status. A strong asso- ciation with maternal education does not appear to be due to the timing of birth or complications during pregnancy, even controlling for a wide range of background characteristics. However, results do suggest intergenerational persistence in the transmission of poor early life conditions. A compar- ison with the UK Millennium Cohort Study reveals similar social gradients in both countries. Birth weight predicts a number of outcomes at age 9, including test scores, hospital stays and health. An advantage of the data is that I am able to control for a number of typically unmeasured variables. I determine whether parental investments as measured by the quality of interaction with the child, parenting style, or school quality mediate the association between birth weight and later indicators. For test scores, there is evidence of non-linearity. Boys are more adversely affected than girls, and I find that the effects of low birth weight (<2,500g) are particularly strong. I also consider whether there are heterogeneous effects by ability using quantile regression. These results are consistent with a literature which finds that there is a causal relationship between early life conditions and later outcomes.
    Keywords: Early Life Conditions, Birth Weight, Health Inequalities, Test Scores
    Date: 2011–11–16
  10. By: Elisabetta Pellini (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey)
    Abstract: This paper evaluates the impact on the Italian electricity market of replacing the current explicit auction mechanism with market coupling. Maximizing the use of the cross-border interconnection capacity, market coupling increases the level of market integration and facilitates the access to low-cost generation by consumers located in high-cost generation countries. Thus, it is expected that a high-priced area such as Italy could greatly benefit from the introduction of this mechanism. In this paper, the welfare benefits are estimated under alternative market scenarios for 2012, employing the optimal dispatch model ELFO++. The results of the simulations suggest that the improvement in social surplus is likely to be significant, especially when market fundamentals are tight.
    Keywords: Market coupling; market integration; Italian day-ahead electricity market.
    JEL: C61 C63 D40 L10 Q40
    Date: 2011–10
  11. By: Danuše Nerudová (Department of Accounting and Taxes, FBE MENDELU in Brno)
    Abstract: The recent financial crises has revealed the need to improve and ensure the stability of the financial sector to reduce negative externalities, to ensure fair and substantial contribution of the financial sector to the public finances and the need to consolidate public finance. The aim of the paper is to discuss the possibility of the financial sector taxation and to suggest the possible candidate suitable for the implementation on the EU level. Financial transaction tax represents the tool suitable mainly on global level, for only in that case enables to generate sufficient financial resources. From EU point of view is considered as less suitable, for it bears the risk of reallocation. Therefore the introduction of financial activities tax on EU level is considered as a better solution for the financial sector taxation in the EU, for financial sector is exempted from value added tax. However, the approval of directive in the area of taxation requires unanimity of all EU member states, which means that final solution will be also political question.
    Keywords: financial transaction tax, financial activities tax, tax base, crises, financial sector
    JEL: H25
    Date: 2011–11
  12. By: Bojnec, Stefan
    Abstract: The paper provides an overview and a comparison of land markets covering the three candidate countries for European Union membership: Croatia, the Former Yugoslav Republic (FYR) of Macedonia and Turkey. We analyse and compare agricultural land structures and factors driving land markets. The analyses are based on the available cross-section and time-series evidence on agricultural land structures and land productivity (yields). The land productivity measured by production per hectare of agricultural land varies between the three countries. Agricultural land structures are the result of historical evolution in land markets and land-leasing developments with additional different institutional environments and agrarian and land reforms.
    Keywords: Land markets, land structures, land productivity, candidate countries, European Union, Agricultural and Food Policy, Land Economics/Use, Political Economy,
    Date: 2011–09
  13. By: Duschl, Matthias; Schimke, Antje; Brenner, Thomas; Luxen, Dennis
    Abstract: In this paper the relationship between firm growth and external knowledge sources, such as related firms and universities, is studied. The spatial characteristics of these relationships are examined by geolocating firms into a more realistic relational space using travel time distances and using flexible distance decay function specifications. This approach properly accounts for growth relevant knowledge spillovers and allows for estimating their spatial range and functional form. Applying quantile regression techniques on a large sample of German manufacturing firms, we show that the impact of external factors substantially differ along firms' size, type of knowledge source and growth level. --
    Keywords: Firm growth,external factors,universities,agglomeration,space,spatial range,distance decay functions,knowledge spillovers,high growth firms,quantile regression
    JEL: C31 D92 L25 R11
    Date: 2011
  14. By: Stefan Staubli; Josef Zweimüller
    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 a 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: Dominique Goux; Eric Maurin; Barbara Petrongolo
    Abstract: We investigate cross-hour effects in spousal labor supply exploiting independent variation in hours worked generated by the introduction of the short workweek in France in the late 1990s. We find that female and male employees treated by the shorter legal workweek reduce their weekly labor supply by about 2 hours, and do not experience any reduction in their monthly earnings. While wives of treated men do not seem to adjust their working time at either the intensive or extensive margins, husbands of treated wives respond by cutting their labor supply by about half an hour to one hour per week, according to specifications and samples. Further tests reveal that husbands' labor supply response did not entail the renegotiation of usual hours with employers or changes in earnings, but involved instead a reduction in (unpaid) work involvement, whether within a given day, or through an increase in the take-up rate of paid vacation and/or sick leave. These margins of adjustment are shown to have no detrimental impact on men's (current) earnings. The estimated cross-hour effects are consistent with the presence of spousal leisure complementarity for husbands, though not for wives.
    Keywords: Spousal labor supply, cross-hour effects, workweek reduction
    JEL: J22 J12 J48
    Date: 2011–11
  16. By: Murat Genc (University of Otago, New Zealand); Masood Gheasi (VU University Amsterdam, The Netherlands); Peter Nijkamp (VU University Amsterdam, The Netherlands); Jacques Poot (University of Waikato, New Zealand)
    Abstract: Since the early 1990s many empirical studies have been conducted on the impact of international migration on international trade, predominantly from the host country perspective. Because most studies have adopted broadly the same specification, namely a log-linear gravity model of export and import flows augmented with the logarithm of the stock of immigrants from specific source countries as an additional explanatory variable, the resulting elasticities are broadly comparable and yield a set of estimates that is well suited to meta-analysis. We therefore compile and analyze in this paper the distribution of immigration elasticities of imports and exports across 48 studies that yielded 300 observations. The results show that immigration complements rather than substitutes for trade flows between host and origin countries. Correcting for heterogeneity and publication bias, an increase in the number of immigrants by 10 percent may be expected to increase the volume of trade on average by about 1.5 percent. However, the impact is lower for trade in homogeneous goods. Over time, the growing stock of immigrants decreases the elasticities. The estimates are affected by the choice of some covariates, the nature of the data (cross-section or panel) and the estimation technique. Elasticities vary between countries in ways that cannot be fully explained by study characteristics; trade restrictions and immigration policies matter for the impact of immigration on trade. The migrant elasticity of imports is larger than that of exports in about half the countries considered, but the publication bias and heterogeneity-corrected elasticity is slightly larger for exports than for imports.
    Keywords: international trade, imports, exports, immigration, gravity model, meta-analysis
    JEL: F16 F22
    Date: 2011–11

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.