nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒01‒18
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The Wage Premium of Globalisation: Evidence from European Mergers and Acquisitions By Harald Oberhofer; Matthias Stöckl; Hannes Winner
  2. The Change of Job Opportunities: the Role of Computerization and Institutions By V. Nellas; E. Olivieri
  3. Productivity Gains from Services Liberalization in Europe By Jan Bena; Peter Ondko; Evangelia Vourvachaki
  4. Paying for Performance: Incentive Pay Schemes and Employees' Financial Participation By Alex Bryson; Richard Freeman; Claudio Lucifora; Michele Pellizzari; Virginie Perotin
  5. The EU Apportionment Formula: Insights from a Business Case By A. ROGGEMAN; I. VERLEYEN; P. VAN CAUWENBERGE; C. COPPENS
  6. Growth under strain in the European Union: A long run perspective By Francesco Farina
  7. Cultural Differences, Assimilation and Behavior: Player Nationality and Penalties in Football By Giacomo De Luca; Jeroen Schokkaert;
  8. The costs of electricity systems with a high share of fluctuating renewables - a stochastic investment and dispatch optimization model for Europe By Nagl, Stephan; Fürsch, Michaela; Lindenberger, Dietmar
  9. Trash contracts? The impact of temporary employment on leaving the parental home in Poland. By Anna Baranowska
  10. Culture, Geography and Institutions. Empirical Evidence from Small-scale Banking By Franz R. Hahn
  11. The Causal Effects of an Industrial Policy By Chiara Criscuolo; Ralf Martin; Henry G. Overman; John Van Reenen
  12. The Territorial Dimension of the European Social Fund: A Local Approach for Local Jobs? By Cristina Martinez-Fernandez; Pawel Chorazy; Tamara Weyman; Monika Gawron
  13. Is Welfare Dependency Inherited? Estimating the Causal Welfare Transmission Effects Using Swedish Sibling Data By Edmark, Karin; Hanspers, Kajsa
  14. Maternal Labor Market Return, Parental Leave Policies, and Gender Inequality in Housework By Pia S. Schober
  15. “Honey, I shrunk the kids’ benefits!” — Revisiting intergenerational conflict in OECD countries. By Tim Krieger; Jens Ruhose
  16. Diverging trends in unemployment in the United States and Europe: Evidence from Okun’s law and the global financial crisis By Sandrine Cazes; Sher Verick; Fares Al-Hussami
  17. A cross-country experimental comparison of preferences for redistribution By Francesco Farina; Gianluca Grimalda
  18. Eligibility Criteria for Unemployment Benefits: Quantitative Indicators for OECD and EU Countries By Danielle Venn
  19. Average wage, qualification of the workforce and export performance in German enterprises: Evidence from KombiFiD data By Joachim Wagner
  20. Sector-based explanation of vertical integration in distribution systems; Evidence from France By Magali Chaudey; Muriel Fadairo; Gwennaël Solard

  1. By: Harald Oberhofer; Matthias Stöckl; Hannes Winner (WIFO)
    Abstract: We provide evidence on the impact of globalisation on labour market outcomes analysing pay differences between foreign-acquired and domestically-owned firms. For this purpose, we use firm level data from 16 European countries over the time period 1999 to 2006. Applying propensity score matching techniques we estimate positive wage premia of cross-boarder merger and acquisitions, suggesting that foreign acquired firms exhibit higher short-run (post-acquisition) wages than their domestic counterparts. The observed wage disparities are most pronounced for low paying firms (with average wages below the median). Finally, we find systematic wage premia in Western European countries, but not so in Eastern Europe.
    Keywords: Globalisation, mergers and acquisitions, wage effects, propensity score matching
    Date: 2012–01–10
  2. By: V. Nellas; E. Olivieri
    Abstract: This paper studies the pattern of job opportunities over the last two decades in European countries. We find that the share of high-skilled jobs have been expanding over time, while the share of medium- skilled jobs have been declining. These changes are in line with the US patterns and, according to the previous literature, they come from recent technological changes. However, our data show an interesting difference between the US and Europe: in Europe there is not any increase in the share of low-skilled employment. Moreover, we find that the difference between the proportion of employment hired in low-skilled and medium-skilled jobs is negatively correlated with both the unemployment rate and the degree of employment protection in the labour market. We propose a theoretical model to study the effects of a technological shock on the employment structure in a unionized economy. By accounting for the collective bargaining process, our model may fit Continental Europe better than the previous ones. We conclude that the definition of the union policy is crucial in order to explain observed cross-country heterogeneity in low-skilled employment.
    JEL: J2 J51 O3
    Date: 2012–01
  3. By: Jan Bena; Peter Ondko; Evangelia Vourvachaki
    Abstract: As part of the Single Market Program the European Commission commanded the liberalization and regulatory harmonization of utilities, transport and telecommunication services. This paper investigates whether and how this process affected the productivity of European network firms. Exploiting the variation in the timing and degree of liberalization efforts across countries and industries, we find that liberalization increased firm-level productivity but had no reallocation impact. Based on our estimates, the average firm-level productivity gain from liberalization amounts to 38 percent of the average total within-firm productivity gain in network industries. The results underscore the growth-promoting role of liberalization efforts.
    Keywords: productivity; liberalization; allocative efficiency; services; firm-level data;
    JEL: D24 K23 L11 L51
    Date: 2011–12
  4. By: Alex Bryson; Richard Freeman; Claudio Lucifora; Michele Pellizzari; Virginie Perotin
    Abstract: We present new comparable data on the incidence of performance pay schemes in Europe and the USA. We find that the percentage of employees exposed to incentive pay schemes ranges from around 10-15 percent in some European countries to over 40 percent in Scandinavian countries and the US. Individual pay and profit/gain sharing schemes are widely diffused, whereas share ownership schemes are much less common, particularly in Europe. We document a number of empirical regularities. Incentive pay is less common in countries with a higher share of small firms. Higher product and labour market regulation are associated with lower use of incentive pay. Capital market development is a necessary requirement for a wider diffusion of incentive pay, particularly sharing and ownership schemes. When we control for a large set of individual characteristics and company attributes, we find that the probability that a worker is covered by an incentive scheme is higher in large firms and in high-skilled occupations, while it is much lower for females.
    Keywords: performance pay, financial participation, institutions
    JEL: J24 J33 D31
    Date: 2012–01
    Abstract: First, this paper gives an overview of the progress Europe has made in its development of a Common Consolidated Corporate Tax Base (CCCTB). Second, we use firm level data from a listed multinational to investigate how several designs for the CCCTB apportionment formula could affect the allocation of the consolidated tax base. The design is relevant in the light of member states’ concern for protecting their tax revenues, as well as for the multinational companies’ tax minimizing possibilities. Moreover, it plays an important role in achieving an efficient and simple tax system. Simulating different apportionment formulas, the results show that including more factors and using more equal weights distributes the common tax base more equally, which could reduce the incentive to shift factors from high to low tax countries. The results also indicate that simplifying the factor definitions, leads to rather minor changes in the allocation. Using unpublished data, this study allows to investigate the consequences of different formulas in detail, which contributes to the current discussion on corporate tax harmonization in the EU.
    Keywords: CCCTB, corporate tax, European Union, apportionment formula
    Date: 2011–10
  6. By: Francesco Farina
    Abstract: This paper interprets the GDP growth experienced by the economies of the European Union in the perspective of the growth and the agglomeration models. The objective consists in understanding to what extent the growth and convergence paths followed by Europe during the last decades of economic integration process have been affected by the evolution of the exchange rate regime and by increasingly constraining monetary and fiscal policies.
    Keywords: growth, beta and sigma convergence, human capital, European Union.
    JEL: J24 O47 O52
    Date: 2011–05
  7. By: Giacomo De Luca; Jeroen Schokkaert;
    Abstract: We examine the impact of a different cultural background on individual behavior, focusing on violence on the football field of southern European and nothern European football players in the English Premier League. We find that southern European football players collect on average more football penalties than their nothern European colleagues. We also find that the initially higher number of football penalties incurred by southern European players converges towards the local average, the longer their experience in the Premier League.
    Keywords: Football, Violent Behavior, Culture, Assimilation
    JEL: J61 L83 Z10
    Date: 2011
  8. By: Nagl, Stephan (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Fürsch, Michaela (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Lindenberger, Dietmar (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: Renewable energies are meant to produce a large share of the future electricity demand. However, the availability of wind and solar power depends on local weather conditions and therefore weather characteristics must be considered when optimizing the future electricity mix. <p>In this article we analyze the impact of the stochastic availability of wind and solar energy on the cost-minimal power plant mix and the related total system costs. To determine optimal conventional, renewable and storage capacities for different shares of renewables, we apply a stochastic investment and dispatch optimization model to the European electricity market. The model considers stochastic feed-in structures and full load hours of wind and solar technologies and different correlations between regions and technologies. <p>Key findings include the overestimation of fluctuating renewables and underestimation of total system costs compared to deterministic investment and dispatch models. Furthermore, solar technologies are - relative to wind turbines - underestimated when neglecting negative correlations between wind speeds and solar radiation.
    Keywords: Stochastic programming; electricity; renewable energy
    JEL: C61 C63 Q40
    Date: 2012–01–09
  9. By: Anna Baranowska (Institute of Statistics and Demography, Warsaw School of Economics)
    Abstract: Poland stands out in international comparisons as a country where leaving parental home is remarkably delayed. There are many economic and institutional factors which contribute to postponing residential independence among youth, such as housing shortages, the limited share of rental housing or limited social assistance for young people. However, in the public debate there is little discussion about re-designing social policy support for youth or improvement of situation on the housing market. What attracts attention instead is the role of flexibilisation of contractual arrangements on the Polish labour market. In the media discourse, fixed-term contracts have been labelled as “trash contracts” and all the problems that young people in Poland face when making transition to adulthood, have been attributed to the spread this specific employment form. This article aims to find out whether fixed-term contracts indeed hinder residential independence of youth. Models of leaving parental home are estimated based on panel data from EU-SILC. The results show no significant negative impact of temporary employment on probability of establishing one’s own household among youth. What matters is whether young people have jobs, whereas the type of contracts that they receive from employers seems to be of little importance.
    Keywords: fixed-term contracts, temporary employment, leaving parental home, transition to adulthood
    JEL: J12 J13
    Date: 2011
  10. By: Franz R. Hahn (WIFO)
    Abstract: The fast adoption of Western-style democracy and market economy principles as established by EU standards by many of the Eastern European "transformation countries" since the early 1990s should have raised cross-border lending by banks based in "old" EU member countries to clients resident in new Eastern European EU member countries. This should particularly apply to Austria since it shares a long-lasting common history and, hence, common culture with these countries. To account for common culture we propose a new gauge aimed at measuring "cultural proximity" by making out onomastic similarities between common surnames of Austrian residents and common surnames of residents in the Czech Republic, Slovak Republic, in Hungary and Slovenia, respectively. By exploring, with panel econometric techniques, cross-border lending activities of Austria's small-sized to medium-sized regional banks, located close to its eastern border, over the period from 1996 to 2008 this paper provides evidence that is supportive of the presumption that cultural closeness matters for making basic laws of economics work.
    Keywords: panel econometric analysis, cross-border bank lending, geography, common culture, institutions
    Date: 2012–01–10
  11. By: Chiara Criscuolo; Ralf Martin; Henry G. Overman; John Van Reenen
    Abstract: Business support policies designed to raise productivity and employment are common worldwide, but rigorous micro-econometric evaluation of their causal effects is rare. We exploit multiple changes in the area-specific eligibility criteria for a major program to support manufacturing jobs ("Regional Selective Assistance"). Area eligibility is governed by pan- European state aid rules which change every seven years and we use these rule changes to construct instrumental variables for program participation. We match two decades of UK panel data on the population of firms to all program participants. IV estimates find positive program treatment effect on employment, investment and net entry but not on TFP. OLS underestimates program effects because the policy targets underperforming plants and areas. The treatment effect is confined to smaller firms with no effect for larger firms (e.g. over 150 employees). We also find the policy raises area level manufacturing employment mainly through significantly reducing unemployment. The positive program effect is not due to substitution between plants in the same area or between eligible and ineligible areas nearby. We estimate that "cost per job" of the program was only $6,300 suggesting that in some respects investment subsidies can be cost effective.
    Keywords: industrial policy, regional policy, employment, investment, productivity
    JEL: H25 L52 L53 O47
    Date: 2012–01
  12. By: Cristina Martinez-Fernandez; Pawel Chorazy; Tamara Weyman; Monika Gawron
    Abstract: The European Union Treaty of Lisbon brought a new dimension to cohesion – the territorial dimension, which has become one of the most frequently discussed aspects for achieving cohesion and, at the same time, one of the challenges for EU policies. The ‘territorial dimension’ determines many socio-economic problems and presents challenges for the European Social Fund (ESF), which has to enhance its flexibility and highlight the capacity and needs of specific territories at national, regional and local levels at the programming and implementation stages. While our understanding of the national and regional levels has advanced, the dynamics with the local level need further consideration, chiefly in the context of Europe 2020 strategy, and regarding the territorial dimension of the European Social Fund and mechanisms of territorialisation.<p> This paper discusses the conceptualisation of territoriality and the different levels of applicability in regional development approaches. The paper draws on OECD and other organisations research and analysis; particularly the work of the OECD Local Economic and Employment Development Programme (LEED). The paper argues that the local level is emerging as the key spatial dimension where EU development instruments apply and therefore a systemic local approach may be needed when designing national and regional cohesion policies and instruments. The paper is divided into 5 sections discussing: 1) The importance of an integrated spatial approach to development; 2) The success of the local approach to development: complexity, integration and the policy mix; 3) Integrating territorial mechanisms for job creation, employability and inclusive growth; 4) Fostering education policies for qualification and skills rich ecosystems; and 5) The way forward.
    Date: 2011–12–15
  13. By: Edmark, Karin (Research Institute of Industrial Economics (IFN)); Hanspers, Kajsa (Uppsala University)
    Abstract: This study tests whether individuals who grow up with parents on welfare benefits are themselves more (or less) likely to be welfare recipients as young adults, compared to individuals who grow up in non-welfare households. We use the sibling difference method to identify causal effects separately from the effects of correlated factors. While a descriptive analysis reveals a fairly high positive intergenerational correlation, especially in the late teens and conditional on a large set of household level factors, the sibling analysis provides no support for a causal effect of parents’ welfare benefit receipt on children’s future welfare use.
    Keywords: Welfare benefits; Intergenerational mobility; Sibling approach
    JEL: I30 J10
    Date: 2012–01–02
  14. By: Pia S. Schober
    Abstract: This study investigates how the duration of the work interruption and the labor market status of mothers upon their return affect the division of housework in couples after a birth. By observing several parental leave policy reforms in Britain and West-Germany, this research also explores how extended leave entitlements for mothers influence the division of housework. The analysis uses multilevel multiprocess models for 1220 birth events of British couples and 1785 births to German couples based on data from the British Household Panel Survey (1991-2008) and the German Socio-Economic Panel (1985-2009). The results suggest that mothers increase their housework hours with every additional month of employment interruption. Mothers' full-time return seems more effective than a short labor market time-out in altering men's housework contributions and reducing the trend towards a more traditional division of housework. Parental leave policy extensions for mothers were associated with the division of housework only indirectly through their impact on the length of women's work interruptions.
    Keywords: Parenthood, parental leave policy, maternal employment, housework, gender division of labor, Britain, Germany
    Date: 2011
  15. By: Tim Krieger (University of Paderborn); Jens Ruhose (Ifo Institut)
    Abstract: Intergenerational conflicts may arise when interests of different age groups do not align. We examine cross-country data to find evidence for this conflict in OECD countries. We derive our results from a FGLS estimation model, which is complemented by a System-GMM estimation. Data covers a panel of 22 OECD countries over the time period 1985-2005. We find little support for intergenerational conflict in general; however, those who are close to (statutory) retirement age dislike public expenditure for families and education because, once they retire, they have to adapt to lower retirement income levels compared to previous work income. This effect lasts for a transitory period only.
    Keywords: Intergenerational Conflict, Family Benefits, Population Ageing, Education Expenditure, Voting, Retirement Income Shock.
    JEL: D72 H50 J13 J14 I22
    Date: 2011–12
  16. By: Sandrine Cazes (International Labour Office, Employment Analysis and Research Unit); Sher Verick (ILO Decent Work Team for South Asia and ILO Country Office for India); Fares Al-Hussami
    Abstract: The global financial crisis deeply impacted labour markets around the globe, particularly in a number of OECD countries. However, in such cases as the United States, some commentators have argued that the subsequent rise in unemployment has exceeded previous estimates of the elasticity of the unemployment rate with respect to output growth, a statistical relationship known as Okun’s law. In line with the literature on this topic, the estimates of Okun’s coefficients presented in this paper display considerable variation across countries, which captures the heterogeneity in the responsiveness of unemployment to the global financial crisis. In the United States, Canada, Spain and other severely affected economies, the coefficient increased sharply, departing from pre-crisis levels in the 2000s. In other countries where unemployment has remained subdued, namely Germany and the Netherlands, the coefficient has fallen dramatically. While different factors can potentially explain how the crisis has been transmitted to the labour market, the role of labour market institutions is the focus of this paper. In this regard, empirical evidence exploring the relationship between the shift in Okun’s coefficients and such institutions confirms that the responsiveness in the unemployment rate during the Great Recession was lower in countries where workers are afforded greater employment protection (such as Germany).
    Keywords: unemployment / employment / employment security / labour legislation / comment / economic recession / OECD countries / USA
    Date: 2012
  17. By: Francesco Farina; Gianluca Grimalda
    Abstract: We examine experimentally individual preferences for redistributions in the US, Italy, and Norway. We decompose demand for redistribution due to luck vis-à-vis individual merit, and study how they are affected by individual and social characteristics. Experimental subjects made four different decisions on how much earning redistribution they wanted to implement in their group starting from a given initial distribution of earnings. The first decision measured preferences for inequality under a condition of impersonality. The second and third decisions were made behind a “veil of ignorance”, whereas the fourth decision was taken knowing one’s position in the earnings scale. Ambiguity and risk aversions were measured in an independent set of decisions. Between-country differences are sizable. Norwegian subjects were generally the most redistributive of the three, and the US subjects the least redistributive. Italian subjects seemed more willing to accept inequality differences due to individual merit than others. Conversely, Norwegian subjects demanded high levels of redistribution regardless of how inequality had been generated. Experimental redistribution is significantly higher in Norway than Italy, in spite of the two samples holding comparable views over social mobility. This calls for a re-examination of existing theories that see beliefs on mobility as the main explanation of demand for redistribution.
    Keywords: Inequality, redistribution, individual merit, cross-country experiments.
    JEL: C91 D31 D63 P52
    Date: 2011–02
  18. By: Danielle Venn
    Abstract: Eligibility criteria for unemployment benefits, which require recipients to actively look for work, take up suitable job offers or take part in active labour market programmes (ALMPs), or risk benefit sanctions, can play an important role in offsetting the negative impact of generous unemployment benefits on employment incentives. This paper presents information on the strictness of eligibility criteria for unemployment benefits for 36 OECD and/or EU member countries. It covers entitlement conditions (employment and/or contribution requirements to gain access to benefits and sanctions for voluntary unemployment), job-search requirements (availability requirements during ALMPs and suitable work criteria), monitoring of job-search effort and sanctions for refusing a job offer or ALMP placement. These qualitative data are then used to compile a composite indicator of the strictness of eligibility criteria and some comparisons are made with the results of a similar exercise for earlier periods. This indicator complements existing cross-country indicators relating to unemployment benefits, such as net replacement rate data from the OECD Tax and Benefits database and data on ALMP expenditure compiled annually by Eurostat and the OECD.<BR>Les critères d’éligibilité aux allocations de chômage, comme l’obligation de chercher activement un emploi, d’accepter les offres d’emploi convenables ou de participer à des programmes actifs du marché du travail (PAMT), ou bien le risque de sanction par rapport aux prestations, peuvent jouer un rôle important pour compenser l’effet négatif des allocations de chômage généreuses sur les incitations à l’emploi. Ce document présente des informations sur la rigueur des conditions d’éligibilité pour les allocations de chômage dans 36 pays de l’OCDE et/ou membres de l’UE. Il décrit les conditions d’accès aux prestations (période d’emploi et/ou de contribution requise et sanctions en cas de chômage volontaire), les obligations de recherche d’emploi (disponibilité pour les participants aux PAMT et critère d’emploi convenable), le contrôle des efforts de recherche d’emploi et les sanctions en cas de refus d’une offre d’emploi ou d’une proposition de participation à une mesure active du marché du travail. Ces données qualitatives sont ensuite utilisées pour construire un indicateur composite de la rigueur des critères d’éligibilité et effectuer des comparaisons avec des résultats d’exercices similaires pour des périodes antérieures. Cet indicateur complète les autres indicateurs disponibles relatifs aux prestations de chômage, tel les taux de remplacement issus de la base de données de l’OCDE prestations et salaires et les données sur les dépenses publiques des PAMT compilées annuellement par Eurostat et l’OCDE.
    Date: 2012–01–09
  19. By: Joachim Wagner (Institute of Economics, Leuphana University of Lüneburg, Germany)
    Abstract: Empirical investigations with enterprise level data from official statistics often use the average wage as a proxy variable for the qualification of the workforce, mostly due to the lack of detailed information on the qualification of the employees. This paper uses unique newly available data for German enterprises from the KombiFiD project that for the first time combine information from the statistics of employees covered by social security and information from surveys performed by the Statistical Offices to look at the quality of this proxy variable by investigating the link between the average wage in a firm and the qualification of the workforce. Furthermore, it demonstrates that detailed information on the qualification of the workforce sheds new light on the role of highly qualified employees for success on export markets that is not revealed by the average wage as a proxy variable. Based on the results of this paper it is argued that combined firm level data that stem from different data producers should be widely accessible for research.
    Keywords: Qualification of workforce, average wage, export, firm level data
    JEL: C81 F14 J31
    Date: 2012–01
  20. By: Magali Chaudey (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Muriel Fadairo (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Gwennaël Solard (INSEE Paris - INSEE Paris)
    Abstract: Based on recent data concerning the French distribution networks in retail and services, this paper highlights several stylized facts relating to the sector-based differences in the organizational choices. Until now this issue has not been studied in the economical literature. This paper provides an analytical framework derived from the theory of contracts, and evidence for the French case.
    Keywords: Distribution Networks; Vertical relationships; Contract theory; Applied Econometrics
    Date: 2011–12–23

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