nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒03‒14
fifteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Material Deprivation, Economic Stress and Reference Groups in Europe: An Analysis of EU-SILC2099 By Christopher T. Whelan; Bertrand Maître
  2. Understanding Material Deprivation in Europe: A Multilevel Analysis By Christopher T. Whelan; Bertrand Maître
  3. GINI DP 23: Automatic Stabilizers, Economic Crisis and Income Distribution in Europe By Dolls, M.; Fuest, C.; Andreas Peichl
  4. Capital Structure and Corporate Taxation. Empirical Evidence from European Panel Data By Matthias Stöckl; Hannes Winner
  5. Labour Market Penalties of Mothers: the Role of Reconciliation Policies By Lia Pacelli; Silvia Pasqua; Claudia Villosio
  6. Food Safety Regulation and Firm Productivity:Evidence from the French Food Industry By Bontemps, Christophe; Nauges, Céline; Réquillart, Vincent; Simioni, Michel
  7. School-to-work transitions in Europe: Paths towards a permanent contract By Garrouste, Christelle; Loi, Massimo
  8. Assessing the Rise of Organic Farming in the European Union: Environmental and Socio-economic Consequences By Charalampos Konstantinidis
  9. Well-being in Germany: What explains the regional variation? By Vatter, Johannes
  10. Asylum Policy in the EU: The Case for Deeper Integration By Tim Hatton
  11. Innovation in EU merger control: walking the talk By Reinhilde Veugelers
  12. GINI DP 21: Transfer Taxes and Inequality By Jappelli, T.; Padula, M.; Pica, G.
  13. Is price dynamics homogeneous across Eurozone countries? By David Guerreiro; Marc Joëts; Valérie Mignon
  14. GINI DP 22: Institutional Reforms and Educational Attainment in Europe By Michela Braga; Daniele Checchi; Elena Meschi
  15. The effect of Germany's repeal of the corporate capital gains tax: Evidence from the disposal of corporate minority holdings By Rünger, Silke

  1. By: Christopher T. Whelan (School of Sociology and Geary Institute, University College Dublin); Bertrand Maître (Economic and Social Research Institute, Dublin)
    Abstract: In this paper we take advantage of the recent availability of data from the special module on material deprivation in the 2009 European Union Statistics on Income and Living Conditions (EU-SILC) to develop a more comprehensive understanding of the relationship between material deprivation and economic stress, the mediating role played by cross-national differences in levels of income and income inequality and the implications for competing perspectives on the nature of reference groups in Europe. The paper establishes the critical role of basic deprivation, relating to inability to enjoy customary standards of living, in rising economic stress levels and in mediating the impact of socio-economic conditions. National income levels and inequality had no direct influence on economic stress. However, the impact of basic deprivation was stronger in countries with higher levels of income indicating the crucial role of national reference groups. An interaction between basic deprivation and income inequality was also observed. However, contrary to the expectation that experiencing basic deprivation in a national context of high income inequality is likely to be particularly stressful, the consequences of such deprivation were most negative in low inequality countries. Experiencing basic deprivation where high income levels and lower inequality would lead to the expectation that such deprivation is eminently avoidable exacerbates its impact.
    Keywords: deprivation, economics, income, standards of living, cross-national differences, inequality
    Date: 2012–02–22
  2. By: Christopher T. Whelan (School of Sociology and Geary Institute, University College Dublin); Bertrand Maître (Economic and Social Research Institute, Dublin)
    Abstract: In this paper, taking advantage of the inclusion of a special module on material deprivation in EU-SILC 2009, we provide a comparative analysis of patterns of deprivation. Our analysis identifies six relatively distinct dimensions of deprivation with generally satisfactory overall levels of reliability and mean levels of reliability across counties. Multi-level analysis based on 28 European countries reveals systematic variation across countries in the relative importance of with and between country variation. The basic deprivation dimension is the sole dimension to display a graduated pattern of variation a across countries. It also reveals the highest correlations with national and household income, the remaining deprivation dimensions and economic stress. It comes closest to capturing an underlying dimension of generalized deprivation that can provide the basis for a comparative European analysis of exclusion from customary standards of living. A multilevel analysis revealed that a range of household and household reference person socio-economic factors were related to basic deprivation and controlling for contextual differences in such factors allowed us to account for substantial proportions of both within and between country variance. The addition of macro-economic factors relating to average levels of disposable income and income inequality contributed relatively little further in the way of explanatory power. Further analysis revealed the existence of a set of significant interactions between micro socio-economic attributes and country level gross national disposable income per capita. The impact of socio-economic differentiation was significantly greater where average income levels were lower. Or, in other words, the impact of the latter was greater for more disadvantaged socio-economic groups. Our analysis supports the suggestion that an emphasis on the primary role of income inequality to the neglect of differences in absolute levels of income may be misleading in important respects.
    Keywords: deprivation, economics, income, socio-economic differentiation, multi-level analysis
    Date: 2012–02–21
  3. By: Dolls, M.; Fuest, C.; Andreas Peichl (Institute for the Study of Labor (IZA))
    Abstract: This paper investigates to what extent the tax and transfer systems in Europe protect households at different income levels against losses in current income caused by economic downturns like the present financial crisis. We use a multi country micro simulation model to analyse how shocks on market income and employment are mitigated by taxes and transfers. We find that the aggregate redistributive effect of the tax and transfer systems increases in response to the shocks. But the extent to which households are protected differs across income levels and countries. In particular, there is little stabilization of disposable income for low income groups in Eastern and Southern European countries.
    Date: 2011–12
  4. By: Matthias Stöckl; Hannes Winner (WIFO)
    Abstract: This paper analyses the impact of corporate taxation on a firm's debt policy. We contribute to the existing literature in two ways: 1. we incorporate firm heterogeneity with respect to firm size and legal form, 2. we explicitly model persistence in the debt-to-asset ratio. Econometrically this implies the use of dynamic panel data econometrics. We employ a panel of about 110,000 firms from 22 EU countries between 1999 and 2007. In line with theoretical expectations, we find that the debt ratio is positively affected by the statutory corporate income tax rate. Additionally, we find that capital structures exhibit a substantial degree of persistence over time. Finally, our empirical results show that large firms react more sensitively to the incentives of corporate taxation, while this effect is considerably smaller for stock companies.
  5. By: Lia Pacelli; Silvia Pasqua; Claudia Villosio
    Abstract: A key issue in increasing women’s participation in productive activities is the possibility of achieving a high work-life balance, both in terms of personal wellbeing and in terms of fair career prospects. The crucial event that challenges any level of work-life balance working women achieve is motherhood. We analyse how motherhood affects women's working career, both in terms of participation and in terms of wages, compared to “non-mothers”. The country chosen for the analysis is Italy, a paradigmatic example of low participation rate, scant childcare, high wage inequality and a cultural environment that considers childcare a predominantly “female affair”. While most of the literature focuses either on wages or on participation, we consider both dimensions in a country where female participation is low, thus contributing to filling the gap in the literature of studies of this kind referred to southern European countries. We confirm that the probability of leaving employment significantly increases for new mothers (career-break job penalty); however, this is mitigated by higher job quality and human capital endowment, and by childcare accessibility. Crucially, the availability of part-time jobs reduces the probability of mothers moving out of the labour force. Furthermore, women not leaving employment after becoming mothers face a decrease in wage levels and growth compared to non-mothers, and there are no signs of this gap closing five years after childbirth (family wage gap). Again, part-time employment plays a crucial role, as the family wage gap penalty emerges only among women working full-time both before and after childbirth; a part-time job over the whole period or even only after childbirth prevents any wage gap from opening up between such working mothers and non-mothers. A decisive fact in this context is that in Italy part-time jobs are (scant but) well paid and protected, unlike most other countries.
    Keywords: motherhood, part-time jobs, wage penalty, working career, reconciliation policies
    JEL: J13 J31
    Date: 2012
  6. By: Bontemps, Christophe (GREMAQ,INRA); Nauges, Céline (LERNA-INRA); Réquillart, Vincent (TSE,GREMAQ,INRA,IDEI); Simioni, Michel (GREMAQ,INRA)
    Abstract: The purpose of this article is to assess whether food safety regulations imposed by the European Union in the 2000s may have induced a slow-down in the productivity of firms in the food processing sector. The impact of regulations on costs and productivity has seldom been studied. This article contributes to the literature by measuring productivity change using a panel of French food processing firms for the years 1996 to 2006. To do so, we develop an original iterative testing procedure based on the comparison of the distribution of efficiency scores of a set of firms. Our results confirm that productivity decreased in two major food processing sectors (poultry and cheese) at the time when safety regulation was reinforced.
    Date: 2012–01
  7. By: Garrouste, Christelle; Loi, Massimo
    Abstract: In a context of intensive and global economic competition, European countries are growingly concerned with the consequences of increasing numbers of young people temporarily or permanently prevented from entering the job market and the difficulties faced by college and university graduates to find adequate employment. This study is concerned with analyzing the speed of transition of students to permanent employment as a proxy of professional stability, and by identifying possible discriminatory effects in selected countries. The research questions are addressed with a Cox survival model and a continuous-time Markov chain model where each individual can transit non-sequentially between the following Markov states: (1) education; (2) inactivity; (3)unemployment; (4) fixed-term/temporary employment; and (5) permanent employment (the 5th state being a non-absorbing steady state). The model is tested using the longitudinal ECHP data in thirteen EU member countries, over the period 1994-2001, controlling for individual and household characteristics and labour market characteristics (e.g., youth employment rate and share of temporary contracts). Overall, we find that the Mediterranean countries are the ones where the transition is the most hazardous both in terms of length and number of steps, but that in other countries, the speed of convergence is not necessarily correlated to the number of spells at intermediate states. Moreover, we find that the gender discrimination that affected most of the countries at the beginning of the 1990s, faded away by the end of the decade, replaced by a positive discrimination in favour of the graduates from vocationally oriented programmes.
    Keywords: School-to-work transitions; Permanent occupation; Continuous-time Markov Chains
    JEL: J60 J21 J71 J24
    Date: 2011
  8. By: Charalampos Konstantinidis (Universty of Massachusetts)
    Abstract: Although organic farming is considered the poster child of rural development in Europe, there is little empirical evidence assessing its success in achieving the ambitious environmental and socio-economic objectives that it is purported to assist. This paper presents empirical evidence from the growth of organic farming in Europe over the past two decades that questions the highly optimistic claims of policy makers. Although policies in support of organic impact have had an overall positive environmental impact, their social impact is ambiguous, as organic farming appears to have grown more in areas with larger average farm sizes. Additionally, contrary to what is often assumed, organic farms in Europe display larger average sizes and lower rates of labor intensity than their conventional counterparts, casting doubts on the efficacy of organic farms to allow family farmers to remain in the countryside as high-value producers. I assert that this development should be viewed as evidence of the \conventionalization" of organic farming, and suggest that policy makers take into account the transformations of the structures of production, which benefit from the support for organic farming. Treating the experience of organic farmers in the EU as a lesson for schemes paying for environmental services, I suggest that the success of organic farming should be evaluated by the numbers of participating farmers, rather than by area covered, as has been the predominant approach so far. Finally, I assert that strong agricultural cooperatives are necessary to secure a long-lasting passage of small farmers to organic methods of production. JEL Categories: Q1, Q58, O52
    Keywords: Organic Farming, European Union, Environment
    Date: 2012–02
  9. By: Vatter, Johannes
    Abstract: This paper examines regional differences in subjective well-being (SWB) in Germany. Inferential statistics indicate a diminishing but still significant gap between East andWest Germany, but also differing levels of SWB within both parts of Germany. The observed regional pattern of life satisfaction reflects macroeconomic fundamentals, where labour market conditions play a dominant role. Differing levels of GDP and economic growth have contributed rather indirectly to well-being such that the period since the reunification can be considered as a period of joyless growth. Moreover, the effects of unemployment and income differ in size between regions in such a way that one can assume increasing marginal disutility of unemployment. In total, approximately half of 'satisfaction gap' between East and West Germany can be attributed to differing macroeconomic conditions. In contrast, the comparably high levels of life satisfaction in Northern Germany are driven mostly by couples and go along with significantly higher fertility rates. Overall, I conclude that comparisons of SWB within a single country provide valid information. --
    Keywords: subjective well-being,regional disparities,unemployment,economic growth,fertility rate
    JEL: R10 I31
    Date: 2012
  10. By: Tim Hatton
    Abstract: Over the last decade the locus of policy-making towards asylum seekers and refugees has shifted away from national governments and towards the EU as the Common European Asylum Policy has developed. Most of the focus has been on the harmonisation of policies relating to border control, the processing of asylum claims and reception standards for asylum seekers. But this still falls far short of a fully integrated EU-wide policy. This paper examines the basis upon which a joint EU policy can be justified. I then ask whether superior outcomes can be achieved by harmonisation alone or if more centralised policy-making is necessary. I chart the progress of harmonisation and burden-sharing in the development of the Common European Asylum System and explore its effects. I also study the political feasibility of deeper policy integration by analysing public attitudes in the European Social Survey. I conclude that deeper integration is both desirable and politically possible.
    Keywords: Refugees, Asylum seekers, Asylum policy, Harmonisation, Burden-sharing
    JEL: F22 F53 F55 H77 H87 J15
    Date: 2012–02
  11. By: Reinhilde Veugelers
    Abstract: European Union policymakers have in principle put innovation at the heart of competitiveness, in particular in the Europe 2020 strategy. But in merger control, assessments of the innovation effects of mergers are inadequate, even though mergers and acquisitions can have a significant impact on the development of the structure of an industry, and on its capability to innovate. EU merger control rules include scope for assessing the innovation effects of mergers, but in practice, the European Commission's directorate-general for competition (DG COMP) is not â??walking the talkâ??. Innovation effects are only assessed when claimed by parties to a merger, and this happens rarely. Where innovation effects have been claimed, they have not been decisive in any case, meaning DG COMP has not considered them important enough to influence its decision. A framework should be put in place that makes the reporting of efficiency-related information by the merging parties mandatory, so that innovation effects can be properly assessed for all mergers. In addition, models can be used to make an assessment of the longer-term innovation effects of a merger, and to help inform decision-making. The author acknowledges the excellent research assistance of Joan de Solà-Morales and Hendrik Meder, and would like to thank Lars-Hendrik Röller for discussing and commenting on earlier versions of the paper.
    Date: 2012–02
  12. By: Jappelli, T.; Padula, M.; Pica, G.
    Abstract: This study surveys the existing debate on the taxation of the intergenerational transfers. Understanding the effect of transfer taxes on the intergenerational transmission of wealth requires answering the difficult question of what is the effect of taxes on bequest. On the one hand, the economic literature is far from sharing a unanimous view on the exact nature of the motive to leave bequests. On the other, data problems, and in particular lack of data on donors, makes it hard to provide conclusive evidence on the matter. To put the debate in context, we review the legislation on the taxation of intergenerational transfers in several OECD countries. Institutional arrangements on estate taxations vary widely between countries. Despite such heterogeneity, the revenues from taxing intergenerational transfers are generally low, and decreasing from 1% in the mid-sixties to 0.4% after 1980. We take this trend as broadly indicative that little redistribution takes place through taxation of intergenerational transfers. The available evidence and the related theoretical issues make it hard to establish a causal link between the increase in wealth and income inequality and the vanishing transfer tax.
    Date: 2011–12
  13. By: David Guerreiro; Marc Joëts; Valérie Mignon
    Abstract: The aim of this paper is to investigate whether price dynamics is homogeneous across the Eurozone countries. Relying on monthly data over the January 1970-July 2011 period, we test for the absolute purchasing power parity (PPP) hypothesis through the implementation of second-generation panel unit root and cointegration tests. Our results show that price dynamics are heterogeneous depending on both the time period and the considered group of countries. More specifically, while PPP is validated for the core EMU countries, this hypothesis does not hold for Northern peripheral economies. Turning to the Southern countries, PPP is observed only before the launch of the euro.
    Keywords: price convergence, Eurozone, panel unit root tests, half-life
    JEL: C23 E31 F15 F41
    Date: 2012
  14. By: Michela Braga (Facolta' di Scienze Politiche (DEAS), Universita' degli Studi di Milano); Daniele Checchi (Universita'degli Studi di Milano, Facolta'di Scienze); Elena Meschi (Institute of Education ,Room 405, University of London)
    Abstract: In this paper we analyse the effects of changes in the institutional design of the educational system on school attainment. In particular, we test whether alternative reforms have increased the average educational attainment of the population and whether various deciles of the education distribution have been differentially affected. We constructed a dataset of relevant reforms occurred at the national level over the last century, and match individual information to the most likely set-up faced when individual educational choices were undertaken. Thus our identification strategy relies on temporal and geographical variations in the institutional arrangements, controlling for time/country fixed effects, as well as for confounding factors. We also explore who are the individual most likely affected by the reforms. We also group different reforms in order to ascertain the prevailing attitudes of policy makers, showing that reforms can belong to either “inclusive” or “selective” in their nature. Finally we correlate these attitudes to political coalitions prevailing in parliament, finding support to the idea that left wing parties support reforms that are inclusive in nature, while right wing parties prefer selective ones.
    Date: 2011–12
  15. By: Rünger, Silke
    Abstract: Germany's repeal of the corporate capital gains tax for the disposal of domestic holdings was expected to substantially change the system of corporate network holdings and corporate control. Based on a general divestiture model, we show that the probability of a disposal increased after the tax reform. Using a unique data set with no need to proxy for the disposal of corporate equity holdings, we analyze 354 German minority holdings over the period 1999-2007. We find significant higher disposal rates for 2002, the year the reform became effective. Further analyses reveal that this effect can be attributed to non-listed parent companies outside the financial sector, i.e. companies mainly ignored in prior research. Thus, our results also help to explain why prior research using event studies failed to detect a widespread market reaction of German firms. --
    Keywords: corporate capital gains,lock-in effect,corporate equity holdings,Germany
    JEL: G11 G34 H25 H32
    Date: 2012

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