nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒03‒21
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Designing emissions trading in practice general considerations and experiences from the EU Emissions Trading Scheme (EU ETS) By Heindl, Peter; Löschel, Andreas
  2. Employed and Happy despite Weak Health? Labour Market Participation and Job Quality of Older Workers with Disabilities By Catherine Pollak
  3. European cooperative R&D and firm performance By Luis Aguiar; Philippe Gagnepain
  4. How Do the Unemployed Search for a Job? – Evidence from the EU Labour Force Survey By Ronald Bachmann; Daniel Baumgarten
  5. The change in job opportunities By Elisabetta Olivieri
  6. Implementation of EU legislation on rail liberalisation in Belgium, France, Germany and The Netherlands By Xavier Deville; Fabienne Verduyn
  7. On the Environmental Effectiveness of the EU Marine Strategy Framework Directive By Christine Bertram, Katrin Rehdanz
  8. Appropriate Financial Instruments for Public-Private Partnership to Boost Cross-Border Infrastructural Development-EU Experience By Willem van der Geest; Jorge Nunez-Ferrer
  9. On the Obligation to Provide Environmental Information in the 21st Century – Empirical Evidence from Germany By Massier, Philipp; Römer, Daniel
  10. Cross-Border Health and Productivity Effects of Alcohol Policies By Johansson, Per; Pekkarinen, Tuomas; Verho, Jouko
  11. Parental Leave Policies and Child Care Time in Couples after Childbirth By Pia S. Schober
  12. The timeline of trading fricions in the European Carbon Market By Vicente Medina Martínez; Ángel Pardo Tornero; Roberto Pascual
  13. Banking of Surplus Emissions Allowances: Does the Volume Matter? By Karsten Neuhoff; Anne Schopp; Rodney Boyd; Kateryna Stelmakh; Alexander Vasa
  14. Governance and public service delivery in Europe and Central Asia : unofficial payments, utilization and satisfaction By Diagne, Mame Fatou; Ringold, Dena; Zaidi, Salman
  15. Lifetime labor supply and human capital investment By Rodolfo E. Manuelli; Ananth Seshadri; Yongseok Shin
  16. Policy options for climate policy in the residential building sector: The case of Germany By Schröer, Sebastian
  17. Asylum Policy in the EU: The Case for Deeper Integration By Timothy Hatton
  18. Fiscal Performance, Institutional Design and Decentralization in European Union Countries By Anita Tuladhar; Marialuz Moreno Badia; Luc Eyraud; Juliane Sarnes; Julio Escolano
  19. The Influence of Macroeconomic Conditions and Institutional Quality on National Levels of Life Satisfaction By Brendan Walsh
  20. Are My Neighbours Ageing Yet? Local Dimensions of Demographic Change in German Cities By Uwe Neumann

  1. By: Heindl, Peter; Löschel, Andreas
    Abstract: This paper deals with designing emissions trading in practice. After a short introduction to the general idea of emissions trading, practical requirements for the introduction of an emissions trading scheme are considered, including the temporal and spatial dimension as well as administrative requirements and the role of markets. Historical developments regarding emissions trading are discussed. Currently, the largest trading scheme is the EU Emissions Trading Scheme (EU ETS) that aims to reduce greenhouse gas emissions in the European industry by 21 percent until 2020 compared to 2005 levels. Because of its prominent role, the basic design and the process of introducing the EU scheme are reviewed in more detail. Finally, the impact of the EU ETS on the regulated entities is analyzed based on an annual survey among German companies regulated by the EU ETS which is conducted by the Centre for European Economic Research (ZEW) in a common project with KfW Bankengruppe. --
    Keywords: Emissions Trading,Low Carbon Economy,EU ETS
    JEL: Q48 Q53 Q58
    Date: 2012
  2. By: Catherine Pollak (IRDES institut for research and information in health economics)
    Abstract: European countries with high senior employment rates have the highest levels of job satisfaction despite an older and more physically limited workforce. In this paper, we argue that this paradox can be explained by heterogeneous levels of job quality: better working conditions may enable older workers with disabilities to remain satisfied and employed. Using panel data from the Survey of Health, Ageing and Retirement in Europe, we find that health status, job satisfaction, but also working conditions, are major individual determinants of early labour market exits. We also show that high intrinsic and extrinsic rewards can mitigate the selective effects of disability. Finally,the comparative analysis reveals that older workers with disabilities are more likely to be employed in countries where they receive higher rewards. The findings therefore indicate that improved job quality is a major factor of successful active ageing strategies.
    Keywords: Job satisfaction, Working conditions, Occupational health, Ageing labour supply.
    JEL: J28 J22 I19
    Date: 2012–03
  3. By: Luis Aguiar; Philippe Gagnepain
    Abstract: The goal of this paper is to assess the impact on the performance of firms that participate in Research Joint Ventures (RJVs) funded by the Fifth European Framework Programme for Research and Technological Development (EU-FP5). A special emphasis is made on the User-friendly Information Society (IST) programme, one of the most important thematic programmes of the EU-FP5. We use the funding available to the firms as an instrumental variable to account for self-selection and estimate the Local Average Treatment Effect (LATE) of participation by considering labor productivity and profit margin as performance measures. Our results show a large and positive impact of participation on the labor productivity of the firms, whereas the effect on profit margin is weaker. When taking into account the size of the RJV, we find that the positive impact on labor productivity comes mainly from participation in large projects and that participation in smaller RJVs has a negative effect on the profit margin
    Keywords: Research joint venture, R&D policy, Productivity, EU framework programme
    JEL: L24 L25 O31 O32 O38
    Date: 2012–02
  4. By: Ronald Bachmann; Daniel Baumgarten
    Abstract: Using harmonized micro data, this paper investigates the job search methods of the unemployed in Europe. The analysis focuses on the importance of individual and household characteristics in this context, as well as on cross-country differences in Europe. Our findings suggest that both individual and household characteristics play an important role, with the latter being more decisive for women. However, even when controlling for these factors, remarkable differences remain between countries, which are associated with institutional characteristics at the country level.
    Keywords: Job search; search channels
    JEL: J20 J64 C38
    Date: 2012–01
  5. By: Elisabetta Olivieri (Banca d'Italia)
    Abstract: In the last 15 years the Italian employment structure has undergone some radical changes. As a result, the proportion of high-skilled jobs (managers and professionals) has increased at the expense of medium-skilled jobs (clerks). Differently from the US, in Italy (and in many other European countries) there has been no increase in the share of low-skilled employment. Thus, we do not observe a polarization pattern in the employment structure, but a massive occupational upgrading towards high-skilled jobs. Furthermore, there is a positive correlation between changes in the employment and wage structures. This evidence is a signal of a demand-side shock which has hit the labour market in recent decades. In particular, according to the recent literature, technological change and outsourcing may have deeply affected labour demand in terms of skill level.
    Keywords: opportunities, employment, qualification
    JEL: D3 O3
    Date: 2012–02
  6. By: Xavier Deville (National Bank of Belgium, Microeconomic Information Department); Fabienne Verduyn (National Bank of Belgium, Microeconomic Information Department)
    Abstract: This study provides a detailed and easy-to read overview of the railway liberalisation in Belgium and the three neighbouring countries. The European Union's liberalisation Directives are often complex and are implemented in very specific ways in the different Member States. The analysis goes into some detail about the Commission's underlying motives and economic theories for letting network industries, which had previously been regarded as natural monopolies, convert into competitive enterprises with the separation of infrastructure from operations. The study takes a look at the impact of the European rail liberalisation Directives in Belgium and its neighbouring countries - France, Germany and the Netherlands. There are considerable variations in the way in which the Directives are applied. It is reflected in the way in which the separation of the infrastructure and the transport services within the railway companies was carried out, and in the degree of opening of the market in freight and passenger transport. The analysis shows that the dominance of the former monopolists in the different Member States means that private rail operators face major obstacles. The financial analysis of the railway companies reveals wide variations in economic performance. The combination of better balance sheet figures and a bigger domestic market means that some major players in Europe are financially better off, giving them superiority over the smaller railway companies. This raises the question whether these circumstances will ultimately lead to distortion of competition.
    Keywords: rail, liberalisation, subsidies, debt
    JEL: D23 D40 H20 L14 L92
    Date: 2012–03
  7. By: Christine Bertram, Katrin Rehdanz
    Abstract: Marine and coastal ecosystems – and thus the benefits they create for humans – are subject to increasing pressures and competing usages. For this reason, the European Union (EU) adopted the Marine Strategy Framework Directive (MSFD), which is to guide future maritime policy in the EU and aims at achieving or maintaining a good environmental status (GES) of the European seas by 2020. To this end, the MSFD requires the development of improvement measures, which have to be assessed inter alia by examining their cost-effectiveness and by carrying out cost-benefit analysis (CBA) before their implementation. In this paper, we investigate the applicability of environmental CBA in the marine context and identify and discuss problems that may hamper the environmental effectiveness of the MSFD. For example, marine ecosystem services are much less tangible than terrestrial ecosystem services. This implies greater challenges for the quantification of societal benefits in a marine context. One finding is that the limitations of environmental valuation methods regarding their ability to capture the whole total economic value of improvement measures are a potential source of problems, as the MSFD allows countries to disregard measures with disproportionately high costs. The trans-boundary nature of the main European seas adds to the complexity of the valuation task, e.g. due to the danger that benefits that occur outside of national territories are neglected. Moreover, the current state of knowledge on the functioning of complex marine ecosystems and the links to socio-economic impacts and human well-being seems insufficient to meet the MSFD requirements
    Keywords: Cost-benefit analysis, ecosystem services, environmental valuation, EU Marine Strategy Framework Directive, Europe
    JEL: Q51 Q53 Q57 Q58
    Date: 2012–03
  8. By: Willem van der Geest (Asian Development Bank Institute (ADBI)); Jorge Nunez-Ferrer
    Abstract: The member states of the European Union (EU) and the EU institutions have increasingly been using public-private partnerships (PPPs) to accelerate the development of (ambitious) trans-national infrastructure. This paper argues that in the EU (i) private sector partners remain risk-averse; and (ii) risk-pooling across a larger number of tax-payers tends to reduce the cost of risk to zero, making EU funds highly desirable and sought after for public infrastructure development. This paper argues that private equity has not been forthcoming to the extent that had been expected by those propagating this method of finance. In those instances where private non-publicly guaranteed resources have been used, the distribution of risks between public and private partners remained asymmetric, with public governmental bodies carrying the financial risks, which ultimately may become a contingent liability for the country’s public finances. However, EU and European Investment Bank (EIB) public funding is used not simply because the risks are spread more widely, but rather because EU rules and regulations for using such funds lead to better preparation of projects and greater efficiency gains in project implementation and delivery.
    Keywords: public-private partnerships (PPPs), Cross-border infracstucture development, the EU, European Investment Bank, financial instruments
    JEL: G32 H44 O19
    Date: 2011–05
  9. By: Massier, Philipp; Römer, Daniel
    Abstract: In this paper, we study the effectiveness of environmental information disclosure as a regulatory instrument. In particular we analyze its impact when environmental regulation is already advanced. Using German stock market data, we are able to identify the impact of the European Pollutant Emission Register (EPER) on the market value of listed firms using a Multivariate Regression Model (MVRM). First, we show that the publication of EPER data leads to negative abnormal returns of the respective listed firms in Germany. Second, we study drivers of these abnormal returns. Here, we find that the firms' individual level of non-carbon emissions can explain the observed changes in market valuation, while carbon dioxide emissions do not seem to be punished by the market. Moreover, we include information on voluntarily provided environmental reports and find that these reports can serve as a substitute to the obligatory register.
    Keywords: information disclosure; EPER; event study; environmental reports
    JEL: L51 Q52 G14
    Date: 2012–03–09
  10. By: Johansson, Per (IFAU); Pekkarinen, Tuomas (Aalto University); Verho, Jouko (Social Insurance Institution of Finland)
    Abstract: This paper studies the cross-border health and productivity effects of alcohol taxes. We estimate the effect of a large cut in the Finnish alcohol tax on mortality, alcohol related illnesses and work absenteeism in Sweden. This tax cut led to large differences in the prices of alcoholic beverages between these two countries and to a considerable increase in cross-border shopping. The effect is identified using differences-in-differences strategy where changes in these outcomes in regions near the Finnish border are compared to changes in other parts of northern Sweden. We use register data where micro level data on deaths, hospitalisations and absenteeism is merged to population-wide micro data on demographics and labour market outcomes. Our results on the effect of the Finnish tax cut on mortality and alcohol-related hospitalisations in Sweden are very imprecise. However, we find that workplace absenteeism increased by 5% for males and by 13% for females near the Finnish border as a result of the tax cut.
    Keywords: cross-border shopping, alcohol taxes, health effects of alcohol
    JEL: H23 H73 I18
    Date: 2012–02
  11. By: Pia S. Schober
    Abstract: This research explores how different parental leave reforms in West Germany impacted on the time mothers and fathers in couples spent on child care. I investigate indirect effects through mothers' labor market return decisions more in detail than previous studies and also examine potential direct associations of reforms of the leave period and benefits with maternal and paternal care time. The analysis uses multilevel multiprocess models for 1299 couples with a first or second birth based on data from the German Socio-Economic Panel (1984-2009). I estimate simultaneously the timing and extent of mothers' labor market return, selection into childbearing, and maternal and paternal child care time over the years following a first or second birth. The findings suggest that the extensions of the maximum period of low-paid or unpaid leave between 1986 and 1992 and the introduction of shorter well-paid leave and two 'daddy months' in 2007 indirectly affected maternal and paternal child care through changes in mothers' work return decisions. Even after controlling for these indirect effects and fathers' take-up of leave, the parental leave extensions were directly associated with longer maternal care time on weekdays, whereas father involvement in child care increased after the 2007 reform.
    Keywords: Child care, gender division of unpaid work, maternal employment, parental leave policy, parenting
    Date: 2012
  12. By: Vicente Medina Martínez (Facultad de Economía); Ángel Pardo Tornero (Dpto. Economía Financiera y Actuarial); Roberto Pascual (Universitat de les Illes Balears)
    Abstract: We evaluate the quality of prices of the EU-ETS, the most active European derivative market for greenhouse gas emissions allowances (EUAs). So far, this market has had two phases, a trial phase (from 2005 to 2007) and a commitment phase (from 2008 to 2012). The true value of a trial-phase EUA at the beginning of 2008 was inevitably zero because it could not be used in the commitment phase to cover emission targets. However, continued rumors of over-allocation of EUAs led to an early collapse of the market by May 2007. We study whether this market breakdown and the subsequent outbreak of the international financial crisis had a persistent effect on the quality of the commitment phase. We provide robust evidence of substantial improvements in terms of liquidity, adverse selection costs, and friction-related volatility from the trial phase to the commitment phase. However, price quality (the proportion of friction-unrelated price return volatility) during the commitment phase has been below the levels achieved before the 2007 collapse. Our findings suggest that the carbon market has not fully recovered from the negative effects of its 2007 breakdown and the subsequent financial crisis.
    Keywords: Greenhouse gas emissions, EUAs, European Union Emission Trading Scheme, trading frictions, price efficiency, liquidity, financial crisis, market breakdown, market microstructure.
    JEL: G1
    Date: 2012–02
  13. By: Karsten Neuhoff; Anne Schopp; Rodney Boyd; Kateryna Stelmakh; Alexander Vasa
    Abstract: In the European Emission Trading scheme the supply of allowances exceeds emissions - cumulating, according to our estimates, in a surplus of 2.7 billion tonnes by 2013/2014. We find that initially the surplus was acquired by power companies so as to hedge future carbon costs. As the surplus exceeds this hedging demand, additional allowances need to be acquired as speculative investment. This requires higher rates of return and implies that expected future carbon prices are highly discounted. This could explain the recent drop in carbon prices. The analysis shows that the volume of unused allowances matters for the discount applied to future carbon prices. We use our supply-demand framework to assess currently discussed policy options set-aside, reserve price for auctions and adjustments of emission targets.
    Keywords: European emission trading scheme, banking, discount rates
    JEL: G18 Q48
    Date: 2012
  14. By: Diagne, Mame Fatou; Ringold, Dena; Zaidi, Salman
    Abstract: Using data from the 2010 Life in Transition Survey, this paper examines the levels of citizens'satisfaction with public service delivery in Europe and Central Asia and identifies some factors that may help explain variation in utilization and levels of satisfaction with service delivery. It finds satisfaction with public service delivery in Europe and Central Asia to be relatively high, and, despite the adverse economic and social impact of the recent global economic crisis, to have risen since 2006 in most countries in the region. However, the level of satisfaction with public service delivery in Eastern European and Central Asian countries in 2010 remains lower than in Western European comparator countries. Although the Life in Transition Survey does not provide specific objective measures of service delivery quality and efficiency, the data provide three important clues that may help explain why satisfaction is lower in transition countries than in western comparators: (i) relatively higher utilization of public services in Eastern European and Central Asian countries, (ii) relatively higher reported prevalence of unofficial payments, and (iii) relatively underdeveloped mechanisms for grievance redress.
    Keywords: Population Policies,Public Sector Corruption&Anticorruption Measures,Governance Indicators,Housing&Human Habitats,E-Government
    Date: 2012–03–01
  15. By: Rodolfo E. Manuelli; Ananth Seshadri; Yongseok Shin
    Abstract: We develop a model of retirement and human capital investment to study the effects of tax and retirement policies. Workers choose the supply of raw labor (career length) and also the human capital embodied in their labor. Our model explains a significant fraction of the US-Europe difference in schooling and retirement. The model predicts that reforms of the European retirement policies modeled after the US can deliver 15–35 percent gains in per-worker output in the long run. Increased human capital investment in and out of school accounts for most of the gains, with relatively small changes in career length.
    Keywords: Human capital ; Labor supply ; Retirement
    Date: 2012
  16. By: Schröer, Sebastian
    Abstract: In order to achieve the climate protection goals in the building sector, a higher rate of building refurbishment is necessary to improve the energy standard of residential building stock in the European Union. Although subsidisation seems to be necessary, optimal measures concerning cost effectiveness are unclear. Using a stylised model of the German residential building stock, we analyse different refurbishment measures by simulating every relevant investment until 2030. In particular, we compare two different options that are relevant for political measures: first, comprehensive refurbishments that are expensive but achieve the greatest reductions in energy consumption and GHG emissions and second, partial refurbishments which include only low-cost improvements but can be achieved on a wide scale. We conclude that comprehensive refurbishments will require the least amount of investment costs per ton GHG emissions and provide the highest reductions in energy consumption in 2030. Hence, partial refurbishments are never optimal. However, in terms of cumulated GHG emissions in the period considered, the difference between both options is very small. This is due to their different dynamics: comprehensive refurbishments achieve fewer results in the first years but catch up quickly, which means that the higher the refurbishment rate the higher the advantage of comprehensive refurbishments. --
    Keywords: residential building sector,refurbishment,climate policy,energy saving,policy scenarios
    JEL: C60 H30 O33 Q40 Q58
    Date: 2012
  17. By: Timothy Hatton (University of Essex and Australian National University)
    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 F H77 H87 J15
    Date: 2012–03
  18. By: Anita Tuladhar; Marialuz Moreno Badia; Luc Eyraud; Juliane Sarnes; Julio Escolano
    Abstract: This paper analyzes the impact of decentralization on overall fiscal performance in the European Union, taking into account fiscal institutional arrangements. We find that spending decentralization has been associated with sizably better fiscal performance, especially when transfer dependency of subnational governments is low. However, subnational fiscal rules do not seem to be associated with better performance.
    Keywords: European Economic and Monetary Union , Fiscal policy , Government expenditures ,
    Date: 2012–02–09
  19. By: Brendan Walsh (University College Dublin)
    Abstract: Answers to the Eurobarometer question on Life Satisfaction are used to explore the effects of macroeconomic performance and institutional quality on average levels of self-assessed well-being in the countries of the enlarged European Union between 2004 and 2011. It is found that variations in national levels of life satisfaction can largely be accounted by a small number of socio-economic indicators. Life satisfaction is lowest in poor, corrupt countries where income inequality is pronounced. The adverse effect of higher unemployment on life satisfaction is partially offset by the positive impact of lower inflation. However, even when these factors are allowed for, significant country-level differences persist.
    Keywords: Life Satisfaction, Living Standards, Unemployment, Inflation, Corruption, Income Inequality
    Date: 2012–03–15
  20. By: Uwe Neumann
    Abstract: In the discussion about demographic change, the regional dimension so far has played a subordinate role. Based on municipal data for the period between 1998 and 2008, this paper examines to what extent recent demographic change has affected the population of cities and neighbourhoods, focusing on the largest urban agglomeration in Germany, the Rhine-Ruhr conurbation in North Rhine-Westphalia. The local outcomes of demographic change are modified considerably by regional migration and interrelate closely with regional prosperity. The survey provides a precise outline of the interrelation between basic demographic characteristics and shifts in the composition of neighbourhood populations over the study period. The analysis shows that in the most thriving cities, there is a particularly strong tendency of young adults to separate from other demographic groups. In neighbourhoods where there is no such influx of younger people, particularly in low-density residential areas on the urban fringe, rapid demographic ageing aff ects neighbourhood populations and local economies.
    Keywords: Demographic change; neighbourhoods; segregation; migration
    JEL: J11 R23
    Date: 2012–02

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