nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒05‒02
nineteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Do local amenities affect the appeal of regions in Europe for migrants? By Andrés Rodríguez-Pose; Tobias D. Ketterer
  2. Labor Mobility in an Enlarged European Union By Kahanec, Martin
  3. Income Inequality in the European Union By Kaja Bonesmo Fredriksen
  4. Multidimensional Poverty Measurement in Europe: An Application of the Adjusted Headcount Approach By Christopher T. Whelan; Brian Nolan; Bertrand Maître
  5. Innovation Barriers across Firms and Countries By Werner Hölzl; Jürgen Janger
  6. Minimum Wages as a Barrier to Entry: Evidence from Germany By Bachmann, Ronald; Bauer, Thomas; Kroeger, Hanna
  7. The Impact of Redistributive Policies on Inequality in OECD Countries By Philipp Doerrenberg; Andreas Peichl
  8. The Two Faces of R&D and Human Capital: Evidence from Western European Regions By Johanna Vogel
  9. Transportation policy networks in cross-border regions. First results from a social network analysis in Luxembourg and the Greater Region By DÖRRY Sabine; DECOVILLE Antoine
  10. Socially responsible mutual funds: An efficiency comparison among the European countries By Antonella Basso; Stefania Funari
  11. Work/care policies in European welfare states: continuing variety or change towards a common model? By Blome, Agnes
  12. Varieties of service economies in Europe By Di Meglio, Gisela; Pyka, Andreas; Rubalcaba, Luis
  13. Performance Related Pay and Firm Productivity: New Evidence from a Quasi-Natural Experiment in Italy By Lucifora, Claudio; Origo, Federica
  14. Entitlement Reforms in Europe: Policy Mixes in the Current Pension Reform Process By Axel H. Börsch-Supan
  15. Do those who stay work less? On the impact of emigration on the measured TFP in Poland By Katarzyna Budnik
  16. Exchange Rate Bands of Inaction and Play-Hysteresis in German Exports: Sectoral Evidence for Some OECD Destinations By Ansgar Belke; Matthias Göcke; Martin Günther
  17. Cost-containment policies and hospital efficiency: evidence from a panel of Italian hospitals By Vincenzo Atella; Federico Belotti; Giuseppe Ilardi; Silvio Daidone; Giorgia Marini
  18. Why did Britain’s households get richer? Decomposing UK household income growth between 1968 and 2008–09 By Brewer, Mike; Wren-Lewis, Liam
  19. Methodological approaches for measuring the creative employment: a critical appraisal with an application to Portugal By Sara Santos Cruz; Aurora A.C. Teixeira

  1. By: Andrés Rodríguez-Pose (IMDEA Social Sciences); Tobias D. Ketterer (University of Nottingham)
    Abstract: This paper delves into the factors which determine the attractiveness of regions in Europe for migrants. Contrary to the literature on the US which has increasingly focused on the role of amenities, existing research in Europe tends to highlight the predominance of economic conditions as the main drivers of migration. Differentiating between economic, sociodemographic and amenity-related territorial features, we examine the appeal of various regional characteristics for migrants by analyzing net migration data for 133 European regions between 1990 and 2006. Our results show that, in addition to economic, human capital-related and demographic aspects, network effects and – in contrast to existing literature – different types of regional amenities exert an important influence on the relative attractiveness of sub-national territories across the European Union (EU). Our findings therefore indicate that locational choices in Europe may be much more similar to place-based preferences in the US than originally thought.
    Keywords: location choice; inter-regional migration; economic conditions; amenities; social networks; regions; Europe
    Date: 2012–04–25
  2. By: Kahanec, Martin (Central European University and IZA)
    Abstract: The 2004 and 2007 enlargements of the EU extended the freedom of movement to workers from the twelve new member states mainly from Central Eastern Europe. This study summarizes and comparatively evaluates what we know about mobility in an enlarged Europe to date. The pre-enlargement fears of free labor mobility proved to be unjustified. No significant detrimental effects on the receiving countries’ labor markets have been documented, nor has there been any discernible welfare shopping. Rather, there appear to have been positive effects on EU’s productivity. The sending countries face some risks of losing their young and skilled labor force, but free labor mobility has relieved them of some redundant labor and the associated fiscal burden. They have also profited from remittances. Of key importance for the sending countries is to reap the benefits from brain gain and brain circulation in an enlarged EU. For the migrants the benefits in terms of better career prospects have with little doubt exceeded any pecuniary and non-pecuniary costs of migration. In conclusion, the freedom of movement in the EU provides for a triple-win situation for the receiving and sending countries as well as for migrants themselves, provided the risks are contained and efficient brain circulation is achieved.
    Keywords: EU labor markets, migration, EU enlargement, labor mobility, free movement of workers, transitional arrangements, new member states, European Union
    JEL: F22 J61
    Date: 2012–04
  3. By: Kaja Bonesmo Fredriksen
    Abstract: Poor growth performance over the past decades in Europe has increased concerns for rising income dispersion and social exclusion. European authorities have recently launched the Europe 2020 strategy which aims to improve social inclusion in Europe on top of already existing European regional policies aiming to reduce regional disparities through stimulating growth in areas where incomes are relatively low. While it is most common to confine measures of inequality to national borders, the existence of such union-wide objectives and policies motivates measuring income dispersion among all Europeans in this paper. Towards the end of the 2000s the income distribution in Europe was more unequal than in the average OECD country, albeit notably less so than in the United States. It is the within-country, not the between-country dimension, which appears to be most important. Inequality in Europe has risen quite substantially since the mid 1980s. While the EU enlargement process has contributed to this, it is not the only explanation since inequality has also increased within a “core” of 8 European countries. Large income gains among the 10% top earners appear to be a main driver behind this evolution.<P>L'inégalité des revenus dans l'Union européenne<BR>La faible croissance en Europe au cours des dernières décennies a augmenté les inquiétudes concernant la répartition des revenus et l’exclusion sociale. Les autorités européennes ont récemment lancé la stratégie Europe 2020 qui vise à améliorer l’insertion sociale en Europe en plaçant cet objectif au dessus des politiques régionales européennes déjà existantes afin de réduire les disparités régionales en stimulant la croissance dans les zones où les revenus sont relativement bas. Alors que l’inégalité est, le plus fréquemment, mesurée par pays, le fait de mettre en place des objectifs et des politiques à l’échelle européenne explique pourquoi ce rapport traite de l’inégalité des revenus entre tous les Européens. Vers la fin des années 2000, la distribution des revenus en Europe était plus inégalitaire que la moyenne de la zone de l’OCDE mais beaucoup moins qu’aux États-Unis. Ce sont les inégalités à l’intérieur des pays et non entre pays qui semblent le plus importantes. L’inégalité en Europe a sensiblement augmenté depuis la moitié des années 80. Même si l’élargissement a contribué à cette hausse, ce n’est pas la seule explication puisque l’inégalité a aussi augmenté au sein d’un groupe de 8 pays faisant parti de l’Union sur toute la période considérée. D’importants gains de revenus pour les 10% les mieux rémunérés apparaissent comme étant la raison principale de cette évolution.
    Keywords: redistribution, European Union, convergence, income inequality, Gini coefficient, top incomes, redistribution, Union européenne, convergence, inégalité des revenus, hauts revenus, Gini
    JEL: C81 D31 D63 H23
    Date: 2012–04–16
  4. By: Christopher T. Whelan (School of Sociology and Geary Institute, Univeristy College Dublin); Brian Nolan (College of Human Sciences, University College Dublin University College Dublin); Bertrand Maître (Economic and Social Research Institute, Dublin)
    Abstract: As awareness of the limitations of relying solely on income to measure poverty and social exclusion has become more widespread, attention has been increasingly focused on multi-dimensional approaches. To date efforts to measure multidimensional poverty and social exclusion in rich countries have been predominantly ad hoc and have relied on data that are far from ideal. Here we apply the approach recently developed by Alkire and Foster, characterized by a range of desirable axiomatic properties but mostly discussed so far in a development context, to European countries, exploiting the potential of harmonized microdata on deprivation newly available for the European Union. The analysis seeks to overcome the limitations of the union and intersection approaches that have characterized many earlier studies. Multidimensional poverty is characterized and decomposed in terms of the contribution of different deprivation dimensions, and an account of cross-national and socio-economic variation in risk levels is presented that is in line with theoretical expectations. Multilevel analysis of multi-dimensional poverty provides the basis for assessment of the role of macro and micro characteristics and their interaction in relation to levels and patterns of multidimensional poverty and social exclusion.
    Keywords: poverty, social exclusion, multidimensional
    Date: 2012–04–23
  5. By: Werner Hölzl (WIFO); Jürgen Janger (WIFO)
    Abstract: This paper studies differences in the perception of innovation barriers between innovative and non-innovative firms for 18 EU countries. The countries are grouped by their distance to the technological frontier using Community Innovation Surveys for the years 2002-2004 and 2004-2006. The results show that non-innovators interested in innovation are much more likely to perceive barriers than non-innovators that are not interested in innovation activities. With regard to differences between country groups there is a clear indication that innovation barriers related to the availability of skilled labour, innovation partners and knowledge are more important for firms located in countries close to the frontier, while the opposite is true regarding the availability of external finance. Although the share of innovators decreases with the distance to the technological frontier, the share of barrier-related innovators increases. The results demonstrate the usefulness of the innovation barrier approach to understand the determinants of innovative activity at the firm level and to priority-setting within innovation policies.
    Keywords: Innovation barriers, Europe, innovation policy
    Date: 2012–04–25
  6. By: Bachmann, Ronald (RWI); Bauer, Thomas (RWI); Kroeger, Hanna (RWI)
    Abstract: This study analyses employers' support for the introduction of industry-specific minimum wages as a cost-raising strategy in order to deter market entry. Using a unique data set consisting of 800 firms in the German service sector, we find some evidence that high-productivity employers support minimum wages. We further show that minimum wage support is higher in industries and regions with low barriers to entry. This is particularly the case in East Germany, where the perceived threat of low-wage competition from Central and Eastern European Countries is relatively high. In addition, firms paying collectively agreed wages are more strongly in favour of minimum wages if union coverage is low and the mark-up of union wage rates is high.
    Keywords: minimum wage, product market competition, service sector
    JEL: J38 J50 L41 L80
    Date: 2012–04
  7. By: Philipp Doerrenberg (CGS, University of Cologne); Andreas Peichl (IZA, University of Cologne, ISER and CESifo)
    Abstract: Recent discussions about rising inequality in industrialized countries have triggered calls for more government intervention and redistribution. Due to obvious behavioral effects caused by redistribution, it is however not clear whether redistributional policies are indeed able to combat inequality. This paper contributes to this relevant research question by using different contextual country-level data sources to study inequality trends in OECD countries since the 1980s. We first investigate the development of inequality over time before analyzing the question of whether governments can effectively reduce inequality. Different identification strategies, using fixed effects and instrumental variables models, provide some evidence that governments are capable of reducing income inequality despite countervailing behavioral adjustments. The effect is stronger for social expenditure policies than for progressive taxation, which seems to trigger more inequality increasing indirect behavioral effects. Our results also suggest that the use of secondary inequality data should be handled with caution.
    Keywords: Inequality, Redistribution, Social Expenditure, Progressive Taxation
    JEL: D31 D60 H20
    Date: 2012–04–13
  8. By: Johanna Vogel
    Abstract: This paper investigates two channels through which research and development (R&D) and human capital may affect regional total factor productivity growth in the manufacturing sector, using panel data on 159 EU-15 regions from 1992 to 2005. Based on the endogenous growth model of Griffith, Redding and Van Reenen (2003), we allow R&D and human capital to influence productivity growth both directly, reflecting own innovation, and indirectly, reflecting imitation of frontier technology. Further, the model allows for conditional convergence to a long-run level of TFP relative to the frontier. We also develop an extension that captures geographically localised technology spillovers. Our preferred system-GMM estimates provide evidence of a positive and significant direct effect of human capital, and a positive and significant indirect effect of R&D on productivity growth. This may be interpreted as lending support to the recent focus of EU regional policy on raising educational attainment and R&D expenditures, although their channels of influence appear to differ. Our results also suggest that TFP convergence has taken place over our sample period and that geographic distance to the technology frontier matters.
    Keywords: Total factor productivity, Convergence, Human capital, Research and development, European regions
    JEL: O30 O47 I25 C23
    Date: 2012
  9. By: DÖRRY Sabine; DECOVILLE Antoine
    Abstract: Despite continuing processes of economic and political integration in the European Union (EU), borders have been proven to be persistent. Politically backed and financially supported by the EU, cross-border regions are subject to economic and cultural coalescence. However, the established top-down crossborder policy network structures do not necessarily lead to the results originally aimed at. Policy networks are supposed to make the proclaimed economic, socio-cultural, and spatial EU integration process work on a local level. By empirically analysing cross-border policy networks in one specific though highly central policy domain – the public transportation – we reveal contradictions/inconsistencies and impediments caused by the „border effect? and the complex nature of a specific cross-border policy network in the field of public transportation. With the technique of the social network analysis we trace and discuss such a kind of network. Our empirical findings lead us to critically examine what Hooghe and Marks (2003) describe as „type-II-governance? in crossborder regions.
    Keywords: Cross-border metropolitan regions; public transportation; Luxembourg and the Greater Region; social network analysis; multi-level governance
    JEL: F15 F16 R50 R58
    Date: 2012–04
  10. By: Antonella Basso (Department of Economics, Università Ca' Foscari Venezia); Stefania Funari (Department of Management, Università Ca' Foscari Venezia)
    Abstract: The first objective of this contribution is to evaluate the performance of SRI equity mutual funds in the main European countries with three different DEA models. Secondly, with a series of statistical tests we compare the performance of SRI and non SRI mutual funds in the various countries, to determine if SRI mutual funds have to sacrifice something in terms of financial performance. Thirdly, we compare the performance obtained by SRI mutual funds among the different European countries.
    Keywords: SRI mutual funds; Performance evaluation; Data envelopment analysis
    JEL: C65 G1 G23
    Date: 2012–04
  11. By: Blome, Agnes
    Abstract: This paper investigates work/care policies in fifteen European welfare states during the last two decades in a comparative perspective. The main question is how certain work/care arrangements are supported through public policies of different welfare states and whether this has changed over time. In particular the development of leave regulations and working time policies, the provision of childcare, child allowances and types of taxation schemes which favor the reconciliation of work and care are analyzed based on a comprehensive data collection. Although an ongoing trend towards the support of the dual-earner model is clearly visible in the data, countries still differ in the current extent of work/care reconciliation policies and the pace and timing of political reforms. Moreover, hardly any country fits an ideal type of an entirely coherent policy. Different countries prioritize certain instruments over others, irrespective of the notion they have of any specific work/care arrangement. -- Dieser Artikel analysiert vergleichend Maßnahmen zur Vereinbarkeit von Familie und Beruf in fünfzehn europäischen Wohlfahrtsstaaten. Die zentrale Frage lautet, inwiefern Vereinbarkeitsarrangements durch wohlfahrtsstaatliche Leistungen unterstützt werden und ob und wie sich diese Leistungen in den letzten zwanzig Jahren verändert haben. Basierend auf einer umfassenden Datensammlung werden die Entwicklungen in den Elternzeit-, Elterngeld- und Arbeitszeitregelungen, der öffentlichen Kinderbetreuung, des Kindergeldes sowie der Steuersysteme, die die Vereinbarkeit von Familie und Beruf fördern, untersucht. Obwohl ein länderübergreifender Trend in Richtung des Zweiverdienermodells in den Daten sichtbar wird, bestehen weiterhin Unterschiede sowohl im aktuellen Entwicklungsstand der Vereinbarkeitspolitik als auch beim Reformtempo. Auffällig ist zudem, dass das Maßnahmenbündel in nahezu keinem Land kohärent ist. Unabhängig von den selbstgesteckten Zielen geben die Länder bestimmten Politikinstrumenten Vorrang gegenüber anderen.
    Keywords: work,care,reconciliation,policies,gender,Europe,comparison
    Date: 2011
  12. By: Di Meglio, Gisela; Pyka, Andreas; Rubalcaba, Luis
    Abstract: This paper identifies the varieties and dynamics of service economies in Europe, analysing the role of knowledge base and innovative efforts and their evolution across time and countries. Results based on aggregated macroeconomic data indicate that there is no convergence trend towards a single service economy model. Moreover, different service economies models can be associated with institutional and welfare state diversity. When analysing a comprehensive set of indicators at a disaggregated level a more detailed pattern of service economies emerges. The structural composition of countries plays a prominent role, while heterogeneity is driven by uneven knowledge bases and innovative efforts. --
    Keywords: services,social models,innovation,knowledge,Europe
    JEL: L80 O31 C38
    Date: 2012
  13. By: Lucifora, Claudio (Università Cattolica del Sacro Cuore); Origo, Federica (University of Bergamo)
    Abstract: This paper investigates the causal effect of a switch from fixed wages to collective performance-related pay on firm productivity, exploiting an exogenous variation in the institutional environment regulating collective bargaining. We find that the introduction of collective performance related pay significantly increases productivity by around 3-5 per cent, but such effect varies greatly by firm size, industry and union density. We show that the design of the PRP scheme – in terms of number and type of parameters used – is also relevant for firm productivity.
    Keywords: performance related pay, productivity, unions
    JEL: J31 J33 J52 L61
    Date: 2012–04
  14. By: Axel H. Börsch-Supan
    Abstract: Many European countries have begun (or have announced) programs intended to reduce the growth of entitlement programs, in particular of public pensions. Current costs are high, and the pressures will increase due to population aging and negative incentive effects. This paper focuses on the pension reform process in Europe. It links the causes for current problems to the cures required to make the pay-as-you-go entitlement programs in Continental Europe sustainable above and beyond the financial crisis. It discusses examples which appear, from a current point of view, to be the most viable and effective options to bring entitlement systems closer to fiscal balance and still achieve their key aims. There is no single policy prescription that can solve all problems at once. Reform elements include a freeze in the contribution and tax rates, an indexation of benefits to the dependency ratio, measures to stop the current trend towards early retirement, an adaptation of the normal retirement age to increased life expectancy, and more reliance on private savings – elements of a sustainable but complex multipillar system of pensions and similar entitlement programs.
    JEL: H51 H55 H68
    Date: 2012–04
  15. By: Katarzyna Budnik (National Bank of Poland)
    Abstract: The measured TFP growth in Poland slowed from around 4% in the second half of the 90s to 2% a decade later. This reduction in the growth rate of the Solow residual is argued to reflect the evolution of worker effort and, indirectly, of the labour market within the period. The unobserved worker effort is identified within a structural efficiency wage model with shirking. The model estimates suggest that a reduction in the generosity of the unemployment benefit system and the stabilization of the job destruction rate before 2000 reinforced worker motivation. In turn, the economic revival and the intensification of emigration around the date of the Polish accession to the European Union undermined it. Consequently, a steep increase in worker effort before 2000 temporarily boosted the measured TFP growth. A levelling off and the eventual correction of effort after 2000 depressed the observed TFP growth rates. Around 15% of the estimated decline in GDP tied to an increase in emigration after 2004 can be attributed to negative changes in worker discipline.
    Keywords: emigration, TFP, labour productivity, efficiency wages, shirking, potential product, gross worker flows, EU enlargement
    JEL: C11 J30 J61 J64 F22
    Date: 2012
  16. By: Ansgar Belke; Matthias Göcke; Martin Günther
    Abstract: A non-linear model is applied where suddenly strong spurts of exports occur when changes of the exchange rate go beyond a zone of inaction. We call the latter a "play" area - analogous to mechanical play and implement an algorithm describing path-dependent playhysteresis into a regression framework. The hysteretic impact of real exchange rates on German exports is then estimated based on quarterly data from 1995Q1 to 2010Q3. For some of the main export partners of Germany outside the euro area and some of the most important tradable sectors we find significant hysteretic effects for a part of the German exports.
    Keywords: exchange rate movements, play-hysteresis, modelling techniques, switching/spline regression, export demand
    JEL: F14 C51
    Date: 2012
  17. By: Vincenzo Atella (Faculty of Economics, University of Rome "Tor Vergata"); Federico Belotti (Faculty of Economics, University of Rome "Tor Vergata"); Giuseppe Ilardi (Bank of Italy, Economic and Financial Statistics Department); Silvio Daidone (University of York); Giorgia Marini (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: The main objective of this article is to evaluate to which extent the set of national and regional cost control policies implemented in recent years in Italy have affected hospital activity. Our contribution is mainly empirical as we focus our attention on the impact that policies like hospital mergers and regional bailout plans had on inefficiency. We use a rich longitudinal sample of Italian hospitals over the period 1999-2007 and perform a Bayesian analysis of the random-effects stochastic frontier model proposed by Greene (2005), allowing for a one-step estimation of both production frontier parameters and inefficiency effects. Results show that hospital inefficiency has changed over time and that part of this change could be ascribed to the mentioned policies.
    Keywords: Hospital efficiency, Stochastic frontiers, Bayesian inference, Policy evaluation
    JEL: C23 I11 L23
    Date: 2012–04–13
  18. By: Brewer, Mike; Wren-Lewis, Liam
    Abstract: Average real UK household income has almost doubled over the past forty years. With four decades of micro-data on household incomes, and relatively simple decomposition methods, we document the contribution to this growth in the mean net household income of working-age households from different income sources, and break down further changes in employment income by household member and into separate participation, hours and hourly wage effects. We also perform such analyses for the mean income of the richest working-age households, and among a group defined by having a low household income but a strong connection to the labour market.
    Date: 2012–03–31
  19. By: Sara Santos Cruz (CEF.UP, Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Tec; OBEGEF)
    Abstract: Creative industries and creative occupations have increasingly been attracting attention in recent years, in both policy and academic fields. Not enough literature has yet been produced on the topic to overcome the fuzziness and all-embracing definitions of the creative class, the lack of objectivity in the criteria to select who is creative or not, the limitations of data used and problems of highly aggregated occupational categories which jeopardize an accurate analysis of these workers. This paper presents a survey and mapping of the main methods for measuring the creative class and industries and proposes a combined industry and occupation-based approach for estimating the scale of creative employment in Portugal. Using micro data from 2009 Quadros de Pessoal database, which encompasses over 3 million workers, we found that creative employment in Portugal amounts to 6.9% of total employment (i.e., 215525 workers), with the most important creative sectors being ‘advertising and marketing’ (1.7%), ‘software publishing/computer programming and consultancy’ (1.8%), and ‘research and development’ (0.9%). Additionally, we found that most creative employees (60%) work in non-core creative sectors, that is, Portuguese creative workers are highly dispersed across all the sectors of the economy, particularly those considered non-creative, such as the manufacturing and the services sectors.
    Keywords: Creative class; Occupations; Industries; Measurement; Portugal
    JEL: L80 C81
    Date: 2012–04

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