nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒05‒08
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Environmental Policy and Directed Technological Change: Evidence from the European Carbon Market By Raphael Calel; Antoine Dechezleprêtre
  2. The Impact of Redistributive Policies on Inequality in OECD Countries By Doerrenberg, Philipp; Peichl, Andreas
  3. Employment in Romania: evidence from a panel data analysis By Vasilescu, Denisa Maria; Aparaschivei, Larisa; Roman, Mihai Daniel
  4. Voting Power in the EU Council of Ministers and Fair Decision Making in Distributive Politics By Le Breton, Michel; Montero, Maria; Zaporozhets, Vera
  5. Sorting and Local Wage and Skill Distributions in France By Combes, Pierre-Philippe; Duranton, Gilles; Gobillon, Laurent; Roux, Sébastien
  6. Pension Systems in the EU - Contingent Liabilities and Assets in the Public and Private Sector By Werner Eichhorst; Maarten Gerard; Michael J. Kendzia; Christine Mayrhuber; Conny Nielsen; Gerhard Rünstler; Thomas Url
  7. The Wage Incentive to Management: A Comparison across European Economies By Marco Biagetti; Leone Leonida; Sergio Scicchitano
  8. Immigrant Pupils' Scientific Performance: The Influence of Educational System Features of Origin and Destination Countries By Jaap Dronkers; Manon de Heus; Mark Levels
  9. THE EFFECT OF MAFIA ON PUBLIC TRANSFERS By Guglielmo Barone; Gaia Narciso
  10. Mind the Gap: Net Incomes of Minimum Wage Workers in the EU and the US By Marx, Ive; Marchal, Sarah; Nolan, Brian
  11. Marginal Employment, Unemployment Duration and Job Match Quality By Caliendo, Marco; Künn, Steffen; Uhlendorff, Arne
  12. More Apples Less Chips? The Effect of School Fruit Schemes on the Consumption of Junk Food By Brunello, Giorgio; De Paola, Maria; Labartino, Giovanna
  13. Study on Active Inclusion of Migrants By Klaus F. Zimmermann; Martin Kahanec; Corrado Giulietti; Martin Guzi; Alan Barrett; Bertrand Maître
  14. Why do university graduates regret their study program? A comparison between Spain and the Netherlands By Aleksander Kucel; Montserrat Vilalta-Bufi
  15. Dynamic Long-Term Modelling of Generation Capacity Investment and Capacity Margins: a GB Market Case Study By Eager,D.; Hobbs, B.; Bialek, J.
  16. The Impact of Greek Labour Market Regulation on Temporary and Family Employment: Evidence from a New Survey By Anagnostopoulos, Achilleas; Siebert, W. Stanley
  17. Competition between clearing houses on the European market By Marie-Noëlle Calès; Laurent Granier; Nadège Marchand
  18. Great Britain's Second-Order City Regions in Recessions, 1978-2010 By Tony Champion; Alan Townsend
  19. Cultural investment, local development and instantaneous social capital: A case study of a gathering festival in the South of Italy By Attanasi, Giuseppe; Casoria, Fortuna; Centorrino, Samuele; Urso, Giulia
  20. Synergies and Trade-offs between Climate and Local Air Pollution: Policies in Sweden By Bonilla, Jorge; Coria, Jessica; Sterner, Thomas

  1. By: Raphael Calel; Antoine Dechezleprêtre
    Abstract: The European Union Emissions Trading Scheme (EU ETS) has aimed to encourage the development of low-carbon technologies by putting a price on carbon emissions. Using a newly constructed data set that links 8.5 million European companies with their patenting history and their regulatory status under EU ETS, we investigate the hypothesis that the EU ETS has encouraged development of low-carbon technologies. Exploratory data analysis reveals a rapid increase in low-carbon patenting activities at the EPO since 2005, especially among EU ETS regulated companies during the Scheme's second phase. Naive estimates obtained by comparing EU ETS and non-EU ETS firms suggest that the Scheme may be responsible for up to 30% of the increase in low-carbon patenting of regulated companies. However, more refined estimates that combine matching methods with difference-in-differences provide evidence that the EU ETS has not impacted the direction of technological change. This finding appears to be robust to a number of stability and sensitivity checks. While we cannot completely rule out the possibility that the EU ETS has impacted only large companies for which suitable unregulated comparators cannot be found, our findings suggest that the EU ETS so far has had at best a very limited impact on low-carbon technological change.
    Keywords: Directed technological change, EU emissions trading scheme, policy evaluation
    JEL: O31 Q55 Q58
    Date: 2012–04
  2. By: Doerrenberg, Philipp (University of Cologne); Peichl, Andreas (IZA)
    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
  3. By: Vasilescu, Denisa Maria; Aparaschivei, Larisa; Roman, Mihai Daniel
    Abstract: The labour market in Romania is facing some imbalances arising from the negative demographic trends, legislative instability, poor correlation between the educational programs with the labour market, low labour productivity. The European Union labour market strategy aims at achieving 75% employment rate by 2020, for Romania the objective being 70% (Europe 2020). Although Romania has enjoyed robust economic growth for the most part of the 2000s, the labour market was experiencing large and increasing shortages of labour and skills, which coexisted with low participation rates, as well as excess supply of labour in declining sectors (mainly agriculture). The negative growth rate of the Romanian population, which has started in the early 1990s has already reduced the population. On top of this, there is the migration of the work force - most of the migrants are still included in the labour market statistics, as inactive, but are absent from the Romania’s labour market and might be partly responsible for the slow progress of employment rate in Romania. In this context, we aim to examine the employment rate in Romania, considering a panel data analysis over the period 1996-2009. The explanatory variables are the net migration rate, the mortality and birth rates, the unemployment rate, the real earnings, the secondary and tertiary education graduates.
    Keywords: labour supply; migration; education; panel data; Romania
    JEL: C23 O15 J61 J20
    Date: 2012–02–01
  4. By: Le Breton, Michel (IDEI-TSE); Montero, Maria; Zaporozhets, Vera (TSE)
    Abstract: We analyze and evaluate the di¤erent decision rules describing the Council of Ministers of the EU starting from 1958 up to now. Most of the existing studies use the Banzhaf index (for binary voting) or the Shapley-Shubik index (for distributive politics). We argue in favor of the nucleolus as a power measure in distributive situations and an alternative to the Shapley-Shubik index. We then calculate the nucleolus and compare the results of our calculations with the conventional measures. In the second part, we analyze the power of the European citizens as measured by the nucleolus under the egalitarian criterion proposed by Felsenthal and Machover (1998), and characterize the first best situation. Based on these results we propose a methodology for the de sign of the optimal (fair) decision rules. We perform the optimization exercise for the earlier stages of the EU within a restricted domain of voting rules, and conclude that Germany should receive more than the other three large countries under the optimal voting rule.
    JEL: C71 C72 C78 D63 D72
    Date: 2012–05
  5. By: Combes, Pierre-Philippe (GREQAM, University of Aix-Marseille); Duranton, Gilles (University of Toronto); Gobillon, Laurent (INED, France); Roux, Sébastien (DARES French Ministry of Labour)
    Abstract: This paper provides descriptive evidence about the distribution of wages and skills in denser and less dense employment areas in France. We confirm that on average, workers in denser areas are more skilled. There is also strong over-representation of workers with particularly high and low skills in denser areas. These features are consistent with patterns of migration including negative selection of migrants to less dense areas and positive selection towards denser areas. Nonetheless migration, even in the long run, accounts for little of the skill differences between denser and less dense areas. Finally, we find marked differences across age groups and some suggestions that much of the skill differences across areas can be explained by differences between occupational groups rather than within.
    Keywords: skill distribution, wage distribution, sorting
    JEL: J31 J61 R12 R23
    Date: 2012–04
  6. By: Werner Eichhorst (IZA); Maarten Gerard (IDEA Consult); Michael J. Kendzia (IZA); Christine Mayrhuber (WIFO); Conny Nielsen (NIRAS); Gerhard Rünstler (WIFO); Thomas Url (WIFO)
    Abstract: Based on a study conducted for the European Parliament, Bonn 2011 (144 pages)
    Date: 2011–12
  7. By: Marco Biagetti (Ministry of Economic Development, Rome); Leone Leonida (Queen Mary, University of London); Sergio Scicchitano (Ministry of Economic Development, Rome)
    Abstract: We define the wage incentive to management as the wage premium the manager earns because of his/her supervising role. We adopt an approach based on what if questions and estimate the premium at different quantiles of the distribution of wages for 26 European economies. To ease comparisons we make use of the European Union Statistics on Income and Living Conditions inquiry released in 2009. The premium is found to be higher at the right tail of the distribution of wages, suggesting that the incentive to management differs across individuals at different quantiles of the distribution within each economy. Results also suggest that the premium differs across individuals located at the same quantiles of the distribution of different economies.
    Keywords: Distribution of wages, Incentives to management, Semiparametric methods
    JEL: C14 J31 J41
    Date: 2012–01
  8. By: Jaap Dronkers (Maastricht University); Manon de Heus; Mark Levels (Maastricht University)
    Abstract: This paper explores the extent to which educational system features of destination and origin countries can explain differences in immigrant children's educational achievement. Using data from the 2006 PISA survey, we performed cross- classified multilevel analysis on the science performance of 9.279 15-year-old immigrant children, originating from 35 different countries, living in 16 Western countries of destination. We take into account a number of educational system characteristics of the countries of destination and origin, in order to measure the importance of differentiation, standardization, and the availability of resources. Our results show that differences in educational achievement between immigrants cannot be fully attributed to individual characteristics. Educational system characteristics of countries of destination and origin are also meaningful. At the origin level, the length of compulsory education positively influences educational performance. This is especially the case for immigrant pupils who attended education in their countries of origin. Results show that at the destination level, teacher shortage negatively affects immigrant pupil's scientific performance. Moreover, immigrant children perform less in highly stratified systems than they do in moderately differentiated or comprehensive ones. Especially immigrant children with highly educated parents perform worse in highly stratified systems.
    Keywords: immigration, origin, destination, educational system, educational performance,PISA.
    Date: 2012–04
  9. By: Guglielmo Barone (Bank of Italy, Economic Research Department, Branch of Bologna, Piazza Cavour 6, 40124, Bologna, Italy); Gaia Narciso (Trinity College Dublin, CReAM and IIIS, Department of Economics, 3012 Arts Building, Dublin 2, Ireland)
    Abstract: This paper analyzes the impact of organized crime on the allocation of public transfers. We assemble an innovative data set on Italian mafia and public funds to businesses at municipality level and instrument current mafia activity with rainfall in the XIX century and geographical shifters of land productivity. We show that organized crime greatly increases the amount of public funds to businesses. Mafia is also found to lead to episodes of corruption in the public administration sector. Our results suggest that the design of geographically targeted aid policies should take into account local crime conditions.
    Keywords: organized crime, public transfers, corruption
    JEL: H4 K4 O17
    Date: 2012–04
  10. By: Marx, Ive (University of Antwerp); Marchal, Sarah (University of Antwerp); Nolan, Brian (University College Dublin)
    Abstract: This paper focuses on the role of minimum wages, tax and benefit policies in protecting workers against financial poverty, covering 21 European countries with a national minimum wage and three US States (New Jersey, Nebraska and Texas). It is shown that only for single persons and only in a number of countries, net income packages at minimum wage level reach or exceed the EU's at-risk-of poverty threshold, set at 60 per cent of median equivalent household income in each country. For lone parents and sole breadwinners with a partner and children to support, net income packages at minimum wage are below this threshold almost everywhere, usually by a wide margin. This is the case despite shifts over the past decade towards tax relief and additional income support provisions for low-paid workers. We argue that there appear to be limits to what minimum wage policies alone can achieve in the fight against in-work poverty. The route of raising minimum wages to eliminate poverty among workers solely reliant on it seems to be inherently constrained, especially in countries where the distance between minimum and average wage levels is already comparatively small and where relative poverty thresholds are mostly a function of the dual-earner living standards. In order to fight in-work poverty new policy routes need to be explored. The paper offers a brief discussion of possible alternatives and cautions against 'one size fits all' policy solutions.
    Keywords: minimum wage, poverty, taxes, social transfers, subsidies
    JEL: I3 H2 J8
    Date: 2012–04
  11. By: Caliendo, Marco (University of Potsdam); Künn, Steffen (IZA); Uhlendorff, Arne (University of Mannheim)
    Abstract: In some countries including Germany unemployed workers can increase their income during job search by taking up "marginal employment" up to a threshold without any deduction from their benefits. Marginal employment can be considered as a wage subsidy as it lowers labour costs for firms owing to reduced social security contributions, and increases work incentives due to higher net earnings. Additional earnings during unemployment might lead to higher reservation wages prolonging the duration of unemployment, yet also giving unemployed individuals more time to search for better and more stable jobs. Furthermore, marginal employment might lower human capital deterioration and raise the job arrival rate due to network effects. To evaluate the impact of marginal employment on unemployment duration and subsequent job quality, we consider a sample of fresh entries into unemployment. Our results suggest that marginal employment leads to more stable post-unemployment jobs, has no impact on wages, and increases the job-finding probability if it is related to previous sectoral experience of the unemployed worker. We find evidence for time-varying treatment effects: whilst there is no significant impact during the first twelve months of unemployment, job finding probabilities increase after one year and the impact on job stability is stronger if the jobs are taken up later within the unemployment spell.
    Keywords: marginal employment, unemployment duration, job search, employment stability, timing of events model
    JEL: J64 C41 C33
    Date: 2012–04
  12. By: Brunello, Giorgio (University of Padova); De Paola, Maria (University of Calabria); Labartino, Giovanna (IRVAPP)
    Abstract: We use scanner data of supermarket sales to investigate the effects of the EU School Fruit campaign, conducted in a sample of primary schools in the city of Rome during 2010 and 2011, on the consumption of unhealthy snacks. We allocate supermarkets to treatment and control groups depending on whether they are located or not near treated schools and estimate the causal effect of the program by comparing the changes in the sales of snacks in treated stores with the changes in control stores. We find evidence that the campaign reduced the consumption of unhealthy snacks bought in stores located in high income areas. No effect is found in poorer areas. Repeated treatment does not strengthen the effects of the program.
    Keywords: EU School Fruit campaign, junk food, Rome
    JEL: I18
    Date: 2012–04
  13. By: Klaus F. Zimmermann (IZA); Martin Kahanec (IZA); Corrado Giulietti (IZA); Martin Guzi (IZA); Alan Barrett (ESRI); Bertrand Maître (ESRI)
    Abstract: Report prepared for the European Commission, Bonn 2012 (216 pages)
    Date: 2012–02
  14. By: Aleksander Kucel; Montserrat Vilalta-Bufi (Universitat de Barcelona)
    Abstract: In this paper we investigate the determinants of regret of study program for university graduates in Spain and the Netherlands. These two countries differ in their educational system in terms of their educational tracking in secondary education level and the strength of their education-labor market linkages in tertiary education. Therefore, by comparing Spain and the Netherlands, we aim at learning about the consequences that the two educational systems might have on university program regret. Basing on the psychological literature on regret, we derive some expectations on the determinants of regret of study program. Results reveal that, both education track and education-labor mismatch of tertiary education, are important determinants of the likelihood of program regret. Results allow us to derive some policy recommendations on the tertiary education system.
    Keywords: higher education, regret, horizontal mismatch, tertiary education, overeducation, study program
    JEL: I23 J24
    Date: 2012
  15. By: Eager,D.; Hobbs, B.; Bialek, J.
    Abstract: Many governments who preside over liberalised energy markets are developing policies aimed at promoting investment in renewable generation whilst maintaining the level of security of supply customers have come to expect. Of particular interest is the mix and amount of generation investment over time in response to policies promoting high penetrations of variable output renewable power such as wind. Modelling the dynamics of merchant generation investment in market environments can inform the debate. Such models need improved methods to calculate expected output, costs and revenue of thermal generation subject to varying load and random independent thermal outages in a power system with high penetrations of wind. This paper presents a dynamic simulation model of the aggregated Great Britain (GB) generation investment market. The short-term energy market is simulated using probabilistic production costing based on the Mix of Normals distribution technique with a residual load calculation (load net of wind output). Price mark-ups due to market power are accounted for. These models are embedded in a dynamic model in which generation companies use a Value at Risk (VaR) criterion for investment decisions. An `energy-only' market setting is used to estimate the economic profitability of investments and forecast the evolution of security of supply. Simulated results for the GB market case study show a pattern of increased relative security of supply risk during the 2020s. In addition, fixed cost recovery for many new investments can only occur during years in which more frequent supply shortages push energy prices higher. A sensitivity analyses on a number of key model assumptions provides insight into factors affecting the simulated timing and level of generation investment. This is achieved by considering the relative change in simulated levels of security of supply risk metric such as de-rated capacity margins and expected energy unserved. The model can be used as a decision support tool in policy design, in particular how to address the increased `energy-only market revenue risk facing thermal generation, particularly peaking units, that rely on a small number of high price periods to recover fixed costs and make adequate returns on investment.
    Keywords: Power generation economics, Mix of Normals distribution, Thermal power generation, Wind power generation.
    JEL: O13 P4 Q4
    Date: 2012–04–25
  16. By: Anagnostopoulos, Achilleas (TEI (Technological Education Institute) of Larissa); Siebert, W. Stanley (University of Birmingham)
    Abstract: This paper uses an original dataset for 206 workplaces in Thessaly (Greece), to study consequences of Greece's employment protection law (EPL) and national wage minimum for temporary employment. We find higher temporary employment rates especially among a "grey" market group of workplaces that pay low wages and avoid the national wage minimum. A similar factor boosts family employment. We also find that EPL "matters", in particular, managers who prefer temporary contracts because temps are less protected definitely employ more temps. We discuss whether temporary and family work is a form of escape from regulation for less prosperous firms.
    Keywords: temporary work, Greece, employment protection, national wage agreements
    JEL: J38 J41 J81
    Date: 2012–04
  17. By: Marie-Noëlle Calès (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Laurent Granier (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Nadège Marchand (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon)
    Abstract: For several years, European financial markets have been the place of important mutations. These mutations have hit both stock markets themselves as well as the infrastructures including all necessary services for the transactions on financial securities. Among the market services to which the investors appeal, is the clearing of the orders, the service which allows reducing exchanged flows while guaranteeing their safety. The market of clearing became strongly competitive with the arrival of new Pan European clearing houses. Confronted with aggressive pricing policies, "incumbent" clearing houses have to adopt new strategies : merger, simple or mutual links of interoperability. We develop a model of industrial organization to appreciate the consequences of these various strategies in terms of price and social welfare. The strategic incentives of clearing houses and their effects on their customers, i.e. investors, are observed by means of a sequential game. We show that the interoperability agreements are never reached at the equilibrium in spite of the fact that the "European code of good practice" of postmarkets incites them to accept this type of agreements. On the other hand, a merger between incumbent clearing houses can occur under some conditions. The merger is beneficial to these last ones as well as to the investors, but it is unfavourable to the Pan European clearing houses.
    Keywords: bundling; clearing house; interoperability; merger; post-market organization
    Date: 2012–04–24
  18. By: Tony Champion; Alan Townsend
    Abstract: While it is now accepted that the 2008-09 recession accentuated regional differences in Britain, it is more difficult to identify the role of major cities, especially over a longer time scale. Using previously established methods focussed on employment, this paper assesses the record of nine city regions in the 2008-09 recession, both in its own right and in comparison with the previous two recessions. The 2008-09 recession is found to have impacted the nine city regions less than the previous ones in absolute terms but not in relative terms compared with the London city region or the rest of Britain. Over the whole period from 1978, the paper has found the city regions to be fairly tightly in the grip of national cyclical trends of recession and recovery, but generally performing less resiliently than Britain as a whole. In comparison, London showed appreciably more cyclical behaviour between 1989 and 2002 than at other times, with the most remarkable recovery from recession in this period. The public sector helped the performance of second-order city regions from 1997 to 2010, including the peak of growth rates in city regions and their cores in 1998-2002, but its employment reductions will dominate the prospects for provincial cities for several years to come.
    Keywords: Recession, resilience, employment change, second-order city, city region, Great Britain
    JEL: J21 O18 R11 R12
    Date: 2012–04
  19. By: Attanasi, Giuseppe; Casoria, Fortuna; Centorrino, Samuele; Urso, Giulia
    Abstract: In this paper we show how the investment in cultural events may encourage the building of social capital and foster the development of local communities. We rely on a casestudy that we conducted about the socio-economic impact of the Festival “La Notte della Taranta”, the most important European music festival dedicated to traditional music (about 170.000 participants per year), on the sub-region of southern Italy where it is held. Our evidence is based on a large survey, consisting of nearly 10.000 interviews to Festival participants over a span of five editions (2007-2011). A primary result is that the initial economic investment in the Festival has brought a short-term return in terms of touristic attraction worth more than two times as much. More importantly, our results indicate that a cultural festival, despite being a mass gathering, is able to create strong bonds among its participants and between them and the area where the event takes place. Although these bonds are “instantaneous”, i.e. temporally restricted to the duration of the event, they are positively correlated with the economic impact of the event on the territory.
    Keywords: Cultural event, economic impact, social capital, greatly motivated tourist
    Date: 2012–02
  20. By: Bonilla, Jorge (Department of Economics, School of Business, Economics and Law, Göteborg University); Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Sterner, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In this paper, we explore the synergies and tradeoffs between abatement of global and local pollution. We built a unique dataset of Swedish heat and power plants with detailed boiler-level data 2001-2009 on not only production and inputs but also emissions of CO2 and NOx. Both pollutants are subject to strict policies in Sweden. CO2 is subject to multiple levels of governance using environmental instruments such as the EU ETS and Swedish carbon taxes; NOx – as a precursor of acid rain and eutrophication – is regulated by a heavy fee. Using a quadratic directional output distance function, we characterize changes in technical efficiency as well as patterns of substitutability in response to the policies mentioned. The fact that generating units face a trade-off between the pollutants indicates a need for policy coordination.<p>
    Keywords: Interaction of environmental policies; shadow pricing; directional distance function; climate change; local pollution.
    JEL: H23 L51 L94 L98 Q48
    Date: 2012–04–30

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