nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒05‒22
nineteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. How do work and public policies interact with child poverty? By Manuela Arcanjo; Amélia Bastos; Francisco Nunes; José Passos
  2. Reassessing the EU 2020 Poverty Target an Analysis of EU-SILC 2009 By Bertrand Maître; Brian Nolan; Christopher T. Whelan
  3. Minimum Wages as a Barrier to Entry – Evidence from Germany By Ronald Bachmann; Thomas K. Bauer; Hanna Kröger
  4. Dynamics of Educational Differences in Emigration from Estonia to the Old EU Member States By Kristi Anniste; Tiit Tammaru; Enel Pungas; Tiiu Paas
  5. Comparative Advantage and the Welfare Impact of European Integration By Andrei A. Levchenko; Jing Zhang
  6. How large is the magnitude of fixed-mobile call substitution? Empirical evidence from 16 European countries By Barth, Anne-Kathrin; Heimeshoff, Ulrich
  7. Quit Behavior and the Role of Job Protection By Gielen, Anne C.; Tatsiramos, Konstantinos
  8. The extent of European power markets By Böckers, Veit; Heimeshoff, Ulrich
  9. The European Union's service directive: Contrasting ex ante estimates with empirical evidence By Bianka Dettmer
  10. Modelling FDI based on a spatially augmented gravity model: Evidence for Central and Eastern European Countries By Markus Leibrecht; Aleksandra Riedl
  11. Europe 2020 and national reforms: economic governance and structural reforms By Paolo Sestito; Roberto Torrini
  12. Determinants of Immigrants' Cash-Welfare Benefits Intake in Spain By Rodríguez-Planas, Núria
  13. Paid Work after Retirement: Recent Trends in Denmark By Larsen, Mona; Pedersen, Peder J.
  14. Immigrant students and educational systems. Cross-country evidence from PISA 2006 By Marina Murat; Davide Ferrari; Patrizio Frederic
  15. Dismissal Protection and Worker Flows in OECD Countries: Evidence from Cross-Country/Cross-Industry Data By Bassanini, Andrea; Garnero, Andrea
  16. Temporary Employment, Job Flows and Productivity: A Tale of Two Reforms By Cappellari, Lorenzo; Dell'Aringa, Carlo; Leonardi, Marco
  17. Employment protection and fertility: Evidence from the 1990 Italian reform By Ervin Prifti; Daniela Vuri
  18. WP 120 - The impact of attitudes and work preferences on Dutch mothers’ employment patterns By Justine Ruitenberg; Paul Beer
  19. What explains the gender earnings gap in self-employment? A decomposition analysis with German data By Lechmann, Daniel S. J.; Schnabel, Claus

  1. By: Manuela Arcanjo; Amélia Bastos; Francisco Nunes; José Passos
    Abstract: Child poverty is a problem firmly recognized in the industrialized world. In the EU nearly one in every five children was poor in 2008 (for the population as a whole the risk of poverty was around 17 per cent). The dimension of the problem and its consequences point out for the importance of knowing the processes behind it. This paper aims to investigate how labour market issues and public policies have been impact on child poverty, over recent years. Based on microdata gathered by the European Union Statistics on Income and Living Conditions (EU_SILC) for the period 2004-08 we give a portrait of child income poverty in European Southern countries such as: Italy, Portugal and Spain and also in Poland. Moreover, we investigate the major changes in social policies that could impact on child poverty such benefits target on family and child allowances. The international comparison will allow the identification of children’s poverty profile and pattern across the countries analysed and also design the different compositions between labour market elements / public policies in such countries. This exercise of comparison also enables a first test of the efficiency of these policies. The methodological framework used varies from descriptive methods to econometric models in order to sustain the discussion of the subject under study.
    Keywords: child poverty, income, cross-section, dynamics, social policies, labour market. JEL Classification: H53, I32, I38
    Date: 2012–05
  2. By: Bertrand Maître (Economic and Social Research Institute, Dublin); Brian Nolan (School of Applied Social Sciences, University College Dublin); Christopher T. Whelan (School of Sociology and Geary Institute, Univeristy College Dublin)
    Abstract: As part of its 2020 Strategy adopted, the EU has set a number of headline targets including one for poverty and social exclusion reduction. Our analysis in this paper suggests that, in focusing on the union of the three chosen component indicators, cross-nationally we are not comparing like with like and the case for aggregating the indicators to produce a multidimensional indicator is seriously undermined. In relation to the measurement of deprivation, the development of this target was conducted on the basis of information available in the European Union Survey of Income and Living Conditions (EU-SILC) that was generally recognised to be less than satisfactory. More recently the introduction of a special module on material deprivation as part of EU-SILC 2009 provides an opportunity to explore the consequences of critical choices in relation to the index utilised and the threshold employed. In order to deal with problems relating to the fact that neither the union or intersection of all three of the current dimensions proves to be particularly useful, we explored a consistent poverty approach using both the EU severe material deprivation 4+ threshold and a 3+ and nationally relative threshold based on an alternative basic deprivation index. Employing the EU material deprivation index, extreme deprivation is largely abolished in more affluent member states. A purely relative measure produces much higher rates in these countries but leads to a compression of rates across counties. The basic deprivation 3+ index largely manages to avoid both of these problems.. Understanding the scale of between country difference countries while continuing to be able identify those groups who should remain the focus of national welfare state efforts is a formidable challenge. However, the capacity to respond to such a challenge in a coherent fashion is an indispensable part of any attempt to develop EU poverty targets.
    Keywords: poverty, social exclusion, deprivation, EU-SILC, targets
    Date: 2012–05–09
  3. By: Ronald Bachmann; Thomas K. Bauer; Hanna Kröger
    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
  4. By: Kristi Anniste (University of Tartu); Tiit Tammaru (University of Tartu); Enel Pungas (University of Tartu); Tiiu Paas (University of Tartu)
    Abstract: The study analyzes the changes in emigration from Estonia in order to shed more light on East-West migration, contributing to the main debate on “brain drain” by focusing on educational differences in emigration. We use anonymous individual level data for all emigrants from the register-based Estonian Emigration Database compiled by Statistics Estonia for the period 2000–2008. The analysis shows that there has been no significant brain drain from Estonia as the new EU member state during this period. Moreover, we find evidence of a spreading of the emigration norm into a wider range of population groups, including the less educated, since Estonia joined the European Union in 2004.
    Keywords: education; emigration; East-West migration; Estonia
    Date: 2012–05
  5. By: Andrei A. Levchenko; Jing Zhang
    Abstract: This paper investigates the welfare gains from European trade integration, and the role of comparative advantage in determining the magnitude of those gains. We use a multisector Ricardian model implemented on 79 countries, and compare welfare in the 2000s to a counterfactual scenario in which East European countries are closed to trade. For West European countries, the mean welfare gain from trade integration with Eastern Europe is 0.16%, rang- ing from zero for Portugal to 0.4% for Austria. For East European countries, gains from trade are 9.23% at the mean, ranging from 2.85% for Russia to 20% for Estonia. For Eastern Europe, comparative advantage is a key determinant of the variation in the welfare gains: countries whose comparative advantage is most similar to Western Europe tend to gain less, while countries with technology most different from Western Europe gain the most.
    JEL: F11 F14 F15
    Date: 2012–05
  6. By: Barth, Anne-Kathrin; Heimeshoff, Ulrich
    Abstract: This paper investigates the degree of fixed-mobile call substitution (FMCS). We use quarterly data from 2004 to mid 2010 on 16 mainly Western European countries. By applying dynamic panel data techniques, we are able to estimate short-and long-run elasticities. The own-price and cross-price elasticities found give strong empirical evidence for substitutional effects towards mobile services. In particular, the estimated cross-price elasticities of the mobile price on the fixed line call demand are relatively large compared to other studies. --
    Keywords: Dynamic Panel Model,Fix-Mobile Substitution,Telecommunication markets
    Date: 2012
  7. By: Gielen, Anne C. (IZA); Tatsiramos, Konstantinos (University of Leicester)
    Abstract: Job protection reduces job turnover by changing firms' hiring and firing decisions. Yet the effect of job protection on workers' quit decisions and post-quit outcomes is still unknown. We present the first evidence using individual panel data from 12 European countries, which differ both in worker turnover rates and in the level of job protection. We find that workers are less likely to quit their job in countries with more job protection, but conditional on quitting they receive higher wages. This evidence can be explained by increased mobility costs associated with higher expected risk of post-quit layoff and job mismatch.
    Keywords: institutions, employment protection, labor mobility, job satisfaction, wages
    JEL: J28 J62
    Date: 2012–05
  8. By: Böckers, Veit; Heimeshoff, Ulrich
    Abstract: This paper analyzes the convergence process of Central-West European wholesale electricity markets from 2004 to the beginning of 2011. Jevon's law of price indifference is scrutinized using price correlation, parametric and nonparametric tests of price-differences and cointegration analysis. As a unique identifaction strategy national bank holidays are used as exogenous system shocks to trace the degree of market integration before the advent of the so-called market coupling of European power markets. In order to avoid overestimation of the degree of market integration, we specifically control for seasonal effects and common input factors. While the overall degree of integration between Germany and its neighbours has increased in the course of time, results suggest that only Austria and Germany already constitute a joint price area and that market coupling increases the convergence of markets at least between its participants. --
    Keywords: Market Structure,Spatial Market Delineation,Time Series Econometrics,Energy Data, Electricity,Europe
    JEL: C32 L1 L40 L94 Q40
    Date: 2012
  9. By: Bianka Dettmer (Friedrich-Schiller-University of Jena, Chair of Economic Policy)
    Abstract: One of the top priorities to improve the European Union's growth performance is the creation ofsingle market for services. The directive on services adopted by the Parliament and the Council by the end of 2006 aims at removing barriers to the free movement of service providers on the internal market. Previous studies quantified ex ante sizable effects of implementing the directive in its original form. This paper is a first attempt to evaluate ex post the trade effects induced by a directive - which excludes the country-of-origin principle - by performing a difference-in-difference-(in-differences) estimator on a sample of EU- and non-EU countries in the period 2004 to 2010. We account for non-tariff trade barriers and the endogeneity of regional trade agreements and find that deregulations foster a deeper integration of the new member states into the European value-added-chain and promote business service exports from third countries towards the EU. The reorientation of the new members is in turn associated with declining intra-EU10 business intensities while leaving business trade among the entire members largely unaffected.
    Keywords: service directive, non-tariff barriers, outsourcing, internal market, EU
    JEL: F12 F15 L84
    Date: 2012–05–07
  10. By: Markus Leibrecht (Department for Economics, Leuphana University Lueneburg, Germany); Aleksandra Riedl (Austrian National Bank)
    Abstract: Based on a spatially augmented gravity model the current paper isolates spatial interrelationships in Foreign Direct Investment (FDI) to Central and Eastern European Countries (CEECs) not only across the destination but also across the origin country dimension of FDI. Results show that: (i) spatial interrelationships across destination countries are present and are consistent with the predom- inance of vertical-complex FDI in total FDI; (ii) spatial correlation across origin countries is given in earlier years of transition, while demonstration and competition effects cancel over the whole sample period; and (iii) agglomeration forces gain in importance for FDI to CEECs.
    Keywords: Foreign Direct Investment, Spatial Econometrics, Central and Eastern Europe, Third country effects
    JEL: C33 F21
    Date: 2012–04
  11. By: Paolo Sestito (Bank of Italy); Roberto Torrini (Bank of Italy and ANVUR)
    Abstract: Structural reforms are stressed in Europe 2020 as a tool for boosting economic growth and improving social cohesion. Yet tensions often arises between country specificities and goals, on one side, and pressures by partners and EU wide goals on the other side. The paper discusses the European economic governance issues building upon a sketchy historical account of the so called Open Method of Coordination. It is argued that the structural reforms’ success depends upon aspects like the variety, ex ante identifiability and easiness to organize of their potential supporters as well as the presence of institutional mechanisms through which it is possible to compensate the potential losers and/or distributing on wider and fairer basis their benefits; furthermore mechanisms capable to contrast the shortsightedness of many political decisions, also favouring the political participation of all often silent stakeholders, are argued as essential. The most important contribution from EU wide pressures and rules is identified in the capacity building of national institution, to be based also upon stringent rules, aiming at fostering national governments’ accountability and the policy evaluation tools.
    Keywords: Structural reforms, Economic Governance, EU2020, Open Method of Coordination
    JEL: F55 H79 O43
    Date: 2012–04
  12. By: Rodríguez-Planas, Núria (IZA)
    Abstract: Much of the literature on immigrants' cash-welfare benefits use has focused on countries with a large tradition of receiving immigrants and with well established Welfare states. This paper contributes to this literature by analyzing differences in cash-welfare benefits receipt between immigrants and natives and their determinants in Spain, a country with: (1) a small level of social assistance and a Welfare state heavily reliable on conditioned access to pensions; and (2) an unprecedented immigration boom. Different probit models of social program intake are estimated for immigrants and native-born individuals using pooled cross-sectional data from the 1999 to 2009 Spanish Labor Force Survey. Results show that a negative residual welfare gap exists and that it is mainly driven by recently arrived immigrants, whose legal status or insufficient contribution is likely to hamper participation in social programs. In addition, I find that immigrants with more than 5 years in the host country are more likely to receive unemployment benefits than natives, consistent with findings in other countries. These findings hold regardless of immigrants' continent of origin.
    Keywords: Southern European welfare state, immigrants' residual welfare use
    JEL: J15 J61 J68 I38
    Date: 2012–05
  13. By: Larsen, Mona (SFI - Danish National Centre for Social Research); Pedersen, Peder J. (University of Aarhus)
    Abstract: The labor market in Denmark seems to follow the trend in a number of other countries of increasing labor force participation in the 60+ group. We analyze trends for the early retirement age interval 60-64 and for the age group 65-74 where people are eligible to a national social security program from age 65. Until now, the increase in labor force participation has been most pronounced among 60-64-year-olds and among women. We find significant impact on work after retirement from education, gender, home ownership, aggregate unemployment at the time of retirement, age and education. Being married has a positive impact for men and a negative impact for women. We relate labor force participation after retirement to the cyclical situation and to the several policy reforms introduced since 1980.
    Keywords: labor force participation, retirement
    JEL: H55 J14 J26
    Date: 2012–05
  14. By: Marina Murat; Davide Ferrari; Patrizio Frederic
    Abstract: Using data from PISA 2006 on 29 countries, this paper analyses immigrant school gaps (difference in scores between immigrants and natives) and focuses on tracking and comprehensive educational systems. Results show that the wider negative gaps are present where tracking is sharp and less frequently in countries with comprehensive schooling. In both cases, negative gaps are concentrated in continental Western Europe, where they are also often related to immigrants and natives attending different schools, or are significant within schools
    Keywords: Immigrant students, educational systems, PISA
    JEL: F22 I21
    Date: 2012–05
  15. By: Bassanini, Andrea (OECD); Garnero, Andrea (Paris School of Economics)
    Abstract: Exploiting a unique dataset including cross-country comparable hiring and separation rates by type of transition for 24 OECD countries, 23 business-sector industries and 13 years, we study the effect of dismissal regulations on different types of gross worker flows, defined as one-year transitions. We use both a difference-in-difference approach – in which the impact of regulations is identified by exploiting likely cross-industry differences in their impact – and standard time-series analysis – in which the effect of regulations is identified through regulatory changes over time. We find that the more restrictive the regulation, the smaller is the rate of within-industry job-to-job transitions, in particular towards permanent jobs. By contrast, we find no significant effect as regards separations involving an industry change or persistent joblessness. The extent of reinstatement in the case of unfair dismissal appears to be the most important regulatory determinant of gross worker flows. We also present a large battery of robustness checks that suggest that our findings are robust.
    Keywords: reinstatement, unfair dismissals, employment protection legislation, job-to-job transitions, industry-specific human capital, resource reallocation, gross worker flows, cross-country data
    JEL: J23 J24 J62 J63
    Date: 2012–04
  16. By: Cappellari, Lorenzo (Università Cattolica del Sacro Cuore); Dell'Aringa, Carlo (Università Cattolica del Sacro Cuore); Leonardi, Marco (University of Milan)
    Abstract: We investigate the effects of two reforms of temporary employment using panel data on Italian firms. We exploit variation in their implementation across regions and sectors for identification. Our results show that the reform of apprenticeship contracts increased job turnover and induced the substitution of external staff with firms' apprentices, with an overall productivity-enhancing effect. The reform of fixed-term contracts instead did not produce the intended results: it induced a substitution of temporary employees in favour of external staff and reduced capital intensity, generating productivity losses. We estimate substitution elasticities across various types of temporary contracts that are consistent with this interpretation.
    Keywords: employment contracts, productivity, institutional changes
    JEL: J24 J41
    Date: 2012–04
  17. By: Ervin Prifti (Faculty of Economics, University of Rome "Tor Vergata"); Daniela Vuri (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: The aim of this paper is to investigate the effect of Employment Protection Legislation (EPL) on fertility decisions of Italian working women using administrative data. We exploit a reform that introduced in 1990 costs for dismissals unmotivated by a 'fair cause' or 'justified motive' in firms below 15 employees and left firing costs unchanged for bigger firms. We use this quasi-experimental setup to study the hypothesis that increased EPL reduces future job insecurity and positively affects a female worker's proneness to take childbearing decisions. We use a difference in difference (OLS-DID) model to control for possible period-invariant sorting bias and an instrumental variable (IV-DID) model to account for time-varying endogeneity of the treatment status. We find that reduced economic insecurity following a strengthening of the EPL regime has a positive and sizable effect on fertility decisions of Italian working women. This result is robust to a number of checks regarding possible interactions with other policy reforms occurring around 1990, changes in the sample of workers and firms, and use of an alternative set of exclusion restrictions.
    Keywords: Fertility; Employment protection; Difference-in-difference; Instrumental variables; Policy evaluations.
    JEL: J2 J13 J65
    Date: 2012–05–14
  18. By: Justine Ruitenberg (Programma Dienstbare Overheid, Inspectie Werk & Inkomen, Ministerie van Sociale Zaken en Werkgelegenheid); Paul Beer (AIAS, Universiteit van Amsterdam)
    Abstract: In the last decades, preference theory has gained significance in the academic literature on the determinants of female employment patterns. Mostly, within these studies gender and work attitudes and work preferences (the number of hours a woman prefers to work) are treated as one concept. However, in this article it is argued that relatively variable work preferences act as a mediating factor between more stable gender and work attitudes and actual labour market behaviour. With a path analysis of a representative survey among 940 Dutch mothers, the study demonstrates that the effect of gender and work attitudes on mothers’ labour market behaviour is largely mediated by the variable work preference, which influence on actual labour participation appears much larger than the influence of objective background characteristics. Next, the analysis supports the claim that more or less stable gender and work attitudes have a balancing effect on otherwise more flexible work preferences.
    Date: 2012–04
  19. By: Lechmann, Daniel S. J.; Schnabel, Claus
    Abstract: Using a large data set for Germany, we show that both the raw and the unexplained gender earnings gap are higher in self-employment than in paid employment. Applying an Oaxaca-Blinder decomposition, more than a quarter of the difference in monthly self-employment earnings can be traced back to women working fewer hours than men. In contrast variables like family background, working time flexibility and career aspirations do not seem to contribute much to the gender earnings gap, suggesting that self-employed women do not earn less because they are seeking work-family balance rather than profits. Differences in human capital endowments account for another 13 percent of the gap but segregation does not contribute to the gender earnings gap in a robust way. -- Mit einem großen Datensatz für Deutschland zeigen wir, dass sowohl der gesamte geschlechtsspezifische Verdienstunterschied als auch dessen unerklärter Teil bei Selbständigen größer ausfallen als bei abhängig Beschäftigten. Gemäß einer Oaxaca-Blinder-Zerlegung ist über ein Viertel des Unterschieds im Monatsverdienst von Selbständigen darauf zurückzuführen, dass Frauen kürzere Arbeitszeiten haben als Männer. Dagegen scheinen Variablen wie Familienhintergrund, Arbeitszeitflexibilität und Karriereaspiration nicht substanziell zum Geschlechter-Verdienstdifferenzial beizutragen. Dies legt nahe, dass selbständige Frauen nicht deshalb weniger verdienen, weil sie eher an der Vereinbarkeit von Arbeit und Familie und weniger an Gewinnerzielung interessiert sind. Unterschiede in der Humankapitalausstattung erklären weitere 13 Prozent des Differenzials, doch Segregation spielt keine eindeutige Rolle.
    Keywords: earnings differential,entrepreneurship,gender pay gap,Germany,self-employed,self-employment
    JEL: J31 J71
    Date: 2012

This nep-eur issue is ©2012 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.