nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒06‒25
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The Impact of Social Activities on Cognitive Ageing: Evidence From Eleven European Countries By Loretti Dobrescu; Dimitris Christelis
  2. Fiscal Union in Europe? Redistributive and Stabilising Effects of an EU Tax-Benefit System By Bargain, Olivier; Dolls, Mathias; Fuest, Clemens; Neumann, Dirk; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian
  3. Real Wage Flexibility in the European Union: New Evidence from the Labour Cost Data By Jan Babecky; Kamil Dybczak
  4. The structural changes of the food industry in the European Union By Luljeta Hajderllari; Kostas Karantininis
  5. The Unexpected Appearance of a New German Model By Eichhorst, Werner
  6. New Aspects of Intra-industry Trade in EU Countries By Tadashi Ito; Toshihiro Okubo
  7. Food Safety Regulation and Firm Productivity: Evidence from the French Food Industry By Requillart, Vincent; Nauges, Celine; Simioni, Michel; Bontemps, Christophe
  8. Employment Protection and Fertility: Evidence from the 1990 Italian Reform By Prifti, Ervin; Vuri, Daniela
  9. Trading many goods with many countries: Exporters and importers from German manufacturing industries By Joachim Wagner
  10. The impact of the economic crisis on the EU labour market: a comparative perspective By Pasquale Tridico
  11. The Impact of Immigration on the Well-Being of Natives By Akay, Alpaslan; Constant, Amelie F.; Giulietti, Corrado
  12. Risky Behaviours and Responsibility-Sensitive Fairness in a Non Life-Threatening Health Case: A European Study By Christine Le CLAINCHE; Jerome WITTWER
  13. Industry Compensation Under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme By Ralf Martin; Mirabelle Muûls; Ulrich J. Wagner; Laure B. de Preux
  14. Classification of rural areas in Europe using social sustainability indicators By Chatzinikolaou, Parthena; Manos, Basil D.; Bournaris, Thomas
  15. The Trade-Productivity Nexus in the European Economy By Neil Foster; Roman Stöllinger; Carlo Altomonte; Richard Kneller
  16. Trade costs and the pattern of Foreign Direct Investment: evidence from five EU countries By Cardamone, Paola; Scoppola, Margherita
  17. How direct payments and their reform have affected farm income inequality in Italy? By Severini, Simone; Tantari, A.
  18. Measuring the Impact of Longevity Risk on Pension Systems: The Case of Italy. By Emilio Bisetti; Carlo A. Favero
  19. Quantitative reduction in retirement benefits by the 2011 Spanish Social Security reform By Manuela Bosch-Princep (Universitat de Barcelona); Daniel Vilalta (Independent Pension Consultant)
  20. Contracted government: Unveiling the European Commission's contracted staff By Murdoch, Zuzana; Trondal, Jarle

  1. By: Loretti Dobrescu (School of Economics and ARC Centre of Excellence in Population Ageing Research, Australian School of Business, University of New South Wales); Dimitris Christelis (CSEF, Dept. of Economics, University of Naples Federico II)
    Abstract: Using data from eleven countries from the Survey of Health, Ageing and Retirement in Europe, the authors investigate the impact of engaging in social activities on cognition, as measured from scores in tests on numeracy, fluency and immediate and delayed recall. We deal with the endogeneity of social activities by using panel data and instrumental variable methods. We find that social activities have an important positive effect on cognition, with the results differing by sex. The effect on fluency and immediate recall is strong for females, while numeracy is affected only in the case of males. There is an effect on delayed recall for both sexes.
    Keywords: Cognition, Ageing, Social Activities, SHARE, Panel Data
    JEL: I10 J14 C23
    Date: 2012–05
  2. By: Bargain, Olivier (University of Aix-Marseille II); Dolls, Mathias (IZA); Fuest, Clemens (University of Oxford); Neumann, Dirk (IZA); Peichl, Andreas (IZA); Pestel, Nico (IZA); Siegloch, Sebastian (IZA)
    Abstract: The current debt crisis has given rise to a debate about deeper fiscal integration in Europe. The view is widespread that moving towards a 'fiscal union' would have a stabilising effect in the event of macroeconomic shocks. In this paper we study the economic effects of introducing two elements of a fiscal union: Firstly, an EU-wide tax and transfer system and secondly, an EU-wide system of fiscal equalisation. Using the European tax-benefit calculator EUROMOD, we exploit representative household microdata from 11 Eurozone countries to simulate these policy reforms and to study their effects on the distribution of income as well as their impact on automatic fiscal stabilisers. We find that replacing one third of the national tax and transfer systems by a European system would lead to significant redistributive effects both within and across countries. These effects depend on income levels and the structures of the existing national tax and transfer systems. The EU system would improve fiscal stabilisation especially in credit constrained countries. It would absorb between 10 and 15 per cent of a macroeconomic income shock. Introducing a fiscal equalisation system based on taxing capacity would redistribute revenues from high to low income countries. The stabilisation properties of this system, however, are ambiguous. This suggests that not all forms of fiscal integration will improve macroeconomic stability in the Eurozone.
    Keywords: European income tax, automatic stabilisation, fiscal union
    JEL: H2 H3 J22
    Date: 2012–05
  3. By: Jan Babecky; Kamil Dybczak
    Abstract: This paper presents evidence on the extent of real wage flexibility in 24 EU member countries based on the Eurostat labour cost data covering 2000Q1-2010Q2. The term 'wages' refers, for brevity, to total hourly labour costs and their two main components, namely wages and salaries per hour, and non-wage costs. Following the structural VAR approach, real wage flexibility is measured as the responsiveness of real wages to real (permanent) versus nominal (temporary) shocks. The data shows that the impact of the 2008/2009 crisis on real wage adjustment has not been uniform across the sample countries, with some evidence for an increase in real wage rigidity. A strong negative correlation is observed between our aggregate measure of wage flexibility and both the ESCB Wage Dynamics Network firm-level survey estimates of downward real wage rigidity and the International Wage Flexibility Project microeconomic estimates of downward real wage rigidity. Finally, we find that institutional features of labour markets could help explain the variation in the results across countries; for example, stricter employment protection legislation and stronger presence of unions go hand in hand with higher real wage rigidity.
    Keywords: Labour cost indices, real wage rigidity, structural VAR.
    JEL: C22 E24 F02 J30 P20
    Date: 2012–01
  4. By: Luljeta Hajderllari (Institute of Food and Resource Economics, University of Copenhagen); Kostas Karantininis (Institute of Food and Resource Economics, University of Copenhagen)
    Abstract: This paper studies the structural changes of food industry in the EU-27. We first provide a detailed description of the relative importance of the various sectors in the food industry. The structure is studied by calculating Gini coefficients for the EU members with regard to food industry. We find that the food industry is one of the most important components of the manufacturing sectors in terms of turnover and employment. Enterprises in the EU are relatively large in terms of turnover but small in the number of enterprises with the dairy and meat sectors being the most important branches of the food industry regarding the share of turnover, employment and enterprises. During the eight years 2000-2007, the Gini coefficient of the food industry in the EU is very close to 1, indicating a high degree of concentration.
    Keywords: Food industry, meat, dairy, concentration, EU-25
    JEL: L66 L6
    Date: 2012–06
  5. By: Eichhorst, Werner (IZA)
    Abstract: Most Continental European labour markets and welfare states underwent a substantial transformation over the last two decades moving from a situation of low employment and limited labour market inequality to higher employment, but also more inequality. Germany is a case in point as it exhibits growing employment figures and growing shares of low pay and non-standard work. Furthermore, the German labour market has been remarkably resilient during the recent crisis. How can this be explained? The paper claims that changes in labour market institutions such as unemployment benefits, active labour market policies and employment protection play a major role, but changes in industrial relations at the sectoral level and individual firms' staffing practices are equally important in explaining actual labour market outcomes. Regarding labour market institutions, the pattern found in Germany shows sequences of de- and re-regulatory reforms of employment protection and increasing or decreasing unemployment benefit generosity, both mostly addressing the margins of the labour market, i.e. 'outsiders', and contributing to a growing dualisation of the employment system. The institutional status of 'insiders' was hardly affected by legislative changes. This dualisation trend was reinforced by micro-level dynamics in industrial relations and company employment practices where we can observe growing reliance on mechanisms of internal flexibility for the skilled core work force and increasing use of non-standard types of employment in less specifically skilled occupations.
    Keywords: Germany, employment growth, labor market reforms, dualisation, flexibility
    JEL: J21 J31 J52 J68
    Date: 2012–06
  6. By: Tadashi Ito (JETRO-IDE); Toshihiro Okubo (Faculty of Economics, Keio University)
    Abstract: This paper discusses some new evidences onintra-industry trade (IIT). In particular, we focus on EU trade with Eastern European countries, using trade data at HS eight-digit product level for the period 1988 - 2010. Our findings include Eastern European countries' rise up the quality ladder, and by contrast, the substantially lower prices of China's exports to EU countries vis-a-vis China's imports from them. Thecontrast between EU trade with Eastern Europeancountries and with China is present even in recent years.
    Date: 2012–06
  7. By: Requillart, Vincent; Nauges, Celine; Simioni, Michel; Bontemps, Christophe
    Abstract: The purpose of this article is to assess whether food safety regulations imposed by the European Union in the 2000s may have induced a slow-down in the productivity of firms in the food processing sector. The impact of regulations on costs and productivity has seldom been studied. This article contributes to the literature by measuring productivity change using a panel of French food processing firms for the years 1996 to 2006. To do so, we develop an original iterative testing procedure based on the comparison of the distribution of efficiency scores of a set of firms. Our results confirm that productivity decreased in the poultry processing industry at the time when safety regulation was reinforced.
    Keywords: total factor productivity, safety regulation, food processing sector, panel data, non-parametrics, Food Consumption/Nutrition/Food Safety, C14, D24, L66,
    Date: 2012
  8. By: Prifti, Ervin (University of Rome Tor Vergata); Vuri, Daniela (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
  9. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: In Germany, for the reporting year 2009 transaction-level data on exports and imports of goods have been aggregated at the level of the exporting or importing firm for the first time. In these data the number of goods exported and imported and the number of countries exported to and imported from is reported, together with the values of these cross-border transactions. This paper uses these newly available data for firms from manufacturing industries to uncover new facts and to test theoretical hypotheses of the relationship between a core dimension of firm performance, namely productivity, and the number of goods traded and countries traded with.
    Keywords: Exports, Imports, manufacturing firms, Germany
    JEL: F14
    Date: 2012–06
  10. By: Pasquale Tridico
    Abstract: The objective of this paper is to explore why some countries perform better than others in managing the current economic crisis, which started in 2007 in the US financial sector. I will elaborate on this question using the Crisis Management Index, taking into consideration GDP and labour market performance among European Union member states. My findings conclude that countries which performed better during the economic crisis of 2007-2011 are countries which do not have a flexible labour market and have managed to keep stable employment levels. These countries combine a very good mix of economic policies and social institutions oriented to stabilize the level of consumption and the aggregate demand. Coordination mechanisms, higher level of financial regulation and monitoring are also important features of these economies. Clearly, this group of countries identifies better, in the EU, a coordinated market economy model.
    Keywords: Financial crisis; Labour market; EU Crisis management; Comparative studies
    JEL: G10 J10 H12 O57
    Date: 2012–05
  11. By: Akay, Alpaslan (IZA); Constant, Amelie F. (DIW DC, George Washington University); Giulietti, Corrado (IZA)
    Abstract: This paper examines the effect of immigration directly on the overall utility of natives. To the best of our knowledge, this is the first paper to explore such nexus. Combining information from the German Socio-Economic Panel dataset with detailed local labour market characteristics for the period 1997 to 2007, we investigate how changes in the spatial concentration of immigrants affect the subjective well-being of the German-born population. Our results suggest the existence of a robust, positive effect of immigration on natives' well-being. The presence of confounding local labour market characteristics has a negligible impact on the estimates. Furthermore, we find substantial evidence that the effect of immigration on well-being is a function of the assimilation of immigrants in the region. The effect of immigration is higher in regions with an intermediate level of economic assimilation and is essentially zero in areas where immigrants are either least or fully economically integrated. We conduct robustness checks to address the potential endogeneity between subjective well-being and immigration. Our tests indicate that natives are not crowded out by immigrants, and that the sorting of immigrants to regions with higher SWB is weak. This suggests that our main findings are not driven or strongly influenced by reverse causality or selectivity.
    Keywords: immigration, subjective well-being, assimilation
    JEL: C90 J61 D63
    Date: 2012–06
  12. By: Christine Le CLAINCHE; Jerome WITTWER
    Abstract: Risky behaviours are found to substantially increase medical and social costs and mortality. In this paper, we document the extent to which a sample of European students (from Denmark, France, Italy and Sweden) consider that individuals should assume the financial burden of paying the costs of risky behaviour. Using an empirical social choice methodology, we test in a positive manner the acceptability of different ways of financing costs due to ill-health more or less associated with risky behaviour in accordance with a normative framework relating to responsibility-sensitive fairness. We particularly check the sensitivity of our sample to responsibility in a health context with questions that make it possible to clearly distinguish between risky behaviour under an individual’s control and circumstances beyond the individual’s control. The health conditions chosen in this study are not life-threatening, but the specific disease varies in different parts of the survey. We find that the majority of students approve of responsibility-sensitive fairness but that the specific health context, the type of risky behaviours involved, and the framing all matter as determinants of the choices made by the individuals of our sample in the financing of health care. We also find that students’ nationality has a small influence.
    Date: 2012–06
  13. By: Ralf Martin; Mirabelle Muûls; Ulrich J. Wagner; Laure B. de Preux
    Abstract: When industry compensation is offered to prevent relocation of regulated firms, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to analyze industry compensation rules proposed under the EU Emissions Trading Scheme, which allocate permits for free to carbon and trade intensive industries. We estimate that this practice will result in overcompensation in the order of €6.7 billion every year. Efficient allocation would reduce the aggregate risk of job loss by two thirds without increasing aggregate compensation.
    Keywords: Industry compensation, industrial relocation, emissions trading, permit allocation, EU ETS, firm data
    JEL: H23 H25 Q52 Q54 F18
    Date: 2012–06
  14. By: Chatzinikolaou, Parthena; Manos, Basil D.; Bournaris, Thomas
    Abstract: Social sustainability is “one of the three legs of the sustainability stool” (the other two are environmental and economic. There is limited literature that focuses on social sustainability to the extent that a comprehensive study of this concept is still missing. As a result, there have been very few attempts to define social sustainability as an independent dimension of sustainable development. Social sustainability is related to social capital, social inclusion, social exclusion and social cohesion in rural economies, terms that are measured by relevant social sustainability indicators. This paper aims to measure these indicators and to compare them. In order to measure these indicators, a household survey carried out in the context of the research project CAP-IRE. This survey included eleven case study areas in nine case study areas of the European Union. From the results of this survey we measured a set of economic and social sustainability indicators. We have selected the main social sustainability indicators on which we based on to proceed to the ranking of the eleven European rural areas.
    Keywords: ranking, rural areas, indicators, multicriteria analysis, social sustainability, Community/Rural/Urban Development,
    Date: 2012
  15. By: Neil Foster; Roman Stöllinger; Carlo Altomonte; Richard Kneller
    Abstract: This FIW Special – International Economics contains a policy report on the relationship between trade and productivity in the European Economy. The reports consists of three chapters which all mainly deal with empirical evidence from firm level but with each chapter focusing on a specific aspect of the trade and productivity nexus. Chapter 1 presents some initial findings on the relationship between exporting and productivity for Austrian exporters in the manufacturing industry. Chapter 2 offers new insights into the relationship between exporting and productivity by introducing the cross-country dimension of the export behaviour and internationalisation strategies of European firms. This kind of analysis became possible due to a recently compiled cross-country firm level data set covering seven European countries. Chapter 3 focuses on the causality between exporting and productivity which is a key question also for economic policy. The chapter summarises existing results on self-selection into exporting and the learning-by-exporting hypothesis but also acknowledges that productivity growth is not only driven by within-firm productivity growth but also the reallocation of resources between firms, the entry and exit of firms as well as shifts of resources between industries.
    Keywords: firm productivity, internationalisation of firms, export premia, export starters, learning-by-exporting
    JEL: F15 F23 D22 L25
    Date: 2012–06
  16. By: Cardamone, Paola; Scoppola, Margherita
    Abstract: According to the theoretical models of the multinational enterprise, trade costs play a fundamental role in determining the pattern of foreign direct investment (FDI). The aim of this paper is to assess the impact of trade policies on the outward stocks of FDI of the EU. We estimate a model based on the knowledge-capital theory of the multinational enterprise over the period 1995-2008 by using a sample of five EU countries and 26 partner countries. We consider, first, manufacturing sector as a whole and, then, six manufacturing industries defined at the two-digit level of the NACE classification. Explanatory variables include an index of applied bilateral tariffs and a dummy to capture the presence of Bilateral Investment Treaties (BITs). From an econometric point of view, a dynamic panel model is estimated through the generalized method of moments (GMM) estimator, taking also into account the heterogeneity bias and the endogeneity of regressors. The results show that that the pattern of the outward FDI is a mix of vertical and horizontal FDI. BITs in force have a significant and positive impact on the outward FDI. The impact of tariffs varies across industries, suggesting the predominance of horizontal in some industries and the existence of vertical FDI in others.
    Keywords: FDI, trade protection, knowledge-capital model, dynamic panel data, International Relations/Trade, F15, F21, F23, C33,
    Date: 2012–06
  17. By: Severini, Simone; Tantari, A.
    Abstract: Farm direct payments (DPs) have been the main instrument of the Common Agricultural Policy (CAP) to support farm income in the EU. After the decoupling of DPs from production levels, the distributional objectives are among the major justifications of DPs. This paper addresses their role in the distribution of farm inc come among farmers. The analysis accounts direct payments granted in the context of the market and income supp port policies and of rural development policies. Using the Gini coefficient and its d disaggregation, this study investigates the impact of b both kinds of payments on farm income inequality among a large sample of farms in Italy. The analysis is developed a at a national level but also considering the three main regions of Italy and three types of farming. DPs are very concentrated but reduce fa arm income inequality. Therefore, their reduction should result in an increase of farm income concentration particularly y in some of the considered types of farming. Results suggest that the CAP reform has decreased the role DPs have played in reducing farm income inequality. This is not just because of a change in their relative importance, but especially because of changes in the patterns of their distribution.
    Keywords: Agricultural and Food Policy,
    Date: 2012
  18. By: Emilio Bisetti; Carlo A. Favero
    Abstract: This paper estimates the impact of longevity risk on pension systems by combining the prediction based on a Lee-Carter (1992) mortality model with the projected pension payments for different cohorts of retirees. We measure longevity risk by the difference between the upper bound of the total old-age pension expense and its mean estimate. This difference is as high as 4 per cent of annual GDP over the period 2040-2050. The impact of longevity risk is sizeably reduced by the introduction of indexation of retirement age to expected life at retirement. Our evidence speaks in favour of a market for longevity risk and calls for a closer scrutiny of the potential redistributive effects of longevity risk. Keywords: stochastic mortality, longevity risk, social security reform JEL Classification Numbers J11,J14
    Date: 2012
  19. By: Manuela Bosch-Princep (Universitat de Barcelona); Daniel Vilalta (Independent Pension Consultant) (Universitat de Barcelona)
    Abstract: The aim of this paper is to analyse the effect of the recent Social Security reform on public retirement benefits. The main measures af- fecting the calculation of pensions are: 1) extension of the retirement age from 65 to 67 years, 2) changes in covered earnings of the retirement pension, 3) changes in the weighting factor associated with the number of years of contributions to the system at date of retirement and 4) changes in the early retirement rules. The study distinguishes three group of pensioners and compares be- tween previous pension (benchmark pension) and the pension calculated under the new legislation. The reduction in public retirement benefits ranges between 0% and 16% depending on wages and the number of years of contributions at the time of retirement.
    Keywords: social security reforms, public retirement pension
    JEL: H55 J62
    Date: 2012
  20. By: Murdoch, Zuzana; Trondal, Jarle
    Abstract: Over the past two decades, reliance on short-term contracted staff has increased in government institutions across the Western world. This tendency towards contracted government may be strengthened during periods of economic and financial stress. This article therefore poses the following questions: First, does contracted government lead to civil servants less loyal and attentive to the concerns of their government institutions? Secondly, and more generally, what factors shape the behavioural perceptions of contracted government staff? Benefiting from a new, full-scale survey among seconded national experts in the European Commission, this study shows that contracted Commission staff are largely integrated and committed to the Commission and its administrative sub-units. The general lesson learned is that when under contract, contracted personnel seem mainly loyal and attentive to the concerns of the government institution under which they formally serve. This finding dispels fears that contracted government officials may serve several masters. Theoretically, the behavioural perceptions of contracted Commission officials are explained with reference to their primary organisational affiliation towards the Commission and its sub-units, as well as by the internal organisational composition of the Commission services. --
    Keywords: contracted government,executive order,European Commission,seconded national expert,transformation
    Date: 2012

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