nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒07‒29
sixteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Comparing Labor Supply Elasticities in Europe and the US: New Results By Bargain, Olivier; Orsini, Kristian; Peichl, Andreas
  2. Policy perspectives of grandparenting in Europe By Valeria Bordone; Bruno Arpino; Arnstein Aassve
  3. Life Satisfaction and Air Quality in Europe By Ferreira, Susana; Akay, Alpaslan; Brereton, Finbarr; Cuñado, Juncal; Martinsson, Peter; Moro, Mirko
  4. 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
  5. Differential Welfare State Impacts for Frontier Working Age Families By Burlacu, Irina S.; O'Donoghue, Cathal
  6. Are firms willing to employ a greying and feminizing workforce? By Vincent VANDENBERGHE
  7. Family and Childcare Support Public Expenditures and Short-Term Fertility Dynamics By Cosmin Enache
  8. Income convergence prospects in Europe: Assessing the role of human capital dynamics By Jesus Crespo Cuaresma; Miroslava Havettova; Martin Labaj
  9. Benchmarking Unemployment Benefit Systems By Klara Stovicek; Alessandro Turrini
  10. Mismatch, On-the-job Training, and Unemployment By Frédéric Gavrel; Jean-Pascal Guironnet; Isabelle Lebon
  11. Intangible Capital and Growth in Advanced Economies: Measurement Methods and Comparative Results By Corrado, Carol; Haskel, Jonathan; Jona-Lasinio, Cecilia; Iommi, Massimiliano
  12. UK Innovation Index: Productivity and Growth in UK Industries By Goodridge, Peter; Haskel, Jonathan; Wallis, Gavin
  13. Well-being and psychological consequences of temporary contracts: the case of younger Italian employees By Vincenzo Carrieri; Cinzia Di Novi; Rowena Jacobs; Silvana Robone
  14. What explains the rise in CEO pay in Germany? A Panel Data Analysis for 1977-2009 By Fabbri, Francesca; Marin, Dalia
  15. Migration and remittances in the CEECs: a case study of Ukrainian labour migrants in the Czech Republic By Ondøej Glazar; PhDr. Wadim Strielkowski.; Blanka Weyskrabova
  16. Cultural Participation and Tourism Flows in Italy By Karol Jan BOROWIECKi; Concetta CASTIGLIONE

  1. By: Bargain, Olivier (University of Aix-Marseille II); Orsini, Kristian (K.U.Leuven); Peichl, Andreas (IZA)
    Abstract: We suggest the first large-scale international comparison of labor supply elasticities for 17 European countries and the US, separately by gender and marital status. Measurement differences are netted out by using a harmonized empirical approach and comparable data sources. We find that own-wage elasticities are relatively small and much more uniform across countries than previously thought. Differences exist nonetheless and are found not to arise from different tax-benefit systems or demographic compositions across countries. Thus, we cannot reject that countries have genuinely different preferences. Three other results, important for welfare analysis, are consistent over all countries: the extensive (participation) margin dominates the intensive (hours) margin; for singles, this leads to larger labor supply responses in low-income groups; income elasticities are extremely small everywhere. Finally, the results for cross-wage elasticities in couples are opposed between regions, consistent with complementarity in spouses' leisure in the US versus substitution in spouses' household production in Europe.
    Keywords: household labor supply, elasticity, taxation, Europe, US
    JEL: C25 C52 H31 J22
    Date: 2012–07
  2. By: Valeria Bordone; Bruno Arpino; Arnstein Aassve
    Abstract: Large variation exists in the frequency of informal childcare provided by grandparents across Europe. At the same time, a wide North-South divide characterizes European social policies. Do welfare policy arrangements shape the role of grandparents? If yes, to what extent do grandparenting depend on the availability of public services offered for child care, parental leave regulation and legal obligations of family support? Combining micro-data from the Survey of Health, Ageing and Retirement in Europe and macro-indicators from the Multilinks database, this study aims to answer these questions and to further clarify the link between welfare provision and use of grandparents’ resources for working mothers. By implementing country-specific regression models, we find a clear association between the policy context of the country of residence and (daily) grandparenting.
    Keywords: Grandparental childcare, intergenerational relationships, policies, multilinks database
    Date: 2012–06
  3. By: Ferreira, Susana (University of Georgia); Akay, Alpaslan (IZA); Brereton, Finbarr (University College Dublin); Cuñado, Juncal (University of Navarra); Martinsson, Peter (University of Gothenburg); Moro, Mirko (University of Stirling)
    Abstract: Concerns for environmental quality and its impact on people's welfare are fundamental arguments for the adoption of environmental legislation in most countries. In this paper, we analyse the relationship between air quality and subjective well-being in Europe. We use a unique dataset that merges three waves of the European Social Survey with a new dataset on environmental quality including SO2 concentrations and climate in Europe at the regional level. We find a robust negative impact of SO2 concentrations on self-reported life satisfaction.
    Keywords: air quality, SO2 concentrations, subjective well-being, life satisfaction, Europe, European Social Survey, GIS
    JEL: I31 Q51 Q53 Q54
    Date: 2012–07
  4. By: Bargain, Olivier; Dolls, Mathias; Fuest, Clemens; Neumann, Dirk; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian
    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.
    Date: 2012–07–07
  5. By: Burlacu, Irina S. (Maastricht University); O'Donoghue, Cathal (Teagasc Rural Economy Research Centre)
    Abstract: Benefits and taxes vary greatly across the European Union owing to incongruent welfare and taxation systems. This paper analyzes how welfare states achieve insurance and equity objectives for residents who work in other countries. The aim is to evaluate the impact of unemployment benefits and income taxation on these frontier workers' welfare in Luxembourg and Belgium that exhibit similar welfare state objectives. The analysis is based on social security coordination Regulation 883/2004 provisions on unemployment, taxation regimes and bi-lateral tax treaties. We find mixed results. First, while countries follow analogous welfare regimes and pursue similar welfare objectives, their ensuing outputs differ significantly. Second, differences in unemployment conditions and benefits favor high discrepancies in residents' incomes. Third, mobility creates high vertical and horizontal inequity among Belgian and Luxembourgish residents.
    Keywords: frontier workers, social policy, policy coordination
    JEL: I38
    Date: 2012–07
  6. By: Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), Economics School of Louvain (ESL),)
    Abstract: Are employers willing to employ more older individuals, in particular older women? Higher employment among the older segments of the population will only materialise if firms are willing to employ them. Although several economists have started considering the demand side of the labour market for older individuals, few have considered its gender dimension properly; despite evidence that lifting the overall senior employment rate in the EU requires significantly raising that of women older than 50. In this paper, we posit that labour demand and employability depend to a large extent on how the age/gender composition of the workforce affects firm’s profits. Using unique firm-level panel data we produce robust evidence on the causal effect of age/gender on productivity (value added per worker), total labour costs and gross profits. We take advantage of the panel structure of data and resort to first differences to deal with a potential time-invariant heterogeneity bias. Moreover, inspired by recent developments in the production function estimation literature, we also address the risk of simultaneity bias (endogeneity of firm’s age-gender mix choices in the short run) by combining first differences with i) the structural approach suggested by Ackerberg, Caves & Frazer (2006), ii) alongside more traditional IV-GMM methods (Blundell & Bond, 1998) where lagged values of labour inputs are used as instruments. Results suggest no negative impact of rising shares of older men on firm’s gross profits, but a large negative effect of larger shares of older women. Another interesting result is that the vast and highly feminized services industry does not seem to offer working conditions that mitigate older women’s productivity and employability disadvantage, on the contrary. This is not good news for older women’s employability and calls for policy interventions in the Belgian private economy aimed at combating women’s decline of productivity with age and/or better adapting labour costs to age-gender productivity profiles.
    Keywords: ageing workforce, gender, productivity, profitability, linked employer-employee data, endogeneity and simultaneity bias
    JEL: J11 J14 J21
    Date: 2012–07–18
  7. By: Cosmin Enache (Department of Finance, Faculty of Economics and Business Administration, West University of Timisoara, Romania)
    Abstract: In a period of very low fertility, effective family and childcare support policy measures are needed. From a wide range of instruments available to government intervention, we focus on public expenditures effects on short-term fertility. Using a sample of 28 European countries in a panel framework, we found that there is a small positive elasticity of crude birth rate to cash benefits related to childbirth and childrearing provided through social security system. Different public services provided to ease the burden of parents and all benefits in kind, means or non-means tested, are found to be insignificant. These results are robust to alternative methods of estimation and country heterogeneity.
    Keywords: Social Security, Fertility
    JEL: H55 I38
    Date: 2012–05–02
  8. By: Jesus Crespo Cuaresma (Department of Economics, Vienna University of Economics and Business); Miroslava Havettova (Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava); Martin Labaj (Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava and Institute of Economic Research, Slovak Academy of Sciences)
    Abstract: We employ income projection models based on human capital dynamics in order to assess quantitatively the role that educational improvements are expected to play as a driver of future income convergence in Europe. We concentrate on income convergence dynamics between emerging economies in Central and Eastern Europe and Western European countries during the next 50 years. Our results indicate that improvements in human capital contribute significantly to the income convergence potential of European emerging economies. Using realistic scenarios, we quantify the effect that future human capital investments paths are expected to have in terms of speeding up the income convergence process in the region. The income projection exercise shows that the returns to investing in education in terms of income convergence in Europe could be sizeable, although it may take relatively long for the poorer economies of the region to rip the growth benefits.
    Keywords: Economic growth, income convergence, human capital, income projections, Europe, emerging economies
    JEL: O47 O52 I25 P27
    Date: 2012–07
  9. By: Klara Stovicek; Alessandro Turrini
    Abstract: This paper proposes a methodology for benchmarking unemployment benefits systems, with a view to assess reform needs and priorities. The methodology permits to assess different dimensions of unemployment benefit systems and to consider alternative relevant benchmarks. Looking at all relevant dimensions allows to better gauge how unemployment benefit systems perform in terms of their multi-faceted objectives (such as income support and stabilisation, incentives to take up work) and to have a more thorough assessment of each objective. Comparisons with alternative benchmarks offer the possibility of assessing against more meaningful country comparators, which take into account similarities in terms of economic fundamentals, institutions and policy settings. The methodology is applied to EU countries and results are discussed.
    JEL: J65 J68 H20 H53
    Date: 2012–05
  10. By: Frédéric Gavrel (UFR de sciences économiques et de gestion, Université de Caen Basse-Normandie, CREM-CNRS, UMR 6211); Jean-Pascal Guironnet (UFR de sciences économiques et de gestion, Université de Caen Basse-Normandie, CREM-CNRS, UMR 6211); Isabelle Lebon (UFR de sciences économiques et de gestion, Université de Caen Basse-Normandie, CREM-CNRS, UMR 6211)
    Abstract: In this paper, training, which is seen as a way to reduce the mismatch between workers and jobs, takes place on the job. We show that a general rise in unemployment lowers the probability of on-the-job training by reducing the mismatch. We then close the model by assuming free-entry and study its social efficiency properties. Private educational choices are socially optimal, but job creation is too high under the Hosios condition. Using French data on regional unemployment, we estimate a probit model of the training decision and find that on-the-job training is significantly less probable in regions with high unemployment.
    Keywords: On-the-job training; Mismatch, Equilibrium unemployment, Market efficiency
    JEL: H21 J24 J64
    Date: 2012–06
  11. By: Corrado, Carol (The Conference Board); Haskel, Jonathan (Imperial College London); Jona-Lasinio, Cecilia (ISTAT, Rome); Iommi, Massimiliano (ISTAT, Rome)
    Abstract: We present a harmonized data set on intangible investment for a number of EU countries and an analysis of growth.
    Keywords: growth, intangible investment
    JEL: O47
    Date: 2012–07
  12. By: Goodridge, Peter; Haskel, Jonathan; Wallis, Gavin
    Abstract: This paper provides an update of the NESTA Innovation Index and tries to calculate some facts for the 'knowledge economy'. Building on the work of Corrado, Hulten and Sichel (CHS, 2005,9), using new data sets and a new micro survey, we (1) document UK intangible investment and (2) see how it contributes to economic growth. Regarding investment in knowledge/intangibles, we find (a) this is now 34% greater than tangible investment, in 2009, £124.2bn and £92.7bn respectively; (b) that R&D is about 11% of total intangible investment, software 18%, design 12%, and training and organizational capital 21% each; (d) the most intangible-intensive industry is manufacturing (intangible investment is 17% of value added) and (e) treating intangible expenditure as investment raises market sector value added growth in the 1990s due to the ICT investment boom, but has less impact on aggregate measures of growth in the 2000s. Regarding the contribution to growth, for 2000-09, (a) intangible capital deepening accounts for 26% of labour productivity growth, against computer hardware and telecommunications equipment combined (16%) and TFP (-0.4%); (b) adding intangibles to growth accounting lowers TFP growth by about 18 percentage points (c) capitalising R&D adds 0.04% to input growth and reduces ΔlnTFP by 0.02% and (d) manufacturing accounts for 47% of intangible capital deepening plus TFP.
    Keywords: growth; innovation; intangibles
    Date: 2012–07
  13. By: Vincenzo Carrieri (Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno, Italy); Cinzia Di Novi (Dipartimento di EconomiaUniversità Ca' Foscari, Venezia, Italy); Rowena Jacobs (Centre for Health Economics, University of York, UK); Silvana Robone (Centre for Health Economics, University of York, UK and Dipartimento di Scienze Economiche, Università di Bologna, Italy)
    Abstract: Working conditions in Western countries have changed dramatically in the last twenty years, witnessing the emergence of new forms of employment contracts. The number of "standard" fulltime permanent jobs has decreased, while non-standard work arrangements such as temporary, contingent or part-time contracts have become much more common. This paper analyses the impact of temporary contracts and job insecurity on well-being among younger Italian employees. We use the "Health Conditions and Use of the Health Service Survey" carried out by the Italian National Institute of Statistics in conjunction with the Bank of Italy's Survey on Households Income and Wealth (SHIW). We consider four dimensions of individual well-being: physical health, mental health, self-assessed health and happiness. To account for individual heterogeneity we match each temporary worker with a permanent worker using propensity score matching. Well-being of matched individuals is compared to estimates of the average effect of working with a temporary as opposed to a permanent contract. Our analysis reveals a negative relationship between psychological well-being, happiness and having a temporary job and is particularly marked for males.
    Keywords: health, happiness, psychological well-being, young employees, fixed-term contracts
    JEL: I12 J08
    Date: 2012–07
  14. By: Fabbri, Francesca; Marin, Dalia
    Abstract: The compensation of executive board members in Germany has become a highly controversial topic since Vodafone's hostile takeover of Mannesmann in 2000 and it is again in the spotlight since the outbreak of the financial crisis of 2009. Based on unique panel data evidence of the 500 largest firms in Germany in the period 1977-2009 we test two prominent hypothesis in the literature on executive pay: the manager power hypothesis and the efficient pay hypothesis. We find support for the manager power hypothesis for Germany as executives tend to be rewarded when the sector is doing well rather than the firm they work for. We reject, however, the efficient pay hypothesis as CEO pay and the demand for managers increases in Germany in difficult times when the typical firm size shrinks. We find further that domestic and global competition for managers has contributed to the rise in executive pay in Germany. Lastly, we show that CEOs in the banking sector are provided with incentives for performance and that the great recession of 2009 acted as a disciplining devise on CEO pay in Germany.
    JEL: F23 J3 M12 M52
    Date: 2012–03
  15. By: Ondøej Glazar (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); PhDr. Wadim Strielkowski. (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Blanka Weyskrabova (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper aims to analyse migration and remittances in Central and Eastern European countries (CEECs) on the case study of Ukrainian labour migrants in the Czech Republic using primary data from survey questionnaires collected by the Ukrainian Migration Project (UMP). More specifically, it seeks to examine features and determinants of migration and remittances sent by Ukrainian labour migrants from the Czech Republic to Ukraine. <BR>Our results show that in the case of Ukrainian migrants in the Czech Republic the main determinants of the decision whether to migrate, in order to provide own families with additional income, are demographic characteristics and income of the receiving household, while the level of education does not affect this decision. Further, we found that the remitted amount depends mainly on the labour migrant’s income in the Czech Republic. No statistical significance was found in the relationship between the remitted amount and the income level of the receiving household. Moreover, we did not find any support for channelling remittances primarily into non-productive consumption in the data. On the other hand, no other productive spending besides the spending on house construction was confirmed either. <BR>Good understanding of determinants and motives that are interconnected with them should be helpful for policymakers on both sides of the migration corridor to formulate proper policies that aim at influencing the migration and remittances flows. Thus, certain policy implications might be derived from this research in order to channel Ukrainian migration in CEECs and benefit from remittance transfers.<BR>
    Keywords: international migration, labour market, CEECs, Czech Republic, Ukraine, remittances, remittance behaviour, migration and development policies
    JEL: C33 F22 F24 J61
    Date: 2012–07
  16. By: Karol Jan BOROWIECKi (Department of Economics, Trinity College Dublin); Concetta CASTIGLIONE (Department of Economics, Trinity College Dublin)
    Abstract: The importance of cultural events for attracting tourism has been often posited in research, however rarely tested in relation to non-cultural activities. We investigate the association between participation in entertainment activities and tourism flows in Italian provinces, and find that admission to theater-type activities increases as the number of domestic tourists goes up, whereas admission to museums or concerts rises with an increase in foreign tourists. Admissions to exhibitions and shows attract both domestic and international tourists, while the role of non-cultural activities in determining tourism flow is statistically insignificant.The results provide important empirical support for the existence of a strong relationship between tourism flows and cultural participation. The findings also imply that the demand for entertainment varies depending on the origin of the tourist. Finally, for the cultural activities we calculate also the lower-bound of the estimated revenues obtained from tourism.
    Keywords: Cultural tourists, cultural participation, tourism flows, Italian Provinces
    Date: 2012–07

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