nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒09‒03
fifteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Long-Distance Moves and Labour Market Outcomes of Dual-Earner Couples in the UK and Germany By Philipp M. Lersch
  2. Channeling the final Say in Politics By Peter S. Schmidt; Therese Werner
  3. Cartel overcharges and the deterrent effect of EU competition law By Smuda, Florian
  4. GINI DP 42: Home-Ownership, Housing Regimes and Income Inequalities in Western Europe By Michelle Norris; Nessa Winston
  5. An 'extended" Knowledge Production Function approach to the genesis of innovation in the European regions By Charlot, S.; Crescenzi, R.; Musolesi, A.
  6. Labour market institutions and unemployment volatility: evidence from OECD countries By Faccini, Renato; Rosazza Bondibene, Chiara
  7. New ICT sectors: Platforms for European growth? By Reinhilde Veugelers
  8. Normative and allocation role strain: role incompatibility, outsourcing, and the transition to a second birth in Eastern and Western Germany By Liat Raz-Yurovich
  9. Using Vehicle Taxes to Reduce Carbon Dioxide Emissions Rates of New Passenger Vehicles: Evidence from France, Germany, and Sweden By Klier, Thomas; Linn, Joshua
  10. Inheritance in Germany 1911 to 2009: A Mortality Multiplier Approach By Christoph Schinke
  11. Backing out of private pension provision - Lessons from Germany By Michael Ziegelmeyer; Julius Nick
  12. The Evolution of Income Inequality in Germany and Switzerland since the Turn of the Millennium By Markus M. Grabka; Ursina Kuhn
  13. Household consumption through recent recessions By Thomas Crossley; Hamish Low; Cormac O'Dea
  14. Quality pricing-to-market By Raphael A. Auer; Thomas Chaney; Philip Sauré
  15. Governance without government or: The Euro Crisis and what went wrong with European Economic Governance? By Heise, Arne

  1. By: Philipp M. Lersch
    Abstract: Chances are high that partners in dual-earner couples do not receive equal occupational returns from long-distance moves, because job opportunities are distributed heterogeneously in space. Which partners are more likely to receive relatively higher returns after moves? Recent research shows the stratification of returns by gender and highlights the importance of gender roles in mobility decisions. I extend past literature in two ways. First, while past research mostly examined partners separately, I directly test for gender differences in matched pairs of women and men in dual-earner couples and account for the nonindependence of both careers. Second, I compare evidence from the United Kingdom (UK) and Germany to shed light on the effects of institutional and normative contexts. For my analysis, I draw longitudinal data from the British Household Panel Survey and the German Socio-Economic Panel Study (1991-2008). My results show that women in dual-earner couples are temporarily adversely affected in their careers by long-distance moves in the UK and West Germany after controlling for various characteristics of both partners. Women in East Germany are not affected by long-distance moves. Moves do not change wage rates significantly for women and men that stay in employment in both countries.
    Keywords: Residential mobility, gender inequalities, cross-national comparison, actor-partner interdependence model
    Date: 2012
  2. By: Peter S. Schmidt (University Zurich, Switzerland); Therese Werner (ETH Zurich, Switzerland)
    Abstract: This study examines the relation of stock returns and the announcements on verified emissions in the European Emission Trading Scheme (EU ETS). In a first step we employ event study methods to detect possibly abnormal returns on the respective announcement dates using a sample of quoted stock market firms from Austria, Denmark, Germany and the UK. In a second step we link the estimated abnormal returns to firm characteristics based on the EU ETS (such as verified emissions or over-allocation) as well as to financial firm level data in a cross-sectional analysis. Even though the overall cost from the new regulation on the individual firms was minor, we find evidence for the asset value hypothesis, which states that higher verified emissions induce a higher future permit allocation. This suggests that investors did not perceive the EU ETS in its first set-up as an efficient and effective environmental policy instrument.
    Keywords: Event study; European emission trading scheme; Regulation; Verified Emissions; Emission trade
    JEL: G14 Q48 Q52
    Date: 2012–08
  3. By: Smuda, Florian
    Abstract: This paper examines cartel overcharges for the European market. Using a sample of 191 overcharge estimates and several parametric and semi-parametric estimation procedures, the impact of different cartel characteristics and the market environment on the magnitude of overcharges is analyzed. The mean and median overcharge rates are found to be 20.70 percent and 18.37 percent of the selling price and the average cartel duration is 8.35 years. Certain cartel characteristics and the geographic region of cartel operation influence the level of overcharges considerably. Furthermore, empirical evidence suggests that the currently existing fine level of the EU Guidelines is too low to achieve optimal deterrence. --
    Keywords: cartels,overcharges,Europe,fines,deterrence,damages
    JEL: L13 L41 L44
    Date: 2012
  4. By: Michelle Norris (Extension at the Champaign Center, University of Illinois); Nessa Winston
    Abstract: This article compares the structural features of home-ownership systems in EU15 countries (home-ownership rates, mortgages and public subsidisation of this tenure) with data on inequalities in outcomes (variations in home-ownership access, risks and standards between income groups). Its purpose is to assess the relevance of the debate on the convergence and divergence of housing systems which has dominated the comparative housing literature. The article concludes that, depending on the level of analysis adopted and the particular variables selected for examination, elements of both convergence and divergence are evident in Western European home-ownership systems. The comparative housing literature has also largely failed to capture the key inter-country cleavages in home-ownership systems that are between the Northern and Southern EU15 countries. These shortcomings are related to methodological and conceptual problems in this literature.
    Date: 2012–07
  5. By: Charlot, S.; Crescenzi, R.; Musolesi, A.
    Abstract: The paper looks at the genesis of innovation in the EU regions in ordre to shed light on the link between innovative inputs (R&D and Human Capital) and the genesis of economically valuable knowledge. The 'traditional' regional Knowledge Production Function (KPF) is innovatively developed in three complementary directions. Firs, the KPF is 'augmented' in order to control for all possible 'unobsrevable' and 'immesurable' time varying factors that influence the genesis of innovation (i.e. localised institutional and relational factors, regional innovation policies). Second, a semi-parametric approach that relaxes any arbitrary assumption on the 'shape' of the KPF is adopted. Finally, the assumption of homogeneity in the impact of R&D and Human Capital is relaxed by explicity accounting for the differences between 'core' and 'peripherial' regions. The econometric results confirm the importance of accounting for time varying unobserved heterogeneity through the adoption of a 'random growth' specification: R&D efforts exert a significant influence on innovation only after controlling for regional specific time varying unobserved factors. In addition, the semi parametric approach uncovers significant threshold effects for both R&D expenditure and Human Capital and highlights a strong complementarity between these two factors. However, 'core' regions benefit from a persistent advantage in terms of the 'productivity' of their innovation inputs. This has important implications for the EU innovation policies at the regional level.
    JEL: R11 C14 C23
    Date: 2012
  6. By: Faccini, Renato (Queen Mary, University of London); Rosazza Bondibene, Chiara (NIESR and Royal Holloway, University of London)
    Abstract: Using publicly available data for a group of 20 OECD countries, we find that the cyclical volatility of the unemployment rate exhibits substantial cross-country and time variation. We then investigate empirically whether labour market institutions can account for this observed heterogeneity and find that the impact of various institutions on cyclical unemployment dynamics is quantitatively strong and statistically significant. The hypothesis that labour market institutions could increase the volatility of unemployment by reducing match surplus is not supported by the data. In fact, unemployment benefits, taxation and employment protection appear to reduce the volatility of unemployment rates. In addition, we find that the precise nature of union bargaining has important implications for cyclical unemployment dynamics, with union coverage and density having large and offsetting effects. Finally, we provide evidence suggesting that interactions between shocks and institutions matter for cyclical unemployment fluctuations. However, institutions only account for about one quarter of the explained variation, which implies that they are important but they are not the entire story.
    Keywords: Labour market institutions; labour market fluctuations
    JEL: E32 E60 J01 J08
    Date: 2012–08–21
  7. By: Reinhilde Veugelers
    Abstract: Europe's failure to specialise in new ICT sectors and firms is likely to hold back Europeâ??s post-crisis recovery. Europe lacks in particular leading platform providers, who are capturing most of the value in the new ICT ecosystem. â?¢ In-depth analysis of some specific new emerging ICT sectors shows that the problem in Europe appears not to be so much in the generation of new ideas, but rather in bringing ideas successfully to market. Among the barriers are the lack of a single digital market, fragmented intellectual property regimes, lack of an entrepreneurial culture, limited access to risk capital and an absence of ICT clusters. â?¢ The EU policy framework, particularly the Innovation Union and Digital Agenda EU 2020 Flagships, could better leverage the growth power for Europe of new ICT markets. The emphasis should move beyond providing support for infrastructure and research, to funding programmes for pre-commercial projects. But perhaps most important is dealing with the fragmentation in European digital markets.
    Date: 2012–08
  8. By: Liat Raz-Yurovich (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: The challenges women face in reconciling their work and family responsibilities are at the heart of current explanations concerning the low fertility levels in developed countries. This study examines the role of the outsourcing of household labor and of childcare responsibilities in reducing the incompatibility of women’s roles and in increasing fertility in the two different institutional and normative contexts of Eastern and Western Germany. Using the German Socio-Economic Panel, we analyzed whether Eastern and Western German women who outsourced childcare responsibilities to formal and informal care providers in the first and in the third years after the first birth were at higher risk of having a second child. Drawing on Goode’s role strain theory, we suggest that the incompatibility of women’s roles is affected not only by allocation role strain, but also by normative role strain. Our results indicate that the outsourcing of childcare to formal providers and to grandparents reduces, rather than increases, the propensity to have a second child among Western German women, due to normative role strain. We also find a significant positive effect of the outsourcing of housework on the transition to a second birth in Germany, due to the decline in allocation role strain.
    Keywords: Germany, child care, fertility
    JEL: J1 Z0
    Date: 2012–08
  9. By: Klier, Thomas; Linn, Joshua (Resources for the Future)
    Abstract: France, Germany, and Sweden link vehicle taxes to the carbon dioxide (CO2) emissions rates of passenger vehicles. Based on new vehicle registration data from 2005–2010, a vehicle’s tax is negatively correlated with its registrations. The effect is somewhat stronger in France than in Germany and Sweden. Taking advantage of the theoretical equivalence between an emissions rate standard and a CO2-based emissions rate tax, we estimate the effect on manufacturers’ profits of reducing emissions rates. For France, a decrease of 5 grams of CO2 per kilometer reduces profits by 24 euros per vehicle. We find considerable heterogeneity across manufactures and countries.
    Keywords: feebate, fuel economy standards, emissions rate standards
    JEL: L62 Q54
    Date: 2012–08–13
  10. By: Christoph Schinke
    Abstract: We estimate the size of inheritance and gift flows in Germany for selected years over the last century, applying the methodology used by Piketty (2011) for France and combining national accounts, tax statistics and survey data (mainly the German Socio-Economic Panel, SOEP). The data clearly supports the finding of a U-shaped evolution. The annual flow of inheritance and gifts was almost 15% of national income in 1911 and declined to less then 2% by the middle of the last century. Over the last five decades, it has risen steadily to over 10% of national income in recent years, amounting to Euro 220 billion in 2009. The pattern is close to the evolution in France, but at a slightly lower level. Evidence on transfers based on pure household survey data or inheritance tax statistics yields much lower values. We can decompose the gap between the taxed and the aggregate inheritance flow: controlling for valuation and tax evasion effects, the taxed flow would be at least twice as high; tax exemption effects account for the rest.
    JEL: D31 H24 N34
    Date: 2012
  11. By: Michael Ziegelmeyer; Julius Nick
    Abstract: Financing pensions in the EU is a challenge. Many EU countries introduced private pension schemes to compensate declining public pension levels due to reforms made necessary by demographic change. In 2001, Germany introduced the Riester pension. Ten years after introduction the prevalence rate of this voluntary private pension scheme approximates 37%. However, numerous criticisms raise doubts that the market for Riester products is transparent. Using the 2010 German SAVE survey, this paper investigates for the first time terminated and dormant Riester contracts on a household level. Respectively 14.5% and 12.5% of households who own or have owned a Riester contract terminated it or stopped paying contributions. We find that around 45% of terminated or dormant Riester contracts are caused at least partly by product-related reasons, which is significantly higher than for endowment life insurance contracts. Uptake of a new contract after a termination is more likely if termination is productrelated. Nevertheless, after a termination 73% of households do not sign a new contract, which can have serious long-term consequences for old-age income. Households with low income, low financial wealth or low pension literacy are more likely to have terminated or dormant contracts. Low income and low financial wealth households also have the lowest prevalence rate of Riester contracts and are at higher risk of old-age poverty.
    Keywords: private pension, Riester, termination, financial literacy, SAVE
    JEL: D12 D91 D14 J26
    Date: 2012–07
  12. By: Markus M. Grabka; Ursina Kuhn
    Abstract: This paper presents and compares trends in income inequality in Switzerland and Germany from 2000 to 2009 using harmonized data from the Socio-Economic Panel (SOEP) and the Swiss Household Panel (SHP). Whereas in Germany inequality has increased substantially during this period, in Switzerland inequality in market incomes has increased only marginally and inequality in disposable incomes has decreased slightly. Economic and demographic indicators suggest that labor market participation—but not economic growth, globalization, or sectoral change—are potential explanations. The decomposition of inequality reveals the effects of Germany’s slightly older population and smaller household sizes, as well as the impact of educational expansion and government redistribution.
    Keywords: Income inequality, subgroup decomposition, income stratification, income mobility, SOEP, SHP
    JEL: I31 D31
    Date: 2012
  13. By: Thomas Crossley (Institute for Fiscal Studies and University of Cambridge); Hamish Low (Institute for Fiscal Studies and Trinity College, Cambridge); Cormac O'Dea (Institute for Fiscal Studies)
    Abstract: This paper examines trends in household consumption and saving behaviour in each of the last three recessions in the UK. The 'Great Recession' has been different from those that occurred in the 1980s and 1990s. It has been both deeper and longer, but also the composition of the cutbacks in consumption expenditures differs, with a greater reliance on cuts to non durable expenditure than was seen in previous recessions, and the distributional pattern across individuals differs. The young have cut back expenditure more than the old, as have mortgage holders compared to renters. By contrast, the impact of the recession has been similar across education groups. We present evidence that suggests that two aspects of fiscal policy in the UK in 2008 and 2009- the temporary reduction in the rate of VAT and a car scrappage scheme- had some success in encouraging households to increase durable purchases.
    Keywords: Consumption, Spending, Recessions
    JEL: E21 D12
    Date: 2012–08
  14. By: Raphael A. Auer; Thomas Chaney; Philip Sauré
    Abstract: We document that in the European car industry, exchange rate pass-through is larger for low than for high quality cars. To rationalize this pattern, we develop a model of quality pricing and international trade based on the preferences of Mussa and Rosen (1978). Firms sell goods of heterogeneous quality to consumers that differ in their willingness to pay for quality. Each firm produces a unique quality of the good and enjoys local market power, which depends on the prices and qualities of its closest competitors. The market power of a firm depends on the prices and qualities of its direct competitors in the quality dimension. The top quality firm, being exposed to just one direct competitor, enjoys the highest market power and equilibrium markup. Because higher quality exporters are closer to the technological leader, markups are generally increasing in quality, exporting is relatively more profitable for high quality than for low quality firms, and the degree of exchange rate pass-through is decreasing in quality.
    Keywords: Price levels ; International trade
    Date: 2012
  15. By: Heise, Arne
    Abstract: The Great Recession after 2008 did not turn out to be as deep and severe as the Great Depression of the 1930s. According to the European Commission, this positive result is due to the fact that economic policy-makers around the world learnt their lessons from the Great Depression in stabilizing their financial systems and, moreover, that particularly the European Union and its economic governance system has become a shelter against negative external shocks in coordinating stabilization policies to maintain aggregate demand. This paper argues that the claim of the European Commission needs some qualifications: on the one hand, the lessons have not been applied appropriately in all EU and, particularly, Eurozone Member States. This is, on the other hand, not merely the result of mismanagement of individual governments but the systematic outcome of an ineffective and even counterproductive European economic governance system. Although, in the wake of the Euro Crisis some crisis control and emergency measures have been established, crisis resolution has failed as the core of the inefficient governance system - the European Stability and Growth Pact (ESGP) - has not been reformed adequately. --
    Keywords: Euro Crisis,European Governance,Economic Policy
    JEL: B59 F15 H30 N10
    Date: 2012

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