nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒11‒03
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The transatlantic productivity gap: Is R&D the main culprit? By Raquel Ortega-Argilés; Mariacristina Piva; Marco Vivarelli
  2. European immigrants in the UK before and after the 2004 enlargement: Is there a change in immigrant self-selection? By Longhi, Simonetta; Rokicka, Magdalena
  4. Migration, Cultural Diversity and Innovation: A European Perspective By Valentina Bosetti; Cristina Cattaneo; Elena Verdolini
  5. An Empirical Investigation into the Design of an EU Apportionment Formula Related to Profit Generating Factors By A. ROGGEMAN; I. VERLEYEN; P. VAN CAUWENBERGE; C. COPPENS
  6. Fiscal consolidation in reformed and unreformed labour markets: A look at EU countries By Alessandro Turrini
  7. Intertemporal remittance behaviour by immigrants in Germany By Giulia BETTIN; Riccardo LUCCHETTI
  8. Driving Up Wages: The Effects of Road Construction in Great Britain By Rosa Sanchis-Guarner
  9. Gender Differences in Residential Mobility: The Case of Leaving Home in East Germany By Ferdinand Geissler; Thomas Leopold; Sebastian Pink
  10. Minimum wages: do they really hurt young people? By Sofía Galán; Sergio Puente
  11. Institutional Frameworks, Venture Capital and the Financing of European New Technology-Based Firms By A. HEUGHEBAERT; T. VANACKER; S. MANIGART
  12. Income, Wealth and Consumption of Cross-Border Commuters to Luxembourg By Thomas Y. Mathä; Alessandro Porpiglia; Michael Ziegelmeyer
  13. The Large Scale Roll-Out of Electric Vehicles: The Effect on the Electricity Sector and CO2 Emissions By Talaei, A.; Begg, K.; Jamasb, T.
  14. Cost-containment policies in public pharmaceutical spending in the EU By Giuseppe Carone; Christoph Schwierz; Ana Xavier
  16. Private monetary transfers and altruism: An empirical investigation on Italian families By Luigi Aldieri; Damiano Fiorillo
  17. SPATIAL RETAIL PRICING STRATEGIES FOR BEER IN GERMANY By Empen, Janine; Glauben, Thomas; Loy, Jens-Peter
  18. Innovation Systes and Knowledge-Intensive Enterpreneurship: a Country Case Study of Poland By Richard Woodward; Elzbieta Wojnicka; Wojciech Pander
  19. Parent Transmit Happiness along with Associated Values and Behaviors to Their Children: A Lifelong Happiness Divided? By Bruce Headey; Ruud Muffels; Gert G. Wagner

  1. By: Raquel Ortega-Argilés (Instituto Superior Técnico, Lisboa, Portugal); Mariacristina Piva (DISCE, Università Cattolica); Marco Vivarelli (DISCE, Università Cattolica)
    Abstract: The literature has pointed to different causes to explain the productivity gap between Europe and United States in the last decades. This paper tests the hypothesis that the lower European productivity performance in comparison with the US can be explained not only by a lower level of corporate R&D investment, but also by a lower capacity to translate R&D investment into productivity gains. The proposed microeconometric estimates are based on a unique longitudinal database covering the period 1990-2008 and comprising 1,809 US and European companies for a total of 16,079 observations. Consistent with previous literature, we find robust evidence of a significant impact of R&D on productivity; however – using different estimation techniques - the R&D coefficients for the US firms always turn out to be significantly higher. To see to what extent these transatlantic differences may be related to the different sectoral structures in the US and the EU, we differentiated the analysis by sectors. The result is that both in manufacturing, services and high-tech sectors US firms are more efficient in translating their R&D investments into productivity increases.
    Keywords: R&D, productivity, embodied technological change, US, EU
    JEL: O33
    Date: 2012–09
  2. By: Longhi, Simonetta; Rokicka, Magdalena
    Abstract: The 2004 accession of Eastern European countries (EU8) to the European Union has generated concerns about the influx of low-skill immigrants to the Western member states (EU15). Only three countries, namely Ireland, Sweden, and the UK, did not impose restrictions to immigration from Eastern Europe. Did the elimination of barrier to immigration have an impact on the quality of immigrants arriving to the UK? Using EU15 immigrants as a control group, we find systematic differences between EU8 immigrants arrived before and after the enlargement. The elimination of barriers to immigration seems to have changed the quantity and quality of EU8 immigrants to the UK.
    Date: 2012–10–18
  3. By: Hanisch, Markus; Rommel, Jens; Mueller, Malte
    Abstract: With an average market share of about 57%, the European dairy industry is dominated by cooperatives. Large diversity exists in the importance of cooperatives across the EU-27. The cooperative yardstick school of thought suggests that agricultural cooperatives drive competition towards efficiency and “fair” prices. We revisit this argument by analyzing, whether the relative strength of cooperatives in dairy, as measured by market share, explains price variation in average national farm gate milk prices in the EU-27. Our panel data analysis shows that milk prices increase with member states´ market share of cooperatives, when controlling for GDP, fodder prices and new member states. We relate these findings to the policy debate on agricultural cooperatives and conclude that policies promoting cooperatives have the potential to increase farmer welfare.
    Keywords: EU-27, Dairy, Cooperatives, Cooperative Yardstick, Institutional and Behavioral Economics, Livestock Production/Industries,
    Date: 2012
  4. By: Valentina Bosetti (Fondazione Eni Enrico Mattei and CMCC); Cristina Cattaneo (Fondazione Eni Enrico Mattei and CMCC); Elena Verdolini (Fondazione Eni Enrico Mattei and CMCC)
    Abstract: This paper analyses the effect of skilled migration on two measures of innovation, patenting and citations of scientific publications, in a panel of 20 European countries. Skilled migrants positively contribute to the knowledge formation in host countries as they add to the pool of skills in destination markets. Moreover, they positively affect natives' productivity, as new ideas are likely to arise through the interaction of diverse cultures and diverse approaches in problem solving. The empirical findings we present support this prediction. Greater diversity in the skilled professions are associated with higher levels of knowledge creation, measured either by the number of patents applied for through the Patent Cooperation Treaty or by the number of citations to published articles. This finding is robust to the use of different proxies for both the explanatory variables and the diversity index in the labour force. Specifically, we first measure diversity with a novel indicator which uses information on the skill level of foreigners’ occupations. We then check our results by following the general literature, which measures skills by looking at the foreigners’ level of education. We show that cultural diversity consistently increases the innovation performance of European Countries.
    Keywords: Cultural Diversity, Innovation, Skilled Migration, Knowledge Production Function, Europe
    JEL: F22 J24 O31
    Date: 2012–09
    Abstract: The European Commission (EC) has the intention to establish a Common Consolidated Corporate Tax Base, which requires an allocation formula to fairly distribute the consolidated tax base among all group entities. A fair distribution would mean that the allocation is closely related to the profit generating factors of the underlying entities. The EC supposes that fixed tangible assets, sales and labour are the dominant factors in the generation of profit. This paper analyses the profit generating capacity of these factors and of the alternative factor intangible assets. The results show that the proposed factors only explain 28% of the variation in profit. Moreover, the results indicate that recognized intangibles do not increase R2 significantly. However, for R&D intensive companies, adding the market less book value to proxy for unrecognized intangibles, increases the explanatory power with 30%. This suggests that for these companies unrecognized intangibles could be important in generating profit.
    Keywords: CCCTB, apportionment formula, fairness, international corporate taxation, European Union
    JEL: D63 F23 H25 H87
    Date: 2012–09
  6. By: Alessandro Turrini
    Abstract: This paper estimates the impact of fiscal consolidation on unemployment and job market flows across EU countries using a recent database of consolidation episodes built on the basis of a “narrative” approach (Devries et al., 2011). Results show that the impact of fiscal consolidation on cyclical unemployment, is temporary and significant mostly for expenditure measures. As expected, the impact of fiscal policy shocks on job separation rates is much stronger in low-EPL countries, while high-EPL countries suffer from a stronger reduction in the rate at which new jobs are created. Since a reduced job-finding rate corresponds to a longer average duration of unemployment spells, fiscal policy shocks also tend to raise the share of long-term unemployment if EPL is stricter. Results are broadly confirmed when using "top-down" fiscal consolidation measures based on adjusting budgetary data for the cycle.
    Date: 2012–07
  7. By: Giulia BETTIN (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Riccardo LUCCHETTI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)
    Abstract: In this paper, we use data from the German Socio-Economic Panel (SOEP) in the 1997-2009 period for a large sample of migrants from 84 countries in order to develop an empirical model for the propensity by migrants to remit. Our model takes into full account the intertemporal aspects of the problem, which has been ignored by a large part of the applied literature, despite its theoretical and empirical importance. We find that most results already established in the empirical literature are confirmed; however, the intertemporal nature of the remittance behaviour emerges very clearly, giving rise to individual patterns which are difficult to synthesize by a simple description. Building on our framework, we find also support for theoretical models which predict different remittance time paths between return and permanent migrants.
    Keywords: German Socio Economic Panel, Migration, Remittances
    JEL: F22 F24
    Date: 2012–10
  8. By: Rosa Sanchis-Guarner
    Abstract: This paper estimates the effects of road construction on individual labour market outcomes using micro-data from Great Britain between 2002 and 2008. To capture these effects, I use a measure of accessibility to employment through the road network at a very detailed geographical level. I test the effect of accessibility changes on weekly wages and hours worked. In order to tackle potential sources of bias, I use an instrumental variable which exploits the variation in employment accessibility stemming only from changes in minimum travel times between locations. I argue that, conditional on controls, small scale spatial variation in the accessibility impact of road construction can be considered to be exogenous because road schemes are aimed to improve connectivity and reduce congestion for wider and more distant areas. I further use home and work location specific individual fixed-effects to control for endogenous sorting of workers and I also restrict the sample to workers who are located very close to the projects. I find a positive impact of accessibility from work location on weekly wages and total hours worked but no effect of accessibility from home neither on wages nor hours, conditional on commuting time. These effects are not due to selection into employment as a result of road construction. I also find evidence of accessibility from home reducing commuting travel time. Increased spatial competition or agglomeration externalities are potential explanations for the findings.
    Keywords: Job accessibility, labour markets, roads, spatial sorting
    JEL: J31 R12
    Date: 2012–10
  9. By: Ferdinand Geissler; Thomas Leopold; Sebastian Pink
    Abstract: This paper investigates gender differences in the spatial mobility of young adults when initially leaving their parental home. Using individual data from 11 waves (2000-2010) of the SOEP, we examine whether female home leavers in East Germany move across greater distances than males and whether these differences are explained by the gender gap in education. Our results reveal that female home leavers in East Germany are exceptionally mobile. This effect is attributable to their higher propensity of moving to West Germany. Education does not explain these gender differences.
    JEL: C23 J61 R23
    Date: 2012
  10. By: Sofía Galán (Banco de España); Sergio Puente (Banco de España)
    Abstract: We estimate the effects of a significant increase in the minimum wage in Spain between 2004 and 2010 on the individual probability of losing employment, using a large panel of social security records. Our main finding is that older people experienced the largest increase in the probability of losing their job, when compared with other age groups, including young people. The intuition is simple: among the affected (low-productivity) workers, young people are expected to increase their productivity more than older ones, who are in the flat part of their life-cycle productivity curve. Consequently, an employer facing a uniform increase in the minimum wage may find it profitable to retain young employees and to fire older ones
    Keywords: Minimum wage, labour demand, firing
    JEL: J23 J38 J63
    Date: 2012–10
    Abstract: Manuscript Type: Empirical<br><br> Research Question/Issue: We first study how cross-country differences in legal quality and personal bankruptcy laws affect the financing of New Technology-Based Firms (NTBFs). Second, we study how venture capital (VC) investors, as expert monitors and initiators of good governance practices in their portfolio firms, moderate abovementioned relationships.<br><br> Research Findings/Insights: Using a unique longitudinal dataset comprising 6,813 NTBFs from six European countries, we find that higher quality legal systems increase the use of outside financing. Less forgiving personal bankruptcy laws decrease the use of outside financing. More importantly, VC ownership strengthens the abovementioned relationships.<br><br> Theoretical/Academic Implications: This paper provides new evidence on the link between national legal systems and the financing of NTBFs. More significantly, we address recent calls for more research that integrates institutional and agency frameworks. Specifically, this paper shows that the financing of NTBFs is the outcome of both national institutional frameworks and firm-level corporate governance.<br><br> Practitioner/Policy Implications: NTBFs play a key role in employment and wealth generation in our modern knowledge-based economies. Yet, access to sufficient and adequate financing is a critical barrier in the development of these firms. This study informs policy makers on the role of national institutions, firm-level corporate governance and their interaction on the financing strategies of NTBFs.
    Keywords: Corporate Governance, Financing, Legal Quality, Personal Bankruptcy Laws, Venture Capital
    Date: 2012–08
  12. By: Thomas Y. Mathä; Alessandro Porpiglia; Michael Ziegelmeyer
    Abstract: Exceeding 40% of domestic employment cross-border commuters are extremely important to Luxembourg?s economy and labour market in general. This paper presents unique information on their income, wealth and consumption using representative survey data from cross-border commuter households to Luxembourg. The estimated average total net wealth of cross-border commuter households is about ?240,000, which falls substantially short of comparable estimates for Luxembourg resident households exceeding ?700,000. Cross-border commuters do not only receive money from but also leave money in Luxembourg. In terms of consumption expenditures, they spend on average more than ?9,300 per year inside Luxembourg?s borders, representing about 15% of their total gross income and 17% of their gross income from Luxembourg.
    Keywords: household, survey, wealth, income, consumption, cross-border, commuter
    JEL: D31 C81 C83 J61
    Date: 2012–10
  13. By: Talaei, A.; Begg, K.; Jamasb, T.
    Abstract: The UK government has set the ambitious targets of 20 and 50% reduction in greenhouse gas emissions by 2020 and 2050 respectively. The transport sector accounts for 21% of total CO2 emissions in the UK and can, therefore, be important for achieving the emissions reduction targets. Within the transport sector, electric vehicles (EV) are considered as one of the important mitigation options. However the effect of EVs on emissions and the electricity sector is subject to debate. We use scenario analysis to investigate the emission reduction potential of EVs and their interaction with electricity sector. We show that managing the charging patterns could reduce adverse effects of EVs on the electricity sector while the number of EVs remains the factor affecting the mitigation potential. Our findings indicate that in the UK, by 2030, EVs could result in up to 32% emissions reduction compared to advanced internal combustion engines. We also found that the need for new electricity generation and distribution capacity to meet the conventional electricity demand and demand from EVs could be reduced by up to 12% from 70.6 to 61.8 GW if the EV’s electricity demand is managed.
    Keywords: Electric Vehicles, CO2 Emissions, Electricity Demand Management
    Date: 2012–10–26
  14. By: Giuseppe Carone; Christoph Schwierz; Ana Xavier
    Abstract: This paper presents and evaluates pharmaceutical policies in the EU aimed at the rational use of medicines and at keeping pharmaceutical spending under control. Policy makers are growing more aware that by regulating pharmaceutical markets correctly, considerable savings can be achieved without compromising the quality of care. Specifically, the paper makes the case that, by following numerous best-practices in pharmaceutical sector regulations, the value for money of pharmaceutical consumption could be substantially increased. Appropriate regulations can be relevant for pricing, reimbursement, market entry and expenditure control, as well as specific policies targeted at the distribution chain, physicians and patients. Drawing on various initiatives at the EU level related to the pharmaceutical sector, the paper also explores policy options for the EU.
    JEL: I11 I18
    Date: 2012–09
  15. By: Heinrich, Barbara
    Abstract: The European Union’s Common Agricultural Policy is currently undergoing a reform process which inter alia aims to achieve a higher environmental standard in agricultural production by binding direct payments to practices beneficial for the climate and the environment (the so-called ‘greening’). Some experts as well as some farmers doubt the effectiveness of the proposed measures. I simulate how farms would respond to these measures using a case study farm modeling approach and data for different farm types in Germany. I find that the currently envisaged ‘greening’ measures can be expected to function in general due to the linkage to the direct payments, which provide a strong disincentive to forego participation. The individual economic outcome strongly depends on the current intensity of the farm in question and on the implementation details of the introduced measures. However, farms with very high gross margins per hectare will forego the support scheme.
    Keywords: Greening, Common Agricultural Policy, reform of the CAP, direct payments, ecological focus area, Agricultural and Food Policy, Environmental Economics and Policy,
    Date: 2012
  16. By: Luigi Aldieri; Damiano Fiorillo (-)
    Abstract: The aim of this paper is to explore the motivation of monetary transfers received by household heads. Indeed, the financial transfers may be motivated by altruism or by the expectation of future services. For this reason, we select a sample of Italian families from the 2006 European Union Statistics on Income and Living Conditions (EU-SILC) dataset. The empirical analysis is divided into two parts. First, we consider the transfer decision and try to account for the factors that affect the probability that the household member will receive a transfer. Next, we restrict our analysis to those families who did receive a positive transfer and examine the factors that affect the size of the transfer. The economic interest in the intrinsic explanation of monetary transfers is supported by the efficacy of policy makers instruments. For this reason, we also explore the relationship between private and public financial transfers. The main contribution to the existing literature is to investigate the social motivation of private transfers and their implications in terms of policy in a unified framework.
    Keywords: Altruism, Household behaviour, Cross-sectional Models
    JEL: D64 H31 C21
    Date: 2012–09–10
  17. By: Empen, Janine; Glauben, Thomas; Loy, Jens-Peter
    Abstract: The market for beer in Germany is special for many reasons, e.g. the purity law, the large number of breweries, or consumers who are highly loyal to local brands. To what extent brand loyalty affects spatial pricing strategies, is the main question of this article. We employ weekly retail scanner data for Germany from 2000 to 2001. We find that discounts are higher and offered more often the closer the brands are sold to the brewery they originate from. In addition, average prices are also lower on home markets. According to Anderson and Kumar (2007) this strategy is chosen because promotions generate new loyal customers who repay in periods of regular prices. Thus, loyalty of consumers may be endogenous. Alternatively, retailers use local beer brands as loss leaders, which can also explain the observed regional pricing strategies.
    Keywords: Spatial Pricing, Regional Brands, Brand Loyalty, Beer, Germany, Räumliche Preissetzung, Regionale Marken, Markentreue, Bier, Deutschland, Agricultural Finance, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Marketing,
    Date: 2012
  18. By: Richard Woodward; Elzbieta Wojnicka; Wojciech Pander
    Abstract: This study surveys the current state of affairs in Poland with regard to the development of knowledge-intensive entrepreneurship (KIE), or new firm creation in industries considered to be science-based or to use research and development (R&D) intensively. We place KIE in Poland in the larger institutional context, outlining the key features of the country’s National Innovation System, and then focus on KIE itself. Our findings are perhaps more optimistic than many previous studies of knowledge-based economy development in Poland. We observe significant progress due to Polish access to the European Union. The frequency with which universities are playing a significant role as partners for firms in the innovation process has increased significantly; moreover, we observe a significant degree of internationalization of innovation-related cooperation. Another optimistic development is that the level of activity of venture capitalists seems to be fairly high in Poland considering the relatively low degree of development of capital markets offering VC investors exit opportunities. Moreover, after almost two decades of decline in the share of R&D spending in GDP, there are signs that this is beginning to rise, and that businesses are beginning to spend more on R&D. While demand-side problems continue to be significant barriers for the development of KIE, due to the relatively low level of education and GDP per capita in the country, the trends here are optimistic, with high rates of economic growth and improvements in the level of education of younger generations. Significant improvement is still needed in the area of intellectual property protection.
    Keywords: Knowledge-Based Economy, Entrepreneurship, Transition, Post-Communist, SMEs, Poland
    JEL: L26 O31 O52 P27
    Date: 2012–10
  19. By: Bruce Headey; Ruud Muffels; Gert G. Wagner
    Abstract: There are strong two-way links between parent and child happiness (life satisfaction), even for ‘children’ who have grown up, moved to their own home and partnered themselves. German panel evidence shows that transmission of (un)happiness from parents to children is partly due to transmission of values and behaviors known to be associated with happiness (Headey, Wagner and Muffels, 2010, 2012). These values and behaviors include giving priority to pro-social and family values, rather than material values, maintaining a preferred balance between work and leisure, active social and community participation, and regular exercise. Both parents have about equal influence on the values and behaviors which children adopt. However, the life satisfaction of adult ‘children’ continues to be directly influenced by the life satisfaction of their mothers, with the influence of fathers being only indirect, via transmission of values and behaviors. There appears to be a lifelong happiness dividend (or unhappiness dividend) due to parenting.
    Keywords: Life satisfaction, inter-generational transmission, German panel survey (SOEP)
    Date: 2012
  20. By: Salzwedel, Arvid; Huttel, Silke; Odening, Martin
    Keywords: efficiency, static and dynamic DEA, quasi-fixed inputs, dairy farms, Livestock Production/Industries, Productivity Analysis, Research Methods/ Statistical Methods,
    Date: 2012

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