nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2012‒12‒06
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Carbon Price Dynamics – Evidence from Phase II of the European Emission Trading Scheme By Wilfried Rickels; Dennis Görlich; Gerrit Oberst; Sonja Peterson
  2. European immigrants in the UK before and after the 2004 enlargement: Is there a change in immigrant self-selection? By Simonetta Longhi; Magdalena Rokicka
  3. Innovation Drivers, Value Chains and the Geography of Multinational Firms in European Regions By Riccardo Crescenzi; Carlo Pietrobelli; Roberta Rabellotti
  4. What determines attitudes to immigration in European countries? An analysis at the regional level By Markaki, Yvonni; Longhi, Simonetta
  5. Mapping and measuring the distribution of household wealth: A cross-country analysis By Frank A Cowell; Eleni Karagiannaki; Abigail McKnight
  6. Preferences for Redistribution in Europe By Javier Olivera
  7. The Co-evolution of ICT, Skills and Organization in Public Administrations: Evidence from new European country-level data. By Paolo Seri; Antonello Zanfei
  8. Long-term participation tax rates By Bartels, Charlotte
  9. Coordinating cross‐border congestion management through auctions: An experimental approach to European solutions By Céline Jullien; Virginie Pignon; Stéphane Robin; Carine Staropoli
  10. Cartel enforcement in the European Union: Determinants of the duration of investigations By Hüschelrath, Kai; Laitenberger, Ulrich; Smuda, Florian
  11. How relevant is job mismatch for German graduates? By Berlingieri, Francesco; Erdsiek, Daniel
  12. Care and the Capability of Living a Healthy Life in a Gender Perspective By Tindara Addabbo; Marco Fuscaldo; Anna Maccagnan
  13. Declining returns to skill and the distribution of wages : Spain 1995-2006 By Raquel Carrasco; Juan F. Jimeno; A. Carolina Ortega
  14. Privatization and Quality: Evidence from Elderly Care in Sweden By Spagnolo, Giancarlo; Bergman, Mats A.; Lundberg, Sofia
  15. Mobility Regimes and Parental Wealth: The United States, Germany, and Sweden in Comparison By Fabian T. Pfeffer; Martin Hällsten
  16. The Impact of Teenage Motherhood on the Education and Fertility of their Children: Evidence for Europe By Navarro Paniagua, Maria; Walker, Ian
  17. Trade Dynamics in the Euro Area: The role of export destination and composition By Peter Wierts; Henk van Kerkhoff; Jakob de Haan
  18. Forecasting Life Satisfaction Across Adulthood: Benefits of Seeing a Dark Future? By Frieder R. Lang; David Weiss; Denis Gerstorf; Gert G. Wagner
  19. Employment adjustment in German firms By Jung, Sven
  20. Economic Conditions and Employment Dynamics of Immigrants versus Natives: Who Pays the Costs of the "Great Recession"? By Raquel Carrasco; J. Ignacio García Pérez

  1. By: Wilfried Rickels; Dennis Görlich; Gerrit Oberst; Sonja Peterson
    Abstract: In this paper we empirically investigate potential determinants of allowance (EUA) price dynamics in the European Union Emission Trading Scheme (EU ETS) during Phase II. In contrast to previous papers, we analyze a significantly longer time series, place particular emphasis on the importance of price variable selection, and include an extensive data of renewable energy feed-in in Europe. We show (i) that results are extremely sensitive to choosing different price series of potential determinants, such as coal and gas prices, (ii) that EUA price dynamics are only marginally influenced by renewable energy provision in Europe, and iii) that EUA prices currently do not reflect marginal abatement costs across Europe. We conclude that the expectation of a more mature allowance market in Phase II cannot be confirmed
    Keywords: Carbon emission trading, EU ETS, Carbon price influence factors, Fuel switching
    JEL: C22 G14 Q54
    Date: 2012–11
  2. By: Simonetta Longhi (Institute for Social and Economic Research, University of Essex); Magdalena Rokicka (Institute for Social and Economic Research, University of Essex)
    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.
    Keywords: EU enlargement; East-West migration, UK labour market, self-selection.
    JEL: F22 J30 J61
    Date: 2012–11
  3. By: Riccardo Crescenzi; Carlo Pietrobelli; Roberta Rabellotti
    Abstract: This paper investigates the geography of multinational corporations’ investments in the EU regions. The ‘traditional’ sources of location advantages (i.e. agglomeration economies, market access and labour market conditions) are considered together with innovation and socio-institutional drivers of investments, captured by means of regional “social filter” conditions. The introduction of a wider set of attraction factors makes is possible to empirically assess the different role played by such advantages in the location decision of investments at different stages of the value chain and disentangle the differential role of national vs. local and regional factors. The empirical analysis covers the EU-25 regions and suggests that regional-socio economic conditions are crucially important for an understanding of the location investment decisions in the most sophisticated knowledge-intensive stages of the value chain.
    Keywords: Innovation, Multinationals, Systems of Innovation, Value Chains, Regions, European Union
    JEL: F21 F23 O33 R12 R58
    Date: 2012–10
  4. By: Markaki, Yvonni; Longhi, Simonetta
    Abstract: Different disciplines within the social sciences have produced large theoretical and empirical literatures to explain the determinants of anti-immigration attitudes. We bring together these literatures in a unified framework and identify testable hypotheses on what characteristics of the individual and of the local environment are likely to have an impact on anti-immigration attitudes. Most of the previous literature focuses on the explanation of attitudes at the individual level. When cross country comparisons are involved the heterogeneity across countries is modelled by fixed or random effects in multilevel models. We analyse anti-immigration attitudes across regions of 24 European countries to explain why people living in different regions differ in terms of their attitudes towards immigration. We isolate the impact of the region from regressions using individual-level data and explain this residual regional heterogeneity in attitudes with aggregate level indicators of regional characteristics. We find that regions with a higher percentage of immigrants born outside the EU and a higher unemployment rate among the immigrant population show a higher probability that natives express negative attitudes to immigration. Regions with a higher unemployment rate among natives however, show less pronounced anti-immigrant attitudes.
    Date: 2012–11–05
  5. By: Frank A Cowell; Eleni Karagiannaki; Abigail McKnight
    Abstract: In this paper we compare the level, composition and distribution of household wealth in five industrial countries: the UK, US, Italy, Finland and Sweden. We exploit the harmonized data within the Luxembourg Wealth Study, which we have extended to allow us to examine trends in the UK and the US between the mid-1990s and the mid-2000s. Remaining differences between surveys, variable definitions and coverage are highlighted to the extent that they impact on cross-country comparisons. We find that the Nordic countries have lower average wealth holdings, smaller absolute gaps between low wealth and high wealth households but high relative measures of wealth inequality. Italian households hold very little debt and are much more likely to own their homes outright, leading to relatively high median levels of wealth. In contrast American households tend to hold much more housing debt well into retirement. Increases in owner occupation and house prices 2000-05 in the UK has led to substantial increases in wealth, particularly median wealth holdings and this had led to falls in relative measures of wealth inequality such as the Gini coefficient even though absolute gaps between high and low wealth households have grown substantially. We show that there are underlying country differences in terms of distributions of age, household composition, educational attainment and income as well as wealth and debt portfolios. Educational loans are increasing in their size and prevalence in some countries and look set to create some marked differences in the distribution of wealth for different age cohorts.
    Keywords: household wealth, wealth inequality, debt, housing assets, educational loans, age-wealth profiles
    JEL: C81 D31 D63 I24 I31
    Date: 2012–11
  6. By: Javier Olivera (UCD Geary Institute, University College Dublin)
    Abstract: This paper analyses the determinants of preferences for redistribution in a pool of 33 European countries over the period 2002-2010. We find that income inequality affects positively the individual demand for redistribution and that the actual level of redistribution implemented in the country decreases the support for more redistribution. Furthermore, a fixed effect model applied to pseudo panels constructed over that period confirms that increases in income inequality over time raise the demand for redistribution. This result is predicted by standard political economy models but has found little empirical support. We show that at least in Europe growing income inequality leads to more individual support for redistribution.
    Keywords: Redistribution, Income Inequality, Social Preferences, Pseudo-Panels
    JEL: D31 D63 D72 H20
    Date: 2012–11–20
  7. By: Paolo Seri (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Antonello Zanfei (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")
    Abstract: During the past two decades a big effort has been made in exploring the complementarities between information and communications technology (ICT) adoption, investment in human capital and organizational change, and how these affect economic performance. Such investigations, however, remain substantially circumscribed to private sectors, while the role of these factors in Public Sector performance has been largely disregarded. In this paper we aim at filling this gap in empirical literature by combining different data-sources and constructing a panel of comparable data about output quality, input costs, ICT investments, skills and organizational changes in Public Administrations of 15 European countries. We propose an index-based approach to the measurement of PA performance relying on the adoption of public e-services as a proxy of revealed output quality, and provide an econometric analysis of how the co-evolution of ICT, skills and organizational factors affect Government effectiveness.
    Keywords: Innovation in public services, ICTs, Organizational change, Skills.
    JEL: O14 O33 L32
    Date: 2012
  8. By: Bartels, Charlotte
    Abstract: Generous income support programs as provided by European welfare states have often been blamed to reduce work incentives for lower income classes and to increase durations of unemployment. Standard studies measure work incentives based on annual income concepts. This paper analyzes how work incentives inherent in the German tax-benefit system evolve when extending the time horizon to three years (long-term). Participation tax rates are computed for 3-year periods 1995-1997 and 2005-2007 to reveal potential effects of the labor market reforms between 2003 and 2005. Results show that long-term work incentives increased even more than short-term work incentives. Particularly for middle-income individuals, this is largely explained by the abolition of earnings-related unemployment assistance. --
    Keywords: welfare,work incentives,unemployment,unemployment insurance
    JEL: H31 J65
    Date: 2012
  9. By: Céline Jullien (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM)); Virginie Pignon (EDF R&D Division - EDF Recherche et Développement); Stéphane Robin (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Carine Staropoli (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne)
    Abstract: Competition among producers within an integrated electricity system is impeded by any limited transmission capacity there may be at its borders. Two alternative market mechanisms have recently been designed to organize the allocation of scarce transmission capacity at cross-border level: (i) the "implicit auction", already used in some countries, and (ii) the "coordinated explicit auction", proposed by the European Transmission System Operators (ETSO) but not implemented yet. The main advantage of the explicit auction is that it allows each country to keep its own power exchange running. In the European institutional context, this is seen as a factor of success of a market reform, although the explicit auction (not coordinated) is known to be less efficient than the implicit mechanism. The addition of a coordination dimension in the explicit auction is intended to solve problems of international flows. We use an experimental methodology to identify and compare in a laboratory setting the efficiency properties of these two market mechanisms, given a market structure similar to the existing one in continental Europe, i.e. a competitive oligopoly. Our main result highlights the inefficiency of the coordinated explicit auction compared to the performance of the implicit auction, measured in terms of both energy prices and transmission capacity allocation. We suggest that the poor performance of the coordinated explicit auction in the laboratory is due to the level of individual expectations about both energy and transmission prices that the mechanism demands. One solution to resolve this problem when the mechanism is implemented in the field would be to design an additional and secondary market for "used" transmission capacity.
    Keywords: auctions; congestion management; electricity markets; experimental economics
    Date: 2012
  10. By: Hüschelrath, Kai; Laitenberger, Ulrich; Smuda, Florian
    Abstract: We provide an empirical assessment of EC cartel enforcement decisions between 2000 and 2011. Following an initial characterisation of our dataset, we especially investigate the determinants of the duration of cartel investigations. We are able to identify several key drivers of investigation length such as the Commission's speed of cartel detection, the type of cartel agreement, the affected industry or the existence of a chief witness. --
    Keywords: Competition Policy,Empirical Analysis,Cartels,European Union,Fines,Leniency,Duration of Investigation
    Date: 2012
  11. By: Berlingieri, Francesco; Erdsiek, Daniel
    Abstract: In this study, we examine the incidence and direct consequences of job mismatch for German graduates. Beyond measuring job mismatch by the comparison of qualification obtained by employees and required for a job, we employ self-reported skill mismatch variables concerning overall skills and more detailed information about the surplus or deficit in specific competences. The results indicate that a substantial share of graduates underutilizes own skills in the job. The rate of overqualification and skill mismatch is found to differ strongly between fields of study, type of university and gender. In addition, we investigate to what extent jobs of matched graduates differ from jobs held by mismatched graduates. Jobs of the latter are found to exhibit lower complexity and creativity requirements but to be more monotone than matching jobs. Furthermore, we provide a conceptual underpinning of the possible explanations of job-worker mismatch and its implication for different actors in the economy. --
    Keywords: job mismatch,overqualification,skill mismatch
    JEL: J24 I2
    Date: 2012
  12. By: Tindara Addabbo; Marco Fuscaldo; Anna Maccagnan
    Abstract: This paper deals with the definition of the capability of living a healthy life with special reference to the Italian context. The increasing ageing of Italian population and the higher likelihood for elderly to experience poorer health conditions (Addabbo, Picchio; 2010; Addabbo, Chiarolanza, Fuscaldo, Pirotti, 2010) lead us to focus especially on elderly population and gender differences in the measurement of the development of this capability. Institutional as well family and individual conversion factors are analysed in their interaction with the observed development of the capability of living a healthy life taking a gender perspective. To measure the latter we use both self assessed health status and objective gerontological measures of health conditions available in the Italian sample of the Survey of Health, Ageing, Retirement in Europe (SHARE). The self-completion questionaire, that is submitted only to a part of the whole SHARE sample, allows to gain important information on the household characteristics and in particular on the sharing of different responsibilities within the household (doing the cleaning, caring for children and elderlies, earning money etc.). Part of this information is also retrospective. This allows us to extend our analysis on the measurement of individual current achievement in the capability taking into account how conversion factors can interact with the development of the capability since it allows a long term analysis of their effect.
    Keywords: health
    JEL: I14 J14
    Date: 2012–11
  13. By: Raquel Carrasco; Juan F. Jimeno; A. Carolina Ortega
    Abstract: In contrast to the pattern observed in other developed countries, Spanish wage inequality did not increase during the period from 1995-2006. In this paper we analyse the relative role of supply and demand factors when accounting for this “atypical” fact. Because noticeable changes in both labour supply and labour demand - such as educational upgrading of the labour force, huge immigration flows, and a boom in the construction sector - took place during these years, we start by decomposing observed wage changes into changes in the composition of the labour force and changes in the prices of workers’ and jobs’ characteristics. The results indicate that the compression of the wage distribution is largely explained by a decrease in the returns to education. We also provide some evidence of the relative impact of labour supply and labour demand factors on the changes of these returns, showing that both the increase in the supply of high-skilled workers and the increasing weight of low-skilled occupations are related to the decreasing trend in the skill premium over this period.
    Keywords: Wage structure, Quantile regressions, Composition effects, Polarization
    JEL: J31 J21
    Date: 2012–11
  14. By: Spagnolo, Giancarlo (Stockholm Institute of Transition Economics); Bergman, Mats A. (Södertörn University); Lundberg, Sofia (Umeå University)
    Abstract: Many quality dimensions are hard to contract upon and are at risk of degradation when services are procured rather than produced in-house. However, procurement may foster performance-improving innovation. We assemble a large data set on elderly care services in Sweden between 1990 and 2009, including survival rates - our measure of non-contractible quality - and subjectively perceived quality of service. We estimate how procurement from private providers affects these measures using a difference-in-difference approach. The results indicate that procurement significantly increases non-contractible quality as measured by survival rate, reduces the cost per resident but does not affect subjectively perceived quality.
    Keywords: elderly care; incomplete contracts; limited enforcement; mortality; non-contractible quality; outsourcing; nursing homes; performance measurement; perceived quality; privatization; procurement.
    JEL: H57 I18 L33
    Date: 2012–11–09
  15. By: Fabian T. Pfeffer; Martin Hällsten
    Abstract: We study the role of parental wealth for children’s educational and occupational outcomes across three types of welfare states and outline a theoretical model that assumes parental wealth to impact offspring’s attainment through two mechanisms, wealth’s purchasing function and its insurance function. We argue that welfare states can limit the purchasing function of wealth, for instance by providing free education and generous social benefits, yet none of the welfare states examined here provides a functional equivalent to the insurance against adverse outcomes afforded by parental wealth. Our empirical evidence of substantial associations between parental wealth and children’s educational success and social mobility in three nations that are marked by large institutional differences is in line with this interpretation and helps us re-examine and extend existing typologies of mobility regimes.
    Date: 2012
  16. By: Navarro Paniagua, Maria (Lancaster University); Walker, Ian (Lancaster University)
    Abstract: This paper estimates the causal effect of being born to a teenage mother on children's outcomes, exploiting compulsory schooling changes as the source of exogenous variation. We impose external estimates of the direct effect of maternal education on child outcomes within a plausible exogeneity framework to isolate the transmission from teen motherhood per se. Our findings suggest that the child's probability of post compulsory education decreases when born to a teenage mother, and that the daughters of teenage mothers are significantly more likely to become teenage mothers themselves.
    Keywords: teenage motherhood, education, fertility, children, instrumental variables, compulsory schooling laws
    JEL: I2 J13 J62
    Date: 2012–11
  17. By: Peter Wierts; Henk van Kerkhoff; Jakob de Haan
    Abstract: We investigate to what extent the destination of exports and export composition affect the export performance of euro area countries, using a dataset on exports from euro area countries to their top 20 trade partners for the period 1980-2010. Our analysis shows that European integration has not led to an increase in the share of the core and the northern periphery in the exports of the southern periphery. Our results suggest that a higher share of high tech exports in total exports leads to a higher growth of total exports. Export composition also conditions the effects of the real exchange rate and partner income growth. The effect of the real exchange rate on export growth becomes smaller the higher the share of high tech exports in total exports. The effect of partner income on export growth becomes larger the higher the share of high tech exports in total exports.
    Keywords: trade relations; export composition; euro area
    JEL: F14 F15
    Date: 2012–10
  18. By: Frieder R. Lang; David Weiss; Denis Gerstorf; Gert G. Wagner
    Abstract: Anticipating one’s future self is a unique human capacity that contributes importantly to adaptation and health throughout adulthood and old age. Using the adult lifespan sample of the national German Socio-Economic Panel (SOEP; N > 10,000, age range 18-96 years), we investigated age-differential stability, correlates, and outcomes of accuracy in anticipation of future life satisfaction across six subsequent 5-year time intervals. As expected, we observed few age differences in current life satisfaction, but stronger age differences in future expectations: Younger adults anticipated improved future life satisfaction, overestimating their actual life satisfaction 5 years later. By contrast, older adults were more pessimistic about the future, generally underestimating their actual life satisfaction after 5 years. Such age differences persisted above and beyond the effects of self-rated health and income. Survival analyses revealed that in later adulthood, underestimating one’s life satisfaction 5 years later was related to lower hazard ratios for disability (n = 735 became disabled) and mortality (n = 879 died) across 10 or more years, even after controlling for age, sex, education, income, and self-rated health. Findings suggest that older adults are more likely to underestimate their life satisfaction in the future, and that such underestimation was associated with positive health outcomes.
    Keywords: Subjective well-being, future anticipation, optimism, aging, health, mortality, disability, SOEP
    Date: 2012
  19. By: Jung, Sven
    Abstract: Using a representative establishment data set for Germany, we show that, in line with the existing literature for several countries, firms' adjustment costs for employment are characterized by a fixed and convex functional form. Furthermore, they are asymmetric with dismissal costs exceeding hiring costs. An analysis of firms' adjustment in the period 1996-2010 also indicates that adjustment behavior has changed over time. Comparing the employment adjustment in the two observed business cycles comprising the years 1996-2003 and 2004-2010, we find that the adjustment speed was higher in the second business cycle indicating that adjustment costs have fallen in recent years. -- Anhand von repräsentativen Daten des IAB-Betriebspanels wird gezeigt, dass die Kosten der betrieblichen Beschäftigungsanpassung in Deutschland eine funktionale Form mit fixer und konvexer Komponente aufweisen, wie es auch frühere Studien für andere Länder feststellen. Des Weiteren ist die Struktur der Anpassungskosten asymmetrisch, wobei die Entlassungskosten größer als die Einstellungskosten sind. Bei der Analyse des betrieblichen Anpassungsverhalten für den Zeitraum 1996-2010 wird zudem deutlich, dass sich das Verhalten über die Zeit geändert hat. Ein Vergleich der betrieblichen Beschäftigungsanpassung in den zwei beobachteten Konjunkturzyklen 1996-2003 und 2004-2010 zeigt eine schnellere Anpassung im zweiten Konjunkturzyklus, was auf gesunkene Anpassungskosten hinweist.
    Keywords: adjustment costs,dynamic labor demand,employment adjustment,Germany
    JEL: C24 D22 E24 J23
    Date: 2012
  20. By: Raquel Carrasco; J. Ignacio García Pérez
    Abstract: This paper studies how unemployment and employment durations for immigrants and natives respond differently to changes in the economic conditions due to the 2008 crisis and to the receipt of unemployment benefits when the economy declines. Using administrative data for Spain, we estimate multi-state multi-spell duration models that disentangle unobserved heterogeneity from true duration dependence. Our findings suggest that immigrants are more sensitive to changes in economic conditions, both in terms of unemployment and employment hazards. Moreover, the effect of the business cycle is not constant but decreases with duration at a higher rate among immigrants. The results also point to a disincentive effect of unemployment benefits on unemployment duration, which is stronger for immigrants but only at the beginning of the unemployment spell and mainly during good times (before the 2008 recession). Finally, we find evidence of a positive effect of unemployment benefits on subsequent employment duration, but only for native workers with temporary contracts. Nonetheless, this effect vanishes as workers qualify again for unemployment benefits.
    Keywords: Duration models, Multiple spells, Unobserved heterogeneity, Unemployment benefits, Economic cycle, Immigration
    JEL: J64 J61 C23 C45 J65
    Date: 2012–11

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