nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒01‒19
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Comparing Labor Supply Elasticities in Europe and the US: New Results By Olivier Bargain; Kristian Orsini; Andreas Peichl
  2. Who Earns Minimum Wages in Europe? New Evidence Based on Household Surveys By François Rycx; Stephan Kampelmann
  3. Economic well-being and distributional effects of housing-related policies in 3 European countries By Maestri, Virginia
  4. Determinant factors of job quality in Europe By Nuno Crespo; Nádia Simões; José Castro Pinto
  5. Employment Protection and Innovation Intensity By Murphy, Gavin; Siedschlag, Iulia; McQuinn, John
  6. Public Support for European Integration : A comparative analysis By Kristel Jacquier
  7. Social capital and household poverty: the case of European Union. By Isabella Santini; Anna de Pascale
  8. Migration, Cultural Diversity and Innovation: A European Perspective By Valentina Bosetti; Cristina Cattaneo; Elena Verdolini
  9. 10 Years After: EU Enlargement, Closed Borders, and Migration to Germany By Elsner, Benjamin; Zimmermann, Klaus F.
  10. The Effect of Educational Mismatch on Wages Using European Panel Data By Iñaki Iriondo; Teodosio Pérez-Amaral
  11. Does Subsidizing Investments in Energy Efficiency Reduce Energy Consumption?: Evidence from Germany By Caroline Dieckhöner
  12. Labour Shares and Employment Protection in European Economies By Mirella Damiani; Fabrizio Pompei; Andrea Ricci
  13. The Incentive to Invest in Thermal Plants in the Presence of Wind Generation By di Cosmo, Valeria; Malaguzzi Valeri, Laura
  14. The effect of feed-in tariffs on the production cost and the landscape externalities of wind power generation in West Saxony, Germany By Martin Drechsler; Jürgen Meyerhoff; Cornelia Ohl
  15. Distance Effects, Social Class and the Decision to Participate in Higher Education in Ireland By Cullinan, John; Flannery, Darragh; Walsh, Sharon; McCoy, Selina
  16. Immigrant Workers and Farm Performance: Evidence from Matched Employer-Employee Data By Malchow-Møller, Nikolaj; Munch, Jakob R.; Seidelin, Claus Aastrup; Skaksen, Jan Rose
  17. R&D INCENTIVES: THE EFFECTIVENESS OF A PLACE-BASED POLICY By Marco Corsino; Roberto Gabriele; Anna Giunta
  18. Using Supervised Environmental Composites in Production and Efficiency Analyses: An Application to Norwegian Electricity Networks By Orea, Luis; Growitsch, Christian; Jamasb, Tooraj
  19. Learning through experience in Research & Development: an empirical analysis with Spanish firms By Pilar Beneito; María E. Rochina-Barrachina; Amparo Sanchis
  20. Joint macro/micro evaluations of accrued-to-date pension liabilities: an application to French reforms By D. BLANCHET; S. LE MINEZ

  1. By: Olivier Bargain; Kristian Orsini; Andreas Peichl
    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
  2. By: François Rycx; Stephan Kampelmann
    Abstract: This paper aims to provide a comprehensive, evidence-based, and up-to-date assessment of minimum wages in a range of European countries. A first step towards a better understanding of where Europe stands today on this issue requires to grasp the diversity of European minimum wage systems, a key objective of the paper at hand. The second objective is to document international differences in the so-called "bite" of the minimum wage. This leads to questions such as "how do national minimum wages compare to the overall wage distribution?" and "how many people earn minimum wages in each country?" that are assessed for a set of nine countries from Western, Central and Eastern Europe: Belgium, Bulgaria, Germany, Hungary, Ireland, Poland, Romania, Spain, and the United Kingdom. This sample was designed to include countries for which recent evidence has been missing prior to this paper. What is more, the study also overcomes the narrow focus of extant overviews that have typically focussed only on full-time employment. Crucially, the study improves on existing work by looking beyond aggregate numbers; it provides a detailed panorama of the population of minimum wage earners in each country under investigation, notably by describing their composition in terms of a range of socio-demographic characteristics.
    Keywords: Minimum wage systems; Europe; Socio-economic consequences
    JEL: J51 J58 J83
    Date: 2013–01–10
  3. By: Maestri, Virginia
    Abstract: This paper evaluates the redistributive effect of a comprehensive set of housing-related policies, taking into account the housing advantage of homeowners and social tenants. We use the Euromod microsimulation model to simulate housing policies in Estonia, Italy and the United Kingdom. Disentangling the contribution to inequality and poverty of each housing-related policy, we find that the current design of property taxes is not progressive and that other housing policies have a limited impact on inequality in Estonia and on both inequality and relative poverty in Italy. In all three countries, housing-related policies favor the elderly.
    Date: 2012–12–19
  4. By: Nuno Crespo; Nádia Simões; José Castro Pinto
    Abstract: We analyze the determinants of job quality in Europe based on an individual level approach. Using data from the Fourth European Working Conditions Survey, covering 31 countries, we propose a multidimensional indicator of job quality based on eight objective and three subjective dimensions and evaluate the influence of worker and firm characteristics on the overall job quality level as well as on each of its constituent dimensions. Our results confirm the influence of worker and firm characteristics on the quality of jobs. Among worker characteristics, the factors that most strongly influence job quality are education and whether the worker is self-employed or a wage earner. The economic sector is the most important firm-related characteristic.
    Keywords: Job quality, Europe, determinant factors, twice-censored Tobit model dimensional analysis.
    JEL: J01 J21 J81
    Date: 2013–01–11
  5. By: Murphy, Gavin; Siedschlag, Iulia; McQuinn, John
    Abstract: We examine the impact of the strictness of employment protection legislation on innovation intensity. To this purpose, we use a panel of annual data from OECD countries over the period 1990-1999 and estimate difference-in-difference models to explain the variation of innovation intensity between industries within countries. Our estimates indicate that stricter employment protection legislation led to significantly lower innovation intensity in industries with higher job reallocation rates or higher layoff propensities. Further, we find that the strictness of employment regulations on the use of temporary contracts had a stronger impact on innovation intensity than the strictness of employment protection for regular contracts. Our findings are robust to additional industry covariates and to other labour market institutions that may affect innovation performance and industry job reallocation propensity. In addition, our sensitivity analysis indicates that our results are not driven by the particular measures of employment protection legislation and industry layoff propensity that we use or by any country in our sample.
    Keywords: data/employment/labour market/protection/reallocation/regulation
    Date: 2012–12
  6. By: Kristel Jacquier (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne)
    Abstract: This paper proposes to study how socio-economic characteristics shape preferences in European matters. It is assumed that social groups threatened by liberalization tend to be more euro-skeptical than others. This hypothesis is tested using individual-level data from two rounds of the European Social Survey. Controlling for national fixed effects and income, we focus on variables of occupational status (International Standard Classification of Occupations ISCO-88, and current occupation). Finally, we include a variable of subjective partisan affiliation to make sure that our results are not concealing a left/right positioning. We argue that the economic status of agents plays a crucial role in explaining cross-sectional variations in public support for the European process in each member state. Additionally, the partisan affiliation confirms that in European matters, socio-economic forces are not a mere reflection of the left/right spectrum.
    Keywords: European integration; political economy; globalization; survey research
    Date: 2012–12
  7. By: Isabella Santini; Anna de Pascale (Department of Metodi e modelli per l'economia, il territorio e la finanza MEMOTEF - Sapienza University of Rome (Italy))
    Abstract: It is widespread opinion that the concept of poverty, as well as measures of the extent of poverty at national or local level, cannot be entirely linked to income and assets but because of its multidimensionality necessarily involves a variety of individual/household characteristics (age, gender, education level, employment status, household size and so on) and several territorial and societal level aspects. Social capital plays a crucial role, here. According to the most widely accepted definition suggested by the World Bank Social Capital Initiative Program research group, social capital INCLUDES THE INSTITUTIONS, The relationships, the attitudes and values that govern interactions among people And contribute to economic and social development. This definition encompasses economic, social and political aspects and implies that socio- institutional relationships can foster economic development and improve both the quality of the territorial context where households live and the welfare of the whole population. However, empirical research designed to test the relationships between social capital and household poverty in Europe is almost rare because of reduced data availability. The EU-SILC survey and the Eurostat statistic database certainly offer a new opportunity for research in this specific field. As a matter of fact, they represent an important reference source for comparative studies whose purpose is to assess the determinants of household poverty because they provide comparable and high quality cross-sectional indicators for all the EU countries. Taking these observations into account, this paper aims to assess the potential of EU-SILC survey and Eurostat statistic database in describing the relationships between social capital and household poverty in Europe. In particular, a Principal Component Analysis (PCA) has been performed on two sets of variables: a set of active variables proxy for community and household social capital endowment and a set of supplementary variables describing household economic well-being. Results show that there is a strong association between social capital and household economic wellbeing especially as far as poverty perception is regarded. Implications for public policies are also discussed.
    Keywords: Social Capital, Household poverty, European Union, EU-SILC
    JEL: I32 D10 I38
  8. By: Valentina Bosetti; Cristina Cattaneo; Elena Verdolini
    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
  9. By: Elsner, Benjamin (IZA); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: We study how the EU enlargement in 2004 and the Great Recession in the late 2000s have shaped the scale and composition of migration flows from the New Member States to Germany. We demonstrate that immigration increased substantially despite the restrictions on the German labor market, and that net flows decreased to zero at the outset of the recession. The cohorts arriving after 2004 had on average a lower education than the previous arrival cohort, but the wage gap compared to Germans became narrower over time. Almost 10 years after EU enlargement, we re-assess the transitional arrangements, and argue that Germany would have been better off, had it immediately opened its labor market. Finally, the Great recession allows us to study how effective migration within the EU is as an adjustment mechanism. Our data clearly show an increase in immigration from countries that were hit by the crisis, although the annual net flows are still too small to significantly reduce unemployment in the countries hit by the crisis.
    Keywords: EU enlargement, migration, Germany
    JEL: F22
    Date: 2013–01
  10. By: Iñaki Iriondo (Complutense University of Madrid and Queen Mary, University of London); Teodosio Pérez-Amaral (Complutense University of Madrid)
    Abstract: This paper analyzes the effect of educational mismatch on wages, using a rich panel dataset of workers in the major euro area countries from 2006 to 2009, drawn from the <i>European Union Statistics on Income and Living Conditions</i> (Eurostat). We use a consistent estimator to address the two econometric problems faced by the empirical literature: the omitted variable bias and measurement error. In principle, our fixed effect estimates confirm that overeducated workers suffer a wage penalty of similar magnitude to the return on each year of schooling attained. Interestingly, when we split the sample by age, we find that the wages of people aged under 35 basically depend on the level of education attained, while those of workers aged over 35 depend on job educational requirements. These results are interpreted taking into account the impact of the depreciation of skills on human capital. The main policy implication of the paper is that overeducation constitutes a waste of resources. Therefore public authorities should seek to reduce the negative impact of overeducation on the labor market.
    Keywords: Overeducation, Educational mismatch, Wages, Ability bias, Measurement error, Panel data
    JEL: I21 J24 J31
    Date: 2013–01
  11. By: Caroline Dieckhöner
    Abstract: Improving energy efficiency is one of the three pillars of the European energy and climate targets for 2020 and has led to the introduction of several policy measures to promote energy efficiency. The paper analyzes the effectiveness of subsidies in increasing energy efficiency in residential dwellings. An empirical analysis is conducted in which the effectiveness of subsidies on the number of dwelling modernizations is investigated. Next, the impact of renovations on energy consumption is analyzed using a differences-in-differences-in-differences approach for modernizations made in given subsidy program periods, as well as for ownership status and household types for more than 5000 German households between 1992 and 2010. By controlling for socio-economic status, dwelling characteristics and macro-indicators, it becomes apparent that homeowners invest significantly more and have significantly lower heating expenditures than their tenant counterparts. Thus, the landlord-tenant problem tends to broaden the energy efficiency gap. It is also found that the number of modernizations made by landlords does not increase with higher subsidies. However, the renovations made during the subsidy periods decrease the heating consumption of tenants. Given the conditions that homeowners already invest more in energy efficiency, they increase modernizations only slightly with increasing subsides. However, these modernizations during subsidy periods do not further decrease homeowners' energy consumption. Thus, the large part of the overall subsidies received by homeowners can be identified as windfall profits.
    Keywords: ousehold behavior, econometric analysis, energy effciency, demand modelling
    Date: 2012
  12. By: Mirella Damiani; Fabrizio Pompei; Andrea Ricci
    Abstract: Liberalisation of temporary contracts has become an important component of recent labour reforms but up to now available research has not paid attention to the impacts of these institutional changes on functional income distribution. The present paper intends to fill this gap by focussing on the reduction in strictness of employment protection of temporary jobs and analysing its effects on factor shares. We have estimated labour share, as well as its components, worker pays and employment, by considering country-sector evidence for 14 EU economies and the sample period 1995-2007. We have found that these legislative changes, that have favoured the extensive use of temporary contracts, have contributed to instability of working conditions and caused negative effects on workers’ pays. These impacts have more than counterbalanced the scanty positive effects on employment (due to greater access to the labour market of additional workers, likely young and women), thus leading to a decrease in income share accruing to workers.
    Keywords: factor income distribution, labour regulation.
    JEL: E25 J50
    Date: 2012–11–05
  13. By: di Cosmo, Valeria; Malaguzzi Valeri, Laura
    Abstract: In a deregulated market, the decision to build new thermal power plants rests with private investors and they will decide whether to invest on the basis of expected profits. This paper evaluates how such profits are affected by the increasing presence of wind generation. We use hourly historical data for the Irish Single Electricity Market, a compulsory pool market with capacity payments, and simulate future series of electricity shadow prices, bids of representative plants and wind generation. We estimate the correlation between shadow price and installed wind capacity on the basis of past data, finding a negative correlation. We then evaluate the effects of increased wind capacity on thermal power plants' expected profits. We find that increasing installed wind from the current level of 2000MW to about 3000MW causes a larger decrease in profits for baseload gas plants and a smaller decrease for less flexible coal-fuelled plants. The decrease in profits is of the order of 1 to 2 per cent.
    Keywords: data/electricity/wind generation
    Date: 2012–12
  14. By: Martin Drechsler; Jürgen Meyerhoff; Cornelia Ohl (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))
    Abstract: Although wind power is currently the most efficient source of renewable energy, the cost of wind electricity still exceeds the market price. Subsidies in the form of feed-in tariffs (FIT) have been introduced in many countries to support the expansion of wind power. These tariffs are highly debated. Proponents say they are necessary to pave the way for decarbonising energy production. Opponents argue they prevent a welfare-optimal energy supply. Thus, in a case study we try to shed light on the welfare economic aspect of FIT by combining spatial modelling and economic valuation of landscape externalities of wind turbines. We show for the planning region West Saxony, Germany, that setting FIT in a welfare optimal manner is a challenging task. If set too high the production costs are overly increased, lowering social welfare. If set too low energy production targets may not be reached and/or external costs are overly increased, again lowering social welfare. Taking a closer look at the tariffs offered by the German Renewable Sources Energy Act we find for West Saxony that the tariffs quite well meet economic welfare considerations. One should note, however, that this finding might apply only to the present data set.
    Keywords: feed-in tariff, spatial allocation, wind power
    Date: 2012–07
  15. By: Cullinan, John; Flannery, Darragh; Walsh, Sharon; McCoy, Selina
    Abstract: While a number of international studies have attempted to assess the influence of geographic accessibility on the decision to participate in higher education, this issue has not been addressed in detail in an Irish context. The aim of this paper is to fill this gap and to present a higher education choice model that estimates the impact of travel distance on the decision of school leavers to proceed to higher education in Ireland, while also controlling for a range of individual level characteristics and school related variables. To do so we use data from the 2007 wave of the School Leavers' Survey. We find that, on average, travel distance is not an important factor in the higher education participation decision, when factors such as student ability are accounted for. However, further analysis shows that travel distance has a significantly negative impact on participation for those from lower social classes and that this impact grows stronger as distance increases. We also find that the distance effects are most pronounced for lower ability students from these social backgrounds. This has important implications for higher education policy in Ireland, especially in relation to equity of access and the design of the maintenance grant system.
    Keywords: data/education/equity/higher education/Ireland/Policy/Social class
    Date: 2012–12
  16. By: Malchow-Møller, Nikolaj (University of Southern Denmark); Munch, Jakob R. (University of Copenhagen); Seidelin, Claus Aastrup (University of Southern Denmark); Skaksen, Jan Rose (Copenhagen Business School)
    Abstract: Many developed countries have recently experienced a significant inflow of immigrants in the agricultural sector. At the same time, the sector is still in a process of structural transformation resulting in fewer but bigger and presumably more efficient farms. In this paper, we exploit detailed matched employer-employee data for the entire population of Danish farms in the period 1980-2008 to analyze the micro-level relationship between these two developments. We find that farms that employ immigrants tend to be both larger and at least as productive as other farms. Furthermore, an increased use of immigrants is found to be associated with an improvement in farm performance as measured by job creation and revenue, and this seems at least in part to reflect a causal effect of the immigrants.
    Keywords: immigration, agriculture, matched employer-employee data
    JEL: J61 J43
    Date: 2013–01
  17. By: Marco Corsino; Roberto Gabriele; Anna Giunta
    Abstract: The empirical evidence concerning the impact of R&D subsidies on both sides of the innovation process (input and output) and the overall performance of the firm is mixed. Moreover, while the role of regions in implementing innovation policies has increased since the last decade, little is known on the effectiveness of regional policy. This paper analyzes the effectiveness of a local R&D policy implemented in the Italian province of Trento, during the period 2002-07. The econometric analysis is based on counterfactual models. We evaluate the achievements of the local policy maker with respect to the following objectives: (i) prompt additional investment in innovation; (ii) enhance the overall competitiveness of the business sector in the regional area. We find that R&D incentives positively affect investments in intangible assets and human capital, while they have no effect on firms’ turnover, labor productivity and profitability.
    Keywords: Regional Innovation Policy, Ex Post Evaluation, Subsidies, Research and Development, Counterfactual Models
    JEL: O25 O31 O38
    Date: 2012–11
  18. By: Orea, Luis (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Growitsch, Christian (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Jamasb, Tooraj (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: Supervised dimension reduction methods have been extensively applied in different scientific fields like biology and medicine in recent years. However, they have hardly ever been used in micro economics, and in particular cost function modeling. Nonetheless, these methods can also be useful in regulation of natural monopolies such as gas, water, and electricity networks, where firms’ cost and performance can be affected by a large number of environmental factors. In order to deal with this ‘dimensionality’ problem we propose using a supervised dimension reduction approach that aims to reduce the dimension of data without loss of information. Economic theory suggests that in the presence of other relevant production (cost) drivers, the traditional all-inclusive assumption is not satisfied and, hence, production or cost predictions (and efficiency estimates) might be biased. This paper shows that purging the data using a partial regression approach allows us to address this issue when analyzing the effect of weather and geography on cost efficiency in the context of the Norwegian electricity distribution networks.
    Keywords: supervised composites; environmental conditions; electricity networks
    JEL: L15 L51 L94
    Date: 2012–12–02
  19. By: Pilar Beneito (University of Valencia and ERI-CES); María E. Rochina-Barrachina (University of Valencia and ERI-CES); Amparo Sanchis (University of Valencia and ERI-CES)
    Abstract: In this paper we analyse the role of learning through experience in Research and Development (R&D) activities in strengthening firms’ capabilities to achieve innovation outcomes. Using a production function approach, we estimate a count-data model using a panel dataset of Spanish manufacturing firms for the period 1990-2006. We find that the number of years of engagement in R&D activities is positively associated with the achievement of product innovations. Our results highlight that experience in R&D is an additional technological asset to be considered for a good management practice. In particular our findings indicate that the relationship between firms’ R&D experience and product innovations is non-linear, that is, that experience has a positive effect on the probability to achieve product innovations, but at a decreasing rate. In addition, our results suggest that, although large firms are more efficient than SMEs in converting R&D investment into product innovations, SMEs obtain more efficiency gains from R&D experience than large firms.
    Keywords: R&D experience, learning, product innovation, count data, SMEs
    Date: 2013–01
  20. By: D. BLANCHET (Insee); S. LE MINEZ (Insee)
    Abstract: Accrued-to-date liabilities (ADLs) could soon add to the set of regular statistics on public pensions, in compliance with updated SNA provisions. This raises two questions: how can this indicator be produced, and what for? Microsimulation is shown to constitute a relevant answer to the first question. Despite its stochastic nature, it displays results that seem stable enough for accounting purposes. Concerning the what for question, it is well-known that ADLs are not an indicator of global financial sustainability. Their message is more interesting from the household perspective and especially at the micro level. This fosters the case for microsimulation that automatically produces consistent micro/macro results. All these macro and micro properties are illustrated in the French case, with applications to the assessment of the successive 1993, 2003 and 2010 reforms that have modified entitlements in rather complex ways, differentiated across cohorts and skill levels.
    Keywords: Accrued-to-date liabilities, microsimulation, pension reforms
    JEL: C53 H55 J26
    Date: 2012

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