nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒03‒23
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The relationship between EU indicators of persistent and current poverty By Stephen P Jenkins; Philippe Van Kerm
  2. The EU-SILC sample design variables: critical review and recommendations By Tim Goedemé
  3. Is the eco-efficiency in greenhouse gas emissions converging among European Union countries? By Mariam Camarero; Juana Castillo Giménez; Andrés J. Picazo-Tadeo; Cecilio Tamarit
  4. Towards a common framework for developing cross-nationally comparable reference budgets in Europe By Bérénice Storms; Tim Goedemé; Karel Van den Bosch; Kristof Devuyst
  5. Explaining the Patenting Propensity: A Regional Analysis using EPO-OECD Data By Cozza, Claudio; Schettino, Francesco
  6. Labour-Market Outcomes of Older Workers in the Netherlands: Measuring Job Prospects Using the Occupational Age Structure By Bosch, Nicole; ter Weel, Bas
  7. Does venture capital really foster innovation? By Ana Paula Faria; Natália Barbosa
  8. Real Wages, Amenities and the Adjustment of Working Hours Across Regional Labour Markets By Teresa Schlüter
  9. Monopolistic Sequestration of European Carbon Emissions By Niko Jaakkola
  10. Migration and Wage Effects of Taxing Top Earners: Evidence from the Foreigners' Tax Scheme in Denmark By Henrik Jacobsen Kleven; Camille Landais; Emmanuel Saez; Esben Anton Schultz
  11. Regulation of Pharmaceutical Prices: Evidence from a Reference Price Reform in Denmark By Kaiser, Ulrich; Méndez, Susan J.; Rønde, Thomas; Ullrich, Hannes
  12. Examining the non-linear relationship between migration and trade By Guadalupe Serrano-Domingo; Francisco Requena-Silvente
  13. Consolidating the Evidence on Income Mobility in the Western States of Germany and the U.S. from 1984-2006 By Gulgun Bayaz Ozturk; Richard V. Burkhauser; Kenneth A. Couch
  14. The Role of Natural Gas in a Low-Carbon Europe: Infrastructure and Regional Supply Security in the Global Gas Model By Franziska Holz; Philipp M. Richter; Ruud Egging
  15. Skill Premia and Intergenerational Skill Transmission: The French Case By B. Ben Halima; N. Chusseau; J. Hellier
  16. How Sensitive Are Individual Retirement Expectations to Raising the Retirement Age? By de Grip, Andries; Fouarge, Didier; Montizaan, Raymond
  17. Determinants of Generic vs. Brand Drug Choice: Evidence from Population-wide Danish Data By Niels Skipper; Rune Vejlin
  18. Is the Willingness to Take Financial Risk a Sex-Linked Trait?: Evidence from National Surveys of Household Finance By Nataliya Barasinska; Dorothea Schäfer
  19. Business Cycles, Unemployment and Entrepreneurial Entry - First Evidence from Germany By Michael Fritsch; Alexander Kritikos; Katharina Pijnenburg
  20. Product and Labor Market Imperfections and Scale Economies: Micro-Evidence on France, Japan and the Netherlands By Dobbelaere, Sabien; Kiyota, Kozo; Mairesse, Jacques

  1. By: Stephen P Jenkins; Philippe Van Kerm
    Abstract: The current poverty rate and the persistent poverty rate are both included in the EU's portfolio of primary indicators of social inclusion. We show that there is a near-linear relationship between these two indicators across EU countries drawing on empirical analysis of EU-SILC and ECHP data. Using a prototypical model of poverty dynamics, we explain how the near-linear relationship arises and show how the model can be used to predict persistent poverty rates from current poverty information. In the light of the results, we discuss whether the EU's persistent poverty measure and the design of EU-SILC longitudinal data collection require modification.
    Keywords: Persistent poverty, income poverty, poverty, EU-SILC, Europe
    JEL: I32 D31
    Date: 2013–03
  2. By: Tim Goedemé
    Abstract: The EU Statistics on Income and Living Conditions (EU-SILC) are the principal data source for analysing the social situation in Europe. Given that EU-SILC is based on a representative sample in each participating country, estimates based on EU-SILC are subject to sampling variance. One of the principal determinants of the sampling variance is the sample design that has been used for drawing the sample. Therefore, standard errors, significance tests and confidence intervals should be computed taking the sample design as much as possible into account. For doing so, good sample design variables are an indispensable starting point. In this paper, I review the quality of sample design information in the EU-SILC dataset and formulate recommendations for data producers about how to improve the quality of sample design variables and for data users about how to make optimal use of the information that is already available in the EU-SILC UDB.
    Keywords: EU-SILC, sample design, sample design variables, sampling variance, Standard error
    JEL: D31 O52
    Date: 2013–03
  3. By: Mariam Camarero (Universidad Jaume I); Juana Castillo Giménez (Universidad de Valencia); Andrés J. Picazo-Tadeo (Universidad de Valencia); Cecilio Tamarit (Universidad de Valencia)
    Abstract: Eco-efficiency refers to the ability to produce more goods and services with less impact on the environment and less consumption of natural resources. This issue has become a matter of concern that is receiving increasing attention by politicians, scientists and academics. Furthermore, greenhouse gases emitted as a result of production processes have a heavy impact in the environment and also are the foremost responsible of global warming and climate change. This paper assesses convergence in eco-efficiency from greenhouse gas emissions in the European Union (EU). Eco-efficiency is assessed at both country and greenhouse-gas-specific levels using Data Envelopment Analysis techniques and directional distance functions, as recently proposed by Picazo-Tadeo et al. (2012). Then, convergence is evaluated using the Phillips and Sul (2007) approach that allows testing for the existence of convergence groups. Although the results point to the existence of different convergence clubs depending on the specific pollutant considered, they signal the existence of, at least, four clear groups of countries. The first two groups are conformed of core EU high-income countries (Benelux, Germany, Italy, Austria, the United Kingdom and Scandinavian countries). A third club is made up of peripheral countries (Spain, Ireland, Portugal, Greece) together with some Eastern countries (Latvia, Slovenia) and the rest of clubs consists of groups containing Eastern European countries.
    Keywords: Eco-efficiency; convergence; clubs; greenhouse gases emissions; European Union; directional distance functions; Data Envelopment Analysis
    JEL: C15 C22 C61 F15 Q56
    Date: 2013–03
  4. By: Bérénice Storms; Tim Goedemé; Karel Van den Bosch; Kristof Devuyst
    Abstract: Reference budgets could play an important role in the work of measuring poverty and assessing income adequacy, and in the process of monitoring social inclusion policies in the European Union. As the reference budgets that are already constructed in some European countries are all developed rather independently from each other, they are not directly comparable due to substantial differences in objectives and methods used. In this paper we sketch how to move forward towards the construction of cross-country comparable reference budgets. A common theoretical framework, a common methodology and commonly agreed criteria are essential building blocks. We discuss the choices we have made in order to start developing cross-nationally comparable reference budgets for Belgium, Finland, Greece, Hungary, Italy and Spain in the project ImPRovE , a project financed by the European Commission.
    Keywords: Europe, Poverty, Concept, measurement, Reference budgets, budget standard, capabilities, human needs
    JEL: D31 D63 O52
    Date: 2013–03
  5. By: Cozza, Claudio; Schettino, Francesco
    Abstract: The aim of this paper is to study empirically the patenting propensity at the European regional level. To do that we use the OECD-REGPAT dataset, that includes patent applications made by European inventors and applicants to EPO in the time-span 1978-2011. Explanatory variables on R&D and human capital are extracted from EUROSTAT and OECD databases. In order to reduce biases we use patent applications by region of the inventor, as its linkage to the territory is stronger than using the region of the applicant. Analyzing the data, we sketch out the existence of a deep uneven distribution both in patent applications and R&D expenditure. Richer regions in terms of GDP – generally those of central-western Europe – show higher level of both private and public R&D expenditure as well as a consistent share of the whole European patent applications in last decades. As a consequence, eastern (and to a minor extent southern) European regions report harmful outcomes in terms of both variables. Thus, following the approach of Cincera (1997, 2005) we explain the determinants of patenting propensity using a regional panel data. Our main results substantially confirm the key role of R&D expenditure on patenting activity: mainly the business-enterprises component, but also the government sector one. Moreover, human capital variables – such as the share of human resources employed in high tech industries, and the number of highly qualified workers in science and technology occupations – show a positive relationship with patenting propensity. On the other side, average enterprise size seems not to play a determinant role on patent applications.
    Keywords: Patents, Intellectual Property Rights, Innovation, EPO, R&D
    JEL: K29 O34 O4
    Date: 2013–03–01
  6. By: Bosch, Nicole (CPB Netherlands Bureau for Economic Policy Analysis); ter Weel, Bas (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: This paper analyses changes in job opportunities of older workers in the Netherlands in the period 1996-2010. The standard human capital model predicts that, as a result of human capital obsolescence, mobility becomes more costly when workers become older. We measure and interpret how changing job opportunities across 96 occupations affect different age and skill groups. Older workers end up in shrinking occupations, in occupations with a lower share of high-skilled workers, in occupations facing a higher threat of offshoring tasks abroad, more focus on routine-intensive tasks and less rewarding job content. This process is not only observed for the oldest group of workers, but for workers aged 40 and above. Observing older workers in declining occupations is to a large extent a market outcome, but declining job opportunities in terms of less satisfying working conditions and job tasks and content could potentially raise incentives to retire early.
    Keywords: occupational mobility, employment, older workers
    JEL: J24 J60
    Date: 2013–02
  7. By: Ana Paula Faria (Universidade do Minho - NIPE); Natália Barbosa (Universidade do Minho - NIPE)
    Abstract: Using panel data of 17 European Union countries, we find robust empirical support for a positive impact of venture capital on innovation. After controlling for the potential endogenous relationship between venture capital and innovation, the results indicate that venture capital fosters innovation but mainly on a later stage.
    Keywords: venture capital; innovation; dynamic panel data
    JEL: O31 G30
    Date: 2013
  8. By: Teresa Schlüter
    Abstract: This article establishes a link between the traditional labour economics and the urban economics literature by analyzing differences in working hours across regional labour market areas in the UK. Using a real wage index reflecting skill adjusted earnings net of quality adjusted house prices in Britain and panel data on working hours the effect of regional real wages on labour supply is assessed. The identification strategy relies on workers who move across 157 labour market areas in Britain and includes individual fixed effects. The main finding is that working hours are significantly higher in labour market areas that offer lower real wages. Decreasing real wages by £1000 results in an increase of working hours of 0.3 %. Real wage differentials can be seen as a proxy for the local amenity level. I can replicate my finding including a set of amenities instead of the real wage index. The effect is mainly due to labour supply decisions of low skilled workers who work significantly longer hours in low real wage areas than high skilled workers. This indicates that low skilled workers are willing to increase their labour supply in order to afford living in high amenity areas.
    Date: 2013–03
  9. By: Niko Jaakkola
    Abstract: Mitigating climate change by carbon capture and storage (CCS) will require vast infrastructure investments. These investments include pipeline networks for transporting carbon dioxide (CO2) from industrial sites ('sources') to the storage sites ('sinks'). This paper considers the decentralised formation of trunk-line networks when geological storage space is exhaustible and demand is increasing. Monopolistic control of an exhaustible resource may lead to overinvestment and/or excessively early investment, as these allow the monopolist to increase her market power. The model is applied to CCS pipeline network formation in northwestern Europe. The features identified above are found to play a minor role. Should storage capacity be effectively inexhaustible, underinvestment due to the inability of the monopolist to capture the entire social surplus is likely to have substantial welfare impacts. Multilateral bargaining to coordinate international CCS policies is particularly important if storage capacity is plentiful.
    Keywords: carbon capture and storage, exhaustible resources, network formation, spatial networks
    JEL: L50 Q31 Q58
    Date: 2013
  10. By: Henrik Jacobsen Kleven; Camille Landais; Emmanuel Saez; Esben Anton Schultz
    Abstract: This paper analyzes the effects of income taxation on the international migration and earnings of top earners using a Danish preferential foreigner tax scheme and population-wide Danish administrative data. This scheme, introduced in 1991, allows new immigrants with high earnings to be taxed at a preferential flat rate for a duration of three years. We obtain three main results. First, the scheme has doubled the number of highly paid foreigners in Denmark relative to slightly less paid ineligible foreigners, which translates into a very large elasticity of migration with respect to the net-of-tax rate on foreigners, between 1.5 and 2. Hence, preferential tax schemes for highly paid foreign workers could create severe tax competition between countries. Second, we find compelling evidence of a negative effect of scheme-induced increases in the net-of-tax rate on pre-tax earnings at the individual level. This finding cannot be explained by the standard labor supply model where pay equals marginal productivity, but it can be rationalized by a matching frictions model with wage bargaining where there is a gap between pay and marginal productivity. Third, we find no evidence of positive or negative spillovers of the scheme-induced influx of high-skilled foreigners on the earnings of highly paid natives.
    JEL: H24 J61
    Date: 2013–03
  11. By: Kaiser, Ulrich (University of Zurich); Méndez, Susan J. (University of Zurich); Rønde, Thomas (Copenhagen Business School); Ullrich, Hannes (University of Zurich)
    Abstract: Reference prices constitute a main determinant of patient health care reimbursement in many countries. We study the effects of a change from an "external" (based on a basket of prices in other countries) to an "internal" (based on comparable domestic products) reference price system. We find that while our estimated consumer compensating variation is small, the reform led to substantial reductions in list and reference prices as well as co-payments, and to sizeable decreases in overall producer revenues, health care expenditures, and co-payments. These effects differ markedly between branded drugs, generics, and parallel imports with health care expenditures and producer revenues decreasing and co-payments increasing most for branded drugs. The reform also induced consumers to substitute from branded drugs – for which they have strong preferences – to generics and parallel imports. This substitution also explains the small increase in consumer welfare despite a substantial decrease in expenditures.
    Keywords: pharmaceutical markets, regulation, co-payments, reference pricing, welfare effects
    JEL: I18 C23
    Date: 2013–02
  12. By: Guadalupe Serrano-Domingo (University of Valencia); Francisco Requena-Silvente (University of Valencia)
    Abstract: The migration-trade link has been studied extensively since the mid nineties, finding a positive impact through different channels. Based on the generalized propensity score (GPS) methodology, we estimate a dose-response function, depicting a non-linear impact of immigration on exports using regional data for Spain and Italy. For both countries the elasticity of province exports to immigration from a given nationality is always positive. However, it is magnitude varies with the level of immigrants: increasing with less than 100 immigrants; decreasing between 100 and 1500; increasing again with more than 1500. In contrast to previous studies that use country-level data, we find no exhaustion point in the effectiveness of the immigration networks on regional exports.
    Keywords: Immigration, exports, generalized propensity score, dose-response function, Spanish provinces, Italian provinces
    JEL: C21 F14 F22
    Date: 2013–03
  13. By: Gulgun Bayaz Ozturk; Richard V. Burkhauser; Kenneth A. Couch
    Abstract: The cross-national intragenerational income mobility literature assumes within-country mobility is invariant over the period measured. We argue that a great social transformation—German reunification—abruptly and permanently altered economic mobility. Using standard measures of mobility (with panel data for the western states of Germany and the U.S.) over the entire period 1984-2006, we find the conventional result that income mobility is greater in Germany. But when we cut the data into moving five-year windows and compare mobility before and after reunification, income mobility declines significantly over the years immediately following reunification in Germany but not in the U.S.
    Date: 2013
  14. By: Franziska Holz; Philipp M. Richter; Ruud Egging
    Abstract: In this paper, we use the Global Gas Model to analyze the perspectives and infrastructure needs of the European natural gas market until 2050. Three pathways of natural gas consumption in a future low-carbon energy system in Europe are envisaged: i) a decreasing natural gas consumption, along the results of the PRIMES model for the EMF decarbonization scenarios; ii) a moderate increase of natural gas consumption, along the lines of the IEA (2012) World Energy Outlook's New Policy Scenario; and iii) a temporary increase of natural gas use as a bridge technology, followed by a strong decrease after 2030. Our results show that import infrastructure and intra-European transit capacity currently in place or under construction are largely sufficient to accommodate the import needs of the EMF decarbonization scenarios, despite the reduction of domestic production and the increase of import dependency. However, due to strong demand in Asia which draws LNG and imports from Russia, Europe has to increasingly rely on pipeline exports from Africa and the Caspian region from where new pipelines are built. Moreover, pipeline investments open up new import and transit paths, including reverse flow capacity, which improves the diversification of supplies. In the high gas consumption scenario similar pipeline links are realized-though on a larger scale, doubling the costs of infrastructure expansion. In the bridge technology scenario, the utilization rates of (idle) LNG import capacity can be increased for the short period of temporary strong natural gas demand.
    Keywords: natural gas, climate change, infrastructure, equilibrium modeling
    JEL: Q31 Q47 Q54 C61 D43
    Date: 2013
  15. By: B. Ben Halima (EQUIPPE, Univ. of Lille 1 and MESHS); N. Chusseau (EQUIPPE, Univ. of Lille 1 and MESHS); J. Hellier (LEMNA, University of Nantes)
    Abstract: In the case of France, we analyse the changes (i) in the skill premium linked to each level of education and (ii) in the impact of parents’ skill and income upon the educational attainment of their children. To this end, we build a theoretical model which is subsequently estimated. Our calculations firstly reveal (i) a critical decline in the skill premium of the Baccalaureate in relation to the lowest skill level, and (ii) an increase in the skill premia of higher education in relation to the Baccalaureate, which however is not large enough to avoid the decrease in all the skill premia relative to the lowest skill. Secondly, we find (i) a significant increase in the impact of the family backgrounds upon the individuals’ education from 1993 to 2003 which essentially derives from a higher impact of parental income upon the educational attainment, and (ii) an increase in the impact of public expenditure upon education. Consequently, if inequality has decreased among the employed population, the slowdown in intergenerational mobility could reverse this tendency in the longer term. This may however be offset by higher public educational expenditure.
    Keywords: Family backgrounds, intergenerational mobility, return to education, skill premium
    JEL: I2 J24 J31
    Date: 2013–01
  16. By: de Grip, Andries (ROA, Maastricht University); Fouarge, Didier (ROA, Maastricht University); Montizaan, Raymond (ROA, Maastricht University)
    Abstract: This paper investigates the causal effects of the announcement of an increase in the statutory pension age on employee retirement expectations. In June 2010, the Dutch government signed a new pension agreement with the employer and employee organizations that entailed an increase in the statutory pension age from 65 currently to 66 in 2020 for all inhabitants born after 1954. Given the expected increase in average life expectancy, it was also decided that in 2025 the pension age would be further increased to 67 for those born after 1959. This new pension agreement received huge media coverage. Using representative matched administrative and survey data of public sector employees, we find that the proposed policy reform increased the expected retirement age by 3.6 months for employees born between 1954 and 1959 and by 10.8 months for those born after 1959. This increase is reflected in a clear shift in the retirement peak from age 65 to ages 66 and 67 for the respective treated cohorts. Men respond less strongly to the policy reform than women, but within couples we find no evidence that the retirement expectations of one spouse are affected by an increase in the statutory pension age of the other. Furthermore, we show that treatment effects are largely driven by highly educated individuals but are lower for employees whose job involves physically demanding tasks or managerial and supervisory tasks.
    Keywords: retirement, labor supply, pension system reform, cross-spouse effects
    JEL: J14 J26
    Date: 2013–03
  17. By: Niels Skipper (Department of Economics and Business, Aarhus University); Rune Vejlin (Department of Economics and Business, Aarhus University)
    Abstract: When prescription medications go off patent, vastly cheaper generic drugs usually enters the market. However, the original brand medication often maintains non-negligible market shares. This paper investigates whether demand for branded medications in post-patent markets is patient- or doctor driven. We use population-wide Danish register data including all prescriptions for seven blockbuster drugs from 1998-2008. At the outset, descriptive statistics suggest large variation in drug choice over doctors. Nonetheless, using a two-way fixed effects model we find that the primary determinants of brand drug use are unobserved patient characteristics and price effects, while observed and unobserved doctor characteristics in general explain only 0.7 % of the variation in drug choice. This is suggestive evidence that the doctors in the Danish setting with no incentives to push expensive brand drugs do indeed not do so. Our results also suggest that one should be careful when applying fixed effects in small samples.
    Keywords: Prescription drug demand, fixed effects, brand preferences
    JEL: I11 L65
    Date: 2013–03–14
  18. By: Nataliya Barasinska; Dorothea Schäfer
    Abstract: We investigate whether the willingness to take investment risk is a sex-linked trait and link the results to the country's gender equality regime. Our empirical analysis involves household data on financial asset holdings as well as on self-reported risk tolerance for Austria, Italy, the Netherlands and Spain. Of those countries, Italy is by far the country with the greatest degree of gender inequality according to the 2009 Global Gender Gap Report. Two stages of building a portfolio of financial assets are analyzed. For the first-stage decision of whether to invest in risky assets in the first place, gender is found to have no effect in Austria, the Netherlands and Spain but does have an impact in Italy. However, even for Italy, it seems to be irrelevant in the second-stage decision about the share of wealth invested in the risky assets. We infer from these findings that, for countries with a high degree of gender equality, it is inappropriate to base financial advice primarily on gender.
    Keywords: Gender, risk aversion, financial behavior
    JEL: G11 J16
    Date: 2013
  19. By: Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Alexander Kritikos (German Institute for Economic Research (DIW Berlin), and University of Potsdam, and IZA (Bonn) and IAB (Nuremberg)); Katharina Pijnenburg (German Institute for Economic Research (DIW Berlin))
    Abstract: We investigate whether people become more willingly self-employed during boom periods or in recessions and to what extent it is the business cycle or the employment status influencing entry rates into entrepreneurship. Our analysis for Germany reveals that start-up activities are positively influenced by unemployment rates and that the cyclical component of real GDP has a negative effect. This implies that new business formation is counter-cyclical. Further disentangling periods of low and high unemployment periods reveals a "low unemployment retard effect".
    Keywords: Self-employment, business cycle, unemployment, start-up
    JEL: L26 E32
    Date: 2013–03–20
  20. By: Dobbelaere, Sabien (VU University Amsterdam); Kiyota, Kozo (Yokohama National University); Mairesse, Jacques (CREST-INSEE)
    Abstract: Allowing for three labor market settings (perfect competition or right-to-manage bargaining, efficient bargaining and monopsony), this paper relies on an extension of Hall's econometric framework for estimating simultaneously price-cost margins and scale economies. Using an unbalanced panel of 17,653 firms over the period 1986-2001 in France, 8,725 firms over the period 1994-2006 in Japan and 7,828 firms over the period 1993-2008 in the Netherlands, we first apply two procedures to classify 30 comparable manufacturing industries in 6 distinct regimes that differ in terms of the type of competition prevailing in product and labor markets. For each of the three predominant regimes in each country, we then investigate industry differences in the estimated product and labor market imperfections and scale economies. We find important regime differences across the three countries and also observe differences in the levels of product and labor market imperfections and scale economies within regimes.
    Keywords: rent sharing, monopsony, price-cost mark-ups, production function, panel data
    JEL: C23 D21 J50 L13
    Date: 2013–02

This nep-eur issue is ©2013 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.