nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒04‒13
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Corporate taxation and the quality of research and development By Ernst, Christof; Richter, Katharina; Riedel, Nadine
  3. Comparing Labor Supply Elasticities in Europe and the US: New Results By Olivier Bargain; Christina Orsini; Andreas Peichl
  4. Demand pull and technological flows within innovation systems: the intra-European evidence By Antonelli Cristiano; Gehringer Agnieszka
  5. Early Child Care and Child Development: For Whom it Works and Why By Felfe, Christina; Lalive, Rafael
  6. Migration and Wage Effects of Taxing Top Earners: Evidence from the Foreigners' Tax Scheme in Denmark By Kleven, Henrik; Landais, Camille; Saez, Emmanuel; Schultz, Esben
  7. Factor Components of Inequality: A Cross-Country Study By Cecilia García-Peñalosa; Elsa Orgiazzi
  8. The Clothing Export Performance and Prospects for Advanced and Emerging Economies: Evidence from a Panel Data Analysis By Donatella Baiardi; Carluccio Bianchi; Eleonora Lorenzini
  9. From the EU Savings Directive to the US FATCA, Taxing Cross Border Savings Income By Marcel GERARD; Lucia GRANELLI
  10. Bridge Unemployment in Germany: Response in Labour Supply to an Increased Early Retirement Age By Matthias Giesecke; Michael Kind
  11. The lifetime gender gap in Italy. Does the pension system countervail labour market outcomes? By Leombruni Roberto; Mosca Michele
  12. Comparing Inequality Aversion across Countries When Labor Supply Responses Differ By Olivier Bargain; Mathias Dolls; Dirk Neumann; Andreas Peichl; Sebastian Siegloch
  13. Youth Labour Market Performance in Spain and its Determinants: A Micro-Level Perspective By Juan J. Dolado; Marcel Jansen; Florentino Felgueroso; Andrés Fuentes; Anita Wölfl
  14. The First Review of EU Antidumping Reviews By Nita, Andreea; Zanardi, Maurizio
  15. Gender Differences in Long Term Health Outcomes of Internal Migrants in Italy. By Vincenzo Atella; Partha Deb
  16. Cost Efficiency and Subsidization in German Local Public Bus Transit By Nieswand, Maria; Walter, Matthias
  17. Is the willingness to take financial risk a sex-linked trait? Evidence from national surveys of household finance By Barasinska, Nataliya; Schäfer, Dorothea
  18. Sorting out the impact of cultural diversity on innovative firms. An empirical analysis of Dutch micro-data By Ceren Ozgen; Thomas de Graff
  19. The Economic Incentives of Cultural Transmission: Spatial Evidence from Naming Patterns across France By Algan, Yann; Mayer, Thierry; Thoenig, Mathias
  20. Musn't Grumble: Immigration, Health and Health Service Use in the UK and Germany By Jonathan Wadsworth

  1. By: Ernst, Christof; Richter, Katharina; Riedel, Nadine
    Abstract: This paper examines the impact of tax incentives on corporate research and development (R&D) activity. Traditionally, R&D tax incentives have been provided in the form of special tax allowances and tax credits. In recent years, several countries moreover reduced their income tax rates on R&D output (patent boxes). Previous papers have shown that all three tax instruments are effective in raising the quantity of R&D related activity. We provide evidence that, beyond this quantity effect, corporate taxation also distorts the quality of R&D projects, i.e. their innovativeness and revenue potential. Using rich data on corporate patent applications to the European patent office, we find that a low tax rate on patent income is instrumental in attracting innovative projects with a high earnings potential and innovation level. The effect is statistically signficant and economically relevant and prevails in a number of sensitivity checks. R&D tax credits and tax allowances are in turn not found to exert a statistically significant impact on project quality. --
    Keywords: corporate taxation,patent quality,micro data
    JEL: H3 H7 J5
    Date: 2013
  2. By: Mark Smith (MC - Management et Comportement - Grenoble École de Management (GEM))
    Abstract: Although there has been more than thirty years of equal pay legislation in the European Union the gap between male and female earnings has remained remarkably resilient and is present across all Member States regardless of Member State institutional arrangements. The European regulatory landscape has changed to one relying heavily on soft law approaches and with more limited ambitions in the field of gender equality than at the creation of the European Employment Strategy. In this environment the European Commission has placed greater emphasis on the role of social partners in addressing the gender pay gap. This paper critically reviews the role of these social partners in addressing pay inequalities.
    Keywords: directives, equality. Europe. gender, pay gap. social partners. soft law
    Date: 2012
  3. By: Olivier Bargain (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, and IZA); Christina Orsini (U. of Leuven); Andreas Peichl (IZA, U. of Cologne, CESifo and ISER)
    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, with measurement differences 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 considered. Nonetheless, such differences do exist, and are found not to arise from different tax-benefit systems, wage/hour level or demographic compositions across countries, suggesting genuine differences in work preferences across countries. Furthermore, three other important results for welfare analysis are consistent across countries: the extensive (participation) margin dominates the intensive (hours) margin; for singles, this leads to larger labor supply responses in low-income groups; and 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 their household production in Europe.
    Keywords: household labor supply, elasticity, taxation, Europe, US.
    JEL: C25 C52 H31 J22
    Date: 2013–03
  4. By: Antonelli Cristiano; Gehringer Agnieszka (University of Turin)
    Abstract: We investigate the demand pull effects on sector-level total factor productivity growth. Such effects stem from the knowledge interactions carried by the market transactions of intermediate inputs between competent customers and innovative suppliers. Both knowledge interactions and transactions are substantial Ingredients in making the competent demand operate the positive impact on productivity growth of the entire economic system. The demand pull hypothesis is, thus, rejuvenated through the focus on the inter-sectoral linkages between competent users and innovative producers. In the empirical analysis bas ed on a dynamic panel technique, we implement intermediate flows from input-output tables, qualified by productivity increases downstream, in order to investigate their joint influence on the upstream growth of productivity. The evidence Union of the derived demand-driven influence regarding the European (EU) over the period 1995-2007 is strong and positive, but varies between three EU innovation systems, EU core, East and South
    Date: 2013–01
  5. By: Felfe, Christina; Lalive, Rafael
    Abstract: Many countries are currently expanding access to child care for young children. But are all children equally likely to benefit from such expansions? We address this question by adopting a marginal treatment effects framework. We study the West German setting where high quality center-based care is severely rationed and use within state differences in child care supply as exogenous variation in child care attendance. Data from the German Socio-Economic Panel provides comprehensive information on child development measures along with detailed information on child care, mother-child interactions, and maternal labor supply. Results indicate strong differences in the effects of child care with respect to observed characteristics (children’s age, birth weight and socio-economic background), but less so with respect to unobserved determinants of selection into child care. Underlying mechanisms are a substitution of maternal care with center-based care, an increase in average quality of maternal care, and an increase in maternal earnings.
    Keywords: child care; child development; marginal treatment effects
    JEL: I21 I38 J13
    Date: 2013–01
  6. By: Kleven, Henrik; Landais, Camille; Saez, Emmanuel; Schultz, Esben
    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.
    Keywords: International Migration; Taxation; Wage Bargaining
    JEL: H22 H31 J61
    Date: 2013–03
  7. By: Cecilia García-Peñalosa (Aix Marseille University (Aix Marseille School of Economics), Cnrs and Ehess); Elsa Orgiazzi (University of Rennes 1 and CREM)
    Abstract: This paper uses data from the Luxembourg Income Study to examine some of the forces that have driven changes in household income inequality over the last three decades of the 20th century. We decompose inequality for 6 countries (Canada, Germany, Norway, Sweden, the UK, and the US) into the three sources of market income (earnings, property income and income from self-employment) and taxes and transfers. Our findings indicate that although changes in the distribution of earnings are an important aspect of recent increases in inequality, they are not the only one. Greater earnings dispersion has in some cases been accompanied by a reduction in the share of earnings that dampened its impact on overall household income inequality. In some countries the contribution of self-employment income to inequality has been on the rise, while in others, increases in inequality in capital income account for a substantial fraction of the observed distributional changes.
    Keywords: income inequality, factor decomposition, decomposition by population subgroups.
    JEL: D31 D33
    Date: 2013–03
  8. By: Donatella Baiardi (Department of Economics and Management, University of Pavia); Carluccio Bianchi (Department of Economics and Management, University of Pavia); Eleonora Lorenzini (Department of Economics and Management, University of Pavia)
    Abstract: This paper studies the clothing export performance of twelve top exporting countries (China, Honk Kong, France, Germany, India, Indonesia, Italy, Netherlands, Spain, Turkey, UK and USA) in the period between 1992 and 2011. Price and income elasticities are estimated for each country, after controlling for nonstationarity, cointegration and Granger causality. Price elasticities estimates are used, together with market shares and unit values dynamics, to assess the export performance and prospects of the various countries. A multifarious picture emerges from the analysis, whereby China plays the role of uncontested leader, but not all the advanced European countries, which are supposed to be more severely hit by the competition of the low-labour costs countries, definitely lose competitiveness, since different outcomes are possible according to the specific price and quality strategies adopted.
    Keywords: Clothing, Price elasticity, Income elasticity, Export Performance, Product Quality, Panel Granger causality
    JEL: F10 F14 O10
    Date: 2013–03
  9. By: Marcel GERARD (UNIVERSITE CATHOLIQUE DE LOUVAIN and CESifo); Lucia GRANELLI (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper is motivated by the recent innovations regarding the taxation of cross-border savings that took place in the European Union and the United States. We develop a model to assess the functioning of the different systems of international taxation used on both sides of the Atlantic Ocean. We consider agents as investors able to diversify their portfolio between countries and kinds of financial assets. Furthermore, we show the effects of the various settings investigated not only on the taxation of foreign savings income, but also on the tax rates applied to domestic savings. Finally, comparing the respective merits of diverse regimes of information exchange and coordinated withholding taxation, we explore the consequences of the loopholes in both the EU Savings Directive and the US Qualified Intermediary mechanism, and cope with the cost of information sharing. We find that only three tax designs ensure efficiency: a framework of taxation based on the principle of residence, perfect information exchange for all substitutable assets and strategies, and a system of withholding taxation where the residence country can choose the withholding tax rate and also receives all the withholding tax revenues collected abroad.
    Keywords: International Taxation, Taxation of Personal Income, Savings Taxation, European Integration
    JEL: H24 H26 H31 F36 F55
    Date: 2013–03–25
  10. By: Matthias Giesecke; Michael Kind
    Abstract: This study examines an increase in the early retirement age from 60 to 63 for the group of older unemployed men in Germany. As consequence of this policy reform, the time to retirement is increased from the perspective of recently unemployed individuals and therefore serves as a source of exogenous variation. We estimate continuous time hazard models for individuals at risk of leaving the state unemployment into employment or into early retirement due to exceptional rules. We find a positive impact of an increase in the early retirement age on the reemployment probability whereas the probability to retire early due to exceptional rules is not affected.
    Keywords: Labour supply; retirement behaviour; old age unemployment; duration analysis
    JEL: J14 J26 J64
    Date: 2013–03
  11. By: Leombruni Roberto; Mosca Michele (University of Turin)
    Abstract: In Italy large work career gender gaps currently ex ist, particularly regarding wages and activity rates. This paper investigates the issue looking at lifetime incomes, where from the one side all the career gaps are sum med up, from the other the redistribution acted by the pension system may mitigate the differences. Exploiting an original database on entire work careers, we document how the pay gap constantly widens with age and how women tend to cumulate a lower number of eligible working years. Both gaps have an impact on the pension calculation, so that at retirement gender differences are even higher. By means of a microsimulation model we show that the pension system partially countervails labour market outcomes, implying lower differences in lifetime in comes. However, due to the current transition to an actuarially neutral system, the effect will vanish, posing some concerns about the future prospects of gender income inequality
    Date: 2013–01
  12. By: Olivier Bargain (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, and IZA); Mathias Dolls (IZA and University of Cologne); Dirk Neumann (IZA and the University of Cologne); Andreas Peichl (IZA, U. of Cologne, CESifo and ISER); Sebastian Siegloch (IZA and the University of Cologne)
    Abstract: We analyze to which extent social inequality aversion differs across nations when control ling for actual country differences in labor supply responses. Towards this aim, we estimate labor supply elasticities at both extensive and intensive margins for 17 EU countries and the US. Using the same data, inequality aversion is measured as the degree of redistribution implicit in current tax-benefit systems, when these systems are deemed optimal. We find relatively small differences in labor supply elasticities across countries. However, this changes the cross-country ranking in inequality aversion compared to scenarios following the standard approach of using uniform elasticities. Differences in redistributive views are significant between three groups of nations. Labor supply responses are systematically larger at the extensive margin and often larger for the lowest earnings groups, exacerbating the implicit Rawlsian views for countries with traditional social assistance programs. Given the possibility that labor supply responsiveness was underestimated at the time these programs were implemented, we show that such wrong perceptions would lead to less pronounced and much more similar levels of inequality aversion.
    Keywords: Social preferences, redistribution, optimal income taxation, labor supply.
    JEL: H11 H21 D63 C63
    Date: 2013–03
  13. By: Juan J. Dolado; Marcel Jansen; Florentino Felgueroso; Andrés Fuentes; Anita Wölfl
    Abstract: This paper provides both descriptive and empirical evidence about the main youth labour market problems in Spain. Using the experiences of other EU economies as a benchmark, we document the performance of Spain as regards a wide set of youth labour market dimensions. These include employment and unemployment rates, youth wages, decisions to work and study, youth mobility, type of employment contract, time to find a first job, skill mismatch, etc. Cross-country econometric evidence from different micro-datasets is reported to understand the role played by several underlying supply/demand factors which might explain the difficulties faced by the Spanish youth labour market (<P>L'insertion des jeunes sur le marché du travail espagnol : résultats et facteurs déterminants - une perspective microéconomique<BR>Le présent document apporte des éléments descriptifs et empiriques sur les problèmes principaux auxquels sont confrontés les jeunes sur le marché du travail en Espagne. Nous comparons les résultats de l'Espagne avec ceux d’autres États membres de l’UE au regard de multiples indicateurs de l’emploi des jeunes, notamment les taux d’emploi et de chômage, le salaire des jeunes actifs, les décisions relatives au travail et aux études, la mobilité des jeunes, les types de contrat de travail, la durée nécessaire pour trouver un premier emploi, l’inadéquation des compétences, etc. Des données économétriques internationales, tirées de plusieurs micro-bases de données, sont utilisées pour mieux comprendre le rôle joué par plusieurs facteurs sous-jacents de l’offre et de la demande pouvant expliquer les difficultés du marché du travail des jeunes en Espagne (
    Keywords: Spain, youth employment, youth unemployment, youth labour market youth mobility, overqualification, skill mismatch, job search, duality, Espagne, emploi des jeunes, chômage des jeunes, marché du travail des jeunes, surqualification, inadéquation des compétences, recherche d'emploi, dualité
    JEL: J20 J30 J40 J60
    Date: 2013–03–27
  14. By: Nita, Andreea; Zanardi, Maurizio
    Abstract: The literature on antidumping (AD) has documented various aspects of this protectionist tool. However, a peculiar feature of AD has not received much attention: these measures are endogenous to the behavior of the exporting firms, which can adjust the dumping margin by changing their export price and ask the authority to amend the AD measures accordingly. The objective of this paper is to fill part of this gap in the literature by analyzing the AD reviews conducted by the European Union for affirmative petitions initiated in 1980-2009. To this end, a novel dataset of all such reviews has been assembled. Summary statistics reveal that more than a third of all petitions concluded with the imposition of AD measures are reviewed at least once before their expiration and most reviews lead to lower AD duties (still, almost 20% of the firms investigated through interim reviews see their duties increase). There are significant differences in the outcome of the reviews depending on the party requesting them (i.e., reviews lodged by European producers are less likely to lead to lower duties). These conclusions are confirmed by the econometric analysis, which also shows that Chinese firms see their duties reduced significantly less than those of firms from other countries.
    Keywords: antidumping; antidumping reviews
    JEL: F13
    Date: 2013–02
  15. By: Vincenzo Atella (University of Rome "Tor Vergata"); Partha Deb (Hunter College and the Graduate Center)
    Abstract: This article examines the long term physical and mental health effects of internal migration. We use data from Italy that allows us to study a relatively unique migration experience from Southern and Northeastern regions of Italy to Northwestern ones and to the region around Rome concentrated over a relatively short period from 1950-1970. We distinguish between impacts on women and men and between "early" and "late" migrants. We use finite mixture models to account for heterogeneity in the effects of migration and find that there is a statistically significant and substantial improvement in physical and mental health for rural migrant females. In addition, for these women the effect can be attributed to better living conditions at the destination and not due to selection. Even with the finite mixture models, we find no evidence of migration-health effects for the later cohort, nor for males in the early cohort. Finally, we do not find evidence of selection effect.
    Keywords: Health status, Migration decisions, Finite Mixture models, Italy.
    JEL: C23 I11 L23
    Date: 2013–03–29
  16. By: Nieswand, Maria; Walter, Matthias
    Abstract: This paper examines the impact of endogenous deficit-balancing subsidies on the cost efficiency of local public bus companies by using alternative frontier cost models for panel data. Thereby, the multidimensional performance estimation incorporates the subsidy variable directly. The empirical analysis relies on a unique dataset of 33 German companies observed over a period of up to twelve years. We find a positive effect of endogenous subsidies on the standard deviation of cost inefficiency implying that the range of companies’ cost inefficiency increases with the level of subsidies relative to total costs. Further, we find that non-subsidized firms perform better.
    Keywords: cost efficiency; endogenous subsidies; heteroscedasticity; local public bus transportation; panel data; stochastic cost frontier
    JEL: C13 D24 L92
    Date: 2013–02
  17. By: Barasinska, Nataliya; Schäfer, Dorothea
    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
  18. By: Ceren Ozgen (Department of Spatial Economics, VU University Amsterdam and bTinbergen Institute, Amsterdam,); Thomas de Graff (aDepartment of Spatial Economics, VU University Amsterdam)
    Abstract: An increasing amount of research in the migration literature shows a positive association between migrant diversity and rm productivity. However, the potential bias due to unobserved heterogeneity remains a challenge. In this paper we analyse the impact of cultural diversity on firm innovativeness, while using finite mixture modeling to control for observed and unobserved heterogeneity. Recent availability of microdata has enabled us to construct a linked employee- employer dataset through merging datasets on both workers and firms. We explore the possible ways of firm-level knowledge exchange among the employees with different cultural backgrounds and its impact on firms' product and process innovations. We find that workforce diversity is beneficial for innovativeness in capital-intensive sectors. It also positively impacts large firms that operate in high-level services, manufacturing, mining and R&D sectors, that are predominantly located in the non-urban areas in the Netherlands. In labour and land intensive sectors, the impact of cultural diversity on innovativeness is inconclusive.
    Keywords: Cultural diversity, innovativeness, (un-)observed heterogeneity, finite mixture modeling, migration
    JEL: J15 J21
    Date: 2013–04
  19. By: Algan, Yann; Mayer, Thierry; Thoenig, Mathias
    Abstract: This paper aims at studying how economic incentives influence cultural transmission. We do so in the context of naming decisions, a crucial expression of cultural identity. Our focus is on Arabic versus Non-Arabic names given by parents to their newborn babies in France over the 2003-2007 period. Our model of cultural transmission disentangles between three determinants: (i) vertical transmission of parental culture; (ii) horizontal influence from the neighborhood; (iii) economic penalty associated with names that sound culturally distinctive. Our identification is based on the sample of households being exogenously allocated across public housings dwellings. We find that economic incentives largely influence naming choices: In the absence of economic penalty, the annual number of babies born with an Arabic name would have been more than 50 percent larger. Our theory-based estimates allow us to perform a welfare analysis where we gauge the strength of cultural attachment in monetary units. We find that the vertical transmission of an Arabic name provides the same shift in parents' utility as a 3\% rise in lifetime income of the child.
    Keywords: Culture; Social Interaction
    JEL: D19 Z10
    Date: 2013–04
  20. By: Jonathan Wadsworth
    Abstract: A rise in population caused by increased immigration, is sometimes accompanied by concerns that the increase in population puts additional or differential pressure on welfare services which might affect the net fiscal contribution of immigrants. The UK and Germany have experienced significant increases in immigration in recent years. This study uses longitudinal data from both countries to examine whether immigrants differ in their use of health services compared to native born individuals, both on arrival and over time. While immigrants to Germany, but not the UK, are more likely to self-report poor health than the native-born population, the samples of immigrants in both countries use hospital and GP services at broadly the same rate as the native born populations. Controls for observed and unobserved differences between immigrants and native-born sample populations make little difference to these broad findings.
    Keywords: Immigration, Health, Health Service
    JEL: H00 J00
    Date: 2013

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