nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒04‒20
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The impact of emissions-performance benchmarking on free allocations in EU ETS Phase 3 By Stephen Lecourt; Clément Pallière; Oliver Sartor
  2. EU Enlargement and Satisfaction with Democracy: A Peculiar Case of Immizerising Growth By Barbara Dluhosch; Daniel Horgos; Klaus W. Zimmermann
  3. Changes in the patterns of poverty duration in Germany, 1992-2009 By KYZYMA Iryna
  4. Corporate Taxation and Productivity Catch-Up: Evidence from European firms By Gemmell, Norman; Kneller, Richard; McGowan, Danny; Sanz, Ismael; Sanz-Sanz, José F.
  5. Development Scenarios for the North and Baltic Sea Grid - A Welfare Economic Analysis By Jonas Egerer; Friedrich Kunz; Christian von Hirschhausen
  6. Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis By Helene Maisonnave; Jonathan Pycroft; Bert Saveyn; Juan Carlos CISCAR
  7. Housing wealth decumulation, portfolio composition and financial literacy among the European elderly By Agnese Romiti; Mariacristina Rossi
  8. “Building a “quality in work” index in Spain” By Jordi López-Tamayo; Vicente Royuela; Jordi Suriñach
  9. Child Well-being in Economically Rich Countries: Changes in the first decade of the 21st century By Jonathan Bradshaw; Bruno Martorano; Chris De Neubourg; Luisa Natali; UNICEF Innocenti Research Centre
  10. Multi-dimensional Deprivation in Ireland Among 9-Year Olds in Ireland: An Analysis of the Growing Up in Ireland Survey By James Williams; Aisling Murray; Christopher Whelan
  11. The Impact of Migration Policy on Migrants' Education Structure: Evidence from an Austrian Policy Reform By Petr Huber; Julia Bock-Schappelwein
  12. The effects of unemployment benefits on migration in lagging regions By Jordi Jofre-Monseny
  13. European capitals of culture and life satisfaction By Lasse Steiner; Bruno S. Frey; Simone Hotz
  14. Do more financially literate households invest less in housing? Evidence from Italy By Riccardo Calcagno; Maria Cesira Urzì Brancati
  15. Knowledge Networks and Their Impact on New and Small Firms in Local Economies: The Case Studies of the Autonomous Province of Trento and Magdeburg By Alessandra Proto; Simone Tani; Joerg Bühnemann; Olaf Gaus; Mathias Raith
  16. Explaining the Sources of IncomeRelated Inequality in Health Care Utilization in Denmark By Gundgaard, Jens; Lauridsen, Jørgen
  17. The evolution of innovation networks: The case of a German automotive network By Buchmann, Tobias; Pyka, Andreas
  18. “Do intra- and inter-industry spillovers matter? CDM model estimates for Spain” By Esther Goya; Esther Vayá; Jordi Suriñach
  19. Tariff-Mediated Network Effects versus Strategic Discounting: Evidence from German Mobile Telecommunications By Zucchini, Leon; Claussen, Jörg; Trüg, Moritz
  20. Reform of ill-health retirement of police in England and Wales: impact on pension liabilities and the role of local finance By Rowena Crawford; Richard Disney

  1. By: Stephen Lecourt; Clément Pallière; Oliver Sartor
    Abstract: From Phase 3 (2013-20) of the European Union Emissions Trading Scheme carbon-intensive industrial emitters will receive free allocations based on harmonised, EU-wide benchmarks. This paper analyses and evaluates the impacts of these new rules on allocations to key energy-intensive sectors. It exploits an original dataset that combines recent data from the National Implementing Measures of 20 Member States with the Community Independent Transaction Log and ETS-installation NACE code data. The analysis reveals that free allocations to benchmarked sectors will be reduced significantly, though not excessively, in Phase 3. This reduction should both increase public revenues from carbon auctions and has the potential to enhance the economic efficiency of the carbon market. The analysis also shows that changes in allocation vary mostly across installations within, rather than across, countries. Lastly, the analysis finds evidence that the new rules will, as intended, reward installations with better emissions performance, and will improve harmonisation of free allocations in the EU ETS by reducing differences in allocation levels across countries with similar carbon intensities of production.
    Keywords: European Union Emissions Trading Scheme (EU ETS), CO2 allowance allocation, Emissions-performance benchmarking
    Date: 2013–03
  2. By: Barbara Dluhosch; Daniel Horgos; Klaus W. Zimmermann
    Abstract: Studies on EU enlargement mostly focus on its welfare-economic and much less so on its public-choice dimension. Yet, the latter may be as important as the former when it comes to sustain integration. This paper aims at filling the gap by exploring theoretically and empirically how enlargement of multi-level systems like the EU affects satisfaction with democracy (SWD) and voter turnout (PART). In order to assess the effects of a widening in membership, we present a novel approach that draws on the probability of being outvoted. We find that, given the institutional arrangement, enlargement tends to depress SWD. Our theoretical results are backed by empirical evidence in German Eurobarometer data displaying a tendency towards a decline in SWD that shows up in a significant fall in PART with growth in EU-membership.
    Keywords: European Union, Enlargement, Multi-level Systems, Democracy, Regime Satisfaction
    JEL: F55 D72 H77
    Date: 2013–04
  3. By: KYZYMA Iryna
    Abstract: Using data from the German Socio-Economic Panel, this study explores how the duration of poverty and its determinants evolved in Germany between the early 1990s and the late 2000s. Shifts in the duration of poverty over time are captured with the application of a rolling window framework which allows us to identify when exactly a change occurred and to link it to trends in general macro-economic conditions and social policies. Joint modeling of poverty and non-poverty spells, controlling for unobserved heterogeneity, is applied within each window in order to uncover how the poverty experiences of individuals with different socio-economic characteristics have evolved over time. The results indicate that poverty has become more persistent and recurrent in Germany since the beginning of the 1990s. While those living in East Germany and in households with an EU head partially improved their situation over time, individuals over 55 years old, households with a disabled or uneducated head as well as single parent households have become more prone to poverty.
    Keywords: poverty duration; multiple spells; temporal changes; SOEP
    JEL: C41 D31 I32
    Date: 2013–04
  4. By: Gemmell, Norman; Kneller, Richard; McGowan, Danny; Sanz, Ismael; Sanz-Sanz, José F.
    Abstract: Firms that lie far behind the technological frontier have the most to gain from imitating the technology or management practices of others. That some firms converge relatively slowly to the productivity frontier suggests the existence of factors that cause them to underinvest in their productivity. In this paper we explore how far higher rates of corporate taxation affect firm productivity convergence by reducing the after tax returns to productivity enhancing investments for small firms. Using data for 11 European countries we find evidence for such an effect; productivity growth in small firms is slower the higher are corporate tax rates. Our results are robust to the use of instrumental variable and panel data techniques with quantitatively similar effects found from a natural experiment following the German tax reforms in 2001.
    Keywords: Productivity, taxation, convergence,
    Date: 2013–04–11
  5. By: Jonas Egerer; Friedrich Kunz; Christian von Hirschhausen
    Abstract: The North and Baltic Sea Grid is one of the largest pan-European infrastructure projects raising high hopes regarding the potential of harnessing large amounts of renewable electricity, but also concerns about the implementation in largely nationally dominated regulatory regimes. The paper develops three idealtype development scenarios and quantifies the technical-economic effects: i) the Status quo in which engagement in the North and Baltic Sea is largely nationally driven; ii) a Trade scenario dominated by bilateral contracts and point-to-point connections; and iii) a Meshed scenario of fully interconnected cables both in the North Sea and the Baltic Sea, a truly pan-European infrastructure. We find that in terms of overall welfare, the meshed solution is superior; however, from a distributional perspective there are losers of such a scheme, e.g. the incumbent electricity generators in France, Germany, and Poland, and the consumers in low-price countries, e.g. Norway and Sweden. Merchant transmission financing, based on congestion rents only, does not seem to be a sustainable option to provide sufficient network capacities, and much of the investment will have to be regulated to come about. We also find strong interdependencies between offshore grid expansion and the subsequent onshore network.
    JEL: D60 L51 L94
    Date: 2012–12–01
  6. By: Helene Maisonnave (Universite Laval, Quebec, Canada); Jonathan Pycroft (JRC IPTS, European Commission); Bert Saveyn (JRC IPTS, European Commission); Juan Carlos CISCAR (JRC IPTS, European Commission)
    Abstract: The European Union has committed itself to reduce greenhouse gas (GHG) emissions by 20% in 2020 compared with 1990 levels. This paper investigates whether this policy has an additional benefit in terms of economic resilience by protecting the EU from the macroeconomic consequences due to an oil price rise. We use the GEM-E3 computable general equilibrium model to analyze the results of three scenarios. The first one refers to the impact of an increase in the oil price. The second scenario analyses the European climate policy and the third scenario analyses the oil price rise when the European climate policy is implemented. Unilateral EU climate policy imposes a cost on the EU of around 1.0% of GDP. An oil price rise in the presence of EU climate policy does impose an additional cost on the EU of 1.5% of GDP, but this is less than the 2.2% of GDP that the EU would lose from the oil price rise in the absence of climate policy. This is evidence that even unilateral climate policy does offer some economic protection for the EU.
    Keywords: Oil price, general equilibrium, climate policy
    JEL: Q54 C68 Q40
    Date: 2012–02
  7. By: Agnese Romiti; Mariacristina Rossi
    Abstract: This paper analyses the role played by financial literacy in savings decisions and wealth decumulation. The broad evidence shows that (elderly) households do not decumulate their assets as they age, contradicting the standard life-cycle theory, which predicts that households should decumulate their assets in order to keep their consumption smooth. In particular, older people seem to be very attached to illiquid assets, such as housing wealth, which is far more difficult to liquidate and use to face unexpected shocks and to smooth consumption. Using the SHARE (Survey of Health, Ageing, and Retirement in Europe) survey, we try to detect whether more financial literacy brings about more optimal behaviour from a life-cycle perspective, and we look at the impact of financial literacy on three different dimensions of savings decisions: an unbalanced portfolio with excessive weight assigned to illiquid assets, the optimal consumption path, and housing wealth decumulation. According to our findings, financial literacy substantially reduces the portfolio imbalance of people aged 50+ by reducing the weight of housing wealth over total net worth; at the same time, it is responsible for a more optimal consumption path and for housing wealth decumulation.
    Keywords: Financial literacy, savings, wealth decumulation, housing, portfolio
    JEL: D14 D91 G11
    Date: 2012
  8. By: Jordi López-Tamayo (Faculty of Economics, University of Barcelona); Vicente Royuela (Faculty of Economics, University of Barcelona); Jordi Suriñach (Faculty of Economics, University of Barcelona)
    Abstract: DThe European Union launched the Lisbon Strategy in 2000 with the aim of establishing itself as the world’s most competitive knowledge-based economy. At the same time, job quality was placed at the top of the European employment and social policy agenda and, later, it was to be incorporated as part of the European Employment and Europe-2020 Strategies. However, in a climate of economic crisis, it is argued that the price we are paying for continued economic growth is the dehumanisation of labour relationships with good jobs being substituted by bad jobs. In order to appraise such claims, scholars require quantifiable measures. The aim of this study is to define and apply a composite index of the quality in work in Spain. We present the results for the period 2001 to 2009. Our measure adopts the dimensional framework provided by the European Commission, and we present our results by region, sector, professional category and firm size. We find that the best results are recorded in the most developed regions, in the service sector, in the largest firms and in jobs in which workers are entrusted with most responsibility.
    Keywords: Regional Data, Regional Development, Economic Geography, Quality of Life, Labour Economics. JEL classification: R10, R11, R12; I31, J01.
    Date: 2012–02
  9. By: Jonathan Bradshaw; Bruno Martorano; Chris De Neubourg; Luisa Natali; UNICEF Innocenti Research Centre
    Abstract: The analysis shows that the rankings are relatively stable: indeed, the Netherlands and the Scandinavian countries are still in the best performing group while the United States is still in the bottom of the ranking. Data analysis also highlights a common pattern for East European countries as material conditions improved and the behaviour of young people became more similar to their peers living in Western economies even though children’s living conditions have not improved overall. On the whole, Norway, Portugal and the United Kingdom recorded the most positive changes, while Poland, Spain and Sweden recorded the most negative changes.
    Keywords: child related policies; child well-being; comparative analysis; industrialized countries;
    JEL: A1
    Date: 2013
  10. By: James Williams (Economics and Social Research Institute, Dublin); Aisling Murray (Economics and Social Research Institute, Dublin); Christopher Whelan (School of Sociology and Social Policy, Queen’s University, UCD Geary Institute and School of Sociology, University College Dublin)
    Abstract: In this paper we make use of the 9-year old wave of the Growing Up in Ireland study to analyse multidimensional deprivation in Ireland. The Alkire and Foster adjusted head count ratio approach (AHCR; 2007, 2011a, 2011b) applied here constitutes a significant improvement on union and intersection approaches and allows for the decomposition of multidimensional poverty in terms of dimensions and sub-groups. The approach involves a censoring of data such that deprivations count only for those above the specified multidimensional threshold leading to a stronger set of interrelationships between deprivation dimensions. Our analysis shows that the composition of the adjusted head ratio is influenced by a range of socio-economic factors. For less-favoured socio-economic groups dimensions relating to material deprivation are disproportionately represented while for the more advantaged groups, those relating to behavioral and emotional issues and social interaction play a greater role. Notwithstanding such variation in composition, our analysis showed that the AHCR varied systematically across categories of household type, and the social class, education and age group of the primary care giver. Furthermore, these variables combined in a cumulative manner. The most systematic variation was in relation to the head count of those above the multidimensional threshold rather than intensity, conditional on being above that cut-off point. Without seeking to arbitrate on the relative value of composite indices versus disaggregated profiles, our analysis demonstrates that there is much to be gained from adopting an approach with clearly understood axiomatic properties. Doing so allows one to evaluate the consequences of the measurement strategy employed for the understanding of levels of multidimensional deprivation, the nature of such deprivation profiles and socio-economic risk patterns. Ultimately it permits an informed assessment of the strengths and weaknesses of the particular choices made.
    Keywords: Multidimensional poverty, decomposition of poverty, deprivation, composite poverty indices; childhood well-being; well-being indicators
    JEL: D31 D63 Z13
    Date: 2013–04–12
  11. By: Petr Huber (Austrian Institute for Economic Research (WIFO), Arsenal, Objekt 20, 1030 Wien and Faculty of Business and Economics, Mendel University in Brno.); Julia Bock-Schappelwein (Austrian Institute for Economic Research (WIFO), Arsenal, Objekt 20, 1030 Wien)
    Abstract: We ask how a reform of migration law intended to increase the selectivity of migration (the so-called integration agreement regulation in 2003) impacted on the education structure of migrants to Austria. To identify the effects of this reform, we use the fact it affected only migrants from third countries but not from EEA-countries. We find no compelling evidence that this regulation improved the education structure of migrants to Austria. Our interpretation of this is that the implicit positive impact of the reforms on the education structure of migrants was countervailed by an increased restrictiveness of the migration regime in total.
    Keywords: Migration Policy, Self-Selection, European Economic Area
    JEL: F22 J61 I20 O15
    Date: 2013–04
  12. By: Jordi Jofre-Monseny (Universitat de Barcelona & IEB)
    Abstract: In this paper we analyze the unintended effects on mobility of a national place-based policy (SIPTEA) that provides greater unemployment protection in two lagging regions of southern Spain (namely, Extremadura and Andalucía). Using a border identification strategy and (1981 and 1991) census data at the municipal level, we estimate the effects of SIPTEA on population growth, the probability of staying and in-migration in rural areas that are experiencing high unemployment and significant out-migration flows. The results indicate that the policy mitigated population losses by increasing both the probability of staying and in-migration, although the locational inefficiencies implied are not particularly large. We also explore the effects of greater unemployment protection on labor market outcomes. Here, the results indicate that the policy led to a 10- to 13-percentage point increase in unemployment.
    Keywords: Unemployment protection, migration, mobility, place-based policy, lagging regions
    JEL: H73 J6 R23
    Date: 2013
  13. By: Lasse Steiner; Bruno S. Frey; Simone Hotz
    Abstract: This paper analyzes whether hosting the most prestigious European cultural event, the European Capital of Culture, has an impact on regional economic development or the life satisfaction of the local population. Concerning the economic impact, we show that European Capitals are hosted in regions with above average GDP per capita, but do not causally affect the economic development in a significant way. Even a positive impact on GDP per capita would not imply a positive impact on individual utility or social welfare of the regional population. Surprisingly, using difference-in-difference estimations, a negative effect on the well-being of the regional population is found during the event. Since no effect is found before the event, reverse causality and positive anticipation can be ruled out. The negative effect during the event might result from dissatisfaction with the high levels of public expenditure, transport disruptions, general overcrowding or an increase in housing prices.
    Keywords: Life Satisfaction, mega-events, culture, european capital of culture
    JEL: H40 H54 R12 Z11
    Date: 2013–04
  14. By: Riccardo Calcagno; Maria Cesira Urzì Brancati
    Abstract: Using the Bank of Italy’s Survey of Household Income and Wealth (SHIW) covering a 5-year panel, we measure the impact of the degree of households’ financial literacy on their portfolio imbalance towards housing investment. We find that households with higher levels of financial literacy hold a relatively lower share of illiquid wealth, and the results are more pronounced at older ages, when according to the lifecycle hypothesis they are meant to decumulate their assets. Results appear robust to different specifications of the dependent variable and potential endogeneity of financial literacy.
    Keywords: financial literacy, intertemporal consumer choice, housing, portfolio choice
    JEL: D12 D91
    Date: 2013
  15. By: Alessandra Proto; Simone Tani; Joerg Bühnemann; Olaf Gaus; Mathias Raith
    Abstract: New and small firms can be important engines of job creation and local development when they identify and exploit entrepreneurial opportunities. We live in an economy more and more characterised by open innovation methods, where new companies and SMEs are benefitting from innovations, technological and non technological available on the market or from other companies and organisations part of their networks. Knowledge networks, understood as a three-component construction of (i) knowledge generation, (ii) knowledge transfer, and (iii) knowledge application, can play a crucial role in boosting companies performance. As many OECD researches shows, there is often a major networking gap, however, between knowledge sources in universities and research organisations and industry exploitation in new spin-off enterprises and SMEs. The analysis of the actors of the knowledge networks and the way they behave and interact with other component inside and outside the networks is a fundamental support to local policy making in entrepreneurship and innovation. <p>The OECD LEED Programme in cooperation with the University of Trento has prepared this paper to analyse in deep the behaviour of knowledge networks in two specific local contexts: the Autonomous Province of Trento in Italy and the Magdeburg Province in Germany. <p>The aim of this research project is to analyse the relevance of knowledge networks to entrepreneurship and the growth of young and small firms, the role of the different components and their interplay for network effectiveness, impeding and favouring factors, and the role of public policy.
    Date: 2012–01–31
  16. By: Gundgaard, Jens (Novo Nordisk A/S); Lauridsen, Jørgen (COHERE, Department of Budiness and Economics)
    Abstract: Objectives with the health care system often include equity considerations. One objective is equal treatment for equal need. In this paper we explain the sources of income-related inequality in utilization of health care services in Funen County, Denmark, by linking survey data to register based data. A decomposition of the concentration index was used to explain the sources of overall income-related inequality in utilization. The decomposition approach suggests that health care is in general equally distributed in Denmark when need based variables are controlled for. However, this overall result is a consequence of a number of off-setting effects from different types of health care and a complicated pattern of various explanatory variables.
    Keywords: health care; utilization; concentration index; inequality; decomposition
    JEL: D20 D31 I10 I12
    Date: 2013–04–01
  17. By: Buchmann, Tobias; Pyka, Andreas
    Abstract: In this paper we outline a conceptual framework for depicting network development patterns of interfirm innovation networks and for analyzing the dynamic evolution of an R&D network in the German automotive industry. We test the drivers of evolutionary change processes of a network which is based on subsidised R&D projects in the 10 year period between 1998 and 2007. For this purpose a stochastic actor-based model is applied to estimate the impact of various drivers of network change. We test hypotheses in the innovation and evolutionary economics framework and show that structural positions of firms as well as actor covariates and dyadic covariates are influential determinants of network evolution. --
    Date: 2013
  18. By: Esther Goya (Faculty of Economics, University of Barcelona); Esther Vayá (Faculty of Economics, University of Barcelona); Jordi Suriñach (Faculty of Economics, University of Barcelona)
    Abstract: This paper uses a structural model to analyse the impact of innovation activities, including intra- and inter-industry externalities, on the productivity of Spanish firms. To the best of our knowledge, no previous paper has examined spillover effects by adopting such an approach. Here, therefore, we seek to determine the extent to which the innovations carried out by others affect a firm’s productivity. Additionally, firm’s technology level is taken into account in order to ascertain whether there are any differences in this regard between high-tech and low-tech firms both in industrial and service sectors. The database used is the Technological Innovation Panel (PITEC) which includes 8,611 firms for the year 2009. We find that low-tech firms make the most of a range of factors, including funding and belonging to a group, to increase their investment in R&D. As expected, R&D intensity has a positive impact on the probability of achieving both product and, more especially, process innovations. Finally, innovation output has a positive impact on firm’s productivity, being greater in more advanced firms in the case of process innovations. Both intra- and inter-industry spillovers have a positive impact on firm’s productivity, but this varies with the firm’s level of technology. Thus, innovations made by firms from the same sector are more important for low-tech firms than they are for their high-tech counterparts, while innovations made by the rest of the sectors have a greater impact on high-tech firms.
    Keywords: Productivity, innovation, industry spillovers. JEL classification: D24, O33.
    Date: 2012–09
  19. By: Zucchini, Leon; Claussen, Jörg; Trüg, Moritz
    Abstract: Mobile telecommunication operators routinely charge subscribers lower prices for calls on their own network than for calls to other networks (on-net discounts). Studies on tariff-mediated network effects suggest this is due to large operators using on-net discounts to damage smaller rivals. Alternatively, research on strategic discounting suggests small operators use on-net discounts to advertise with low on-net prices. We test the relative strength of these effects using data on tariff setting in German mobile telecommunications between 2001 and 2009. We find that large operators are more likely to offer tariffs with on-net discounts but there is no consistently significant difference in the magnitude of discounts. Our results suggest that tariff-mediated network effects are the main cause of on-net discounts.
    Keywords: Competition; Network effects; Mobile telecommunications; Pricing strategies
    JEL: D22 L11 L96
    Date: 2013–04
  20. By: Rowena Crawford (Institute for Fiscal Studies); Richard Disney (Institute for Fiscal Studies)
    Abstract: We examine ill-health retirement of police officers in England and Wales between 2002-3 and 2009-10. Differences in ill-health retirement rates across forces are statistically related to area-specific stresses of policing and force-specific differences in human resources policies. Reforms to police pensions plans- in particular a shift in the incidence of financing ill-health retirement from central government to local police authorities- impacted on the level of ill-health retirement, especially among forces with above-average rates of retirement. We find that residual differences in post-2006 ill-health retirement rates across forces are related to their differential capacities to raise revenue from local property taxes. We quantify the impact of these reforms on overal pension plan liabilities.
    Keywords: Police pensions, ill-health retirement, state and local finance
    JEL: H75 J26 J45
    Date: 2013–03

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