nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒06‒30
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Europe’s capital cities and the happiness penalty: an investigation using the European Social Survey By Piper, Alan T.
  2. The Employment of the Low-Skilled Youth in France By Cahuc, Pierre; Carcillo, Stéphane; Zimmermann, Klaus F.
  3. Transparency in Electricity Markets By von der Fehr, Nils-Henrik M.
  4. Factors behind international relocation and changes in production geography in the European automobile components industry By Jesús F. Lampón; Santiago Lago-Peñas
  5. Do Mixed Reimbursement Schemes Affect Hospital Productivity? An Analysis of the Case of Denmark. By Hansen, Xenia Brun; Bech, Mickael; Jacobsen, Mads Leth; Lauridsen, Jørgen T
  6. Enterprise Search in the European Union: A Techno-Economic Analysis By Martin White; Stavri G. Nikolov
  7. Testing the Tunnel Effect: Comparison, Age and Happiness in UK and German Panels By FitzRoy, Felix; Nolan, Michael A.; Steinhardt, Max; Ulph, David
  8. Polarization of time and income – A multidimensional approach with well-being gap and minimum 2DGAP: German evidence By Joachim Merz; Bettina Scherg
  9. Mobility of Knowledge. Territorial Knowledge Dynamics in luxury car industry. Beyond standard and production markets By Macneill Stewart; Hugues Jeannerat
  10. The Impact of Structural and Macroeconomic Factors on Regional Growth By Sabine D’Costa; Enrique Garcilazo; Joaquim Oliveira Martins
  11. Sostegno del reddito e lotta alla povertà in Italia: le politiche pubbliche in tempo di crisi By Massimo Baldini; Stefano Toso
  12. Report No. 53: Combining the Entry of Young People in the Labour Market with the Retention of Older Workers By Eichhorst, Werner; Boeri, Tito; Braga, Michela; De Coen, An; Galasso, Vincenzo; Gerard, Maarten; Kendzia, Michael J.; Mayrhuber, Christine; Pedersen, Jakob Louis; Schmidl, Ricarda; Steiber, Nadia
  13. The Commission proposal for a European Tobacco Products Directive - A critical evaluation of the Roland Berger studies By Frank Maier-Rigaud
  15. Ex-post Merger Evaluation in the UK Retail Market for Books By L. Aguzzoni; E. Argentesi; L. Ciari; T. Duso; M. Tognoni
  16. The "emersion" effect: an ex post and ex ante social program evaluation on labor tax evasion in Italy By Edoardo Di Porto; Leandro Elia; Cristina Tealdi
  17. Down and Out in Italian Towns: Measuring the Impact of Economic Downturns on Crime By Carlo Menon; Guido de Blasio
  18. Is the quality of hospital care price sensitive? Regression kink estimates from a volume dependent price setting scheme By Kristensen, Søren Rud; Fe, Eduardo; Bech, Mickael; Mainz, Jan
  19. Do outliers and unobserved heterogeneity explain the exporter productivity premium? Evidence from France, Germany and the United Kingdom By Temouri, Yama; Wagner, Joachim
  20. The mathematics skills of school children: how does England compare to the high performing east Asian jurisdictions? By John Jerrim; Álvaro Choi

  1. By: Piper, Alan T.
    Abstract: This study investigates in three steps whether there is an association between happiness and living in one of Europe’s capital cities. Making use of the European Social Survey, the first step is a raw unadjusted correlation assessment which finds a negative and statistically significant effect on happiness of living in one of Europe’s capitals. The second step is the addition of socio-economic controls which (overall) increases the happiness penalty associated with living in a European capital city. This picture, like that of the initial finding, is different in different capitals; however no capital is associated with higher levels of happiness than elsewhere in that country. The third step adds environmental factors and perceptions (safety of local area, worries about crime, for example) to control for potential confounding factors. Tentative evidence is also presented that this is not just a big city effect. Overall, there is a happiness penalty associated with living in Europe’s capitals though this result is dominated by a few particularly unhappy capitals.
    Keywords: Happiness, Life Satisfaction, Geography, European Social Survey
    JEL: I31 R19 R23
    Date: 2013–06
  2. By: Cahuc, Pierre (Ecole Polytechnique, Paris); Carcillo, Stéphane (OECD); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: Youth unemployment is notoriously high in France, in particular for the low-skilled. Within the EU, only the crisis countries of Southern Europe fare worse. This report delivered to the French Council of Economic Analysis analyzes the causes and consequences of this alarming trend. In addition, drawing on the available evidence on various measures that could improve the current situation, concrete policies proposals are derived that cover the areas of vocational education, second chance programs, job search assistance, income support, employment subsidies and dismissal protection.
    Keywords: labor policy, youth unemployment, minimum wage, vocational education, employment protection, France
    JEL: J24 J38 J68
    Date: 2013–06
  3. By: von der Fehr, Nils-Henrik M. (Dept. of Economics, University of Oslo)
    Abstract: The European Commission is introducing new regulations on submission and publication of data in electricity markets (SPDEM) and on wholesale energy market integrity and transparency (REMIT). I discuss issues relevant for undertaking an evaluation such regulations. I argue that, for market performance, more information is not always better; indeed, more information may undermine market performance by facilitating behaviour that is either not cost efficient or aims at exercising market power or establishing and maintaining collusion. Moreover, ensuring rational economic behaviour and an efficient and competitive market outcome does not require general access to information at a very detailed level or with a high degree of immediacy. I conclude that to achieve the aims of efficiently functioning wholesale electricity markets, fair and non-discriminatory access to data and a coherent and consistent view of the European wholesale electricity market, it does not seem advisable to go quite so far with respect to immediacy and detail as intended by the new regulations.
    Keywords: electricity; market performance; information; transparency; regulation
    JEL: D40 D80 K21 L10 L40 L51 L94
    Date: 2013–05–22
  4. By: Jesús F. Lampón (University of Vigo & REDE); Santiago Lago-Peñas (University of Vigo & REDE & IEB)
    Abstract: This article analyses business strategies in the automobile sector to determine the key factors behind production relocation processes in automobile components suppliers. These factors help explain changes in production geography in the sector not only in terms of location advantages but also from a perspective of corporate strategies and decision-making mechanisms within firms. The results obtained from an empirical study in Spain during the period 2001-2008 show how the components sector has used relocation to meet the requirements for efficiency imposed by automobile manufacturers. The search for lower labour costs, production concentration and specialisation in order to obtain economies of scale and improved productivity are found to be the main factors determining relocation in the sector. These processes are facilitated by the operational flexibility of the multinational firms that dominate the sector which allows them to transfer resources internationally. Lean supply, technological requirements for production processes and the integration of production plants in the institutional environment are the main barriers to such processes of mobility, and may also determine the geographical destination of migrated production.
    Keywords: Production relocation, automobile components sector, geography, Spain, Europe
    JEL: F2 F23 L2 L23
    Date: 2013
  5. By: Hansen, Xenia Brun (COHERE, Department of Business and Economics); Bech, Mickael (COHERE, Department of Business and Economics); Jacobsen, Mads Leth (Department of Political Sciences, Universitry of Århus); Lauridsen, Jørgen T (COHERE, Department of Business and Economics)
    Abstract: The majority of public hospitals in Scandinavia are reimbursed through a mixture of two prospective reimbursement schemes, block grants (a fixed amount independent of the number of patients treated) and activity-based financing (ABF). This article contributes theoretically to the existing literature with a deeper understanding of such mixed reimbursement systems as well as empirically by identifying key design factors that determines the incentives embedded in such a mixed model. Furthermore, we describe how incentives vary in different designs of the mixed reimbursement scheme and assess whether different incentives affects the performance of hospitals regarding activity and productivity differently. Information on Danish reimbursement schemes has been collected from documents provided by the regional governments and through interviews with regional administrations. The data cover the period from 2007-2010. A theoretical framework identified the key factors in an ABF/block grant model to be the proportion of the national Diagnosis-Related Group (DRG) tariff above and below a predefined production target (i.e. the baseline); baseline calculations; the presence of kinks/ceilings; and productivity requirements. A comparative case study across the five regions in Denmark demonstrated presence of inter-regional variation in the design of reimbursement schemes. This variation creates different incentives regarding activity and productivity. Using gender-age standardized rates across year and region we show that there have not been any significant changes in the number of hospital discharges for any of the regions from 2007 to 2010 within any of the treatment groups.
    Keywords: Mixed reimbursement system; prospective payment system; activity-based financing; incentives; activity; productivity
    JEL: H51 H72 I18
    Date: 2013–04–01
  6. By: Martin White (Intranet Focus, London); Stavri G. Nikolov
    Abstract: The term ‘enterprise search’ (ES) refers to the information retrieval applications that use a range of different core technologies to search enterprise repositories. It includes the search of the organisation’s external web site, intranets and other electronic text held by the organisation in the form of email, database records, and documents on ?le shares. One reason for adopting Enterprise Search solutions (ES) is the growth in data generation; however, more worrying than the huge amount of information is its structure. It is clear that quick access to information is of strategic importance for enterprises and in general for the Information Economy. Although the issue is acknowledged as of extreme importance, only a small number of companies benefit from dedicated search technologies. The global enterprise search business probably has no more than 200 companies. Six vendors, all of them multinational IT companies, have a major impact on the development of search technology but only a limited impact on the development of the search market through promotional activities. One main barrier to making a business case is a lack of awareness of the functionality of enterprise search applications and the benefits that effective search can have on the enterprise. The installed base of enterprise search applications is still low in the EU (probably no greater than 10,000 organizations) and no dominant supplier of search applications exists. However, data suggest that there is a significant market potential in the EU for enterprise search and we can assume that the potential is considerable particularly for mid-sized companies that could benefit from using ES solutions. Moreover, the market for search applications is significantly larger than just the corporate sector and potential customer sectors would include Government departments and agencies, Hospitals and University. These are some of the insights emerged from a Delphi study conducted by IPTS and Intranet Focus Ltd in 2011 and from further analysis about ES. This report builds also on the results of the expert workshop organized at the IPTS, Seville, on Enterprise Search in Europe in October 2011. In particular, a number of challenges have been identified that need to be addressed at European level. For instance, efforts to meet changing business requirements, the lack of support post-implementation, or the lack of a search support team. Six important areas of technical development for enterprise search over the next five years have been identified (e.g., Integrated search of structured and un-structured content) in which, there are evolutions of current search technologies and products. Moreover, future trends in ES have been envisaged (for instance, in cloud-based and user-demand approach, open data models, interoperability). To our knowledge, this report contains the most complete and detailed techno-economic analysis of the ES market in the EU and includes an up-to-date list of existing ES vendors.
    Keywords: Enterprise Search, European policy, search engines, multimedia
    JEL: D2 D4 D5 K2 L1 L2 L5 O3 O4
    Date: 2012–12
  7. By: FitzRoy, Felix (University of St. Andrews); Nolan, Michael A. (University of Hull); Steinhardt, Max (Hamburg Institute of International Economics (HWWI)); Ulph, David (University of St. Andrews)
    Abstract: In contrast to previous results combining all ages we find positive effects of comparison income on happiness for the under 45s, and negative effects for those over 45. In the BHPS these coefficients are several times the magnitude of own income effects. In GSOEP they cancel to give no effect of effect of comparison income on life satisfaction in the whole sample, when controlling for fixed effects, and time-in-panel, and with flexible, age-group dummies. The residual age-happiness relationship is hump-shaped in all three countries. Results are consistent with a simple life cycle model of relative income under uncertainty.
    Keywords: subjective life-satisfaction, comparison income, reference groups, age, welfare
    JEL: D10 I31 J10
    Date: 2013–06
  8. By: Joachim Merz (LEUPHANA University Lüneburg); Bettina Scherg (LEUPHANA University Lüneburg)
    Abstract: A growing polarization of society accompanied with an erosion of the middle class experiences more and more attention at least in the German recent economic and social policy discussion. Our study contributes to the polarization discussion with respect to multidimensional theoretical measurement and empirical application in two ways: First, we propose extended multidimensional polarization indices based on a CES-type well-being function and present a new measure to multidimensional polarization, the mean minimum polarization gap 2DGAP. This polarization intensity measure provides transparency with regard to each singular attributes – important for targeted policies – and ensures at the same time its interdependent relations. Second, the empirical application – in addition to the traditional income measure –incorporates time as a fundamental resource for any activity. In particular, genuine personal leisure time will take care of social participation in the spirit of social inclusion/exclusion and Amartya Sen’s capability approach. Instead of arbitrarily choosing the attributes’ parameters in the CES well-being function the interdependent relations of time and income will be evaluated by German Society. With the German Socio-Economic Panel (SOEP) and detailed time use diary data of the available German Time Use Survey (GTUS) 1991/92 and 2001/02 we quantify available and extended multidimensional polarization measures as well as our new approach for the polarization development of the working poor and the working rich in Germany. Results: Genuine personal leisure time in addition to income is an important polarization attribute. Compensation is of economic and static significance. In particular supported by the new minimum 2DGAP approach, multidimensional polarization increased over that decade in Germany.
    Keywords: Multidimensional polarization, intensity of time and income poverty and affluence, interdependent multidimensional time and income poverty and affluence, minimum multidimensional polarization gap (2DGAP), extended economic well-being, satisfaction/happiness, working poor, CES well-being function, German Socio-Economic Panel, German Time Use Surveys 1991/92 and 2001/02.
    JEL: I32 D31 J22
    Date: 2013–05
  9. By: Macneill Stewart; Hugues Jeannerat (Group of Research in Territorial Economy GRET, Faculty of Letters and Human Sciences, University of Neuchâtel, Switzerland)
    Abstract: At regional level a number of models, such as innovation systems and cluster have been developed which have been influential on this policy support. Policy initiatives based around these models are firmly rooted in a technological model of innovation and a standard market situation which takes little account of the socio-economic environment and the potential for downstream based innovation. Here we present a case study of the automotive industry in the UK West Midlands region where we consider innovation networks and knowledge developments associated with a shift from the standard market, largely prevalent in the sector, towards a status based market. We observe how, in the status market, composite knowledge networking and interaction with consumers is integral to the innovation process.
    Keywords: Territorial knowledge dynamics, production market, status market, territorial innovation models, EURODITE
    JEL: D71 D81 G1 G23 Q01 R11 R51
    Date: 2013–01
  10. By: Sabine D’Costa; Enrique Garcilazo; Joaquim Oliveira Martins
    Abstract: This papers aims to understand the impact of nation-wide structural policies such as product market regulation in six upstream sectors and employment protection legislation and that of macroeconomic factors on the productivity growth of OECD regions. In particular we explore how this effect varies with the productivity gap of regions with their country’s frontier region. We use a policy-augmented growth model that allows us to simultaneously estimate the effects of macroeconomic and structural policies on regional productivity growth controlling for region-specific determinants of growth. We estimate our model with an unbalanced panel dataset consisting of 217 regions from 22 OECD countries covering the period 1995 to 2007. We find a strong statistical negative effect of product market regulation on regional productivity growth in five of the six upstream sectors considered and the effects are differentiated with respect to the productivity gap. Our estimates also reveal that dispersion of policies hurts regional productivity growth suggesting that policy complementarity can boost productivity growth. The effects of employment protection legislation are negative overall and are especially detrimental to productivity growth in lagging regions. The three macroeconomic factors we consider also influence regional performance: inflation has a negative effect on regional growth and government debt has a positive effect on average. When differentiating the effects by the distance to the frontier, trade-openness is more beneficial to lagging regions and the negative effects of inflation are less negative in lagging regions. These results reveal a strong link between nation-wide policies and the productivity of regions, which carries important policy implications, mainly that these effects should be taken into account in the policy design.
    Keywords: regional productivity growth, regional impact of structural policies, spatial impact of national policies
    JEL: E66 R12
    Date: 2013–06–13
  11. By: Massimo Baldini; Stefano Toso
    Abstract: This paper reviews the impact on the distribution of households’ living standards (in terms of occupation, inequality and poverty) of the great recession in Italy, the evolution of labour market policies and social assistance over the last year and their effectiveness in facing the social consequences of the crisis. Also due to the severe consolidation of public finances in the short-medium run, the ongoing crisis has been handled so far with temporary measures which do not have reduced the categorical character of the Italian welfare state. However, first steps of a strategy reform in labour market policies and social assistance have been enacted or are going to be introduced, namely new income support schemes for job-losers, measures aimed to contrast extreme poverty and a revision of targeting welfare criteria. This paper critically examines the reform strategy, pointing out its potentialities and flaws.
    Keywords: Labour market policies, Social Assistance, inequality, poverty
    JEL: I21 J71 J81
    Date: 2013–06
  12. By: Eichhorst, Werner (IZA); Boeri, Tito (Bocconi University); Braga, Michela (Fondazione Rodolfo DeBenedetti); De Coen, An (IDEA Consult); Galasso, Vincenzo (Bocconi University); Gerard, Maarten (IDEA Consult); Kendzia, Michael J. (IZA); Mayrhuber, Christine (WIFO - Austrian Institute of Economic Research); Pedersen, Jakob Louis (NIRAS); Schmidl, Ricarda (IZA); Steiber, Nadia (Vienna University of Economics and Business)
    Abstract: Report based on a study conducted for the European Parliament, Bonn 2013 (142 pages)
    Date: 2013–06–24
  13. By: Frank Maier-Rigaud (IESEG School of Management (LEM-CNRS))
    Abstract: In December 2012, the European Commission published a draft proposal for a revision of the European Tobacco Products Directive. Since then, this proposal has created significant debate fuelled partly by the economic evaluation of the Commission proposal by Roland Berger. This paper analyses the merits of the claims and criticisms voiced in that study.
    Date: 2013–06
  14. By: Andrea Filippetti (Institute for the Study of Regionalism, Federalism and Self-Government); Marion Frenz (Department of Management, Birkbeck University of London); Grazia Ietto-Gillies (Centre for Innovation Management Research, Birkbeck University of London)
    Date: 2013–01
  15. By: L. Aguzzoni; E. Argentesi; L. Ciari; T. Duso; M. Tognoni
    Abstract: This paper empirically evaluates the price effects of the merger of two major book retail chains in the UK: Waterstone’s and Ottakar’s. We employ differences-in-differences techniques and use a rich dataset containing monthly scanner data information on a sample of 200 books sold in 60 stores in 50 different local markets for a period of four years around the merger. Since retail mergers may have either local or national effects (or both) according to the level at which retail chains set prices, we undertake an ex-post assessment of the impact of the merger at both levels. At the local level, we compare the changes in the average price charged before and after the merger in the shops located in overlap areas –i.e. areas where both chains were present before the merger– and in non-overlap areas –i.e. areas where only one chain was present before the merger. At the national level, we employ two distinct control groups to evaluate the merger, namely the competitors and the top-selling titles. We find that the merger did not result in an increase in prices either at the local or at the national level. We also perform heterogeneous treatment effects estimations in order to assess whether the effect of the merger differs along various dimensions of heterogeneity that are present in our data.
    JEL: K21 L24 L44 D22 O32
    Date: 2013–06
  16. By: Edoardo Di Porto (MEMOTEF, Department "Sapienza" University of Rome and EQUIPPE USTL/Lille); Leandro Elia (Institute for the Protection and Security of the Citizen European Commission-Joint Research Centre); Cristina Tealdi (IMT Lucca Institute for Advanced Studies)
    Abstract: We analyze how different policy interventions may incentive the transition of workers from the informal to the formal sector. We use Italian data over the period 1998-2008 to evaluate ex post whether the 2003 Italian labor market reform was able to reach the objective to reduce the share of shadow employment. Based on our empirical results, we develop an ex ante evaluation based on a search and matching model, á la Mortensen and Pissarides to determine the right combination of policy interventions which may be effective in generating a significant reduction in undeclared work together with an expansion of the formal sector. We find that in an economy where permanent and temporary contracts coexist, the combination of lower payroll taxes for permanent jobs and higher probability of being audited generates a compression of the informal sector, leaving unemployment unchanged. A similar result can be obtained through a reduction of the firing cost associated with permanent jobs, even though this causes temporary contracts to increase relatively more than permanent contracts.
    Keywords: Labor tax evasion, temporary contracts, firing costs, search frictions, policy evaluation
    JEL: J38 J63 J64 H26
    Date: 2013–06
  17. By: Carlo Menon; Guido de Blasio
    Abstract: The paper investigates the effect of local economic conditions on crime. The study focuses on Italy's local labor markets and analyzes the short-term response of crime to the severe slump of 2007-2009. It shows that the downturn led to a significant increase in economic-related offenses that do not require particular criminal skills or tools (namely, thefts); on the other hand, for offenses for which specific skills and criminal experience are essential (say, robberies) the impact of the crisis was negative. The results also suggest that: i) labor market institutions (i.e. wage supplementary schemes and pro-worker contractual arrangements) had a role in slowing down the effect of the economy on crime; ii) the link between the downturn and crime was weaker in areas where the presence of organized crime is relatively more intensive.
    Keywords: crime, economic crises, Italy
    JEL: K14 K42 E32
    Date: 2013–06
  18. By: Kristensen, Søren Rud (Centre of Health Economics); Fe, Eduardo (Health Economics Research Unit); Bech, Mickael (COHERE, Department of Business and Economics); Mainz, Jan (COHERE)
    Abstract: This paper estimates the price sensitivity of the quality of acute stroke care using a regression kink design. When Danish hospitals reach a production target, marginal taris for treating acute stroke patients falls by 50%{100%. This reimbursement scheme allow us to identify local average treatment ef- fects of reimbursement taris on the quality of hospital care. A rich data set of the process quality of stroke care allows us to detect minor changes in the quality of care that are important for the long term outcomes but do not lead to dead or readmission captured by commonly employed outcome indicators. Hospitals that were exposed to reductions in the marginal tari of less than 100% did not appear to respond in quality to reductions in taris. Hospital for which the marginal tari for acute stroke patients dropped to 0 responded to tari reductions by slightly decreasing the level of quality for acute stroke care patients. The estimated size of the eect is minor but robust to various tests of sensitivity, indicating that the estimated eect is not spurious.
    Keywords: Quality of health care; Price regulation; Activity based reimbursement; Supply side incentives
    JEL: H42 I18 L51
    Date: 2013–06–24
  19. By: Temouri, Yama (Aston University); Wagner, Joachim (Leuphana University)
    Abstract: A stylized fact from the literature on the Micro-econometrics of International Trade and a central implication of the heterogeneous firm models from the New New Trade Theory is that exporters are more productive than non-exporters. It is argued that this exporter productivity premium is due to extra costs of exporting that can be covered only by more productive firms. However, in recent papers that control for extreme observations and unobserved firm heterogeneity by applying a highly robust fixed-effects estimator, no such exporter productivity premium is found for firms from manufacturing and services industries in Germany. This paper uses enterprise level panel data for France, Germany and the United Kingdom from 2003 to 2008 to systematically investigate the role of outliers and unobserved firm heterogeneity for estimates of the exporter productivity premium. We report that outliers do have an influence on the estimated exporter productivity premium. We argue that the vanishing exporter premium in robust fixed effects estimations that is reported for all three countries is caused by characteristics of firms that start or stop to export over the period under investigation, and that are not representative for the bulk of firms that either export or not.
    Keywords: Export; productivity premium; outlier; unobserved heterogeneity; robust estimation
    JEL: F14
    Date: 2013–06–18
  20. By: John Jerrim (University of London); Álvaro Choi (Universitat de Barcelona & IEB)
    Abstract: English policymakers have been disappointed with children’s performance on TIMSS and PISA, particularly in comparison to the results of young people from East Asia. In this paper we provide new insight into the England – East Asia gap by considering how cross-national differences in math test scores change between ages 10 and 16. Our results suggest that, although average math test scores are higher in East Asian countries, this gap does not increase between ages 10 and 16. Thus, reforming the secondary school system may not be the most effective way for England to ‘catch up’. Rather earlier intervention, during pre-school and primary school, may be needed instead.
    Keywords: PISA, TIMSS, educational policy, primary education, secondary education
    JEL: I20 I21 I28
    Date: 2013

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