nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒07‒05
seventeen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  2. A Spatial Dynamic Panel Analysis of the Environmental Kuznets Curve in European Countries By Hermann Pythagore Pierre Donfouet; P. Wilner Jeanty; Eric Malin
  3. Lassoing the Determinants of Retirement By Malene Kallestrup-Lamb; Anders Bredahl Kock; Johannes Tang Kristensen
  4. Study on the Impacts of Fiscal Devaluation By CPB Netherlands; CAPP
  5. A multi-factor inequality approach to a transfer scheme: the case of Common Agricultural Policy By A. Palestini; G. Pignataro
  6. Revisiting the Merit-Order Effect of Renewable Energy Sources By Marcus Hildmann; Andreas Ulbig; G\"oran Andersson
  7. The Impact of Socio-Ecological Transition on Employment Structure and Patterns in the Context of (Non) Rural Regions By Boris Najman; Alexander Neumann; Izabela Styczynska
  8. Personal income distribution at the local level. An estimation for Spanish municipalities using tax microdata By Miriam Hortas-Rico; Jorge Onrubia; Daniele Pacifico
  9. Food Inflation in EU: Distribution Analysis and Spatial Effects By Angelos Liontakis; Dimitris Kremmydas
  10. How does space affect the distribution of the EU RDP funds? By Camaioni, B.; Esposti, R.; Lobianco, A.; Pagliacci, F.; Sotte, F.
  11. The marginal cost of public funds in the EU: the case of labour versus green taxes By Salvador Barrios; Jonathan Pycroft; Bert Saveyn
  12. The Impact of EU Trade Preferences on the Extensive and Intensive Agricultural and Food Product Margins By Scoppola, M.; Raimondi, V.; Olper, A.
  13. The Effect of Mafia on Public Transfers By Guglielmo Barone; Gaia Narciso
  14. Recent findings regarding the shift from direct to indirect taxation in the EA-17 By Bernardi, LUIGI
  15. On beta and sigma convergence of Czech regions By Mazurek, Jiří
  16. Understanding Irish house price movements - a user cost of capital approach By Browne, Frank; Conefrey, Thomas; Kennedy, Gerard
  17. Works council introductions: Do they reflect workers' voice? By Oberfichtner, Michael

  1. By: Jaan Masso; Raul Eamets; Pille Mõtsmees
    Abstract: The existing literature on return migration has resulted in several studies analysing the impact of foreign work experience on the returnees’ earnings or their decision to become self-employed; however, in this paper we analyse the less studied effect on occupational mobility – how the job in the home country after returning compares to the job held before migration. The effect of temporary migration on occupational mobility is analysed using unique data from an Estonian online job search portal covering approximately 10–15% of the total workforce, including thousands of employees with temporary migration experience. The focus on data from a Central and Eastern European country is motivated given that the opening of labour markets in old EU countries to the workforce of the new member states has led to massive East-West migration. We did not find any positive effect of temporary migration on upward occupational mobility and in some groups, such as females, the effect was negative. These results could be related to the typically short-term nature of migration and occupational downshifting abroad as well as the functioning of the home country labour market.
    Keywords: occupational mobility, temporary migration, Central- and Eastern Europe
    JEL: F22 J62
    Date: 2013
  2. By: Hermann Pythagore Pierre Donfouet (CREM CNRS, UMR 6211, University of Rennes 1, France); P. Wilner Jeanty (Kinder Institute for Urban Research & Hobby Center for the Study of Texas Rice University); Eric Malin (CREM CNRS, UMR 6211, University of Rennes 1, France)
    Abstract: Previous studies in the environmental Kuznets curve have overlooked spatial interdependence and this could bias the estimates. This paper therefore addresses the issue of spatial interdependence in the environmental Kuznets curve by using panel data on European countries over the period of 1961-2009. The results obtained from the spatial dynamic panel suggest a significant degree of persistence in the per capita CO2 emissions in European countries over time. Furthermore, it has been found that per capita CO2 emissions in a nearby country lead to a domestic increase in per capita CO2 emissions and overall, the results are robust irrespective of the concept of neighborhood.
    Keywords: Environmental Kuznets curve, spatial dynamic panel
    JEL: Q56 C21
    Date: 2013–06
  3. By: Malene Kallestrup-Lamb (Aarhus University and CREATES); Anders Bredahl Kock (Aarhus University and CREATES); Johannes Tang Kristensen (Aarhus University and CREATES)
    Abstract: This paper uses Danish register data to explain the retirement decision of workers in 1990 and 1998.Many variables might be conjectured to influence this decision such as demographic, socio-economic, financially and health related variables as well as all the same factors for the spouse in case the individual is married. In total we have access to 399 individual specific variables that all could potentially impact the retirement decision.We use variants of the Lasso and the adaptive Lasso applied to logistic regression in order to uncover determinants of the retirement decision. To the best of our knowledge this is the first application of these estimators in microeconometrics to a problem of this type and scale. Furthermore, we investigate whether the factors influencing the retirement decision are stable over time, gender and marital status. It is found that this is the case for core variables such as age, income, wealth and general health. We also point out themost important differences between these groups and explain why these might be present.
    Keywords: Retirement, Register data, High-dimensional data, Lasso, Adaptive Lasso, Oracle property, Logistic regression
    JEL: C01 C25 J0 J14 J62
    Date: 2013–06–29
  4. By: CPB Netherlands (CPB Netherlands); CAPP (CAPP)
    Abstract: The main research question of the project is summarized as: What are the macroeconomic and distributional consequences of fiscal devaluation for a selection of countries and the EU as a whole? The selected countries are France, Italy, Spain and Austria. The project aims to perform four tasks: 1. Provide a review of the impacts of fiscal devaluations in the light of economic literature and former studies. 2. Use suitable models to analyse macroeconomic impacts of fiscal devaluation in the selected countries and do a comparative analysis of the results obtained in different countries. 3. Analyse distributional impact of fiscal devaluations with the help of models in the selected countries and link these results, if possible, to the macro-level analysis. 4. Analyse the suitability of the policy for the EU as a whole with the help of model simulations and in the light of the country-specific results.
    Keywords: European Union, Taxation, fiscal devaluation, redistribution
    JEL: H21 H23 H24 H31
    Date: 2013–05
  5. By: A. Palestini; G. Pignataro
    Abstract: The purpose of this paper is to propose theoretical foundations on the impact of transfer scheme, e.g. Community Agricultural Policy, on income inequality within European Countries. First, we show that ex-post inequality (in the after-transfer distribution) may increase if either initial aggregate income or the amount of fiscal contributions are sufficiently high. Second according to welfare ordering, we characterize a multi-factor decomposition of the Atkinson index to gauge the impact of each income source on the inequality profile. Third, we introduce a methodology to construct a cooperative game played by different income factors (as net incomes and/or incoming transfers) explicitly measuring the cost of inequality across the population in terms of welfare loss. We finally rely on Banzhaf and Shapley values to determine the marginal contributions of each factor to overall inequality.
    JEL: D31 D63 I32
    Date: 2013–07
  6. By: Marcus Hildmann; Andreas Ulbig; G\"oran Andersson
    Abstract: An on-going debate in the energy economics and power market community has raised the question if energy-only power markets are increasingly failing due to growing in-feed shares from subsidized renewable energy sources (RES). The short answer to this is: No, they are not failing! Energy-based power markets are, however, facing several market distortions, namely from the gap between the electricity volume traded at spot markets versus the overall electricity consumption as well as the (wrong) regulatory assumption that variable RES generation, i.e., wind and PV, have zero marginal operation costs. This paper shows that both effects overamplify the well-known merit-order effect of RES power in-feed beyond a level that can still be explained by the underlying physical realities.In this paper we analyze the current situation of wind and photovoltaic (PV) power in-feed in the German electric power system and their effect on the spot market. We show a comparison of the FIT-subsidized renewable energy sources (RES) energy production volume to the spot market volume and the overall load demand. Furthermore, a spot market analysis based on the assumption that renewable energy sources (RES) units have to feed-in with their assumed true marginal costs, i.e., operation and maintenance costs, is performed. Our combined analysis results show that, if the necessary regulatory adaptations are taken, i.e., significantly increasing the spot market's share of overall load demand and using true marginal costs of RES units in the merit-order, energy-based power markets can remain functional despite very high RES power in-feed.
    Date: 2013–07
  7. By: Boris Najman; Alexander Neumann; Izabela Styczynska
    Abstract: This paper focuses on emerging labour patterns within the Socio-Ecological Transition (SET), with particular attention paid to the effects of urbanisation. Based on the European Labour Force Survey (ELFS), we mobilize micro-econometric approaches in order to understand three major employment patterns: job mobility (between unemployment, inactivity, and employment), the desire to change jobs, and underemployment (i.e. part time jobs) in the European Union. The results show that the urbanization transition might express some positive effects on the labour market in the medium-term for several reasons. The employment rate has slightly decreased in all types of regions, yet it remains higher in urban settlements. Urban settlements offer more job opportunities and more part-time employment options. However, cyclical shocks tend to have a higher impact on urban areas when compared to rural areas. This means higher chances for employment in urban settlements during a boom and more job losses during a slow-down (causing less security on the labour market).
    Keywords: Employment Structure and Patterns, Urbanisation, Socio-Ecological Transformation
    JEL: J21 R11
    Date: 2013–06
  8. By: Miriam Hortas-Rico (Universidad Complutense de Madrid, Spain.); Jorge Onrubia (Universidad Complutense de Madrid); Daniele Pacifico (Department of the Treasury – Italian Ministry of Economy and Finance; Centre for North-South Economic Research, University of Cagliari, Italy)
    Abstract: Local income data is a key element to analyze residents’ standard of living and wellbeing as well as an important economic indicator, very used in a wide range of studies related to regional convergence, urban economics, fiscal federalism, housing and spatial welfare analysis. Despite its importance, there is a lack of official data on local incomes and, most importantly, on local income distributions. In this paper we use official data on personal income tax returns and a reweighting procedure to derive a representative income sample at the local level. Unlike previous attempts in the literature to get local income estimates, the results obtained allow us to derive not only an average value of income but its local distribution, a valuable and informative tool for distributional and income inequality analysis. We apply this methodology to Spanish micro-data and illustrate its potential use in income inequality analysis by means of computed Gini and Atkinson coefficients for a set of municipalities.
    Keywords: local income distribution, sample reweighting, income inequality
    Date: 2013–05–04
  9. By: Angelos Liontakis (Department of Agricultural Economics & Rural Development, Agricultural University of Athens, Greece); Dimitris Kremmydas (Department of Agricultural Economics & Rural Development, Agricultural University of Athens, Greece)
    Abstract: In the European Union homogenous inflation forces are expected to prevail due to the increased economic integration, especially after the creation of the single currency area. This expectation is directly related to the issue of inflation convergence which has gained increasing attention by both academia and policy makers in Europe. While the examination of the core inflation is of great importance for macroeconomic policy, the prominent role of disaggregate inflation indices and especially food inflation has been also frequently emphasized in the literature. However, the issue of food inflation convergence has been largely ignored in empirical studies. This study explores the evolving distribution of the food inflation rates in the EU-25 member states, using the distribution dynamics analysis and covering the period from January 1997 to March 2011. This analysis rests on the assumption that each country represents an independent observation which provides unique information that can be used to estimate the transition dynamics of inflation. However, we show that inside EU-25, spatial autocorrelation prevails and therefore, the independency assumption is violated. To insure spatial independence, the Getis spatial filter is implemented prior to the distribution dynamics analysis. The results of the analysis confirm the existence of convergence trends which are even more clear after the spatial filtering procedure, indicating, on the one hand, the influence of spatial effects on food inflation and, on the other hand, the effectiveness of Getis spatial filtering.
    Keywords: European Union, inflation, convergence, spatial filtering
    JEL: E31 C21 R12
    Date: 2013
  10. By: Camaioni, B.; Esposti, R.; Lobianco, A.; Pagliacci, F.; Sotte, F.
    Abstract: This paper aims at investigating what influences the distribution of the RDP funds across the EU space. Eventually, funds allocation is the consequence of some political decision. Nonetheless, this political decision can not be directly observed. While the allocation across countries and, when present, across NUTS2 regions is explicitly decided ex-ante, the allocation at a lower territorial level can only be observed ex-post. This “local” allocation depends not only on the top-down decision taken at some national or local political level but also on the bottom-up (or local) capacity to attract and use these funds. To investigate this more “local” level, funds distribution across 1300 EU NUTS3 regions is considered. Three different effects are admitted as major drivers of this spatial allocation. The country effect takes into account the well known differentials in the size and intensity of support across EU countries. The rural effect captures the fact that, at least in principle, the more rural a given region is the larger is the amount of RDP support it is expected to receive. In practice, however, this effect may vary according to alternative definition of rurality, The last effect is the pure spatial effect and expresses the influence on the amount of support received by a region of the bordering regions and, in particular, of their degree of rurality. These effects are estimated adopting and estimating alternative spatial model specifications: the spatial Durbin model, the SEM and the SAR model.
    Keywords: spatial econometrics, EU rural development policy, rurality indicators, Agricultural and Food Policy, Community/Rural/Urban Development, Research Methods/ Statistical Methods, R58, Q01, O18,
    Date: 2013–06
  11. By: Salvador Barrios (European Commission); Jonathan Pycroft (European Commission); Bert Saveyn (European Commission)
    Abstract: One key objective of tax-based fiscal consolidations which is too often disregarded in public debate is to minimise economic distortions. This paper uses a computable general equilibrium model to gauge these potential distortions by calculating the marginal cost of public funds (MCF) for EU member states. We consider two specific tax categories which are often proposed as good candidates for efficiency-enhancing tax shifting policies: labour and green taxes. Our analysis suggests that the economic distortions provoked by labour taxes are significantly larger than for green taxes. This result suggests that a green-taxes oriented fiscal consolidation would be preferred to a labour-tax oriented one (assuming that both tax increases would yield the same tax revenues). This holds for all EU member states modelled and despite the fact that potential welfare enhancement through pollution abatement are cancelled-out. Nevertheless, this result is slightly less strong when one considers the spillover effects between countries, which are more pronounced (in relative terms) for green taxes. This suggests that the use of green taxes for fiscal consolidation would be more effective were there to be close coordination across EU countries. In addition the efficiency losses associated with labour taxes are also likely to be greater when labour markets are less flexible (from an efficiency-wage perspective), a result also found to a small extent for green taxes. This raises the possibility that undertaking structural reforms (especially in the labour market) would help to minimize the efficiency losses entailed by tax-driven fiscal consolidations.
    Keywords: European Union, Taxation, labour taxation, environment, marginal cost public funds
    JEL: H21 H23 H24
    Date: 2013–05
  12. By: Scoppola, M.; Raimondi, V.; Olper, A.
    Abstract: In this paper we study the trade creation effects of the EU preferential trade agreements (PTAs) in the agriculture and food sectors for a large sample of developing countries in the period 1990-2006. We build upon the existing literature on trade with heterogeneous firms, by investigating the extent to which the effects of PTAs occurs mainly through the extensive – number of exported products – or the intensive – volume of existing products – margins. A direct measure of export diversification based on the theoreticallyfounded decomposition of trade into the two margins is here used. Empirically, we use a gravity framework in a panel data setting, and different estimators to deal with the issues of zero trade flows and of the presence of an upper bound in the dependent variable, which has been recently shown to raise new problems in the most common gravity econometric approaches. Main results show that the EU PTAs positively affect the agricultural extensive margins, especially through other than tariff provisions linked with the PTA, while in the food industry results are more sensitive to the estimator used. As far as concern the intensive margin, the PTAs effect is only driven by the role of tariff, while other provisions of the PTAs do not exert any relevant impact in both agricultural and food products.
    Keywords: Gravity equation, trade preferences, extensive mergin, Demand and Price Analysis, International Relations/Trade, F13, Q17, F14,
    Date: 2013
  13. By: Guglielmo Barone (Economic Research Department, Branch of Bologna, Bank of Italy, Italy; RCEA, Italy); Gaia Narciso (Department of Economics, Trinity College Dublin, Ireland; CReAM, UK; IIIS, Ireland)
    Abstract: Organised crime is widely regarded as damaging to economic outcomes. This paper analyses the impact of organized crime on the allocation of public subsidies to businesses. We assemble an innovative data set on Italian mafia at municipality level and test whether mafia diverts public funding. We exploit exogenous variation at municipality level to instrument mafia activity and show that the presence of organized crime positively affects the probability of obtaining funding and the amount of public funds. Mafia is also found to lead to episodes of corruption in the public administration sector. A series of robustness checks confirms the above findings.
    Keywords: organized crime, public transfers, corruption
    JEL: H4 K4 O17
    Date: 2013–06
  14. By: Bernardi, LUIGI
    Abstract: The relative merits of direct vs. indirect taxes have been largely debated since the advent of public finance theory. The current phase of the discussion concerns the relative ability of these two kinds of taxes to creating a more growth-friendly environment. The prevailing view favours indirect taxation, and suggests a shift of the fiscal burden towards indirect taxes, especially those on consumption. We shall be looking only briefly at this last question, as this paper has two other principal aims. The first aim is to evaluate the entity of the said tax shift over the last decade across Euro Area (EA-17) member countries. Our conclusion is that a “true” tax shift has not been as widespread and large as the EU Commission believes. Secondly, among the most widely-debated issues concerning the tax shift, we are going to examine the contrasting short-term impacts on the economy resulting from it, and we shall outline the possible risk that, in the short term, this tax shift may exacerbate the economic slump spreading across the European Union, particularly as an effect of the general adoption of restrictive fiscal policies by almost all member countries
    Keywords: Direct taxes, indirect taxes, Euro Area
    JEL: H2
    Date: 2013–06–28
  15. By: Mazurek, Jiří
    Abstract: The aim of the article is to examine beta and sigma convergence of fourteen Czech regions during 1995-2009. Using real GDP per capita panel data from the Czech Statistical Office it was found that Czech regions σ-diverged in the period and this divergence was accelerating in time regardless of whether the capital city Prague was included among regions or not. Also, statistically significant β-divergence was present during the same period. There are two main possible reasons for the divergence: inequalities in foreign and domestic investments as well as the accumulation of human and physical capital in the most attractive regions, while less competitive regions were left behind. Policy implications necessary to reverse the situation include government’s support of investments in poorer regions and also gaining more financial resources from European ESF and ERDF funds.
    Keywords: β-convergence Czech Republic; Czech regions; divergence; GDP per capita; σ-convergence
    Date: 2013–07–01
  16. By: Browne, Frank (Central Bank of Ireland); Conefrey, Thomas (Central Bank of Ireland); Kennedy, Gerard (Central Bank of Ireland)
    Abstract: This paper employs the user cost of capital to examine Irish house price movements. The bundle of services afforded by a dwelling can be accessed either by renting the dwelling or by outright purchase. Between 2002 and 2007, a combination of factors including rapid house price appreciation and the prevailing fiscal and monetary environment created a strong bias towards homeownership. This was reflected in a negative user cost of housing as capital gains exceeded funding costs (both direct mortgage cost and the opportunity cost) thereby incentivising home ownership and fuelling further increases in prices. We find that the collapse in house prices since 2007 has contributed to a reversal of this process. From mid-2007 onwards, the user cost has soared as capital losses have greatly exceeded the funding costs (albeit falling) causing house prices to fall further. Both fiscal and financial policy measures which could enable a more efficient functioning of the housing market are discussed.
    Keywords: house prices, user cost, bubbles, rents, equilibrium
    JEL: R3 R31 E62
    Date: 2013–06
  17. By: Oberfichtner, Michael
    Abstract: Using a large linked employer-employee dataset from Germany, the author investigates workers' decision to introduce a works council as an exit-voice consideration. Thereby, the author explores the collective voice face of introductions, while previous studies focus on the monopoly aspect. Controlling for unobserved plant heterogeneity, council introductions are more likely if workers have high plant-specific human capital or earn high wages, whereas no association between the labor market situation and introductions shows up. The findings on human capital and wages are consistent with the idea that workers trade off introducing a council against exit as well as with workers trying to protect an existing distribution of rents. Redoing the analysis for a sample of plants in which it is less relevant for workers to protect themselves against management decisions yields similar results supporting the voice interpretation. -- Mit einem umfangreichen kombinierten Betriebs-Beschäftigten-Datensatz für Deutschland betrachtet diese Arbeit die Entscheidung, einen Betriebsrat zu gründen, als ein Abwägen von Exit und Voice. Damit untersucht sie mögliche Voiceaspekte von Betriebsratsgründungen, während sich frühere Arbeiten auf Monopolaspekte konzentrieren. Bei Berücksichtigung unbeobachteter Heterogenität sind Betriebsratsgründungen wahrscheinlicher, wenn die Beschäftigten über hohes betriebsspezifisches Humankapital verfügen oder das Lohnniveau im Betrieb hoch ist. Es zeigt sich jedoch kein Zusammenhang mit der Arbeitsmarktsituation. Die Ergebnisse zu Löhnen und Humankapital sind sowohl mit einem Abwägen von Exit und Voice vereinbar als auch mit dem Versuch der Beschäftigten, eine bestehende Verteilung von Renten abzusichern. Bei einer getrennten Analyse für Betriebe, in denen es für Beschäftigte weniger relevant ist, sich gegen Entscheidungen der Unternehmensführung zu schützen, werden ähnliche Ergebnisse gefunden, was die Voiceinterpretation stützt.
    Keywords: co-determination,works councils,works council introductions,workers' voice
    JEL: J53
    Date: 2013

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