nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒07‒28
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. “Do labour mobility and technological collaborations foster geographical knowledge diffusion? The case of European regions” By Ernest Miguélez; Rosina Moreno
  2. Why has social security become less pro poor? By Bea Cantillon; Natascha Van Mechelen; Olivier Pintelon; Aaron Van den Heede
  3. Labour Market Institutions and Regional Unemployment Disparities By Peter Huber
  4. New empirical findings for international investment in intangible assets By Martin Falk
  5. Ownership structures and R&D in Europe: the good institutional investors, the bad and ugly impatient shareholders By Olivier Brossard; Stéphanie Lavigne; Mustafa Sakinc Erdem
  6. Women's Work and Family Profiles over the Lifecourse and their Subsequent Health Outcomes. Evidence for Europe By Thomas Leoni; Rainer Eppel
  7. Analysis of the impact of Croatia's accession to the EU on the agri-food sectors. A focus on trade and agricultural policies. By Pierre Boulanger; Emanuele Ferrari; Jerzy Michalek; Cristina Vinyes
  8. Integrated Healthcare in Andalusia - Analysis of primary care, specialised care, emergency care, social care and citizen support platforms By Elena Villalba Mora; Jose A. Valverde Albacete
  9. Exporting and Labor Demand: Micro-Level Evidence from Germany By Lichter, Andreas; Peichl, Andreas; Siegloch, Sebastian
  10. “I want creative neighbours”. Do creative service industries spillovers cross regional boundaries? By Rafael Boix; José Luis Hervás-Oliver; Blanca De Miguel-Molina
  11. The effects of children on mothers' employment and earnings : evidence from Spain By Alfonso Alba; Julio Cáceres-Delpiano
  12. The Effect of Weather Uncertainty on the Financial Risk of Green Electricity Producers under Various Renewable Policies By Nagl, Stephan
  13. The Role of Costs in Irish Pension Fund Performance By Bridget McNally; Jim Stewart
  14. The Social Effects of Ethnic Diversity at the Local Level: A Natural Experiment with Exogenous Residential Allocation By Yann Algan; Camille Hémet; David Laitin
  15. Over-qualification of immigrants in the UK By Altorjai, Szilvia
  16. Minimising Misery: A New Strategy for Public Policies Instead of Maximising Happiness? By Lelkes, Orsolya
  17. Taxpaying response of small firms to an increased probability of audit: some evidence from Italy By Carlo Fiorio; Stefano Iacus; Alessandro Santoro
  18. Is Financial Fair Play really justified? An economic and legal assessment of UEFA's Financial Fair Play rules By Vöpel, Henning
  19. The added value from a general equilibrium analyses of increased efficiency in household energy use By Patrizio Lecca; Peter McGregor; J. Kim Swales; Karen Turner
  20. Demand Uncertainty and Hospital Costs: an Application to Portuguese NHS Hospitals By Alvaro Almeida; Joana Cima

  1. By: Ernest Miguélez (Economics and Statistics Division, WIPO and AQR-IREA); Rosina Moreno (Faculty of Economics, University of Barcelona)
    Abstract: The goal of this paper is twofold: first, we aim to assess the role played by inventors’ cross-regional mobility and collaborations in fostering knowledge diffusion across regions and subsequent innovation. Second, we intend to evaluate the feasibility of using mobility and co-patenting information to build cross-regional interaction matrices to be used within the spatial econometrics toolbox. To do so, we depart from a knowledge production function where regional innovation intensity is a function not only of the own regional innovation inputs but also external accessible knowledge stocks gained through interregional interactions. Differently from much of the previous literature, cross-section gravity models of mobility and co-patents are estimated to use the fitted values to build our ‘spatial’ weights matrices, which characterize the intensity of knowledge interactions across a panel of 269 regions covering most European countries over 6 years.
    Keywords: inventors’ spatial mobility, co-patenting, gravity models, weights matrix, knowledge production function. JEL classification: C8, J61, O31, O33, R0.
    Date: 2013–07
  2. By: Bea Cantillon; Natascha Van Mechelen; Olivier Pintelon; Aaron Van den Heede
    Abstract: The present paper argues that we are witnessing an increase of the tensions between the three main goals of social security systems (poverty alleviation, securing living standards and prevention) and that, as a consequence, the poverty-reducing capacity of social transfers has come under pressure. The paper focuses on the working age population in 25 EU countries and on the good years before the crisis. Three different data sources are used: ECHP, its successor EU-SILC and the German SOEP. The paper augments the traditional pre-post approach by considering more direct policy indicators such as spending levels, observed average benefit levels and theoretical tax benefit packages and by focussing on the distinction between work-poor and work-rich households. We find that in many countries the relative decline in poverty reduction has primarily affected work-poor households. This observation is confirmed by more direct policy indicators. It may support the hypothesis that in many countries the poverty alleviation function of social protection has come under pressure as a consequence of a shift of attention towards preventing benefit dependency by recommodification on the one hand and ‘securing living standards’ for working families on the other hand.
    Keywords: Europe, welfare state, poverty, redistribution, work intensity, social exclusion
    JEL: D31 I38 O52
    Date: 2013–07
  3. By: Peter Huber
    Abstract: We conduct a theoretically based, empirical analysis of the impact of national wage bargaining, labour market and housing market institutions as well as product market regulation on regional unemployment rate disparities. Using both national and regional data on unemployment rates for 14 EU countries for the period 1998 to 2009 we find a robust correlation between centralisation, net replacement rates and regional autonomy with the size of regional unemployment rate disparities within a country and a further potential role for minimum wages, generosity of old age and sickness benefits, marginal tax rates, housing market flexibility, employment protection and the costs of overtime contracts. In contrast to expectations only the regional autonomy index, net replacement rates, sickness benefits and employment protection are positively correlated with regional unemployment rate disparities, while the other robust variables are negatively correlated.
    Keywords: Regional labour markets, institutions, unemployment disparities
    JEL: R23 J64
    Date: 2013–07
  4. By: Martin Falk
    Abstract: This study empirically analyses the determinants of greenfield investment in intangible assets in emerging and industrialized countries. Data consists of host parent country pairs of greenfield FDI projects in (i) software (except video games), (ii) advertising, public relations and related activities, (iii) headquarters, (iv) research & development and (v) design, development & testing. With a world market share of 33 per cent in 2011 in terms of the number of projects, descriptive statistics show that the EU 27 is one of the most important locations for international greenfield investment in intangible assets. However, there was a decline in the EU 27s share of such projects after the recent financial and economic crisis, which is mainly due to the decrease in intra-EU greenfield FDI activities. In contrast, FDI inflows in intangible assets increased in the United States, in other non EU OECD countries and in emerging countries. Among the EU countries of Ireland, Luxembourg, the United Kingdom, Denmark, Belgium, Netherlands and Sweden are the most attractive locations for Non-EU investors, whereas the southern and East EU countries are least successful in attracting FDI projects in intangible assets. The results using fixed and random effects negative binomial regression models for 40 host and 26 parent countries during the period 2003–2010 show that FDI in intangible assets depends significantly positively on quantity of human capital, quality of human capital measured as the PISA score in maths and reading, costs of starting a business, broadband penetration, strength of investor protection, R&D endowment and direct R&D subsidies. Wage costs (or unit labour costs) have a significant negative impact on FDI inflows in intangible assets. Other policy factors, such as labour market regulations, product, or FDI regulations, do not have a significant impact. Separate estimates for the EU-27 countries show that corporate taxes matter for the international location decision for intangible assets. The empirical results presented may help to develop a proactive action plan to attract international investments in intangible assets in Europe.
    Keywords: Innovation, innovation policy, intangible assets
    JEL: O3
    Date: 2013–07
  5. By: Olivier Brossard (LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - Université des Sciences Sociales - Toulouse I : EA4212 - École Nationale de Formation Agronomique - ENFA - Institut d'Études Politiques [IEP] - Toulouse - Université Toulouse le Mirail - Toulouse II); Stéphanie Lavigne (LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - Université des Sciences Sociales - Toulouse I : EA4212 - École Nationale de Formation Agronomique - ENFA - Institut d'Études Politiques [IEP] - Toulouse - Université Toulouse le Mirail - Toulouse II); Mustafa Sakinc Erdem (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - CNRS : UMR5113 - Université Montesquieu - Bordeaux IV)
    Abstract: This study examines the relationship between ownership structures in large European companies and their innovative activity in terms of R&D spending. The analysis is performed on a sample of 324 large innovative companies over 8 years. Contrary to the view that institutional investors can have a negative influence on R&D spending, we report a positive impact of these investors. Our study also tests the impact of 'impatient' institutional investors and provides evidence of their negative influence on R&D spending.
    Keywords: ownership structures; institutional ownership; innovation; R&D intensity
    Date: 2013
  6. By: Thomas Leoni; Rainer Eppel
    Abstract: The reconciliation of family and work is one of the "new social risks" contemporary welfare states are challenged to address. This paper contributes to a better understanding of the roles of work and family in women's life trajectories, shedding light on determinants and welfare outcomes of different combinations of motherhood and employment. We identify and compare distinctive life-course employment profiles of mothers across 13 European countries. After analyzing selection patterns, we investigate the possible link that exists between these work-family profiles up to the age of 50 and subsequent health outcomes. We embed our empirical investigation in a comparative welfare state framework and differentiate between four geographical areas that can be associated with different types of European welfare state regimes.
    Keywords: Welfare state, gender, family and work, health
    JEL: I1 J2
    Date: 2013–07
  7. By: Pierre Boulanger (European Commission – JRC - IPTS); Emanuele Ferrari (Oxford Brookes University); Jerzy Michalek (freelance researcher); Cristina Vinyes (European Commission – JRC - IPTS)
    Abstract: This report analyses the likely effects of Croatia's accession to the European Union (EU) on the agricultural and food sectors in terms of trade, production, employment and GDP for Croatia, the EU-27 and their main trading partners. Using a multi-country Computable General Equilibrium model (MAGNET) this study evaluates the impacts of the harmonisation of trade and agricultural policies that occur after this enlargement on July 1st, 2013. The results show that both Croatia's GDP and employment will slightly increase. The main conclusions point out significant market price effects as well as changes in trade patterns.
    Keywords: CGE, European integration, agricultural trade, agricultural policy
    JEL: C68 Q17 Q18
    Date: 2013–07
  8. By: Elena Villalba Mora (European Commission – JRC - IPTS); Jose A. Valverde Albacete (Emergencias Sanitarias, Consejería de Salud y Bienestar)
    Abstract: The SIMPHS research studied the deployment of Integrated Personal Health and Social Care Services (IPHS) by analysing IPHS projects across 20 regions in eight European Countries. An outcome of the research was the identification of eight facilitators (key factors) for IPHS deployment. This report extends the analysis of facilitators to the case of Andalusia, a Spanish region recognised internationally as one of the "Best eHealth regional case studies". The aim was to review cases of Integrated Care in the region, especially those where ICT and IPHS enable integration, so as to identify the role of the eight facilitators in these settings.
    Keywords: Integrated care, telehealth, telecare, ICT, governance, innovation, impact assessment, Andalusia, Spain, region
    JEL: I11 I18 O33 O38
    Date: 2013–05
  9. By: Lichter, Andreas (IZA); Peichl, Andreas (IZA); Siegloch, Sebastian (IZA)
    Abstract: It is widely believed that globalization increases the volatility of employment and decreases the bargaining power of workers. One mechanism explaining this relationship is given by the long-standing Hicks-Marshall laws of derived demand: with international trade increasing competition and therefore the price elasticity of product demand, exporters are predicted to have higher labor demand elasticities. Our paper is the first to test this relationship empirically by analyzing the effects of exporting on firms' labor demand. Using rich, administrative linked employer-employee panel data from Germany, we explicitly control for issues of self-selection and endogeneity in the firms' decisions to export by providing fixed effects and instrumental variable estimates. Our results show that exporting indeed has a positive and significant effect on the own-wage elasticity of unconditional labor demand, due to higher price elasticities of product demand.
    Keywords: trade, export, labor demand, wage elasticity, microdata, Germany
    JEL: F16 J23
    Date: 2013–07
  10. By: Rafael Boix (Departament d’Estructura Econòmica, Facultat d’Economia, Universitat de València); José Luis Hervás-Oliver (Departament d’Organització d’Empreses, Universitat Politecnica de València); Blanca De Miguel-Molina (Departament d’Organització d’Empreses, Universitat Politecnica de València)
    Abstract: The occurrence of creative service industries (CSI) is a strong determinant of differences in wealth amongst European regions. However, it is unknown if the strong effects are limited to occurring within regional boundaries or whether there are spillover effects into neighbouring regions. The purpose of this paper is to assess the existence of CSI spillover effects on the wealth of neighbouring regions. CSI and spillovers are integrated into both an empirical model and an endogenous growth model. Both models are estimated for a sample of 250 regions in the European Union in 2008. We find that most of the effects of CSI take place within regions, although there is also evidence that CSI has indirect spillovers across regions.
    Keywords: creative industries; creative services; regional growth; spatial spillovers; spatial econometrics
    JEL: R11 R12 R58
    Date: 2013–07
  11. By: Alfonso Alba; Julio Cáceres-Delpiano
    Abstract: Using a large and rich data set from administrative sources, we study the effects of children on mothers’ employment and earnings in Spain. By being able to pinpoint the event of multiple births along a twenty-year panel of women’s work history, we address two methodological hurdles in this research: the omitted-variable problem and concerns about twins as a good instrument for family size. We find that the effects of fertility on mothers’ labor outcomes differ by level of education. Women with only compulsory education experience falls of 17 percent in employment and 15 percent in earnings, increased duration of non-employed spells, and reductions in the likelihood of holding a secondary job or chaining contracts within a certain employment spell. Among more educated women, the employment rate drops by a mere 4 percent and earnings increase slightly in some cases. Nonetheless, a relatively higher employment rate of more educated mothers, besides unexpected changes in family size, involves costs in terms of working conditions, like holding temporary contracts. Our results indicate that mothers in general have a hard time regaining employment as revealed by the sharp increase in the take-up rate of unemployment insurance benefits around the third month after the birth. Finally, we are able to obtain some results for the impact of family size on the labor supply of a second earner (husband) in the household. For instance, we find that second earners tend to compensate for mothers’ income diminution.
    Date: 2013–07
  12. By: Nagl, Stephan (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: In recent years, many countries have implemented policies to incentivize renewable power generation. In this paper, we analyze the variance in profits of renewable-based electricity producers due to weather uncertainty under a `feed-in tariff' policy, a `fixed bonus' incentive and a `renewable quota' obligation. In a first step, we discuss the price effects of fluctuations in the feed-in from renewables and their impact on the risk for green electricity producers. In a second step, we numerically solve the problem by applying a spatial stochastic equilibrium model to the European electricity market. The simulation results allow us to discuss the variance in profits under the different renewable support mechanisms and how different technologies are affected by weather uncertainty. The analysis suggests that wind producers benefit from market integration, whereas producers from biomass and solar plants face a larger variance in profits. Furthermore, the simulation indicates that highly volatile green certificate prices occur when introducing a renewable quota obligation without the option of banking and borrowing. Thus, all renewable producers face a higher variance in profits, as the price effect of weather uncertainty on green certificates overcompensates the negatively correlated fluctuations in production and prices.
    Keywords: RES-E policy; financial risk; mixed complementarity problem
    JEL: C61 L50 Q40
    Date: 2013–06–24
  13. By: Bridget McNally (Department of Economics Finance and Accounting, National University of Ireland, Maynooth); Jim Stewart (Trinity College, Dublin)
    Abstract: This paper highlights the lack of transparency in the reporting of overall cost levels incurred by Irish pension schemes and demonstrates the impact of costs on pension fund performance. The paper relies on primary and secondary data analysis of financial statements of Irish pension schemes over a six year period. The paper finds that a significant portion of costs incurred by Irish pension schemes are not disclosed separately in the schemes’ financial statements. This results in a significant lack of transparency as to overall costs incurred annually by pension schemes. The RIY impact of pension fund costs (administrative and all other charges) over the lifetime of a scheme highlights the need for greater focus to be placed on cost efficiencies and competitiveness in any proposals for pension reform in Ireland.
    Keywords: Transparency, R.I.Y. impact, Cumulative effect
    Date: 2013
  14. By: Yann Algan (Department of Economics, Sciences Po); Camille Hémet (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS and Sciences Po); David Laitin (Department of Political Science, Stanford University)
    Abstract: This paper demonstrates the effects of ethnic diversity on social relationships and the quality of public spaces at a very finite neighborhood level. We use detailed block level data on diversity and housing quality from a representative survey on housing in France. We show how and to what extent diversity within a neighborhood can directly affect household well-being and the quality of the common spaces, whereas the previous literature looks at more aggregate outcomes through voting channels. Our identification strategy relies on the exogeneity of public housing allocations with respect to ethnic characteristics in France, to address the bias due to endogenous residential sorting. Diversity is shown to have a negative effect on the quality of local public goods, either due to vandalism, not deterred by other-regarding preferences and social policing, or due to collective action failure to ensure effective property management. However, we find that diversity has no robust effect on public safety at a local level and, if anything, is more related to social anomie.
    Keywords: diversity, neighborhood effects, living conditions, public housing
    JEL: H10 H41
    Date: 2013–07–10
  15. By: Altorjai, Szilvia
    Abstract: This paper uses the first wave of Understanding Society, the UK Household Longitudinal Study (UKHLS), to assess whether or not male migrant workers in the UK are more likely to be over-qualified than the UK born. It also explores whether immigrants from different countries and arriving under different immigration policy regimes vary in their probability of over-qualification. The results suggest that both country of origin (sending factor) and immigration policy (selecting factor) matter and that the greater probability of immigrants over-qualification masks significant group heterogeneities. Thus, the mechanisms that lead to over-qualification may vary for different groups of immigrants.
    Date: 2013–07–17
  16. By: Lelkes, Orsolya
    Abstract: This paper raises the issue whether public policy should focus on minimizing unhappiness rather than maximizing happiness. Using a cross-sectional multi-country dataset with 57 thousand observations from 29 European countries, we show that unhappiness varies a great deal more across social groups than (high levels of) happiness does. Our findings are robust to several alternative specifications, using both self-reported life satisfaction and self-reported happiness, and different cut-off points for defining unhappiness (dissatisfaction) and high levels of happiness (satisfaction). While misery appears to strongly relate to broad social issues (such as unemployment, poverty, social isolation), bliss might be more of a private matter, with individual strategies and attitudes, hidden from the eye of a policy-maker. The social cost of unhappiness may be also reflected in the immense cost of mental health problems. Preventing avoidable unhappiness, however, needs to be complemented with other strategies for promoting happiness, perhaps on a more decentralized level, given the different causes of bliss and that of misery.
    Keywords: Happiness, Unhappiness, Life satisfaction, Public policy, Bipolar scales
    JEL: D02 I31 Z0
    Date: 2013–05
  17. By: Carlo Fiorio; Stefano Iacus; Alessandro Santoro
    Abstract: Income tax evasion by small rms has been seldom investigated mostly because of lack of data. In this paper we use a large data set produced by the Italian Revenue Agency for this project to analyse a recent policy to contrast business income tax evasion. Since 1998 Italy has adopted a method to audit small businesses (Studi di Settore), which denes the probability of a tax audit based on presumptive and reported levels of sales. In 2007 a letter campaign was implemented by the Italian Revenue Agency aimed at reducing manipulation of reports by threatening that if the "anomaly" was repeated with the 2008 tax declaration, the probability of a thorough tax audit would have drastically increased. By using dierence in dierence with matching methods on a sample of about 50,000 treated firms and 95,000 controls, we find that the letter campaign had a positive and statistically signicant average effect on treated firms. A cost-benet analysis of the policy suggests that the letter campaign generated a net increase of revenues of about 140 million euros.
    Keywords: Business Taxation, Tax Compliance, Coarsened Exact Matching, Studi di Settore
    JEL: H26 H25 C13
    Date: 2013–07
  18. By: Vöpel, Henning
    Abstract: There is an ongoing debate on how Financial Fair Play (FFP) will affect European club football and whether it is really fair. So far regulations have been very different among national leagues. Therefore, FFP is expected to trigger some asymmetric adjustments among clubs and leagues thereby leading to some changes in the competitive balance and probably to a new competitive equilibrium in European club football in an inter- as well as in an intra-league comparison. The Paper discusses to what regard and to what extent FFP rules are really needed to remedy market failure and whether these rules are legitimate or justifiable with respect to their objectives and potential conflicts with EU competition law. --
    Date: 2013
  19. By: Patrizio Lecca (Department of Economics, University of Strathclyde); Peter McGregor (Department of Economics, University of Strathclyde); J. Kim Swales (Department of Economics, University of Strathclyde); Karen Turner (Department of Accounting, Economics and Finance, School of Management and Languages, Heriot-Watt University)
    Abstract: The aim of the paper is to identify the added value from using general equilibrium techniques to consider the economy-wide impacts of increased efficiency in household energy use. We take as an illustrative case study the effect of a 5% improvement in household energy efficiency on the UK economy. This impact is measured through simulations that use models that have increasing degrees of endogeneity but are calibrated on a common data set. That is to say, we calculate rebound effects for models that progress from the most basic partial equilibrium approach to a fully specified general equilibrium treatment. The size of the rebound effect on total energy use depends upon: the elasticity of substitution of energy in household consumption; the energy intensity of the different elements of household consumption demand; and the impact of changes in income, economic activity and relative prices. A general equilibrium model is required to capture these final three impacts.
    Keywords: Energy efficiency, indirect rebound effects, economy-wide rebound effects, household energy consumption, CGE models
    JEL: C68 D57 D58 Q41 Q43 Q48
    Date: 2013–06
  20. By: Alvaro Almeida (CEF.UP and Faculdade de Economia, Universidade do Porto); Joana Cima (Faculdade de Economia, Universidade do Porto)
    Abstract: In this paper, we evaluate the effect of demand uncertainty on hospital costs. Since hospital managers want to minimize the probability of not having enough capacity to satisfy demand, hospitals have to build excess capacity since demand is uncertain, and incur on the associated costs. Using panel data that comprises information for 43 Portuguese NHS hospitals for the period 2007 to 2009, we estimate a translog cost function that relates total variable costs to the usual variables (outputs, the price of inputs, some of the hospitals’ organizational characteristics) and an additional term measuring the excess capacity related to the uncertainty of demand. Demand uncertainty is measured as the difference between actual and projected demand for emergency services. Our results indicate that the cost function term associated with the uncertainty of demand is significant, which means that cost functions that do not include this type of term may be misspecified. For most of our sample, hospitals that face higher demand uncertainty have higher excess capacity and higher costs. Furthermore, we identify economies of scale in hospital costs, at least for smaller hospitals, suggesting that a policy of merging smaller hospitals would make a significant contribution to the reduction of hospital costs.
    Keywords: hospitals, demand uncertainty, cost function
    JEL: D24 I11
    Date: 2013–07

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