nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒09‒13
eighteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Inequality-Adjusted Gender Wage Differentials in Germany By Ekaterina Selezneva; Philippe Van Kerm
  2. Doing Well in Reforming the Labour Market? Recent Trends in Job Stability and Wages in Germany By Giannelli, Gianna Claudia; Jaenichen, Ursula; Rothe, Thomas
  3. Self-Reported Satisfaction and the Economic Crisis of 2007-10: Or How People in the UK and Germany Perceive a Severe Cyclical Downturn By Antje Mertens; Miriam Beblo
  4. Are the EU trade preferences really effective? A Generalized Propensity Score evaluation of the Southern Mediterranean Countries' case in agriculture and fishery By Emiliano Magrini; Pierluigi Montalbano; Silvia Nenci
  5. Health-Related Life Cycle Risks and Public Insurance By Daniel Kemptner
  6. Do Firms Benefit from Active Labour Market Policies? By Lechner, Michael; Wunsch, Conny; Scioch, Patrycja
  7. Trade Protectionism and Intra-industry Trade: A USA - EU Comparison By Ferreira-Lopes, Alexandra; Sousa, Cândida; Carvalho, Helena; Crespo, Nuno
  8. Effects of Early Childhood Intervention on Maternal Employment, Fertility and Well-Being. Evidence from a Randomized Controlled Trail By Sandner, Malte
  9. Parental benefits improve parental well-being: evidence from a 2007 policy change in Germany By Mikko Myrskylä; Rachel Margolis
  10. Explaining Rising Income Inequality in Germany, 1991-2010 By Kai Daniel Schmid; Ulrike Stein
  11. Energy market liberalisation and renewable energy policies in oecd countries By Francesco Vona; Francesco Nicolli
  12. The contribution of intangible assets to sectoral productivity growth in the EU By Niebel, Thomas; O'Mahony, Mary; Saam, Marianne
  13. Wage leadership models: a country-by-country analysis of the EMU By Gaetano D’Adamo; Mariam Camarero; Cecilio Tamarit
  14. Persistence vs. mobility in industrial and technological specialisations: Evidence from 11 Euro area countries By Raphaël Chiappini
  15. The links between economic integration and remittances behaviour of migrants in the Netherlands By Bilgili, Özge
  16. Segregated integration : recent trends in the Austrian gender division of labor By Margareta Kreimer; Ricardo Mora
  17. Coping with the Crisis: Recent Evolution in Danish Firms' International Trade Involvement, 2000-2010 By Kaleb Girma Abreha; Valérie Smeets; Frédéric Warzynski
  18. Monetary Transmission to UK Retail Mortgage Rates before and after August 2007 By Jack R. Rogers

  1. By: Ekaterina Selezneva; Philippe Van Kerm
    Abstract: This paper exploits data from the German Socio-Economic Panel (SOEP) to re-examine the gender wage gap in Germany on the basis of inequality-adjusted measures of wage differentials which fully account for gender differences in pay distributions. The inequality-adjusted gender pay gap measures are significantly larger than suggested by standard indicators, especially in East Germany. Women appear penalized twice, with both lower mean wages and greater wage inequality. A hypothetical risky investment question collected in 2004 in the SOEP is used to estimate individual risk aversion parameters and benchmark the ranges of inequality-adjusted wage differentials measures.
    Keywords: Gender gap, wage differentials, wage inequality, expected utility, risk aversion, East and West Germany, SOEP, Singh-Maddala distribution, copula-based selection model
    JEL: D63 J31 J70
    Date: 2013
  2. By: Giannelli, Gianna Claudia (University of Florence); Jaenichen, Ursula (Institute for Employment Research (IAB), Nuremberg); Rothe, Thomas (Institute for Employment Research (IAB), Nuremberg)
    Abstract: The German "employment miracle", with a weak decline in employment and low unemployment during the great recession, seems to be a good example for a successful labour market reform. Nevertheless, there are concerns about rising inequality in the labour market. In this paper we analyze the quality of newly started jobs between 1998 and 2010 using a huge administrative data set which allows us to look at job durations and earnings for different groups of workers. We discuss changes in the distributions of job durations and earnings over time, and present microeconometric models controlling for individual, firm and regional characteristics. Our results show a fairly constant level of overall job stability, but decreasing real wages and rising wage dispersion over time.
    Keywords: labour market reforms, job quality, job duration, real wages, Germany, 1998-2010
    JEL: C34 C41 J31 J62 J68
    Date: 2013–08
  3. By: Antje Mertens; Miriam Beblo
    Abstract: Self-reported satisfaction measures respond to a great variety of socio-demographic characteristics as well as the job and living environment. In this paper we ask whether the recent financial market crisis has caused a deterioration of satisfaction not only for the unemployed but also for those out of the labour force and especially those in employment. The focus of our analyses is on the pattern of life, job and health satisfaction over time and the influence of unemployment rates, inflation rates and GDP growth. We compare the UK and Germany, two countries with different employment protection regulations and different consequences of the crisis for the labour market. For our analysis we use data from the German Socio-Economic Panel (SOEP) and the British Household Panel Study (BHPS) for the period 1996 to 2010 and supplement this with annual information on macroeconomic indicators. We estimate Ordered Logit and OLS models, both with individual fixed effects. We were somewhat surprised to find significant differences between the formerly separated parts of Germany even twenty years after re-unification – not only in satisfaction but also its determinants. While people living in the western part of Germany report somewhat lower satisfaction in 2009 compared to the previous years, those living in the eastern part report higher levels than in 2006, the year before the financial crisis started. This could be due to the largely different employment structures in both parts of Germany. As exports and not so much services were hit by the crisis, western German federal states were facing stronger negative demand pressures. Our findings for the UK are similar to the East German evidence, as year dummies for the crisis years 2008 to 2010 do not show any sign of a decrease, except for a fall in job satisfaction in 2010. Looking at the impact of macroeconomic indicators such as GDP growth, inflation and unemployment, we find mostly diverse effects between the two German regions but similar between West Germany and the UK. First of all, satisfaction with life is related to the business cycle, we observe positive reactions to an increase in GDP in the whole of Germany and negative reactions to rising inflation in the UK and Germany. However, the strongest and most robust result concerns the relationship between self-reported satisfaction and the regional unemployment rate: The higher regional unemployment the more satisfied people in East Germany seem to be irrespective their current labour market status. Both unemployed and employed seem to be more satisfied with their lives, jobs and health when unemployment is rising around them. At the same time, the overall level of unemployment has a significantly negative effect. In West Germany and the UK, on the contrary, the reverse is true: overall unemployment is positively related to satisfaction and regional unemployment in West Germany is negatively related. Interestingly, we get similar though somewhat weaker results when looking at job and health satisfaction. Hence, though the direct costs of the financial and economic crisis in form of falling GDP seem to have been by far larger than the psychological costs, we find some limited additional costs in the crisis years, and a considerable impact of regional and national unemployment rates.
    Keywords: Happiness, life satisfaction, subjective well·being, business cycles, crisis
    JEL: D60 E30 I31 J60 Z13
    Date: 2013
  4. By: Emiliano Magrini (European Commission - JRC-IPTS - AGRILIFE Unit (Sevilla, ES)); Pierluigi Montalbano (Sapienza, University of Rome); Silvia Nenci (University of ROme 3)
    Abstract: The aim of this work is to assess the trade impact of preferential schemes in agriculture and fishery granted by the European Union (EU) to the Southern Mediterranean Countries (SMCs). This analysis presents several methodological improvements to previous works. First of all, we rely on a continuous treatment - i.e., preferential margins - to capture the ``average treatment effect'' of trade preferences rather than on a binary treatment based on dummy variables. Second, we apply non parametric matching techniques for continuous treatment, namely a generalized propensity score matching (GPS) technique, to assess the average causal effects of preferences on trade flows. Third, we use highly disaggregated data at sectoral level in order to evaluate properly the preferential treatment which is conceived to be applied at the product level. Our results show how the impact of EU preferences in agriculture and fishery granted to SMCs is positive and significant and better evaluated using impact evaluation techniques. We also assess the functional form of the relationship between EU-SMCs preferences and bilateral trade flows as well as the optimal level of preferential margin above which the marginal impact decreases.
    Keywords: International trade, EU-MED integration, Preferential trade agreement, Impact evaluation, Matching econometrics.
    JEL: C21 F10 F13 F15
  5. By: Daniel Kemptner
    Abstract: This paper proposes a dynamic life cycle model of health risks, employment, early retirement, and wealth accumulation in order to analyze the health-related risks of consumption and old age poverty. In particular, the model includes a health process, the interaction between health and employment risks, and an explicit modeling of the German public insurance schemes. I rely on a dynamic programming discrete choice framework and estimate the model using data from the German Socio-Economic Panel. I quantify the health-related life cycle risks by simulating scenarios where health shocks do or do not occur at different points in the life cycle for individuals with differing endowments. Moreover, a policy simulation investigates minimum pension benefits as an insurance against old age poverty. While such a reform raises a concern about an increase in abuse of the early retirement option, the simulations indicate that a means test mitigates<br /> the moral hazard problem substantially.
    Keywords: dynamic programming, discrete choice, health, employment, early retirement, consumption, tax and transfer system
    JEL: C61 I14 J22 J26
    Date: 2013
  6. By: Lechner, Michael; Wunsch, Conny; Scioch, Patrycja
    Abstract: This paper investigates the link between variation in the supply of workers who participate in specific types of active labour market policies (ALMPs) and firm performance using a new exceptionally informative German employer-employee data base. For identification we exploit that German local employment agencies (LEAs) have a high degree of autonomy in determining their own mix of ALMPs and that firms' hiring regions overlap only imperfectly with the areas of responsibility of the LEAs. Our results indicate that in general firms do not benefit from ALMPs and in some cases may even be harmed by certain programs, in particular by sub¬sidized employment and longer training programs. These findings complement the negative assessment of the cost-effectiveness of ALMPs from the empirical literature on the effects for participants.
    Keywords: Subsidized employment programs, training programs, regional variation, program evaluation
    JEL: J68
    Date: 2013
  7. By: Ferreira-Lopes, Alexandra; Sousa, Cândida; Carvalho, Helena; Crespo, Nuno
    Abstract: The aim of this work is to find patterns for products included in the customs tariffs of the USA and the EU (composed of over 5000 products disaggregated at the 6 digit-level) which share similarities, defined by a set of international trade variables, namely the index of revealed comparative advantages (RCA), the Grubel-Lloyd index, and other indicators of international trade. There is a recent strand in the literature advancing a theory that links the degree of intra-industry trade with the level of protectionism. In order to test this theory we use cluster analysis as a method of data analysis and the Grubel-Lloyd index as a classification variable between groups. For each of the analyzed regions we obtain four different groups. Thereafter each of these four clusters are further characterized with the help of the other international trade indicators and the tariffs. Finally, we establish a comparison between the two regions by examining possible differences and similarities. The results show a significant difference in the tariffs applied between the USA and the EU, with the USA presenting a lower level of protectionism. Additionally, the results for the USA show a positive relationship between the degree of intra-industry trade and a lower level of protectionism, while for the EU the results are not conclusive.
    Keywords: Trade Policy, Customs Tariff, USA, EU, Intra-industry Trade, Cluster Analysis
    JEL: C38 F12 F13 F14
    Date: 2013–07–31
  8. By: Sandner, Malte
    Abstract: This paper presents results from a randomized evaluation of a home visiting program for disadvantaged first-time mothers and their families implemented in three German federal states. I analysis the impact of the intervention on maternal employment, school attendance, child care use, fertility, life-satisfaction and well-being. Biannual telephone interviews with the participating mothers until the third birthday of the child give a rich data source to evaluate these outcomes. I find that the intervention increases fertility and maternal life-satisfaction and well-being, whereas the treatment does not affect maternal employment, school attendance and child care use. These results are in contrast to previous studies from the US where home visiting programs decreased fertility.
    Keywords: Early Childhood Intervention, Randomized Experiment, Fertility
    JEL: J13 J12 I21 H52
    Date: 2013–08
  9. By: Mikko Myrskylä (Max Planck Institute for Demographic Research, Rostock, Germany); Rachel Margolis
    Abstract: Family policies aim to influence fertility and labor force participation, and support families. However, often only fertility and labor supply are considered in policy evaluations. For example, the 2007 extension of parental leave benefits in Germany is generally considered unsuccessful because changes in fertility and labor force participation were modest. However, parental wellbeing is also important, in itself and as a determinant of child well-being. This paper is the first to consider the effect of parental leave policies on parental well-being. We analyze the German 2007 parental benefits reform and find that the extension of benefits strongly increased parental well-being around the birth of a child. The effect is observed for first and second births and for various sub-populations. A placebo test using data from Britain where there was no policy change supports the causal interpretation. Our results cast the success of the German 2007 policy change in new light. Parental leave benefits have an important direct impact on parental wellbeing.
    Keywords: Germany, parenthood
    JEL: J1 Z0
    Date: 2013–08
  10. By: Kai Daniel Schmid; Ulrike Stein
    Abstract: In Germany, inequality of net equivalized income increased noticeably in the first half of the new millennium. We aim to identify the main drivers of this rise in income inequality since the early 1990s. We provide a broad overview of the circumstances under which inequality evolved, i.e. which changes in the German economy are most likely to provide an explanation for changes in income concentration. To explain the development of the distribution of net equivalized income we analyze changes in the distribution of market income as well as shifts in the effectiveness of public redistribution mechanisms. We find that cyclical and structural changes in the labor market, the increasing relevance of capital income as well as the decreasing effectiveness of the public mechanisms of income redistribution are the main explanatory factors for the development of income inequality. In addition to this, we discuss several issues that are of high relevance for the distribution of economic resources but are not directly covered in the analysis of net equivalized income. Most significantly, the design of the tax and social security contributions burden as well as the rising relevance of value-added taxes have exhibited negative redistributive effects for low income households.
    Keywords: Income Inequality, Redistribution, SOEP
    JEL: D12 I30 J30
    Date: 2013
  11. By: Francesco Vona (Ofce sciences-po, Skema Business School); Francesco Nicolli (Ceris/Cnr, University of Ferrara)
    Abstract: We analyse the impact of market liberalisation on renewable energy policies in OECD countries. To this end, we first develop an aggregated indicator of renewable energy policies using principal components analysis and then examine its determinants through panel data techniques. Our results are consistent with the predictions of political-economy models of environmental policies, as brown lobbying, proxied by entry barriers in the energy sector, and citizens preferences have the expected effects on policy. Brown lobbying has a negative effect on the policy indicator, even when accounting for endogeneity in its effects in a dynamic panel specification and using different policy indicators.Reducing income inequality,the ratification of the Kyoto protocol and stronger green parties all positively affect the approval of more ambitious policies but with less robust results.
    Keywords: Renewable energy policy,Energy market liberalisation,Political economy.
    JEL: Q42 Q48 D72 O38
    Date: 2013–07
  12. By: Niebel, Thomas; O'Mahony, Mary; Saam, Marianne
    Abstract: In this paper we report on new data on intangible investment at the level of 1-digit NACE industries of 10 EU countries. The data are constructed as a sectoral breakdown of the INTANInvest database, which contains measures of intangible investment at the level of the aggregate business sector. With the sectoral data we assess the contribution of intangibles to productivity growth based on growth accounting and econometric estimation of production functions. The growth accounting contribution of intangibles to labor productivity growth is generally highest in manufacturing and finance. The estimated output elasticity of intangibles lies between 0.1 and 0.2, considerably below values found in previous research using aggregate data. --
    Keywords: Intangible Assets,Labor Productivity,Growth Accounting,Panel Regressions
    JEL: E22 J24 O47
    Date: 2013
  13. By: Gaetano D’Adamo (Department of Applied Economics II, University of Valencia); Mariam Camarero (Department of Economics, Universidad Jaume I); Cecilio Tamarit (Department of Applied Economics II, University of Valencia)
    Abstract: According to the theory of wage leadership, if there is free inter-sectorial labor mobility, changes in the level of the wage in the leading sector cause changes in the same direction in other sectors’ wage. Moreover, since the traded sector (i.e. Industry) is affected by international competitive pressure, it should act as the leader, because this would be conducive to wage restraint. We apply a Vector Error Correction Model on four macro sectors (Industry, Services, Construction and the Public Sector) in ten EMU countries to test for wage leadership and wage adaptability. Our results show significant cross-country differences, with the Public Sector acting as the leader in Germany, Belgium and Greece. Countries that recently experienced a construction bubble such as Spain and Ireland show wage leadership of the construction sector. Moreover, in half of the countries, wages in different sectors are, to some extent, set autonomously, which suggests low intersectorial labor mobility. Finally, adjustment after a positive vs. negative shock to the leading sector’s wage, in Mediterranean countries, Ireland and the Netherlands is asymmetric.
    Keywords: Wage Leadership; Cointegrated VAR; Labor Market
    JEL: C32 E62 J51
    Date: 2013–07
  14. By: Raphaël Chiappini (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis [UNS])
    Abstract: This paper analyses the evolution of the specialisation pattern of 11 Euro area countries by analysing their comparative and technological advantages over the period 1990-2008. Using the estimation of marginal densities and Markov transition probabilities, we examine both the external shape of the distribution of technological and comparative advantages and the intradistribution dynamics. Our results point out that there is, on average, a high persistence in industrial specialisation patterns of the 11 Euro area countries under scrutiny, confirming a lock-in effect, notably for Italy. Nevertheless, our results related to technological specialisation reveal a large mobility of technological advantages during the same period, especially in Spain.
    Keywords: Specialisation dynamics * Revealed comparative advantage * Technological comparative advantage * Transition probability * Intra distribution dynamics
    Date: 2013
  15. By: Bilgili, Özge (UNU-MERIT / MGSoG)
    Abstract: In a time of economic downturn and the recession in Europe, a migrant's labour market position is even more precarious, and may influence their economic homeland engagement. Based on the IS Academy, Migration and Development: A World in Motion Project survey data , I focus on Afghan, Burundian, Ethiopian and Moroccan first generation migrants in the Netherlands, and explore how their economic integration is related to different aspects of their economic remittances behaviour. The main objectives of this paper can be summarized as follows: 1) to describe migrants' labour market performance; 2) to designate migrants' economic remittances behaviour with a focus on propensity to remit, amount of remittances and reason for remitting; and 3) to discuss how labour market performance relates to migrants' economic homeland engagement. In line with the resource dependent transnationalism argument, this paper concludes that economic integration is positively linked to propensity to remit and the amount of remittances sent. Moreover, I show that especially those with a secure employment status are more likely to remit, remit more and remit more for investment purposes rather than consumption. The paper starts out with a literature review on economic transnationalism and a description of the hypotheses. Next, the data and methods used are explained in detail. Subsequently, the descriptive and analytical results of the paper are presented, followed by a concluding section.
    Keywords: migrants in the Netherlands, economic remittances, economic integration, transnationalism
    JEL: F22 J15 J61 O15
    Date: 2013
  16. By: Margareta Kreimer; Ricardo Mora
    Abstract: Using micro data from the Austrian Labor Force Survey, this paper explores how decreases in the gender differential in participation rates together with increasing differentials in the incidence of part-time jobs and stable or rising levels of occupational segregation by gender affect the gender division of labor. To so so, we propose an index for the gender division of labor based on the Mutual Information index. Our main results show that the gender division of labor is very stable along the 16-year period. This is so because although the rising female labor force participation reduces the gender division of labor, increases in gender differences in the incidence of part-time jobs and increases in occupational segregation result in greater division of labor across genders. These results are robust to alternative definitions of economic activity and labor market involvement and can also be found after controlling for educational levels and fields.
    Keywords: Gender segregation, Female labor force participation, Part-time jobs
    Date: 2013–09
  17. By: Kaleb Girma Abreha (Department of Economics and Business, Aarhus University); Valérie Smeets; Frédéric Warzynski (Department of Economics and Business, Aarhus University)
    Abstract: Using a highly disaggregated firm-product-destination level data from Denmark, we document salient features of Danish international production in the recent decade. These include systematic variation in export participation of firms across industries, positive correlation between the scope (number of products exported and markets served) and scale of exporting activities, considerable dominance of multi-product and multi-destination firms, existence of carry-along trade, the prevalence of core and peripheral products in exports, a small role of economy-wide entry and exit of firms and products, and a sizable role of firm-level adding and dropping of products and product-destination combinations as a margin of trade adjustment. Finally, we show that firms responded to the latest economic shock mainly by adjusting the scale of exports and imports. At the same time, changing their products and productdestination combinations helped them to mitigate the negative effects of the shock.
    Keywords: Foreign trade, Trade collapse, Margins of Trade, Denmark
    JEL: F14 L60
    Date: 2013–09–04
  18. By: Jack R. Rogers (Department of Economics, University of Exeter)
    Abstract: This paper investigates the transmission from UK policy and a range of wholesale money market rates to retail mortgage rates using the long-run estimator proposed by Phillips and Loretan (1991), with a single-equation error correction model (SEECM) framework, from 1995 to 2009. I document the economy-wide effect of the financial market turmoil since August 2007, and show how this has altered long- and short-term relationships. In the long-run there is evidence of a contrast between the discounted mortgage rates that banks may use to initially attract customers, and standard variable rates, with pass-through complete for the former but not for the latter. For fixed rate mortgages, pass-through is generally complete. Since the crisis, for eight of the seventeen estimated relationships I find strong evidence in the long-run of both a significant jump in equilibrium spreads, and a fall in pass-through, whilst in the short-run there is a considerable weakening of the process that re-adjusts retail rates back towards their equilibrium with the money market. Although I do not find strong statistical evidence for an asymmetric re-adjustment process before August 2007, retail mortgage rates generally take considerably longer to move back towards their equilibrium with wholesale rates during times when they are relatively expensive. These results add to previous studies by showing that the UK retail banking sector is imperfectly competitive at the aggregate level, and also suggest that discounted rates are used as a highly competitive loss-leader product.
    Keywords: Mortgage Rates, Monetary Transmission, Error Correction Model.
    JEL: E43 E52
    Date: 2013

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