nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒10‒18
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Outcomes of Social Assistance in Central and Eastern Europe: A Pre-transfer Post-transfer Comparison By Avram, Silvia
  2. Unit Values, Unit Labor Costs and Trade Performance in Four Central European Countries By Gabor Bekes; Balazs Murakozy; Zsuzsa Munkacsi; Gabor Oblath
  3. The East-West gradient in spatial population development within Germany: temporary GDR legacy vs. longstanding spatial disparities By Sebastian Klüsener; Emilio Zagheni
  4. The impact of migration on children left behind in Moldova By Gassmann, Franziska; Siegel, Melissa; Vanore, Michaella; Waidler, Jennifer
  5. Offshoring and Labour Market Inequalities By Tillmann Schwörer
  6. Residual Load, Renewable Surplus Generation and Storage Requirements in Germany By Wolf-Peter Schill
  7. Social Relationships in Later Life: The Role of Childhood Circumstances By Sarah Gibney; Mark E. McGovern; Erika Sabbath
  8. Beyond the Labour Income Tax Wedge: The Unemployment-Reducing Effect of Tax Progressivity By Etienne Lehmann; Claudio Lucifora; Simone Moriconi; Bruno Van Der Linden
  9. The Future of the European Electricity System and the Impact of Fluctuating Renewable Energy – a Scenario Analysis By Stephan Spiecker
  10. Patterns of Integration: Low Educated People and their Jobs in Norway, Italy and Hungary By J nos Kollo
  11. The Relationship between Hours of Domestic Services and Female Earnings: Panel Register Data Evidence from a Reform By Halldén, Karin; Stenberg, Anders
  12. The Emotional Timeline of Unemployment: Anticipation, Reaction, and Adaption By Christian von Scheve; Frederike Esche; Jürgen Schupp
  13. Are Public Research Spin-Offs More Innovative? By Stephan, Andreas
  14. A cross-country analysis of the relationship between income inequality and social capital By Heijke J.A.M.; Ioakimidis M.
  15. Housing transfer taxes and household mobility: Distortion on the housing or labour market? By Teemu Lyytikäinen; Hilber; A. L. Christian
  16. Understanding income mobility: the role of education for intergenerational income persistence in the US, UK and Sweden By Paul Gregg; Jan. O. Jonsson; Lindsey Macmillan; Carina Mood
  17. Economic insecurity and fertility intentions: the case of Italy By Francesca Modena; Concetta Rondinelli; Fabio Sabatini
  18. Heterogeneous sports participation and labour market outcomes in England By Lechner, Michael; Downward, Paul
  19. Cultural Diversity, Cities and Innovation: firm Effects or City Effects? By Neil Lee
  20. How Does Temporary Agency Work Impact German Agency Workers? By Spermann, Alexander

  1. By: Avram, Silvia
    Abstract: The poverty reduction potential of national social assistance programs in eight Central and Eastern European countries is examined using data from the EU-SILC. Results indicate that social assistance programs are a marginal component of the social protection system throughout the region. They serve small populations, spend relatively little compared to needs and the benefits they award are largely a top-up for their clients. However, the more extensive and liberal programs achieve higher effectiveness in reducing poverty. Unlike Western Europe, no trade-off between extensiveness and benefit generosity or between generosity and efficiency could be found. Decentralization and discretion are associated with inefficiency and arbitrariness in entitlement decisions rather than improved targeting.
    Date: 2013–10–09
  2. By: Gabor Bekes (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Balazs Murakozy (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Zsuzsa Munkacsi (European University Institute); Gabor Oblath (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: Our paper, relying on product and industry level data, analyses factors behind divergences in aggregate export price changes in four Central European countries, Poland, Hungary, Czech Republic and Slovakia. We focus on exports to Germany, their largest trading partner and observe the period 2000-2010. As our hypothesis is that divergence in changes may be explained by convergence in levels, we construct relative level indices of export unit values (UVs, as proxies of export prices) and unit labor costs (ULCs), based on the COMEXT and EU KLEMS databases, respectively. By merging the relative level indices with trade performance indicators (export volumes, market shares, extensive and intensive margins), we investigate the relation between UVs and ULCs, their changes, as well as their respective impact on trade performance. Our results suggest that (i) there is convergence in the four countries' export UV levels, (ii) changes in UVs were positively correlated with changes in ULCs, (iii) a higher UV increase was associated with lower growth in export volume, (iv) the level of ULC and that of labor productivity does not show convergence, but the level of labor costs and wage shares do. The results indicate that our approach helps understanding factors contributing to changes in UVs, as well as trade performance of countries. However, to reach more general results, the approach should be extended to more countries and markets.
    Keywords: export price indices and unit values; unit labor costs; price level convergence; export performance
    JEL: F14 F16
    Date: 2013–09
  3. By: Sebastian Klüsener (Max Planck Institute for Demographic Research, Rostock, Germany); Emilio Zagheni (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: Since the unification of Germany in 1990, the former communist eastern part of the country has experienced substantial levels of population decline and outmigration. These trends are largely attributable to East-West differences in economic development (Mai 2007). In this article, we explore the question of whether the recent decline in population is a temporary phenomenon related to the period of transition, or whether long-term geographical factors also affect spatial population trends in Germany. In particular, we investigate to what extent East-West differences are related to the fact that parts of western Germany belong to the European dorsal (or Blue Banana arc), which has long been the most important area of economic activity in Europe (Brunet 1989). Our findings show that an East-West gradient in spatial population trends has existed since the late 19th century. This suggests that long-term geographical factors are relevant for understanding trends in Germany’s spatial population development.
    Keywords: Germany, population change, spatial analysis
    JEL: J1 Z0
    Date: 2013–10
  4. By: Gassmann, Franziska (UNU-MERIT/MGSoG); Siegel, Melissa (UNU-MERIT/MGSoG); Vanore, Michaella (UNU-MERIT/MGSoG); Waidler, Jennifer (UNU-MERIT/MGSoG)
    Abstract: This paper empirically evaluates the well-being of children "left behind" by migrant household members in Moldova. Using data derived from a nationally-representative, large-scale household survey conducted between September 2011 and February 2012 among 3,255 households (1,801 of which contained children aged 0-17) across Moldova, different dimensions of child well-being are empirically evaluated. Well-being of children in Moldova is divided into eight different dimensions, each of which is comprised of several indicators. Each indicator is examined individually and then aggregated into an index. Well-being outcomes are then compared by age group, primary caregiver, migration status of the household (current migrant, return migrant, or no migration experience), and by who has migrated within the household. It was found that migration in and of itself is not associated with negative outcomes on children's well-being in any of the dimensions analysed, nor does it matter who in the household has migrated. Children living in return migrant households, however, attain higher rates of well-being in specific dimensions like emotional health and material well-being. The age of the child and the material living standards experienced by the household are much stronger predictors of well-being than household migration status in a number of different dimensions. The results suggest that migration does not play a significant role in shaping child well-being outcomes, contrary to the scenarios described in much past research. This paper is the first (to the authors' knowledge) to link migration and multidimensional child poverty.
    Keywords: Moldova, migration, poverty, child poverty, multi-dimensional poverty
    JEL: I32 F22 J61 O15
    Date: 2013
  5. By: Tillmann Schwörer
    Abstract: This paper estimates the effects of offshoring on labour market inequalities between skill groups based on German industry level data from 1995 to 2007. Our main findings are the following: First, offshoring is on average biased in favour of high-skilled employees and in disfavour of low-skilled employees. This effect is strongly driven by the manufacturing sector, material offshoring, and offshoring to Central and Eastern Europe. Second, we find that the labour market adjusts to offshoring mainly through changes in relative wages rather than changes in relative employment. This runs counter to the classical argument that German labour market institutions (collective bargaining, unemployment benefits, etc.) lead to rigid wage structures and high unemployment rates. Third, in the service sector it is the group of medium-skilled employees which is particularly exposed to offshoring, possibly due to the different nature of tasks there. Fourth, medium-skilled employees are also negatively affected by technological change, which explains recent trends towards a polarisation in labour demand
    Keywords: offshoring, skills, labour market, inequalities, seemingly unrelated regression
    JEL: F14 J23 J24 J31
    Date: 2013–10
  6. By: Wolf-Peter Schill
    Abstract: We examine the effects of future renewable expansion in Germany on residual load and renewable surplus generation for policy-relevant scenarios for 2022, 2032 and 2050. We also determine the storage capacities required for taking up renewable surpluses for varying levels of accepted curtailment. Making use of extensive sensitivity analyses, our simulations show that the expansion of variable renewables leads to a strong decrease of the right-hand side of the residual load curve. Renewable surpluses generally have high peaks which only occur in very few hours of the year, whereas overall surplus energy is rather low in most scenarios analyzed. Surpluses increase substantially with growing thermal must-run requirements, decreasing biomass flexibility and decreasing load. On average, most surpluses occur around noon and in spring time. Whereas the energy of single surplus hours is often in the range of existing German pumped hydro capacities, the energy of connected surpluses is substantially larger. Using an optimization model, we find that no additional storage is required in the scenarios for 2022 and 2032 in case of free curtailment. Even restricting curtailment to only 1% of the yearly feed-in of non-dispatchable renewables would render storage investments largely obsolete under the assumption of a flexible system. In contrast, further restrictions of curtailment and a less flexible system would strongly increase storage requirements. In a flexible 2050 scenario, 10 GW of additional storage are optimal even in case of free curtailment due to larger surpluses. Importantly, minor renewable curtailment does not impede achieving the German government's renewable energy targets. We suggest avoiding renewable surpluses in the first place by making thermal generators more flexible. Afterwards, different flexibility options can be used for taking up remaining surpluses, including but not limited to power storage. Curtailment remains as a last resort. Full surplus integration by power storage will never be optimal because of the nature of surpluses shown in this paper. Future research should explore synergies and competition between different flexibility options, while not only covering the wholesale market, but also ancillary services.
    Keywords: Renewable energy, Residual load, Storage, Curtailment, Germany
    JEL: Q42 Q47 Q48
    Date: 2013
  7. By: Sarah Gibney (University College Dublin); Mark E. McGovern (Harvard Center for Population and Development Studies); Erika Sabbath (Harvard Center for Population and Development Studies)
    Abstract: Social relationships predict health and emotional wellbeing across the life course. However, it is not known whether gradients in social engagement, social network size or quality in later life mirror socio-economic and health gradients in childhood. This study investigates the long-term impact of childhood circumstances on social relationships. Data are from the Survey of Health, Aging and Retirement in Europe; a panel survey of people aged 50+. Current social network attributes (size, satisfaction and emotional closeness) and retrospective life history data on childhood health, cognition, SES, and parental characteristics are utilized. Regression analysis indicates that childhood circumstances predict social network attributes in later life. Emotional closeness partly mediates the relationship between childhood circumstances and social network satisfaction. A strong but differential association between aspects of childhood circumstance and social network attributes was evident. Therefore we critique the index measurement approach which conflates diverse pathways linking childhood and late-life outcomes.
    Keywords: Social relationships, Ageing, Europe, Childhood conditions, Life course
    JEL: J14 I10 Z13
    Date: 2013–10–10
  8. By: Etienne Lehmann (TEPP - Travail, Emploi et Politiques Publiques - CNRS : FR3435 - Université Paris-Est Marne-la-Vallée (UPEMLV), CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, ERMES - Equipe de recherche sur les marches, l'emploi et la simulation - CNRS : UMR7017 - Université Paris II - Panthéon-Assas); Claudio Lucifora (Università Cattolica di Milano - Università Cattolica di Milano); Simone Moriconi (Università Cattolica di Milano - Università Cattolica di Milano); Bruno Van Der Linden (ACE - Applied and Computational Electromagnetics - Université de Liège - Institut Montefiore - Département d'Electricité, Electronique et Informatique (Liège) - Fonds de la Recherche Scientifique [FNRS])
    Abstract: This paper argues that, for a given overall level of labour income taxation, a more progressive tax schedule reduces the unemployment rate and increases the employment rate. From a theoretical point of view, higher progressivity induces a wage-moderation e ect and increases overall employment since employment of low-paid workers is more responsive. We test these theoretical predictions on a panel of 21 OECD countries over 1998-2008. Controlling for the burden of taxation at the average wage, we show that a more progressive taxation reduces the unemployment rate and increases the employment rate. These ndings are con rmed when we account for the potential endogeneity of both average taxation and progressivity. Overall our results suggest that policy-makers should not only focus on the detrimental e ects of tax progressivity on in-work e ort.
    Keywords: wage moderation; employment; taxation
    Date: 2013–07–15
  9. By: Stephan Spiecker (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: The ongoing transformation of the European energy system comes along with new challenges, notably increasing amounts of power generation from intermittent sources like wind and solar. How current objectives for emission reduction can be reached in the future and what the future power system will look like is, however, not fully clear. In particular, power plant investments in the long run and power plant dispatch in the short run are subject to considerable uncertainty. Therefore an approach is presented which allows electricity market development to be assessed in the presence of stochastic power feed-in and endogenous investments in power plants and renewable energies. To illustrate the range of possible future developments, five scenarios for the European electricity system up to 2050 are investigated. Both generation investments and dispatch as well as utilization of transmission lines are optimized for these scenarios and additional sensitivity analyses are carried out.
    Keywords: integration of renewable energies, stochastic optimization, scenario analysis
    Date: 2013–10
  10. By: J nos Kollo (Institute of Economics, Center for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: The paper looks at how the distribution of jobs by complexity and firms' willingness to hire low educated labor for jobs of different complexity contribute to unskilled employment in Norway, Italy and Hungary. In search of how unqualified workers can attend complex jobs, it compares their involvement in various forms of post-school skills formation. The countries are also compared by the weight of small firms, which are assumed to assist low skilled workers through interpersonal relationships. The data suggest that unskilled employment in Norway benefits from synergies between work in skill-intensive jobs, intense adult training, informal learning and involvement in civil activities. In Italy, workplaces requiring no literacy skills at all have the largest contribution but small businesses tend to employ low educated workers at a large scale even in highly complex jobs. In Hungary, insufficient skills (relative to Norway) and an undersized small-firm sector (relative to Italy) set limits to the inclusion of the low educated. An extreme degree of social isolation is likely to deteriorate their skills and jobs prospects further.
    Keywords: skills, skill requirements, unemployment, firm size
    JEL: J21 J24
    Date: 2013–09
  11. By: Halldén, Karin (Swedish Institute for Social Research, Stockholm University); Stenberg, Anders (Swedish Institute for Social Research, Stockholm University)
    Abstract: We provide evidence on the quantitative relationship between household time con-straints and female earnings. In 2007, a tax discount reform in Sweden reduced prices of outsourced domestic services (ODS) by 50 percent. Linking population register data on yearly tax discounts with annual earnings, we find that 60 percent of married women’s freed hours are applied to labor market work, with ODS of approximately 2-4 percent of full-time work in a year being linked to a 2-4 percent earnings increase, but with no additional increase thereafter. The analysis carefully considers potential bias and outlines the required assumptions regarding reverse causality.
    Keywords: household work; outsourcing; female labor supply
    Date: 2013–10–09
  12. By: Christian von Scheve; Frederike Esche; Jürgen Schupp
    Abstract: Unemployment continues to be one of the major challenges in industrialized societies. Aside from its economic dimensions and societal repercussions, questions concerning the individual experience of unemployment have recently attracted increasing attention. Although many studies have documented the detrimental effects of unemployment for subjective well-being, they overwhelmingly focus on life satisfaction as the cognitive dimension of well-being. Little is known about the emotional antecedents and consequences of unemployment. We thus investigate the impact of unemployment on emotional well-being by analyzing the frequency with which specific emotions are experienced in anticipation of and reaction to job loss. Using longitudinal data of the German Socio-Economic Panel (SOEP) and fixed effects regressions, we find that becoming unemployed leads to more frequent experiences of unpleasant emotions only in the short run and that adaptation occurs more rapidly as compared to life satisfaction. Contrary to existing studies, we find decreases on emotional well-being but not in life satisfaction in anticipation of unemployment.
    Keywords: Unemployment, emotions, well-being, life satisfaction, SOEP
    JEL: A14 D63 J17
    Date: 2013
  13. By: Stephan, Andreas (Ratio & JIBBS)
    Abstract: The main purpose of this paper is to analyse whether research spin-offs, that is, spinoffs from either public research institutes or universities, have greater innovation capabilities than comparable knowledge-intensive firms created in other ways. Using a sample of about 2,800 firms from highly innovative sectors, propensity score matching is used to create a sample group of control firms that is comparable to the group of spin-offs. The paper provides evidence that the 121 research spin-offs investigated have more patent applications and more radical product innovations, on average, compared to similar firms. The results also show that research spin-offs’ superior innovation performance can be explained by their high level of research cooperation and by location factors. An urban region location and proximity to the parent institution are found to be conducive to innovation productivity. The paper also finds evidence that research spin-offs are more successful in attracting support from public innovation support programs in comparison to their peers.
    Keywords: Spin-Offs; Innovation Performance; Propensity Score Matching; Location Factors; Cooperation; Public R&D Subsidies
    JEL: M13 O18
    Date: 2013–10–08
  14. By: Heijke J.A.M.; Ioakimidis M. (ROA)
    Abstract: This study investigated whether earnings inequality is associated with social capital as measured by active membership in organizations and interpersonal trust. Pearson product-moment correlation analysis showed that greater earnings inequality was associated with lower values on both measures of social capital in 14 European countries. While causality in either direction cannot be inferred from this result, it does suggest the possibility that earnings inequality negatively affects social capital. To test this idea further, we also tentatively examined whether other societal indicators related to earnings inequality are associated with social capital. These alternative indicatorsthe countrys percentage of urban residents, percentage of residents with tertiary education, and government spending as a percentage of GDPdid not show stronger relationships with social capital than did earnings inequality. Further analysis of the data by excluding specific groups of countries indicated little association between earnings inequality and measures of social capital. These results suggested that country-specific economic or cultural values play a large role in how earnings inequality and social capital are related.
    Keywords: Wage Level and Structure; Wage Differentials; Economic Sociology; Economic Anthropology; Social and Economic Stratification;
    JEL: J31 Z13
    Date: 2013
  15. By: Teemu Lyytikäinen; Hilber; A. L. Christian
    Abstract: We estimate the effect of the UK Stamp Duty Land Tax on household mobility using micro data. Exploiting a discontinuity in the tax schedule as a quasiexperimental setting, we isolate the impact of the stamp duty from other determinants of mobility. We compare homeowners with self-assessed house values on either sides of a cut-off value where the tax rate increases from 1 to 3 percent and find that a higher stamp duty strongly negatively affects their propensity to move. The 2 percentage-point increase in the stamp duty reduces the annual rate of mobility by between 2 and 3 percentage-points or about 30 percent. This adverse effect is confined to short-distance and non-job related moves, suggesting a distortion in the housing rather than the labour market. As a cross-validation check, we also analyse the distribution of actual transaction prices and find that the tax rate increase reduces the volume of sales by roughly 30 percent.
    Keywords: Stamp duty, housing transfer taxes, transaction costs, homeownership, household mobility
    JEL: R31 R21 J61 H27 H21 R38 D23
    Date: 2013–08–09
  16. By: Paul Gregg (Department of Social and Policy Science, University of Bath); Jan. O. Jonsson (Nuffield College, Oxford University and Swedish Institute for Social Research, Stockholm University); Lindsey Macmillan (Department of Quantitative Social Science, Institute of Education, University of London); Carina Mood (Institute for Future Studies, Stockholm and Swedish Institute for Social Research, Stockholm University)
    Abstract: A growing number of studies in several countries over the past twenty years have documented the persistence in incomes across generations, and much of the current literature is seeking to understand the processes driving intergenerational mobility and how these differ across time periods and across countries. Education is commonly seen, just as in sociological studies of social mobility or status attainment, as the key driving force of intergenerational associations. In this paper we study the role of education for intergenerational income associations in three countries over time, and across the life-span of sons. We pay particular attention to issues of life-cycle bias and measurement error in modelling income mobility in a comparative setting. To explore the role of education, we utilise a three-stage framework that decomposes the intergenerational elasticity into three parts: the relationship between income and education, the returns to education, and the direct relationship between parental income and their child’s income in the next generation after controlling for education. We find that the US and the UK have high levels of income persistence (low mobility) across generations while Sweden is more moderate. Levels of educational inequality are surprisingly similar in all three countries with the majority of the difference between the US/UK and Sweden working through unequal returns to education and, more strikingly, inequality of opportunities for people with similar educational qualifications.
    Keywords: Intergenerational mobility, children, education
    JEL: J62 J13 J31
    Date: 2013–10–08
  17. By: Francesca Modena (University of Trento); Concetta Rondinelli (Bank of Italy); Fabio Sabatini (Sapienza University of Rome)
    Abstract: Starting from the assumption that economic insecurity is a key factor behind childbearing decisions, we empirically assess how fertility intentions are affected by job instability, which may severely compromise the employment status of workers, and economic isadvantages in terms of household income and wealth. We show that the instability of women’s work status (i.e. the holding of occasional and precarious jobs) ignificantly postpones maternity decisions for medium/high level income households; the chances of further childbirth are ignificantly and negatively affected by household income insecurity. Finally, low levels of household wealth influence the decision of having a first child.
    Keywords: economic insecurity, income, wealth, fertility, childbearing, employment instability, precarious employment, Italy.
    JEL: C25 J13
    Date: 2013–09
  18. By: Lechner, Michael; Downward, Paul
    Abstract: Based on a unique composite dataset measuring heterogeneous sports participation, labour market outcomes and local facilities provision, this paper examines for the first time the association between different types of sports participation on employment and earnings in England. Clear associations between labour market outcomes and sports participation are established through matching estimation whilst controlling for some important confounding factors. The results suggest a link between different types of sports participation to initial access to employment and then higher income opportunities with ageing. However, these vary between the genders and across sports. Specifically, the results suggest that team sports contribute most to employability, but that this varies by age across genders and that outdoor activities contribute most towards higher incomes.
    Keywords: Sports Participation, Human Capital, Labour Market, Matching Estimation
    JEL: I12 I18 J24 L83 C21
    Date: 2013–10
  19. By: Neil Lee
    Abstract: Growing cultural diversity is seen as important for innovation. Research has focused on two potential mechanisms: a firm effect, with diversity at the firm level improving knowledge sourcing or ideas generation, and a city effect, where diverse cities helping firms innovate. This paper uses a dataset of over 2,000 UK SMEs to test between these two. Controlling for firm characteristics, city characteristics and firm and city diversity, there is strong evidence for the firm effect. Firms with a greater share of migrant owners or partners are more likely to introduce new products and processes. This effect has diminishing returns, suggesting that it is a 'diversity' effect rather than simply the benefits of migrant run firms. However, there is no relationship between the share of foreign workers in a local labour market and firm level innovation, nor do migrant-run firms in diverse cities appear particularly innovative. But urban context does matter and firms in London with more migrant owners and partners are more innovative than others.
    Keywords: Cultural diversity, innovation, cities, SMEs, migration
    JEL: J61 L21 M13 R23
    Date: 2013–10
  20. By: Spermann, Alexander (Randstad)
    Abstract: The enormous speed of change in the working world is associated with greater job insecurity. As a dynamic external flexibilization instrument, temporary agency work is characterized by high labor turnover rates. As a result, agency workers might perceive more job insecurity than permanent staff. This paper surveys German empirical studies on outcome variables such as job satisfaction, commitment, health, employability, social participation and effects on personal life for agency workers. It is enriched by practical experience gathered at Randstad, Germany’s leading staffing firm, and also provides a summary of recent research on job stability for agency workers.
    Keywords: temporary agency work, staffing industry, job satisfaction, commitment, employability
    JEL: I2 J2 J4
    Date: 2013–10

This nep-eur issue is ©2013 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.