nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒11‒09
seventeen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Corporate taxation and the quality of research & development By Christoph Ernst; Katharina Richter; Nadine Riedel
  2. Trade, market integration and spatial price transmission on EU pork markets following Eastern enlargement By Holst, Carsten; von Cramon-Taubadel, Stephan
  3. Analyzing Zero Returns to Education in Germany: Heterogeneous Effects and Skill Formation By Daniel A. Kamhöfer; Hendrik Schmitz
  4. Projections of future emissions and energy use from passenger cars as a result of policies in the EU with a dynamic model of technological change By Aileen Lam
  5. Diffusion and usage of public e-services in Europe: An assessment of country level indicators and drivers By Seri, Paolo; Bianchi, Annaflavia; Nicola, Matteucci
  6. Transitions In and Out of Unemployment Among Young People in the Irish Recession By Kelly, Elish; McGuinness, Seamus; O'Connell, Philip J.; Haugh, David; Pandiella, Alberto González
  7. Income-specific estimates of competition in European banking By Samantas, Ioannis
  8. The Impact of the Recession on the Structure and Labour Market Success of Young NEET Individuals in Ireland By Kelly, Elish; McGuinness, Seamus
  9. Modelling production cost scenarios for biofuels and fossil fuels in Europe By Festel, Gunter; Würmseher, Martin; Rammer, Christian; Boles, Eckhard; Bellof, Martin
  10. Modeling Passenger Train Delay Distributions - Evidence and Implications By Bergström, Anna; Krüger, Niclas
  11. Credit Constraints, Foreign Ownership, and Foreign Takeovers in Germany By Wagner, Joachim; Gelübcke, John P. Weche
  12. U.S. versus Sweden: The Effect of Alternative In-Work Tax Credit Policies on Labour Supply of Single Mothers By Aaberge, Rolf; Flood, Lennart
  13. Are there alternatives to bankruptcy? a study of small business distress in Spain By Miguel García-Posada; Juan S. Mora-Sanguinetti
  14. Constructing Regional Advantage and Smart Specialization: Comparison of Two European Policy Concepts By Ron Boschma
  15. Carbon Tax Scenarios and their Effects on the Irish Energy Sector By di Cosmo, Valeria; Hyland, Marie
  16. Constructing a new leading indicator for unemployment from a survey among German employment agencies By Hutter, Christian; Weber, Enzo
  17. An Empirical Analysis of Liquidity and its Determinants in The German Intraday Market for Electricity By Simon Hagemann; Christoph Weber

  1. By: Christoph Ernst (ZEW Mannheim); Katharina Richter (University of Mannheim & ZEW Mannheim); Nadine Riedel (University of Hohenheim, Oxford University CBT & CESifo Munich)
    Abstract: This paper examines the impact of tax incentives on corporate research and development (R&D) activity. Traditionally, R&D tax incentives have been provided in the form of special tax allowances and tax credits. In recent years, several countries moreover reduced their income tax rates on R&D output. Previous papers have shown that all three tax instruments are effective in raising the quantity of R&D related activity. We provide evidence that, beyond this quantity effect, corporate taxation also distorts the quality of R&D projects, i.e. their innovativeness and revenue potential. Using rich data on corporate patent applications to the European patent office, we find that a low tax rate on patent income is instrumental in attracting innovative projects with a high earnings potentialand innovation level. The effect is statistically significant and economically relevant and prevails in a number of sensitivity checks. R&D tax credits and tax allowances are in turn not found to exert a statistically significant impact on project quality.
    Keywords: corporate taxation, research and development, micro data
    JEL: H3 H7 J5
    Date: 2013
  2. By: Holst, Carsten; von Cramon-Taubadel, Stephan
    Abstract: The accession of ten countries to the EU in May 2004, and of Bulgaria and Romania in January 2007, eliminated barriers to trade between old and new, and among new member states. We analyse the effects of this accession on the integration of pork markets in the EU. Our results show that the speed of price transmission is positively related to the volume of pork trade between two countries. Our results also reveal that intra-regional price transmission between old or between new member states is more rapid than inter-regional price transmission between old and new member states, and that producer prices in the new member states adjust more rapidly to price changes in the old member states than vice versa. Price transmission is also more rapid between Euro-zone members and member states that share a common border. Finally, our results show that the strengths of these effects have changed in predictable ways in the years since accession took place, as a single, increasingly integrated European pork market has evolved. --
    Keywords: spatial price transmission,market integration,cointegration,European pork market
    Date: 2013
  3. By: Daniel A. Kamhöfer; Hendrik Schmitz
    Abstract: We analyze the effect of education on wages using German Socio-Economic Panel data and regional variation in mandatory years of schooling and the supply of schools. This allows us to estimate more than one local average treatment effect and heterogeneous effects for different groups of compliers. Our results are in line with previous studies that do not find an effect of compulsory schooling on wages in Germany. We go beyond these studies and test a potential reason for it, namely that basic skills are learned earlier in Germany and additional years of schooling are not effective anymore. This is done by also estimating the effect of education on cognitive skills. The results suggest that education after the eighth year does not seem to have a causal effect on cognitive skills in Germany. This is consistent with the explanation for zero effects of schooling on earnings.
    Keywords: Returns to education, Skills, IV estimation
    JEL: I21 J24 C26
    Date: 2013
  4. By: Aileen Lam (Cambridge Centre for Climate Change Mitigation Research, Department of Land Economy, University of Cambridge)
    Abstract: Transport is the only sector in the EU in which greenhouse gas emissions are still rising. This paper uses the FTT (future technology transformation) framework to project energy use and emissions from passenger cars in the EU 27 until 2050. Projections are made based on four policy scenarios in order to explore the effect of different policies on penetration and diffusion of cleaner transport technologies. All our scenario projections support the dominance of hybrid cars in 2050. However, our results illustrate that strong emission targets cannot be achieved by only encouraging low-emitting cars, but requires strong policies targeting the cleanest cars. Further emission reductions can be achieved by non-pecuniary measures such as car use reductions and scrappage schemes.
    Keywords: Transport, Technological change, Emissions, Fuel use
    JEL: O33 O38 R41
    Date: 2013–10
  5. By: Seri, Paolo; Bianchi, Annaflavia; Nicola, Matteucci
    Abstract: We analyze the state of the art of indicators on eGovernment, eHealth, eProcurement and ePartecipation. We survey the main methodological properties of these indicators, and uncover the principal stylized facts and trends; at the same time, we highlight their heuristic limits and potential inconsistencies. Finally, we address empirically the issue of the explanation of the indexes scores – i.e. how the supply of the various eServices in each country is affected by political, institutional and socio-economic differences, and is followed by actual usage. The econometric analysis uncovers the importance of broadband penetration and higher education as drivers for most of the types of eServices and users (citizens and businesses). Moreover, a corruption-free and agile public sector shows up to be an important pre-condition for more effective supply and usage. Despite severe data limits and the complexity of the underlying diffusion phenomena, our study of eServices availability and usage across European countries is a first empirical contribution aimed at disentangling broad empirical trends – with their correlates - from unresolved methodological issues. As such, this work appears useful to inform the policy debate and practice, in a phase characterized by a prospective reorientation of public eServices provision.
    Keywords: eGovernment; eHealth; eProcurement; eParticipation; Europe; diffusion; drivers; comparative analysis
    JEL: L32 O14 O33 O38
    Date: 2013–08
  6. By: Kelly, Elish; McGuinness, Seamus; O'Connell, Philip J.; Haugh, David; Pandiella, Alberto González
    Abstract: Young people have been hit hard by unemployment during the Irish recession. While much research has been undertaken to study the effects of the recession on overall labour market dynamics, little is known about the specific effects on youth unemployment and the associated challenges. This paper attempts to fill this gap by comparing the profile of transitions to work before the recession (2006) and as the economy emerged from the recession (2011). The results indicate that the rate of transition of the youth from unemployment to employment fell dramatically. The fall is not due to changes in the composition or the characteristics of the unemployed group but to changes in the external environment. These changes imply that the impact of certain individual characteristics changed over the course of the recession. In particular, for youth, education and nationality have become more important for finding a job in Ireland.
    Keywords: education/employment/Ireland/labour market/Nationality/recession/unemployment
    Date: 2013–09
  7. By: Samantas, Ioannis
    Abstract: This paper constitutes a new endeavor of investigating competitive conditions in European banking. Since the vast literature of competition modeling has produced mixed results, the proposed methodology goes one step further in order to investigate the intensity of key effects on bank competition as decomposed into specific bank activities. The sample comprises nine of the most developed banking markets in the European region during the period 2002-2010. The concluding remarks over the explanatory power of traditional collusion, relative market power and efficiency alongside other key controls on bank pricing conduct, provide considerable policy implications.
    Keywords: Competition; Banking income, Collusion, Market power, Cost efficiency
    JEL: D4 D57 G21 L11 L21
    Date: 2013–10
  8. By: Kelly, Elish; McGuinness, Seamus
    Abstract: The labour market consequences of the severe fall in economic activity that took place in Ireland after the recent global recession were quite stark, especially for young people. One particularly disquieting development has been the rise in the number of young people not in employment, education or training (NEET), which increased from 11.8 per cent in 2006 to 24 per cent in 2011 (Eurostat, 2013). Very little is known about NEET individuals in Ireland, either in terms of their profile or their labour market transitions, i.e., the extent to which youth NEETs have transitioned into employment. Given this information gap, and particularly its importance for the design of effective activation measures to assist young NEETs, this paper uses newly available longitudinal data from the Quarterly National Household Survey to examine the extent to which transitions to employment among NEETs and prime-aged unemployed changed over the recent recession in Ireland. The paper found that the rate of transition to employment fell dramatically for both groups between 2006 and 2011. The results from the analysis also revealed that the drop in the transition rates of NEET and prime-aged unemployed individuals' was not due to changes in the underlying sub-group population structures but to changes in external factors that have had an impact on individuals possessing certain characteristics during the recession. From a policy perspective, the results would seem to support a greater emphasis on higher levels of human capital (i.e., third-level qualifications) for young NEETs, and the redesign of vocational-type qualifications (i.e., Post Leaving Cert level courses) to increase their relevance to those areas of the labour market where jobs are emerging.
    Keywords: data/education/employment/human capital/Individuals/Ireland/labour market/Policy/population/recession
    Date: 2013–09
  9. By: Festel, Gunter; Würmseher, Martin; Rammer, Christian; Boles, Eckhard; Bellof, Martin
    Abstract: This paper presents the results of a calculation model for biofuel production costs in 2015 and 2020 based on raw material price projections and considering scale and learning effects. Distinguishing six types of biofuels, the paper finds that scale economies and learning effects are critical for 2nd generation biofuels to become competitive. In case these effects can be utilized, cost saving potentials for 2nd generation biofuels are significant. --
    Keywords: Biofuels,Production Cost Scenarios,Raw Material Price Projection,Conversion Costs
    JEL: L25 L26 J24
    Date: 2013
  10. By: Bergström, Anna (Dept. of Economics); Krüger, Niclas (Swedish National Road and Transport Research Institute)
    Abstract: This paper addresses the lack of reliability within the Swedish rail network by identifying passenger train delay distributions. Arrival delays are analyzed in detail using data provided by the Swedish Transport Administration, covering all train departures and arrivals during 2008 and 2009. The paper identifies vulnerabilities by size, space and time in the network. Our results show that the delay distribution seems to be plagued by low probability high impact events. A major share of all delay time is associated with the tail of the delay distribution, indicating that extreme delays cannot be neglected when prioritizing between measures improving rail infrastructure. Delays are not only concentrated in size, but also concentrated in space and time and seem to follow a precise power law with respect to days and an exponential distribution with regard to stations. Moreover, we also examine the link between capacity usage and expected delay over different time scales.
    Keywords: Delay; Reliability; Passenger trains; Delay distribution; Value of time; Cost-benefit analysis
    JEL: H54 R42
    Date: 2013–11–04
  11. By: Wagner, Joachim (Leuphana University Lüneburg and CESIS, Stockholm); Gelübcke, John P. Weche (Leuphana University Lüneburg, Germany)
    Abstract: In this paper we present the first evidence for a link between foreign ownership and credit constraints for Germany, one of the world's leading target countries for foreign direct investment. Furthermore, we contribute to the literature by investigating the impact of a foreign acquisition on the target firms' credit constraints for the first time. We use newly available comprehensive panel data that we constructed from information collected by the German statistical offices and from credit rating scores supplied by the leading German credit rating agency. We ind foreign owned firms in German manufacturing on average to show slightly more financing restrictions than domestically owned enterprises, but this very small difference diminishes once unobserved heterogeneity is taken into account. We further demonstrate that one reason for this finding is the preference of foreign investors for targets with relatively low credit-worthiness. Although the likelihood of a foreign acquisition appears to be correlated with credit constraints, there is no impact of foreign takeovers on the credit constraints of the target firms ex post and therefore no support for the hypothesis that foreign takeovers ease financial frictions.
    Keywords: credit constraints; foreign ownership; acquisitions; Germany
    JEL: F21 F23 G34
    Date: 2013–10–30
  12. By: Aaberge, Rolf (Research Department at Statistics Norway and ESOP, University of Oslo); Flood, Lennart (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: An essential difference between the design of the Swedish and the US in-work tax credit systems relates to their functional forms. Where the US earned income tax credit (EITC) is phased out and favours low and medium earnings, the Swedish system is not phased out and offers 17 and 7 per cent tax credit for low and medium low incomes and a lump-sum tax deduction equal to approximately 2300 USD for medium and higher incomes. The purpose of this paper is to evaluate the efficiency and distributional effects of these two alternative tax credit designs. We pay particular attention to labour market exclusion; i.e. individuals within as well as outside the labour force are included in the analysis. To highlight the importance of the joint effects from the tax and the benefit systems it appears particular relevant to analyse the labour supply behaviour of single mothers. To this end, we estimate a structural random utility model of labour supply and welfare participation. The model accounts for heterogeneity in consumption-leisure preferences as well as for heterogeneity and constraints in job opportunities. The results of the evaluation show that the Swedish system without phase-out generates substantial larger labour supply responses than the US version of the tax credit. Due to increased labour supply and decline in welfare participation we find that the Swedish reform is self-financing for single mothers, whereas a 10 per cent deficit follows from the adapted EITC version used in this study. However, where income inequality rises modestly under the Swedish tax credit system, the US version with phase-out leads to a significant reduction in the income inequality.
    Keywords: labour supply; single mothers; in-work tax credit; social assistance; random utility model
    JEL: I38 J22
    Date: 2013–10–28
  13. By: Miguel García-Posada (Banco de España-Eurosystem); Juan S. Mora-Sanguinetti (Banco de España-Eurosystem)
    Abstract: Small businesses, the majority of Spanish fi rms, rarely fi le for formal bankruptcy, and this has been the case even during the current economic crisis. This suggests that bankruptcy law has a limited role to play in the distress of small fi rms. We propose an explanation based on two premises: (i) bankruptcy procedures are more costly and drawn out than the main alternative procedure, the mortgage foreclosure; (ii) personal bankruptcy law is unattractive to the individual debtor. Empirical analyses on a large micro data sample of Spanish, French and UK fi rms corroborate our hypothesis. It is important to note that these results are based on data that do not yet capture the impact of recent reforms of the Spanish insolvency framework.
    Keywords: bankruptcy, mortgage, insolvency
    JEL: G33 G21 K0
    Date: 2013–10
  14. By: Ron Boschma
    Abstract: This paper discusses two influential policy concepts at the European level that aim to promote economic diversification of regions, that is the Constructing Regional Advantage concept (CRA) and the Smart Specialization concept (SS). Both approaches are in favour of policy intervention but defy ‘one-size-fits-all’ policies as well as ‘stand-alone’ policies that create new activities in regions from scratch. Although ‘picking-the-winner’ policies are rejected, both policy frameworks identify and prioritise ‘promising’ targets for policy intervention, but they do so differently. The SS concept organizes this identification process through entrepreneurial discovery in which entrepreneurs select the domains of future specialization. The CRA concept focuses on identifying related variety and bottlenecks that prevent related industries in regions to connect and interact. Crucial in both frameworks is the strong involvement of local stakeholders. However, both approaches also agree that rent-seeking behavior, corruption and lock-in are potential threats to effective policy making. To avoid this, both are in favor of an open and inclusive approach and a policy implementation process that is closely monitored. The paper argues that the two policy concepts can provide useful inputs to develop a smart and comprehensive policy design that focuses on true economic renewal in regions and that avoids rent-seeking behaviour of vested players.
    Keywords: smart specialization, constructing regional advantage, Regional Cohesion Policy
    Date: 2013–11
  15. By: di Cosmo, Valeria; Hyland, Marie
    Keywords: Carbon Tax/scenarios/taxes
    Date: 2013–07
  16. By: Hutter, Christian (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Weber, Enzo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "The paper investigates the predictive power of a new survey implemented by the Federal Employment Agency (FEA) for forecasting German unemployment in the short run. Every month, the CEOs of the FEA's regional agencies are asked about their expectations of future labor market developments. We generate an aggregate unemployment leading indicator that exploits serial correlation in response behavior through identifying and adjusting temporarily unreliable predictions. We use out-of-sample tests suitable in nested model environments to compare forecasting performance of models including the new indicator to that of purely autoregressive benchmarks. For all investigated forecast horizons (1, 2, 3 and 6 months), test results show that models enhanced by the new leading indicator significantly outperform their benchmark counterparts. To compare our indicator to potential competitors we employ the model confidence set. Results reveal that models including the new indicator perform very well." (Author's abstract, IAB-Doku) ((en))
    JEL: C22 C52 C53 E24
    Date: 2013–10–21
  17. By: Simon Hagemann; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: This paper presents a theoretical and empirical analysis of liquidity in the German intraday market for electricity. Two models that aim at explaining intraday liquidity are developed. The first model considers the fundamental merit-order and intraday adjustment needs as the drivers of liquidity in a perfectly competitive market. The second model relaxes the assumption of perfect competition in the intraday market and assumes that the trading behavior of profit maximizing market participants influences the liquidity provision. The relevance of commonly used liquidity indicators like the bid ask-spread, resiliency, market depth, price variance, delay and search costs as well as trading volume and the number of trades are analyzed with respect to both models of liquidity. The empirical findings indicate that liquidity in the German intraday market can be explained by the trading model while the purely fundamental model is rejected. Hence, the question arises how these different sources of uncertainty will impact the network operator's replacement decision. Further it is of interest how much value can be attributed to the reduction of the uncertainty. In this paper, an optimal replacement strategy in an analytical stationary state model is derived explicitly with local and global optima. Based on a discrete mixture model of failure rates under perfect replacement, we show how different assumptions about the underlying type of uncertainty will affect the replacement decision. In a further step, the value of information representing the cost difference between a state of parameter certainty and the state of parameter uncertainty is derived. Trough the course of some applications, it is shown that the value of information increases with the level of uncertainty. Some exemplary calculations are presented to show that the magnitude of the value of information is significant.
    Keywords: Intraday market, electricity, liquidity, fundamental model, trading model
    JEL: L94 Q41
    Date: 2013–10

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