nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒11‒14
nineteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The relationship between incomes and living arrangements: variation between countries, over the life course, and over time By Maria Iacovou
  2. Scrapping subsidies during the financial crisis: Evidence from Europe By Leheyda, Nina; Verboven, Frank
  3. Do transfer pricing laws limit international income shifting? Evidence from European multinationals By Theresa Lohse; Nadine Riedel
  4. Bridges or Buffers? Motives behind Immigrants’ Religiosity – A Comparative Study of Europe and the United States By Teresa Garcia-Muñoz; Shoshana Neuman
  5. Indexing European carbon taxes to the EU ETS Permit Price: a good idea? By Carlén, Björn; Hernández, Aday
  6. Distributional Implications of Tax Evasion and the Crisis in Greece By Matsaganis, Manos; Leventi, Chrysa; Flevotomou, Maria
  7. The impact of Urban Enterprise Zones on establishment location decisions: Evidence from French ZFUs. By Mayer,T.; Mayneris, F.; Py, L.
  8. The Impact of Behavioral Factors in the Renewable Energy Investment Decision Making Process: Conceptual Framework and Empirical Findings By Masini, Andrea; Menichetti , Emanuela
  9. The Impact of Immigration on Native Wages and Employment By Anthony Edo
  10. The Impact of Parental Income and Education on the Schooling of Children By Chevalier, Arnaud; Harmon, Colm; O'Sullivan, Vincent; Walker, Ian
  11. An evaluation of the impact of industrial restructuring on individual human capital accumulation in France (1956-1993) By Nicolas Fleury; Fabrice Gilles
  12. Synergies or overpayment in European corporate M&A By Díaz Díaz, Belén; Sanfilippo Azofra, Sergio; López Gutiérrez, Carlos
  13. Money for novelty: The role of venture capital investments for innovation in young technology-based firms By Heger, Diana
  14. Language Skills and Homophilous Hiring Discrimination: Evidence from Gender-and Racially-Differentiated Applications By Anthony Edo; Nicolas Jacquemet; Constantine Yannelis
  15. Precautionary motives in short-term cash management: Evidence from German POS transactions By Eschelbach, Martina; Schmidt, Tobias
  16. SME Debt and Interest Costs in Ireland By O'Toole, Conor; Gerlach, Petra; O'Connell, Brian
  17. What Is the Case for Paid Maternity Leave? By Gordon B. Dahl; Katrine V. Løken; Magne Mogstad; Kari Vea Salvanes
  18. Unpacking the Principle of Openness in EU Law: Transparency, Participation and Democracy By Alemanno , Alberto
  19. Applying the Capability Approach to the French Education System: An Assessment of the "Pourquoi pas moi ?" Programme By Kévin André

  1. By: Maria Iacovou
    Abstract: This paper uses data from the EU Survey of Income and Living Conditions 2005-2010 to examine the relationship between incomes and people’s living arrangements, both at the aggregate level (that is, how living arrangements vary with GDP) and at the level of individual behaviour, within countries. We know from previous studies that there are substantial variations in living arrangements between countries in the EU; this study is the first to examine systematically the way in which the relationship between income and living arrangements varies over the life course, and how these variations differ between countries. We find marked variation over the life course, with distinct differences in this life-course variation between countries. However, when we extend this analysis to examine changes over a period which includes the recent recession, we find very little evidence to suggest that living arrangements have changed in response to the recession.
    Keywords: Household structures, families, incomes, Europe, EU-SILC
    Date: 2013–10
  2. By: Leheyda, Nina; Verboven, Frank
    Abstract: We study the effects of the car scrapping subsidies in Europe during the financial crisis. We make use of a rich data set of all car models sold in nine European countries, observed at a monthly level during 2005-2011.We employ a difference-in-differences approach, exploiting the fact that different countries adopted their programs at different points in time. We find that the scrapping schemes played a strong role in stabilizing total car sales in 2009: they prevented a total car sales reduction of 17.4% in countries with schemes targeted to low emission vehicles, and they prevented a 14.8% sales reduction in countries with non-targeted schemes. In contrast, the scrapping schemes only had small environmental benefits: without the schemes, average fuel consumption of new purchased cars would have been only 1.3% higher in countries with targeted schemes and 0.5% higher in countries with non-targeted schemes. We do not find evidence of crowding out due to substitution from non-eligible to eligible cars in countries with targeted schemes. Finally, we identify some competitive and trade effects from the schemes: domestic car producers benefited at the expense of foreign competitors in the countries where the schemes were not targeted. --
    Keywords: scrapping subsidies,economic assessment of state aid,financial crisis,automobile market
    JEL: H25 L52 F14
    Date: 2013
  3. By: Theresa Lohse (University of Mannheim); Nadine Riedel (University of Hohenheim, CESifo Munich & Oxford University CBT)
    Abstract: In recent years several countries have augmented their national tax laws by transfer pricing legislations which intend to limit the leeway of multinational firms to exploit international corporate tax rate diverences and relocate profit to low-tax affiliates by distorting intra-firm transfer prices. The aim of this paper is to empirically investigate whether these laws are instrumental in restricting shifting behaviour. To do so, we exploit unique information on the scope and evolution of national transfer pricing laws and link it with panel data on European multinationals. In line with previous studies, we find evidence for tax-motivated profit shifting. The analysis further suggests that transfer pricing rules significantly reduce shifting activities. The effect is economically relevant, suggesting that the legislations may be socially desirable despite the high administrative burden they impose on firms and tax authorities.
    Keywords: corporate taxation, international prot shifting, transfer pricing laws
    JEL: H25 F23
    Date: 2013
  4. By: Teresa Garcia-Muñoz; Shoshana Neuman (Bar-Ilan University)
    Abstract: This study reviews and evaluates the motives and incentives behind immigrants’ religiosity, focusing on the two sides of the Atlantic – Europe and the United States. The contribution of the study is mainly empirical, trying to identify indicators for the type of incentive – whether immigrants’ religiosity serves as a ‘bridge’ or a ‘buffer’ in the process of adaptation to the receiving country. The statistical analysis draws on data from several waves of the European Social Survey (ESS), the American General Social Survey (GSS), and the International Social Survey Program (ISSP). Estimation of extended ‘mass participation equations’ and ‘prayer equations’ leads to the following findings: (a) immigrants are indeed more religious than the populations in the receiving countries, both in Europe and in the United States; and (b) while in the United States the religiosity of immigrants serves as a bridge between the immigrants and the local population, in Europe it has mainly the function of a buffer and of a “balm for the soul”. There is an extensive literature on the ‘bridge versus buffer’ (or ‘bridge versus boundary’) theories and their different implications in the United States and in Europe. However, to the best of our knowledge, our paper presents an innovative attempt to disentangle the two types of motives and to show that while the former is more relevant in the United States, the latter dominates in Europe.
    Keywords: immigration; religion; integration; Europe; The United States; bridge; buffer
    JEL: J11 J15 Z12 Z13
    Date: 2013–10
  5. By: Carlén, Björn (VTI); Hernández, Aday (University of Las Palmas de Gran Canaria)
    Abstract: We study an environmental policy that (i) tax some emitters while others are covered by a cap-and-trade system and (ii) index the tax level to the permit price. Such a policy could be attractive in a world where abatement costs are uncertain and the regulator has information about the correlation between the cost shocks to the two groups. We show that this index policy yields lower expected social cost than the policy mix studied in Mandell (2008). The value of indexing is higher the stronger the correlation is, the steeper the marginal abatement benefit curve is, and the more uncertain we are about the taxed sector’s abatement costs. The index policy may also outperform the uniform policy alternatives emission tax and cap-and-trade system. The conditions for this are more restrictive, though. Given parameter values plausible for the European climate change policy context, expected net-gains are small or negative.
    Keywords: Uncertainty; Environmental policy; Emissions tax; Tradable permits
    JEL: H23 Q23 Q58
    Date: 2013–10–31
  6. By: Matsaganis, Manos; Leventi, Chrysa; Flevotomou, Maria
    Abstract: The current Greek crisis and the governments fiscal consolidation effort have elevated tax evasion to one of the most crucial policy issues in the domestic debate. The paper attempts to shed light on one aspect of the phenomenon, namely its distributional implications. We compare a large panel data sample of personal income tax returns in 2006-2010 (incomes earned in 2005-2009) with data from the European Union Survey of Income and Living Conditions of the same years. We show that the deviation of incomes between the two data sources is greater in the case of farming and self-employment income. Based on these findings we then calculate stylised factors of income under-reporting by income source. These factors are fed into a tax-benefit microsimulation model to provide tentative estimates of the size and distribution of income tax evasion in Greece in 2009. We estimate income under-reporting at 12.2%, resulting in a shortfall in personal income tax receipts of 29.7%. The paper shows that the effects of tax evasion in Greece are higher income inequality and much lower progressivity of the income tax system.
    Date: 2013–11–07
  7. By: Mayer,T.; Mayneris, F.; Py, L.
    Abstract: In this paper, we study the impact of a French enterprise zones program -- the``Zones Franches Urbaines'' (ZFUs) policy-- on establishment location decisions. Our empirical analysis is based on an micro-geographic dataset that provides exhaustive information on the location of establishments in France over the period 2002-2007 at the census block level. Our identification strategy, which combines spatial and time differencing, assesses how the probability that an establishment locates in the ZFU area rather than in the non-ZFU area of a municipality changes after the implementation of the policy. We also implement double difference estimations, using the fact that targeted urban areas have been selected in different waves over time. Finally, we exploit a discontinuity in the eligibility criteria of the policy as an exogenous source of variation to estimate the impact of the treatment. We find that conditioning on locating in a municipality that hosts a ZFU, the policy has a positive and sizable impact on the probability to locate in the ZFU part rather than in the non-ZFU part of municipalities. However the impact is highly heterogeneous across zones, industries and firms. Moreover, we show that the policy mostly generates diversion effects within municipalities.
    Keywords: Firm Location, Enterprise zones, Spatial and Time Differencing.
    JEL: R12 R38 R5
    Date: 2013
  8. By: Masini, Andrea; Menichetti , Emanuela
    Abstract: Investments in renewable energy (RE) technologies are regarded with increasing interest as an effective means to stimulate growth and accelerate the recovery from the recent financial crisis. Yet, despite their appeal, and the numerous policies implemented to promote these technologies, the diffusion of RE projects remains somehow below expectations. This limited penetration is also due to a lack of appropriate financing and to a certain reluctance to invest in these technologies. In order to shed light on this phenomenon, in this paper we examine the decision making process underlying investments in RE technologies. We propose and test a conceptual model that examines the structural and behavioral factors affecting the investors decisions as well as the relationship between RE investments and portfolio performance. Applying econometric techniques on primary data collected from a sample of European investors, we study how the investors a-priori beliefs, their preferences over policy instruments and their attitude toward technological risk affect the likelihood of investing in RE projects. We also demonstrate that portfolio performance increases with an increase of the RE share in the portfolio. Implications for scholars, investors, technology managers and policy makers are derived and discussed.
    Keywords: Adaptive conjoint analysis; behavioral finance; investments; renewable energy policy; multivariate regression;
    JEL: Q00
    Date: 2013–04–13
  9. By: Anthony Edo (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper investigates the immigration impact on native outcomes using micro-level data for France. I find that immigration does not affect the wages of competing natives, but induces adverse employment effects. This finding is consistent with a wage structure that is much less flexible in France. The quality of the data allows to dig more deeply into the interpretation of the immigration impact. First, I show that immigrants displace native workers because they are more willing to have bad employment conditions. Second, I find that natives on short-term contracts, who are less subject to wage rigidities, do experience wage losses due to immigration.
    Keywords: Immigration; wage rigidities; employment; naturalization
    Date: 2013–09
  10. By: Chevalier, Arnaud; Harmon, Colm; O'Sullivan, Vincent; Walker, Ian
    Abstract: We investigate the relationship between early school-leaving and parental education and paternal income using UK Labour Force Survey data. OLS estimation reveals modest effects of income, stronger effects of maternal education relative to paternal, and stronger effects on sons. Using IV methods to simultaneously model the endogeneity of parental education and income, we find no effect of maternal education. Under certain assumptions, paternal education remains significant (for daughters only). Similarly there are modest effects of paternal income for sons. Thus policies that alleviate income constraints to alter schooling decisions may not be as effective as policies which increase permanent income.
    Keywords: children/data/education/Policy/schooling
    Date: 2013–10
  11. By: Nicolas Fleury (Centre Etudes & Prospective - Groupe ALPHA, EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille I - Sciences et technologies); Fabrice Gilles (EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille I - Sciences et technologies, TEPP - Travail, Emploi et Politiques Publiques - CNRS : FR3435 - Université Paris-Est Marne-la-Vallée (UPEMLV))
    Abstract: This article evaluates the effect of French industrial restructuring during 1956-1993, on individual human capital accumulation. We use data from the French Training and Occupational Skills survey and the Population Census (INSEE). We estimate a human capital production function using two econometric strategies (controlling for covariates; instrumental variables). We show that industrial restructuring has a negative impact on individual human capital accumulation for the children of blue-collar workers.
    Keywords: human capital ; industrial restructuring ; treatment effect
    Date: 2013–09
  12. By: Díaz Díaz, Belén; Sanfilippo Azofra, Sergio; López Gutiérrez, Carlos
    Abstract: The purpose of this research is to test whether the price paid for corporate takeovers in Europe is related to the synergies expected or whether bidders are overpaying for acquisitions. We analyzed the relationship between the premium paid in 147 mergers and acquisitions, and the bidders’ abnormal returns around the date of the transaction from 1995 to 2004. A quadratic relationship between the premiums and returns was found. When the amount paid in a transaction does not exceed the value of the target organization by more than 39.69–40.03%, the premium becomes a sign of the future synergy and will have a positive effect on the bidders’ returns. However, when the premium exceeds these values, the relationship between premiums and returns become negative and therefore the market considers bidders are overpaying. This paper show the importance of the correct valuation of the targets and of the premiums paid to ensure value creation in M&A.
    Keywords: Corporate takeovers; premium; overpayment hypothesis; synergy hypothesis
    JEL: G34
    Date: 2013
  13. By: Heger, Diana
    Abstract: This paper examines the role of venture capital on a firm's innovation activities by using a data set of German technology-based firms founded between 1996 and 2005. Innovation is proxied by patent counts and an index of innovativeness which reflects the degree to which a young firm has developed new technologies based on its own or external resources. The results show that VC financing has a positive impact on both patenting and innovativeness, even if we account for endogeneity of VC financing. --
    Keywords: innovation,venture capital,young technology-based firms,discrete choice methods,count data models,endogeneity
    JEL: O31 G24 C31 C35 L20
    Date: 2013
  14. By: Anthony Edo (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Nicolas Jacquemet (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II); Constantine Yannelis (Stanford University - Department of Economics - Department of Economics)
    Abstract: This paper investigates the importance of ethnic homophily in the hiring discrimination process, and provides a novel test for statistical discrimination. Our evidence comes from a correspondence test performed in France, in which we use three different kinds of ethnic identification: French sounding names, North African sounding names, and "foreign" sounding names with no clear ethnic association. Within both male and female groups, we show that all non-French applicants are equally discriminated against when compared to French applicants. This indicates that racial discrimination in employment is directed against members of non-majority ethnic groups, and highlights the importance of favoritism for in-group members. Moreover we find direct evidence of homophily: recruiters with European names are more likely to call back French named applicants and female recruiters are more likely to call back women. The paper also directly tests for statistical discrimination by adding a signal related to language skill ability in all resumes sent to half the job offers. Although the signal inclusion significantly impacts the discrimination experienced by non-French females, it is much weaker for male minorities.
    Keywords: Correspondence testing; gender discrimination; racial discrimination; ethnic homophily; language skills
    Date: 2013–10
  15. By: Eschelbach, Martina; Schmidt, Tobias
    Abstract: This paper empirically investigates whether individuals withhold a certain amount of cash for precautionary reasons at the point-of-sale (POS) in order to be able to cover future transactions that might have to be paid for in cash. Such behaviour is costly for consumers because it imposes additional restrictions on their choice of payment instrument at the POS. Based on the analysis of unique payment diary data compiled by the Bundesbank, we find that the probability of a transaction being settled in cash declines significantly as the amount of cash available at one's disposal decreases. This indicates that consumers do indeed refrain from parting with the entire amount of cash in their wallet. Further results suggest that this constraint could be relieved by facilitating access to cash or by promoting card acceptance. --
    Keywords: payment behaviour,demand for money,cash usage,payment cards,payment diaries
    JEL: D12 E41 E58
    Date: 2013
  16. By: O'Toole, Conor; Gerlach, Petra; O'Connell, Brian
    Keywords: cost/Ireland/qec
    Date: 2013–10
  17. By: Gordon B. Dahl; Katrine V. Løken; Magne Mogstad; Kari Vea Salvanes
    Abstract: Paid maternity leave has gained greater salience in the past few decades as mothers have increasingly entered the workforce. Indeed, the median number of weeks of paid leave to mothers among OECD countries was 14 in 1980, but had risen to 42 by 2011. We assess the case for paid maternity leave, focusing on parents' responses to a series of policy reforms in Norway which expanded paid leave from 18 to 35 weeks (without changing the length of job protection). Our first empirical result is that none of the reforms seem to crowd out unpaid leave. Each reform increases the amount of time spent at home versus work by roughly the increased number of weeks allowed. Since income replacement was 100% for most women, the reforms caused an increase in mother's time spent at home after birth, without a reduction in family income. Our second set of empirical results reveals the expansions had little effect on a wide variety of outcomes, including children's school outcomes, parental earnings and participation in the labor market in the short or long run, completed fertility, marriage or divorce. Not only is there no evidence that each expansion in isolation had economically significant effects, but this null result holds even if we cumulate our estimates across all expansions from 18 to 35 weeks. Our third finding is that paid maternity leave is regressive in the sense that eligible mothers have higher family incomes compared to ineligible mothers or childless individuals. Within the group of eligibles, the program also pays higher amounts to mothers in wealthier families. Since there was no crowd out of unpaid leave, the extra leave benefits amounted to a pure leisure transfer, primarily to middle and upper income families. Finally, we investigate the financial costs of the extensions in paid maternity leave. We find these reforms had little impact on parents' future tax payments and benefit receipt. As a result, the large increases in public spending on maternity leave imply a considerable increase in taxes, at a cost to economic efficiency. Taken together, our findings suggest the generous extensions to paid leave were costly, had no measurable effect on outcomes and regressive redistribution properties. In a time of harsh budget realities, our findings have important implications for countries that are considering future expansions or contractions in the duration of paid leave.
    JEL: H42 J13 J18
    Date: 2013–10
  18. By: Alemanno , Alberto
    Abstract: The purpose of this article is to shed some light on the emerging, yet largely undefined, principle of openness in EU law. After addressing the semantic confusion existing between openness and transparency, it attempts – through a textual and systemic interpretation of their respective legal basis – to identify the normative content of the EU turn to openness. It then moves to explore the principle’s potential for attaining its declared Treaty-sanctioned objectives: promoting good governance and ensuring the participation of civil society in the democratic life of the Union. It illustrates that, although openness largely maintains an instrumental rationale – aimed at enhancing the quality of the regulatory outcome rather than at promoting a more inclusive process –, the institutional, substantive and societal landscapes surrounding its operation have changed in recent times. It demonstrates that these alterations may help to shift the understanding of openness in the EU away from a specific, unidirectional, bottom-up right of access to information to a much broader, proactive and top-down duty of the EU administration to genuinely open its vault of information to the public and create new avenues of participation for civil societies and other organised interests. The changing nature of the openness rights accompanied by the growing demand for more active participation inherent to our times is set to reinvigorate civic life and, more importantly, to ensure political legitimacy grounded in democratic values.
    Keywords: Open government; Transparency; Participation; Civic empowerment; Legitimacy; Accountability; Civil society; European Union; Good governance;
    JEL: K19 K33
    Date: 2013–07–30
  19. By: Kévin André (ESSEC Business School - ESSEC Business School)
    Abstract: This paper attempts to re-examine the notion of equality, going beyond the classic opposition in France between affirmative action and meritocratic equality. Hence, we propose shifting the French debate about equality of opportunities in education to the question of how to raise equality of capability. In this paper we propose an assessment based on the capability approach of a mentoring programme called 'Une grande école: pourquoi pas moi?' ('A top-level university: why not me?' (PQPM) launched in 2002 by a top French business school. The assessment of PQPM is based on the pairing of longitudinal data available for 324 PQPM students with national data. Results show that the 'adaptive preferences' of the PQPM students change through a process of empowerment. Students adopt new 'elitist' curricula but feel free to follow alternative paths.
    Keywords: Adaptive Preferences ; Agency ; Assessment ; Capability ; Education ; France
    Date: 2013–11

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