nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒12‒06
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Is caring for elderly parents detrimental to women’s mental health? The influence of the European North-South gradient By Elenka Brenna; Cinzia Di Novi
  2. Does Homeownership Lead to Longer Unemployment Spells? The Role of Mortgage Payments By Baert, Stijn; Heylen, Freddy; Isebaert, Daan
  3. Unemployment Benefits in EU Member States By Palme, Joakim
  4. Fragmentation, incomes and jobs: an analysis of European competitiveness By Timmer, Marcel P.; Los, Bart; Stehrer, Robert; de Vries, Gaaitzen
  5. Financial incentives, health and retirement in Spain By Pilar García-Gómez; Sergi Jiménez-Martín; JudiVall Castelló
  6. Old is Gold? The Effects of Employee Age on Innovation and the Moderating Effects of Employment Turnover By Schubert , Torben; Andersson , Martin
  7. An integrated approach to model redispatch and to assess potential benefits from market splitting in Germany By Katrin Trepper; Michael Bucksteeg; Christoph Weber
  8. In-work benefits for married couples: an ex-ante evaluation of EITC and WTC policies in Italy By Giuseppe De Luca; Claudio Rossetti; Daniela Vuri
  9. The scope of the freedom to provide services: prohibited restrictions By Elena Postnikova
  10. Outward FDI from the Central and Eastern European Transition Economies – A Discrete Choice Analysis of Location Choice within the European Union By Cantner, Uwe; Günther, Jutta; Hassan, Sohaib Shahzad; Jindra, Björn
  11. Energy efficiency and industrial output: The case of the iron and steel industry By Flues, Florens; Rübbelke, Dirk; Vögele, Stefan
  12. Endogeneity in the Relation between Poverty, Wealth and Life Satisfaction By André Hajek
  13. Performance in Mathematics and Digit Ratio: Evidence from 500 University Students By Ángeles Sánchez-Domínguez; Maria J.
  14. Non-standard Employment, Working Time Arrangements, Establishment Entry and Exit By Jochen Späth
  15. Electoral rules and public expenditure;composition: Evidence from Italian regions By Raffaella SANTOLINI
  16. The gender wage gap in Italy By Roberta Zizza
  17. After-School Care and Parents' Labor Supply By Felfe, Christina; Lechner, Michael; Thiemann, Petra
  18. Experimental Evidence of the Effect of Monetary Incentives on Cross-Sectional and Longitudinal Response: Experiences from the Socio-Economic Panel (SOEP) By Mathis Schröder; Denise Sassenroth; John Körtner; Martin Kroh; Jürgen Schupp
  19. The impact of family-friendly policies on the labor market: Evidence from Spain and Austria By Sara de la Rica; Lucía Gorjón García
  20. How selective are real wage cuts? A micro-analysis using linked employer-employee data By Hirsch, Boris; Zwick, Thomas

  1. By: Elenka Brenna (Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Cinzia Di Novi (Università Ca’ Foscari, Dipartimento di Economia, Venezia)
    Abstract: In the last decades, both the lengthening of life expectancy and an accentuated decline in birth rates have reduced the consistency of the younger generational cohorts. Due to an ageing population, the burden of care giving is expected to intensify in the next quarter of the century in Europe, especially for mature women. This paper investigates the impact of the provision of constant care for elderly parents on the mental health of adult daughters, between the ages of 50 and 65, living in different European countries. Data is collected from the Survey of Health, Ageing and Retirement in Europe (SHARE). Information on mental health status is provided by Euro-D depression scale, a standardized measure of depression employed across European countries. We focus on differences in the effects according to a North–South gradient: we test whether the relationship between informal caregiving and mental health differs across European macro- regions. Our results reveal the presence of a North-South gradient in the effect of caring on women’s mental health.
    Keywords: caregiver burden, depression, parent care, LTC systems, mature women
    JEL: I10 I12 D10
    Date: 2013–11
  2. By: Baert, Stijn (Ghent University); Heylen, Freddy (Ghent University); Isebaert, Daan (Ghent University)
    Abstract: This paper examines the impact of housing tenure choice on unemployment duration in Belgium using EU‐SILC micro data. We contribute to the literature in distinguishing homeowners with mortgage payments and outright homeowners. We simultaneously estimate unemployment duration by a mixed proportional hazard model, and the probability of being an outright homeowner, a homeowner with mortgage payments or a tenant by a mixed multinomial logit model. To be able to correctly identify the causal influence of different types of housing tenure on unemployment duration, we use instrumental variables. Our results show that homeowners with a mortgage exit unemployment first. Outright owners stay unemployed the longest. Tenants take an intermediate position. Moreover, our results reveal the different share of mortgage holders within the group of homeowners as a possible explanation for the discrepancy between former contributions to this literature.
    Keywords: unemployment, housing tenure, duration analysis
    JEL: C41 J64 R2
    Date: 2013–11
  3. By: Palme, Joakim (Uppsala Center for Labor Studies)
    Abstract: The background to this report is the growing variation between EU Member States' economic and social situation, which has been reinforced by the economic recession and subsequent fiscal consolidation measures. It is increasingly recognized that economic and social responses to the crisis will require strengthened solidarity between Member States, in the first place within the Eurozone but also beyond. While most decisions about taxes and spending remain at national level within the EU, it can equally be argued that continued successful European integration needs an elaborate risk-sharing system where various forms of automatic fiscal transfer mechanisms may have a key role, particularly in Eurozone countries. One strategy is to set up EU- or Eurozone wide unemployment provisions where resources are transferred to areas particularly hit by asymmetric shocks.
    Keywords: unemployment benefits; unemployment assistance
    JEL: J65 J68
    Date: 2013–11–29
  4. By: Timmer, Marcel P.; Los, Bart; Stehrer, Robert; de Vries, Gaaitzen
    Abstract: Increasing fragmentation of production across borders is changing the nature of international competition. As a result, conventional indicators of competitiveness based on gross exports become less informative and new measures are needed. In this paper we propose an ex-post accounting framework of the value added and workers that are directly and indirectly related to the production of final manufacturing goods, called "manufactures GVC income" and "manufactures GVC jobs". We outline these concepts and provide trends in European countries based on a recent multi-sector input-output model of the world economy. We find that since 1995 revealed comparative advantage of the EU 27 is shifting to activities related to the production of non-electrical machinery and transport equipment. The workers involved in manufactures GVCs are increasingly in services, rather than manufacturing industries. We also find a strong shift towards activities carried out by high-skilled workers, highlighting the uneven distributional effects of fragmentation. The results show that a GVC perspective is needed to better inform the policy debates on competitiveness. JEL Classification: F6, J2, O47, O57
    Keywords: European competitiveness, fragmentation, incomes and jobs
    Date: 2013–11
  5. By: Pilar García-Gómez; Sergi Jiménez-Martín; JudiVall Castelló
    Abstract: In this work we combine wage data from Social Security working histories and health information available in the Survey of Health and Retirement in Europe to explore the link between health, financial incentives and retirement in Spain. Our results show that individuals in worse health quintiles are, indeed, the more responsive to financial incentives as they prove to be less likely to retire when incentives to continue working increase.
    Date: 2013–11
  6. By: Schubert , Torben (Fraunhofer Institute for Systems and Innovation Research (ISI) And CIRCLE, Lund University, Sweden); Andersson , Martin (CIRCLE, Lund University, Sweden and Blekinge Institute of Technology)
    Abstract: There is consistent evidence in the literature that average employee age is negatively related to firm-level innovativeness. This observation has been explained by older employees working with outdated technological knowledge and being characterized by reduced cognitive flexibility. We argue that firms can mitigate this effect through employee turnover. In particular turnover of R&D workers is deemed a vehicle for transfer of external knowledge to the firm, which can compensate for lower cognitive flexibility and up-to-date knowledge among older workers. We use a matched employer-employee dataset based on three consecutive CIS surveys for Sweden to test our predictions. Our results suggest a) that overall employee age impacts negatively on product innovation activities (both in terms of propensity and success), b) that the effect of em-ployee staying rate (measured by the share of employees that remain in the firm from one year to the next) on innovation follows an inverted U-shape implying an ‘optimal’ level of employment turnover, and c) that this ‘optimal’ value is lower for firms with older employees. The latter suggests that firms with older employees can at least partially compensate an aged workforce by increased employment turnover.
    Keywords: ageing; employee age; innovation; firm performance; R&D; human capita
    JEL: D22 J21 J24 L25
    Date: 2013–11–25
  7. By: Katrin Trepper; Michael Bucksteeg; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: Future congestion management is one of the major market design issues in the European electricity market. In the light of the sharp increase in redispatch measures seen within the last years, the importance of an efficient management of network congestion increases particularly in Germany. Against this background, we develop an integrated approach to model (re)dispatch for Germany in detail while considering interactions with neighbouring countries. Compared to 2011, our findings indicate a much more critical network situation in Germany for 2015. We identify increased RES production, resulting imports and exports, delays in grid extension and the impacts of the nuclear phase-out (leading to an amplified north-south congestion problem) as main drivers for the nearly doubling of redispatch volumes in 2015. We show that market splitting can potentially contribute to a secure grid operation and leads to a significant reduction of redispatch volumes (59%) according our model calculations. We state that market splitting can of course not be the ’one and only solution’ but an interim approach to manage upcoming congestion in Germany in times when grid expansion has not yet been completed and that the implementation of market splitting can also serve as an alternative to grid extension within less congested areas.
    Keywords: redispatch, congestion management, market design, market splitting
    JEL: Q40 Q47 Q49
    Date: 2013–11
  8. By: Giuseppe De Luca; Claudio Rossetti; Daniela Vuri
    Abstract: This paper investigates labor supply and redistributive effects of in-work benefits for Italian married couples using a tax-benefit microsimulation model and a multi-sectoral discrete choice model of labor supply. We consider in-work benefits based on the Earned Income Tax Credit (EITC) and the Working Tax Credit (WTC) existing in the US and the UK, respectively. The standard design of these income support mechanisms is however augmented with a premium for two-earner households to avoid potential disincentive effects on secondary earners. Revenue neutral policy simulations show that our reforms may greatly improve the current Italian tax-benefit system in terms of both incentive and redistributive effects. Furthermore, neglecting sector-specific attributes of the various job opportunities may lead to an oversimplified representation of the choice set that does not allow to capture some labor market transitions and thus results in attenuated labor supply responses.
    Keywords: In-work benefits, sectoral labor supply, poverty, microsimulation, married couples
    JEL: I38 H31 H53
    Date: 2013–11
  9. By: Elena Postnikova (National Research University Higher School of Economics (Moscow, Russia))
    Abstract: The freedom to provide services is one of the four fundamental freedoms of the European Union (EU) internal market. Interstate trade in services is impeded by different obstacles consisting of the high level national regulation. The objective of this paper is to reveal the nature of prohibited restrictive national measures. The research is based on the analysis of the Treaty of Rome (now the Treaty on the functioning of the European Union), secondary EU law, the evolution of EU case-law, and a range of doctrinal views. It is argued that the definition of prohibited restrictions is the most complex aspect of the case-law on services. The research compares the concept of the restrictions that are to be abolished within the scope of the freedom to provide services and of other freedoms. This study also investigates the correlation between EU and World Trade Organization (WTO) legal mechanisms in the sphere of the provision of services
    Keywords: European Union, services, freedom to provide services, internal market, discrimination, non-discriminatory restrictions, Court of Justice of the EU, market access
    JEL: K33
    Date: 2013
  10. By: Cantner, Uwe; Günther, Jutta; Hassan, Sohaib Shahzad; Jindra, Björn
    Abstract: The location determinants of outward foreign direct investment (OFDI) have received extensive attention in contemporary literature, largely from the perspective of advanced economies. Less attention has been focused on OFDI from emerging economies. This applies, in particular, to Central and East European Countries (CEEC). Apart from traditional OFDI motives such as market-seeking, there is a growing debate regarding the relevance of knowledge-seeking as an investment motive for firms from catch-up economies. We apply a conditional-logit approach to assess OFDI location factors at the host country level for a sample of 1,036 firms from 10 CEEC that entered the EU between 1995 and 2010. We find that firms from CEEC primarily target economies characterized by high growth rates and geographic proximity, i.e., often other transition economies within the EU. The impact of market size increases significantly after EU accession, when more firms are located in advanced economies (EU15 countries). In terms of knowledge-seeking, we find that firms from CEEC seem to be primarily attracted by human capital endowment rather than by the R&D intensity of other EU economies.
    Keywords: Outward FDI, Conditional-logit, Location Choice, Transition Economies, Knowledge Seeking, CEEC
    JEL: F23
    Date: 2013–01–18
  11. By: Flues, Florens; Rübbelke, Dirk; Vögele, Stefan
    Abstract: The iron and steel industry is one of the most carbon emitting and energy consuming sectors in Europe. At the same time this sector is of high economic importance for the European Union. Therefore, while public environmental and energy policies target this sector, there is political concern that it suffers too much from these policy measures. Various actors fear a policy-induced decline in steel production, and possibly an international reallocation of production plants. This study analyzes the role that input prices and public policies may play in attaining an environmentally more sustainable steel production and how this - in turn - affect total steel output. As we find out for examples of major European steel producing countries, a kind of rebound effect of energy-efficiency improvements in steel production on total steel output may arise. --
    Keywords: energy efficiency,iron and steel industry,environmental protection,rebound effect
    JEL: L51 L61 Q43 Q50
    Date: 2013
  12. By: André Hajek
    Abstract: This publication concentrates on the complex interplay between poverty, wealth and life satisfaction. Main areas of life are quantified in a multidimensional approach of poverty and wealth: Individual income, current health, occupational autonomy or employment status and also the mentioned life satisfaction. Data used in this publication were made available by the German Socio Economic Panel Study (SOEP) at the German Institute for Economic Research (DIW Berlin), Berlin. A period from 1998-2009 is examined. This study has two main goals: (1) To contribute to the interconnection between poverty, wealth and life satisfaction. (2) Besides, the endogeneity research regarding life satisfaction should be expanded. Reduced form vector-autoregressions (with first differences) were used to answer the questions. Therefore, granger-causality can be supposed. Major findings: An initial rise in life satisfaction can improve income and health, but not job autonomy. However, even the probability of returning from unemployment to employment can increase. Gender-specific differences are discussed.
    Keywords: life satisfaction, unemployment, SOEP, vector autoregressions, endogeneity, income, health, occupational autonomy
    JEL: I19 I31 I32 J64
    Date: 2013
  13. By: Ángeles Sánchez-Domínguez (Departament of Applied Economics, University of Granada, Spain.); Maria J. (Department of Foundations of Economic Analysis. Universitat Jaume I, Spain.)
    Abstract: This paper constructs an index that synthesizes the eight targets of the EU 2020 Strategy into a one-dimensional target –EU 2020 synthetic target- and the situation of each EU28 Member States (the current 27 Members plus Croatia) in 2011 with respect to them –2011 synthetic situation-. Hence we can measure the distance of each EU Member State synthetic situation in 2011 to the EU 2020 synthetic target. We find that none of the Member States meets the EU 2020 synthetic target, Denmark is the closest and Malta is the furthest to it. In fact we could identify clusters of Member States in terms of the distances to the EU 2020 synthetic target: the North EU region is closer to and the Mediterranean region is further away from it. We extent the distance analysis above by adding three inequality targets -income distribution, female employment and child poverty- and find that all of the Member States increase their distance between their 2011 synthetic inequality-extended situation and the 2020 inequality-extended targeted situation. Finally, we want to analyse each Member State’s relationship between its objective position regarding the EU 2020 synthetic target and its life satisfaction level, inhabitants’ subjective position. Through a multivariate regression methodology, we analyse how much of the total effect of the synthetic index on life satisfaction is direct, and how much is mediated. The mediation analysis shows that a substantial part of the effect of the synthetic index on life satisfaction is mediated by the GDP per capita. These results are in line with recent views in human development and well-being research. That is, the GDP per capita is only a means to achieve socioeconomic progress, not the end.
    Keywords: Inequality, Composite Index, Mediation Analysis, Crisis, Life Satisfaction, Human Development
    JEL: C43 O47 I31 R11 R58
    Date: 2013–12–02
  14. By: Jochen Späth
    Abstract: This paper addresses the issue if and to what extent young firms differ from incumbents regarding the use of non-standard employment, trust-based working time arrangements and overtime hours in the light of the qualitative changes of employment structures that are taking place in industrialized countries, such as rising shares of non-standard employment and borders between work and private life that become increasingly blurred. Based on a microeconometric analysis of the IAB Establishment Panel, a representative survey of about 16,000 employers in Germany, we find that young establishments rely significantly more often on limited contracts and freelance work than incumbent businesses in order to hedge the higher risks and uncertainties of young firms. Likewise, trust-based working time arrangements and overtime hours are more an issue in young than in incumbent firms, indicating a higher level of subjectivated work in young firms. Additionally, we provide basic evidence that these differences are not purely transitory but on the contrary rather stable as the firms grow older, which makes young firms contribute a substantial part to the ongoing qualitative changes of employment structures.
    Keywords: start-ups, trust-based working hours, overtime, team work, job quality, non-standard employment
    JEL: L26 J23 D22
    Date: 2013–11
  15. By: Raffaella SANTOLINI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)
    Abstract: The paper investigates the effects produced by the electoral system on expenditure composition by exploring the case of Italian regions over the period 1986-2009. Empirical analysis shows that the regional current expenditure transfers distributed to families and firms significantly decrease when the regional electoral system moves from being proportional to mixed. Particularly striking is the reduction in pre-electoral years under the regional mixed-regime. Although not robust across different empirical specifications, an increase in the regional expenditure on local public goods is found when the regional electoral system becomes mixed.
    Keywords: local institutional design, panel data analysis, public expenditure composition, regional government
    JEL: D72 H30 H72
    Date: 2013–11
  16. By: Roberta Zizza (Bank of Italy)
    Abstract: The paper estimates the gender wage gap in Italy, taking into account two salient features of the economy: the low rate of women’s labour market participation and the high share of self-employment. It exploits the Bank of Italy’s survey on household income and wealth, which contains information making it possible to control for several socio-economic characteristics and provides valid exclusion restrictions for the choice of working versus not working and for the choice of salaried employment versus self-employment. The wage gap is found to be increasing over time; in 2008 it was equal to 13 per cent. The paper also exploits newly available data from the Eurostat Structure of Earnings Survey to investigate to what extent the performance-pay component of the wage (i.e. bonuses) explains the total gap. Both the overall gap and that in bonuses are found to be significant, even for workers with the same occupation in the same firm. However, the contribution of the gap in bonuses to the overall gap is negligible, given the small share of bonuses in total earnings.
    Keywords: female employment, occupational choice, performance pay, productivity.
    JEL: J16 J30 J71
    Date: 2013–06
  17. By: Felfe, Christina (University of St. Gallen); Lechner, Michael (University of St. Gallen); Thiemann, Petra (University of St. Gallen)
    Abstract: Does after-school care provision promote mothers' employment and balance the allocation of paid work among parents of schoolchildren? We address this question by exploiting variation in cantonal (state) regulations of after-school care provision in Switzerland. To establish exogeneity of cantonal regulations with respect to employment opportunities and preferences of the population, we restrict our analysis to confined regions along cantonal borders. Using semi-parametric instrumental variable methods, we find a positive impact of after-school care provision on mothers' full-time employment, but a negative impact on fathers' full-time employment. Thus, the supply of after-school care fosters a convergence of parental working hours.
    Keywords: childcare, parents' labor supply, semi-parametric estimation methods
    JEL: J13 J22 C14
    Date: 2013–11
  18. By: Mathis Schröder; Denise Sassenroth; John Körtner; Martin Kroh; Jürgen Schupp
    Abstract: The paper gives an overview of two experiments implemented in the German Socio-Economic Panel (SOEP) considering the effect of monetary incentives on cross-sectional and longitudinal response propensities. We conclude that the overall effects of monetary incentives on response rates are positive compared to the "classic" SOEP setting, where a charity lottery ticket is offered as an incentive. In the cross-section, cash incentives are associated with a higher response rate as well as a lower rate of partial unit non-response (PUNR) and fewer noncontacts on the household level. Separate analyses for German and immigrant households show that a monetary incentive has a positive effect on immigrant households’ participation in subsequent waves. Regarding the regions where the households are located, the high cash incentive has a positive effect on response rates in provincial towns and rural areas. The incentive treatment decreases the likelihood of PUNR in the longitudinal setting by motivating members of participating households who had refused to participate in previous waves to respond in subsequent waves.
    Keywords: Incentive experiment, response rates, partial unit nonresponse, nonresponse bias, conditional incentives
    Date: 2013
  19. By: Sara de la Rica; Lucía Gorjón García
    Abstract: The policies under analysis are set out in Spanish Law 39/99 and Austrian Law Nr. 38/2004. In essence both policies were directed at allowing parents to work part-time if they had children under 7 years old, with an equivalent wage reduction. Furthermore, those workers who decided to use the law were protected against being laid off. Our results indicate that the law helped mothers to combine childcare and work because there was an increase in the probability of working PT for targeted mothers (direct effect). Furthermore, there is clear evidence that the law increased the probability of dismissal of non-eligible mothers – i.e. mothers with children over 10 years old. Finally, the law also increased the probability of potential mothers being hired under fixed-term contracts, presumably to avoid the possibility of their availing themselves of the reduced working hours and the protection against dismissal. Therefore, the law had some positive effects but also some negative ones which were largely unexpected.
    Date: 2013–11
  20. By: Hirsch, Boris; Zwick, Thomas
    Abstract: Using linked employer-employee panel data for Germany, this paper investigates whether firms implement real wage reductions in a selective manner. In line with insider-outsider and several strands of efficiency wage theory, we find strong evidence for selective wage cuts with high-productivity workers being spared even when controlling for permanent differences in firms' wage policies. In contrast to some recent contributions stressing fairness considerations, we also find that wage cuts increase wage dispersion among peers rather than narrowing it. Notably, the same selectivity pattern shows up when restricting our analysis to firms covered by collective agreements or having a works council. --
    Keywords: real wage rigidity,real wage cuts,selectivity,Germany
    JEL: J30 J31
    Date: 2013

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