nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒12‒29
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Strategic interactions in public R&D across European countries: A spatial econometric analysis By Hakim Hammadou; Sonia Paty; Maria Savona
  2. Age, Life-satisfaction, and Relative Income – Insights from the UK and Germany By Felix R., FitzRoy; Michael, Nolan; Max F., Steinhardt
  3. The effect of fragmentation on skill and industry wage premiums: Evidence from the European Union By Laura Márquez-Ramos
  4. Does Job Insecurity Deteriorate Health ? A Causal Approach for Europe By Eve Caroli; Mathilde Godard
  5. An Investigation of Housing Affordability in the UK Regions By Alberto, Montagnoli; Jun, Nagayasu
  6. How to Combine the Entry of Young People in the Labour Market with the Retention of Older Workers? By Eichhorst, Werner; Boeri, Tito; De Coen, An; Galasso, Vincenzo; Kendzia, Michael J.; Steiber, Nadia
  7. Labor Demand Effects of Rising Electricity Prices: Evidence for Germany By Cox, Michael; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian
  8. Testing the Tunnel Effect: Comparison, Age and Happiness in UK and German Panels By Felix, FitzRoy; Michael, Nolan; Max, Steinhardt; David, Ulph
  9. The Impact of Green Innovation on Employment Growth in Europe By Georg Licht; Bettina Peters
  10. Assessing the Benefits of Social Networks for Organizations By Michail Batikas; Rene Van Bavel
  11. Why are educated and risk-loving persons more mobile across regions? By Bauernschuster, Stefan; Falck, Oliver; Heblich, Stephan; Suedekum, Jens
  12. State Aid and Export Competitiveness in the EU By Mario Holzner; Roman Stöllinger
  13. The European aerospace R&D collaboration network By Guffarth, Daniel; Barber, Michael J.
  14. Atypical employment in Europe 1996-2011 By Allmendinger, Jutta; Hipp, Lena; Stuth, Stefan
  15. Knowledge spillovers from renewable energy technologies, Lessons from patent citations By Joëlle Noailly; Victoria Shestalova
  16. Energy efficiency in the European Union: What can be learned from the joint application of directional distance functions and slacks-based measures? By Roberto Gómez-Calvet; David Conesa; Ana Rosa Gómez-Calvet; Emili Tortosa-Ausina
  17. Ageing of skills and complementary immigration in the EU, 2010-2025 By Ashley McCormick
  18. Do payroll tax cuts raise youth employment? By Egebark, Johan; Kaunitz, Niklas
  19. Retailer compliance with energy label regulations By Faure, Corinne; Schleich, Joachim; Schlomann, Barbara
  20. UK House Prices: Convergence Clubs and Spillovers By Montagnoli, Alberto; Nagayasu, Jun

  1. By: Hakim Hammadou (EQUIPPE, University of Lille, France); Sonia Paty (Universite de Lyon 2, Universite de Lyon, France); Maria Savona (SPRU, University of Sussex, UK)
    Keywords: Public R&D expenditures; Strategic interactions in public spending; National Systems of Innovation; private R&D; EU countries; spatial dynamic panel data
    JEL: H5
    Date: 2013–12
  2. By: Felix R., FitzRoy; Michael, Nolan; Max F., Steinhardt
    Abstract: We first confirm previous results with the German Socio-Economic Panel by Layard et al. (2010), and obtain strong negative effects of comparison income. However, when we split the sample by age, we find quite different results for reference income. The effects on lifesatisfaction are positive and significant for those under 45, consistent with Hirschman’s (1973) ‘tunnel effect’, and only negative (and larger than in the full sample) for those over 45, when relative deprivation dominates. Thus for young respondents, reference income’s signalling role, indicating potential future prospects, can outweigh relative deprivation effects. Own-income effects are also larger for the older sample, and of greater magnitude than the comparison income effect. In East Germany the reference income effects are insignificant for all. With data from the British Household Panel Survey, we confirm standard results when encompassing all ages, but reference income loses significance in both age groups, and most surprisingly, even own income becomes insignificant for those over 45, while education has significant negative effects.
    Keywords: subjective life-satisfaction, comparison income, reference groups, age, welfare,
    Date: 2013
  3. By: Laura Márquez-Ramos (Department of Economics and Instituto de Economía Internacional, Universitat Jaume I, Castellón, Spain)
    Abstract: This paper hypotheses that diverging trends for skill premium might arise from fragmentation in countries at various stages of economic development. Then, individual wage data are brought directly to capture the evolution of high-skilled and low-skilled wages across industries in two EU countries that represent the "two faces" of fragmentation: an old-EU country (Germany) and a transition new- EU country (Slovenia). Results obtained provide evidence about the magnitude of potential losses suffered by low-skilled workers in high- skill-intensive industries in Germany. Otherwise, the relative wage of low-skilled workers in relation to high- skilled workers has increased with fragmentation in Slovenia. Furthermore, the consequences of increasing fragmentation are also reflected on industry wage premiums, as this paper shows that fragmentation reduces the wage premium in low-skill-intensive industries in Germany and Slovenia.
    Keywords: fragmentation, skill premium, industry premium, Germany, Slovenia, panel data
    JEL: F16 J31 C23
    Date: 2013
  4. By: Eve Caroli (University Paris Dauphine); Mathilde Godard (CREST)
    Abstract: This paper estimates the causal effect of perceived job insecurity - i.e. the fear of involuntary job loss - on health in a sample of 22 European countries. We rely on an original instrumental variable approach based on the idea that workers perceive greater job security in countries where employment is strongly protected by the law, and relatively more so if employed in industries where employment protection legislation is more binding, i.e. in industries with a higher natural rate of dismissals. Using cross-country data from the 2010 European Working Conditions Survey, we show that when the potential endogeneity of job insecurity is not accounted for, the latter appears to deteriorate almost all health outcomes. After controlling for endogeneity, the health-damaging effect of job insecurity is confirmed for a subgroup of health outcomes, namely self-rated health, being sick in the past 12 months, suffering from skin problems, headaches or eyestrain and stomach ache. As for other health variables, the impact of job insecurity appears to be insignificant at conventional
    Keywords: Job insecurity, Health, Instrumental Variables
    Date: 2013–10
  5. By: Alberto, Montagnoli; Jun, Nagayasu
    Abstract: The housing market has been extensively investigated in the literature; however there is a lack of understanding of the fundamentals a ffecting housing affordability across UK regions as measured by the price to income ratio. The aim of this paper is twofold; fi rstly we calculate the a ffordability ratio based on individuals' incomes. Second we set o f to ask which socio-economic factors could a affect this ratio. The analysis finds a strong influence coming from the mortgage rate, the residents' age and academic quali fications. We also report a positive and signifi cant e ffect from foreign capital coming to the UK. Finally, we record a non-negligible degree of heterogeneity across the twelve regions.
    Keywords: House market, a ffordability index,, heterogeneity, panel data,
    Date: 2013
  6. By: Eichhorst, Werner (IZA); Boeri, Tito (Bocconi University); De Coen, An (IDEA Consult); Galasso, Vincenzo (Bocconi University); Kendzia, Michael J. (IWSB); Steiber, Nadia (Vienna University of Economics and Business)
    Abstract: This paper provides an overview of the employment situation of young and old workers in the EU Member States, setting out the most recent development during the crisis and dealing with policies implemented to promote the employment of both groups. The evidence collected shows that there is no competition between young and older workers on the labour market. Structural or general policies to enhance the functioning of EU labour markets are crucial to improving the situation of both groups. However, the responsibility for employment policies still predominantly lies within Member States of the European Union, although initiatives taken at the EU level can provide added value, particularly through stimulating the exchange of experiences and facilitating regional and cross-border mobility throughout the EU.
    Keywords: youth unemployment, older workers, Europe, demographic change
    JEL: J11 J14 J18 J13 J63 J64
    Date: 2013–12
  7. By: Cox, Michael (IZA); Peichl, Andreas (ZEW Mannheim); Pestel, Nico (IZA); Siegloch, Sebastian (IZA)
    Abstract: Germany plays a pioneering role in replacing conventional power plants with renewable energy sources. While this is beneficial with respect to environmental quality, the energy turnaround implies increasing electricity prices for private households and firms. The extent to which this is associated with negative impacts on employment depends on the interrelationship between labor and electricity as input factors. In this paper, we estimate cross-price elasticities between electricity and heterogeneous labor for the German manufacturing sector. We use administrative linked employer-employee micro data combined with information on electricity prices and usage during the period 2003-2007. Our findings suggest that there is a weak substitutability between electricity and labor, when the production level is held constant. We find positive, but small conditional cross-price elasticities of labor demand with respect to electricity prices between 0.09 and 0.31. In case of adjustable output, we find moderate gross complementarity with negative unconditional cross-elasticities ranging between -0.06 and -0.69. Labor demand is affected differently across skill levels with low- and high-skilled workers being affected more than medium-skilled. Our estimates suggest that the announced increase of the EEG surcharge in 2014 would decrease overall employment in the manufacturing sector by 86,000 workers, a decline by 1.4 percent.
    Keywords: electricity prices, labor demand, employment, energy, Germany
    JEL: J08 J23 Q48 Q58
    Date: 2013–12
  8. By: Felix, FitzRoy; Michael, Nolan; Max, Steinhardt; David, Ulph
    Abstract: In contrast to previous results combining all ages we find positive effects of comparison income on happiness for the under 45s, and negative effects for those over 45. In the BHPS these coefficients are several times the magnitude of own income effects. In GSOEP they cancel to give no effect of effect of comparison income on life satisfaction in the whole sample, when controlling for fixed effects, and time-in-panel, and with flexible, age-group dummies. The residual age-happiness relationship is hump-shaped in all three countries. Results are consistent with a simple life cycle model of relative income under uncertainty.
    Keywords: subjective life-satisfaction, comparison income, reference groups, age, welfare,
    Date: 2013
  9. By: Georg Licht; Bettina Peters
    Abstract: This paper studies the impact of environmental innovation on employment growth using firmlevel data for 16 European countries and the period 2006-2008. It extends the model by Harrison et al (2008) in order to distinguish between employment effects of environmental and non-environmental product as well as process innovation. By looking at country and sector level differences, it also generates new insights into the heterogeneity of the environmental innovation-employment growth link along different dimensions. The results demonstrate that both environmental and non-environmental product innovations are conducive to employment growth in European firms. We estimate a gross employment effect of product innovation for both types of product innovators that is very similar in nearly all countries and sectors. That is, in most cases a one-percent increase in the sales due to new products for environmental product innovators also increases gross employment by one percent. This implies that there is no evidence that environmentally-friendly new products are produced with higher or lower efficiency than old products. Yet, we observe differences in the contribution of environmental and non-environmental product innovation to employment growth across countries or sectors that are the result of differences in the average innovation engagement and innovation success across countries or sectors. The absolute contribution to employment growth is positive for both types of new products. However, we find mixed evidence for the relative importance. In manufacturing the contribution of environmental product innovators was larger than that of non-environmental product innovators in half of the countries. In services, however, non-environmental product innovators matters more for growth in the vast majority of countries. In contrast, environmental and non-environmental process innovation plays only a little role for employment growth.
    Keywords: Environmental innovation, employment growth, Europe
    JEL: O33 J23 L80 C21 C23
    Date: 2013–12
  10. By: Michail Batikas (European Commission – JRC - IPTS); Rene Van Bavel (European Commission – JRC - IPTS)
    Abstract: Deliverable 2 of the SEA-SoNS ("Assessing the Benefits of Social Networks on Organizations”) project brings together results from different research activities, both qualitative and quantitative. Together, these results paint a picture of the benefits to organisations of social media, the barriers they face, and the scope for policy action. Phase 2 of SEA-SoNS, which built on the results of Phase 1, included a survey of 600 SMEs in six EU Member States (UK, Netherlands, Spain, Italy, Bulgaria and Latvia), five in-depth interviews conducted with micro firms (less than 10 employees) that use social media in four countries (Spain, Denmark, Netherlands and UK), and a summary of these findings with emphasis on identifying relevant factors for developing future scenarios. This report includes an executive summary and four annexes: the methodological report of the survey, the findings of the survey, the results of the in-depth interviews and a background document for the validation workshop that took place at Seville in July 2013.
    Keywords: Europe 2020, Digital Agenda for Europe, Digital Living, Digital Society, Digital Economy, Information Society, electronic Identity Systems, economic implications of personal data, Behavioural science and policy impacts
    Date: 2013–12
  11. By: Bauernschuster, Stefan; Falck, Oliver; Heblich, Stephan; Suedekum, Jens
    Abstract: Why are better educated and more risk-friendly persons more mobile across regions? To answer this question, we use micro data on internal migrants from the German Socio- Economic Panel (SOEP) 2000 - 2006 and merge this information with a unique proxy for region-pair-specific cultural distances across German regions constructed from historical local dialect patterns. Our findings indicate that risk-loving and skilled people are more mobile over longer distances because they are more willing to cross cultural boundaries and move to regions that are culturally different from their homes. Other types of distance-related migration costs cannot explain the lower distance sensitivity of educated and risk-loving individuals. --
    Keywords: Migration,Culture,Distance,Human Capital,Risk Attitudes
    JEL: J61 R23 D81
    Date: 2013
  12. By: Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Despite the proclaimed return of industrial policy (Wade, 2012) state aid provided by EU Member States remains at a historically low level. This is partly explained by the unique institutional arrangement in the EU which empowers the European Commission to monitor and restrict state aid activities of Member States. Making use of European state aid statistics over the period 1995-2011 we employ an augmented macroeconomic export function to investigate the relationship between state aid for the manufacturing sector and Member States’ export performance. With manufacturing value added exports serving as a proxy for export performance, our model suggests that a 10% increase in manufacturing aid increases exports by 0.67% for the average EU country. The result is confirmed by instrumental variable estimation. We also find that the impact of state aid on exports is increasing with government effectiveness leading to large differences in the leverage of aid expenditures to promote export performance across Member States.
    Keywords: industrial policy, state aid, value added exports, external competitiveness
    JEL: F13 L52
    Date: 2013–12
  13. By: Guffarth, Daniel; Barber, Michael J.
    Abstract: We describe the development of the European aerospace R&D collaboration network from 1987 to 2013 with the help of the publicly available raw data of the European Framework Programmes and the German Förderkatalog. In line with the sectoral innovation system approach, we describe the evolution of the aerospace R&D network on three levels. First, based on their thematic categories, all projects are inspected and the development of technology used over time is described. Second, the composition of the aerospace R&D network concerning organization type, project composition and the special role of SMEs is analyzed. Third, the geographical distribution is shown on the technological side as well as on the actor level. A more complete view of the European funding structure is achieved by replicating the procedure on the European level to the national level, in our case Germany. --
    Date: 2013
  14. By: Allmendinger, Jutta; Hipp, Lena; Stuth, Stefan
    Abstract: To assess the influence of nonstandard employment for the labor market participation of different demographic groups, we provide detailed descriptions of the development of atypical employment in comparison to standard employment, unemployment, and economic inactivity between 1996 and 2011. In our analyses, we distinguish between fixedterm employment, solo self-employment, substantial part-time work (between 20 and 35 hours/week), and marginal part-time work (less than 20 hours/week). By simultaneously considering standard employment, atypical employment, and non-employment, we are able to assess the consequences of flexible labor markets for the economic integration of different population groups, such as women, the elderly, young people, or the low-skilled. --
    Keywords: Labor Market,Nonstandard Employment,Atypical Employment,Part-time,Temporary Jobs,Solo self-employment,International Comparison,Europe
    JEL: J21 J23 J82
    Date: 2013
  15. By: Joëlle Noailly; Victoria Shestalova
    Abstract: This paper studies the knowledge spillovers generated by renewable-energy technologies, unraveling the technological fields that benefit from knowledge developed in storage, solar, wind, marine, hydropower, geothermal, waste and biomass energy technologies. A CPB Background Document accompanies this�CPB Discussion Paper. Using citation data of patents in renewable technologies at seventeen European countries over the 1978-2006 period, the analysis examines the relative importance of knowledge flows within the same specific technological field (intra-technology spillovers), to other technologies in the field of power-generation (inter-technology spillovers), and to technologies unrelated to power-generation (external-technology spillovers). The results show significant differences across various renewable technologies. While wind technologies mainly find applications within their own technological field, a large share of innovations in solar energy and storage technologies find applications outside the field of power generation, suggesting that solar technologies are more general and, therefore, may have a higher value for society. Finally, the knowledge from waste and biomass technologies is mainly exploited by fossil-fuel power-generating technologies. The paper discusses the implications of these results for the design of R&D policies for renewable energy innovation.
    JEL: O33 Q42 Q48 Q55
    Date: 2013–12
  16. By: Roberto Gómez-Calvet (Departament de Matemàtiques per a l’Economia i l’Empresa, Universitat de València, Spain); David Conesa (Departament de Matemàtiques per a l’Economia i l’Empresa, Universitat de València, Spain); Ana Rosa Gómez-Calvet (Departament de Matemàtiques per a l’Economia i l’Empresa, Universitat de València, Spain); Emili Tortosa-Ausina (Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: Over the last few years there have been increasing concerns about the energy mix in many countries. These concerns have been of greater magnitude for countries with a common energy regulation such as European Union (EU) member states. In order to choose a given energy mix, an important aspect to take into account is the efficiency involved to generate it. In this context, the present study analyzes the efficiency with which electricity and derived heat is produced in 25 EU member states over the last decade. This is carried out considering not only the inputs and outputs involved but, more importantly, which undesirable by-products are generated during the production process, which is a relevant issue for the EU climate policy. To this end, two nonparametric frontier models are considered. First, a Directional Distance Function, based on Briec’s (1997) proposal and, second, a modified version of Tone’s (2001) Slack Based Measure (SBM) model, both of which are especially appropriate in this particular context due to its treatment of undesirable outputs. Results from both models show that there are remarkable efficiency differences among EU countries and, therefore, the initiatives aiming at harmonizing environmental policies have still to be intensified.
    Keywords: Data Envelopment Analysis, European Union, efficiency, energy, slackbased measure
    JEL: Q4 Q43
    Date: 2013
  17. By: Ashley McCormick
    Abstract: This paper measures both population ageing and shrinking within the working age populations of all 27 European Union countries between 2010 and 2025, in the absence of any further migration. In this ‘no migration scenario’ it provides the levels of net migration that should be necessary to maintain the size of the young working age population (aged 15-44 years of age). This paper does not give analytic focus to wider non-demographic processes that can either offset or amplify the ageing of skills. For example, neither the introduction of life-long learning programmes nor the postponements to the legal age of retirement are factored into the model. Results highlight that without migrants shows the employed population aged below 45 in all EU member states will have significant levels of shortfall in maintaining the size of the 2010 labour force.
    Date: 2013–11–05
  18. By: Egebark, Johan (Department of Economics, Stockholm University); Kaunitz, Niklas (SOFI, Stockholm University)
    Abstract: In 2007, the Swedish employer-paid payroll tax was cut on a large scale for young workers, substantially reducing labor costs for this group. We estimate a small impact, both on employment and on wages, implying a labor demand elasticity for young workers at around -0.31. Since the tax reduction applied also to excisting employments, the cost of the reform was sizable, and the estimated cost per created job is at more than four times that of directly hiring workers at the average wage. Hence, we conclude that payroll tax cuts are an inefficient way to boost employment for young individuals.
    Keywords: Youth unemployment; Payroll tax; Tax subsidy; Labor costs; Exact matching
    JEL: H25 H32 J23 J38 J68
    Date: 2013–12–20
  19. By: Faure, Corinne; Schleich, Joachim; Schlomann, Barbara
    Abstract: With the Framework Directive 92/75/EEC on Energy Labelling of Household Appliances, the European Union introduced a labelling system that applies to major household appliances. The EU Directive requires manufacturers to provide the data strip (accurate product energy consumption information) with each appliance to the retailers. Retailers are compelled to provide all the appliances displayed in salesrooms with complete energy labels placed on top or front of the appliance in original size and colour and clearly visible (Directive 92/75/EEC). Retailers therefore play a crucial role in the implementation of the European energy label program. Surprisingly however, their role in the success of the program has not received any attention so far. In this paper, we first develop a theoretical framework to explain retailers' compliance with the Directive. The framework comprises instrumental motives for compliance like perceived costs and benefits of compliance as well as normative motives like internalization of regulation or social pressure to comply. These factors are moderated by retailers' ability to comply. Second, we test this framework econometrically on a sample of ca. 100,000 appliances from close to 1,400 retail stores in 27 European countries. Two sets of data were collected in each store: a compliance audit and a standardized survey of store managers. For the compliance audit, researchers noted for each household appliance available in the stores whether the energy label information was available, complete, and placed as required. The survey included perceptual measures of external and internal monitoring, manufacturer compliance, effort to comply, and consumer acceptance of labels. Using as dependent variable the share of completely labelled appliances per retailer - either at the aggregate level or per product category - estimation results of fractional logit models suggest that normative motives generally appear stronger than instrumental ones. --
    Keywords: energy label,compliance,household appliances,retailer
    Date: 2013
  20. By: Montagnoli, Alberto; Nagayasu, Jun
    Abstract: This paper uses the log t test to analyse the convergence of house prices across UK regions and the presence of spillovers e ects. We nd that UK house prices can be grouped into four clusters. Moreover we document the dynamics of the house price spillovers across regions.
    Keywords: Regional house prices, Heterogeneity, Convergence, Spillovers,
    Date: 2013

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