nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2014‒02‒15
nineteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Report on the structure of ownership in the financial sector across the EU By Michal Jurek
  3. Relatedness and Diversification in the EU-27 and ENP countries By Ron Boschma; Gianluca Capone
  4. Towards a green internal electricity market: The self-regulation of European Transmission System Operators for Electricity within EU multilevel governance By Brüning, Anna
  5. When and how to support renewables? Letting the data speak By Georg Zachmann; Amma Serwaah; Michele Peruzzi
  7. Comparison of Feed-in Tariffs and Tenders to Remunerate Solar Power Generation By Thilo Grau
  8. Inventor Data for Research on Migration and Innovation: A Survey and a Pilot By Stefano Breschi; Francesco Lissoni; Gianluca Tarasconi
  9. Exporting and labor demand: Micro-level evidence from Germany By Lichter, Andreas; Peichl, Andreas; Siegloch, Sebastian
  10. Climate change effects and agriculture in Italy: a stochastic frontier analysis at regional level By Auci, Sabrina; Vignani, Donatella
  11. Forecasting Distress in European SME Portfolios By Ferreira Filipe, Sara; Grammatikos, Theoharry; Michala, Dimitra
  12. Seasonality in smoking behaviour: re-evaluating the effects of the 2005 public smoking ban in Italy By Del Bono, Emilia; Grunberger, Klaus; Vuri, Daniela
  13. The geographical restructuring of the European automobile industry in the 2000s By Frigant, Vincent; Miollan, Stéphane
  14. Relocation of Public Sector Workers: Evaluating a Place-based Policy By Giulia Faggio
  15. Mobile and more productive? Firm-level evidence on the productivity effects of mobile internet use at the early stage of diffusion By Bertschek, Irene; Niebel, Thomas
  16. Health, financial incentives, and early retirement: Micro-simulation evidence for Germany By Hendrik Jürges; Lars Thiel; Tabea Bucher-Koenen; Johannes Rausch; Morten Schuth; Axel Börsch-Supan
  17. Tax-price elasticity of charitable donations: Evidence from the German taxpayer panel By Adena, Maja
  18. Life Satisfaction, Ethnicity and Neighbourhoods: Is There an Effect of Neighbourhood Ethnic Composition on Life Satisfaction? By Lucinda Platt; Gundi Knies; Alita Nandi
  19. European Equity Investing through the Financial Crisis: Can Risk Parity, Momentum or Trend Following Help to Reduce Tail Risk? By Andrew Clare; James Seaton; Peter N. Smith; Stephen Thomas

  1. By: Michal Jurek (Department of Banking, Poznan University of Economics)
    Abstract: The purpose of this report is to analyse the structure of ownership in the financial sector in the selected old (France, Germany, Greece, Italy, Sweden, the United Kingdom) and new (the Czech Republic, Hungary, Poland) EU Member States. This subject is particularly important to the proper understanding of the scale and scope of the process of financialisation in the EU countries. General objective of the report is the investigation and evaluation of the evolution of the structure of ownership in the financial sector across the EU and its consequences with the special consideration of relations between this process and withdrawal of the State from the financial sector. In order to accomplish this target, extensive research is undertaken. It encompasses the analysis of the types of financial institutions functioning in selected countries. Areas of competition, cooperation and interdependence between different types of financial institutions are identified, as well as similarities and differences in the present composition and structure of the financial sector in particular EU countries and factors behind inter-country differences. Finally, comparative analysis of evolution of structure of financial sector and its driving forces in particular countries and group of countries is presented.
    Keywords: financial institutions, financial sector, banking and finance, ownership structure, market concentration, mergers and acquisitions, privatization
    JEL: E44 E50 G21 G22 G32 G34 N24
    Date: 2013–12–02
  2. By: Pretolani, Roberto; Cavicchioli, Daniele; Cairo, Valentina
    Keywords: Agribusiness,
    Date: 2014
  3. By: Ron Boschma; Gianluca Capone
    Abstract: This paper analyzes the process of industrial diversification in the EU-27 and ENP countries in the period 1995-2010 by means of world trade data derived from the BACI database (elaborated UN Comtrade data). Our results show that in both the EU-27 and the ENP countries, the evolution of the export mix is strongly path-dependent: countries tend to keep a comparative advantage in products that are strongly related to their current productive structure, and they also diversify in nearby products. However, this effect is much stronger for ENP countries, signalling their lower capabilities to diversify in products that are not very near to their productive structure. We also show that the future export structures of countries are affected by their imports: both the EU-27 and ENP countries keep a comparative advantage in products that are strongly related to their imports, but only EU countries show a strong capability to diversify in new products from related import sectors. Our results also hold when controlling for geographical and institutional proximity.
    Keywords: diversification, relatedness, European Neighborhood Policy, trade
    JEL: F19 O14 O33
    Date: 2014–02
  4. By: Brüning, Anna
    Abstract: Due to the 3rd Energy Package of 2009 the regulation of European electricity transmission did change considerably. Before, cross-border electricity issues have been regulated by voluntary contractual agreements between Transmission System Operators. Now, the new-founded Agency for the Cooperation of Energy Regulators (ACER) and the European Network of Transmission System Operators for Electricity (ENTSO-E) are guiding this process together with the European Commission. Currently, these organizations are developing network codes to be implemented as binding EU electricity transmission regulation within the next years. This paper analyzes, if this new regulation process does promote the creation of an internal electricity market as well as a better integration of intermittent renewable ('green') energies due to the multilevel governance approach. --
    Keywords: EU Energy Policy,Transmission Grids,Renewable Energies,Regulation Theory,Multi-level Governance Theory
    JEL: L43 L59 L94
    Date: 2014
  5. By: Georg Zachmann; Amma Serwaah; Michele Peruzzi
    Abstract: See also blog post 'Does Europe need a renewables target?' Low-carbon energy technologies are pivotal for decarbonising our economies up to 2050 while ensuring secure and affordable energy. Consequently, innovation that reduces the cost of low-carbon energy would play an important role in reducing transition costs. We assess the two most prominent innovation policy instruments (i) public research, development and demonstration (RD&D) subsidies and (ii) public deployment policies. Our results indicate that both deployment and RD&D coincide with increasing knowledge generation and the improved competitiveness of renewable energy technologies. We find that both support schemes together have a greater effect that they would individually, that RD&D support is unsurprisingly more effective in driving patents and that timing matters. Current wind deployment based on past wind RD&D spending coincides best with wind patenting. If we look into competitiveness we find a similar picture, with the greatest effect coming from deployment. Finally, we find significant cross-border effects, especially for winddeployment. Increased deployment in one country coincides with increased patenting in nearby countries. Based on our findings we argue that both deployment and RD&D support are needed to create innovation in renewable energy technologies. However, we worry that current support is unbalanced. Public spending on deployment has been two orders of magnitude larger (in 2010 about â?¬48 billion in the five largest EU countries in 2010) than spending on RD&D support (about â?¬315 million). Consequently, basing the policy mix more on empirical evidence could increase the efficiency of innovation policy targeted towards renewable energy technologies
    Date: 2014–02
  6. By: Franscarelli, Angelo; Ciliberti, Stefano
    Abstract: In the last years European farmers have been facing two new phenomena: the asymmetric price transmission in agro-food sector and the decrease of agricultural value added. The European Commission denounced low transparency in trade relationships and frequent unfair commercial practices between firms and recognized the imperfect functioning of the agro-food supply chain. Economic theories consider contracts as means coordinating entrepreneurs’ decisions (e.g. times, quantity and quality of products, prices). Nevertheless, in some cases buyers may use them to improve and exercise their market power, for instance imposing vertical restraints. That is a typical situation in the European food supply chain, where highly concentrated sectors use their bargaining power against farmers. During that time antitrust authorities and EU Member States have sought to solve the situation by appropriate competition policy measures. The law No. 27/2012 of 24 March 2012 introduced in Italy new mandatory rules regarding contracts of sale of agriculture and food products, aimed at increasing transparency in trade and shortening terms of payment. Thanks to an holistic multiple-case study accomplished by interviews and direct observations, the article analyzes the effects that new rules caused in the Italian agrofood system.
    Keywords: contracts, antitrust, agro-food chain, vertical restraints., Agribusiness, Q13, Q18, L14,
    Date: 2014
  7. By: Thilo Grau
    Abstract: This paper analyzes the trade-offs for using feed-in tariffs or tenders to remunerate different scales of solar photovoltaics (PV) projects. In recent years, European countries increasingly combined feed-in tariffs for small renewables systems with tenders for large installations. This study develops an analytic framework to quantify deployment effectiveness of responsive feed-in tariff adjustment mechanisms across project scales and to compare specific cost effectiveness factors of feed-in tariffs and tenders for PV plants with their dynamic cost trends. To assess deployment effectiveness, an analytic model is used to simulate installations and feed-in tariffs for different project sizes. Then semi-structured interviews with German and French project developers are conducted to identify additional factors to be considered for a comparison of feed-in tariffs and tenders, and to explore how different remuneration schemes impact cost of capital and transaction costs. The paper finally discusses the relative merits of feed-in tariffs and tenders.
    Keywords: Feed-in tariff, tender, solar photovoltaics
    JEL: O33 Q42 Q48
    Date: 2014
  8. By: Stefano Breschi (CRIOS – Università Bocconi, Milan); Francesco Lissoni (GREThA – Université Montesquieu, Bordeaux IV and CRIOS – Università Bocconi, Milan); Gianluca Tarasconi (CRIOS – Università Bocconi, Milan)
    Abstract: This paper discusses the existing literature on migration and innovation, with special emphasis on empirical studies based on patent and inventor data. Other sources of micro-data are examined, too, for comparative purposes. A pilot database, based on patent filings at the European Patent Office is presented. It contains information on individual inventors, including their country of residence and of origin. Preliminary evidence suggests that immigrant inventors contribute to innovation not only in the US, but also in selected European countries, where they often rank among the most productive individuals. Data on returnee inventors to selected countries of origin suggest the phenomenon to be of limited scale, and highly subject to errors of measurement.
    Keywords: immigration, innovation, inventor data, patent data
    JEL: F22 O15 O31
    Date: 2014–01
  9. By: Lichter, Andreas; Peichl, Andreas; Siegloch, Sebastian
    Abstract: It is widely believed that globalization affects the extent of employment and wage responses to economic shocks. To provide evidence for this, we analyze the effect of firms' exporting behavior on the elasticity of labor demand. Using rich, German administrative linked employer-employee panel data from 1996 to 2008, we explicitly control for self-selection into exporting and endogeneity concerns. In line with our theoretical model, we find that exporting at both the intensive and extensive margins significantly increases the (absolute value of the) unconditional own-wage labor demand elasticity. This is not only true for the average worker, but also for different skill groups. For the median firm, the elasticity is three-quarters higher when comparing exporting to nonexporting firms. --
    Keywords: trade,export,labor demand,wage elasticity,administrative microdata
    JEL: F16 J23
    Date: 2014
  10. By: Auci, Sabrina; Vignani, Donatella
    Abstract: Climate changes, associated to atmospheric accumulation of greenhouse gases, could alter level of temperature at the surface, rainfalls and regional water supplies. There are many areas of the Earth that will cope with a rapid increasing of warming at the surface and with an extremization of weather conditions. Although many economic sectors are influenced, agriculture is the most susceptible as weather heavily affects crop production trends, yield variability and reduction of areas suitable to be cultivated. Climate change effects represent a “challenge” that European agriculture has to face in the immediate future. The aim of our work is to analyze the economic impacts of climate change on agricultural sector in Italy at regional scale (NUTS2) in the light of mitigation policies undertaken by Italy in accordance with the commitments made by the EU Policy in the struggle against climate change. Using the stochastic frontier approach, we investigate on the Italian Regions efficiency in the period 2000-2010. Considering that inefficiency could be influenced by two main meteorological factors – rainfall and minimum temperature– we find that rainfall variable has a positive impact on efficiency while minimum temperature variable reduces the efficiency of harvested production.
    Keywords: Climate change effects, agricultural sector, mitigation and adaptation, Italian Regions efficiency, stochastic frontier approach
    JEL: Q10 Q54
    Date: 2014–01–30
  11. By: Ferreira Filipe, Sara; Grammatikos, Theoharry; Michala, Dimitra
    Abstract: In the European Union, small and medium sized enterprises (SMEs) represent 99% of all businesses and contribute to more than half of the total value-added. In this paper, we develop distress prediction models for SMEs using a dataset from eight European countries over the period 2000-2009. We examine idiosyncratic and systematic covariates and find that the first discriminate between healthy and distressed firms based on their relative level of risk, whereas the second move the overall distress rates. Moreover, SMEs across Europe are vulnerable to the same idiosyncratic factors but systematic factors vary in different regions. Also, micro SMEs are more vulnerable to these systematic factors compared to larger SMEs. The paper contributes to the literature in several ways. First, using a sample with many micro companies, it offers unique insights into the European small business sector. Second, it is the first paper to explore distress in a multi-country setting, allowing for regional comparisons and uncovering regional vulnerabilities. Third, by incorporating systematic dependencies, the models can capture changes in overall distress rates and comovements during economic cycles.
    Keywords: credit risk, distress, forecasting, SMEs, discrete time hazard model, multi-period logit model, duration analysis
    JEL: C13 C41 C53 G33
    Date: 2014–02–01
  12. By: Del Bono, Emilia; Grunberger, Klaus; Vuri, Daniela
    Abstract: This paper investigates the impact of the public smoking ban which came into effect in Italy on January 2005 on individual smoking behaviour. Current empirical evidence supports the existence of a negative effect of the Italian ban on smoking prevalence and consumption in the general population. This is in contrast to what has been found in some other European coun- tries. Our analysis shows that the apparent success of the Italian smoking ban is due to the fact that existing results do not take into account seasonal differences in smoking behaviour. Using quarterly data from the 1999/2000 and 2004/2005 Italian Health Surveys and adopting a difference-in-difference approach that nets out monthly variation in smoking rates, we show that the Italian smoking ban had no impact on individual smoking behaviour for the population as a whole, and only small effects on some groups of individuals.
    Date: 2014–02–11
  13. By: Frigant, Vincent; Miollan, Stéphane
    Abstract: The paper seeks to provide a quantitative and macroeconomic picture of the new geography of the automotive industry in Europe. Since ten new members joined the European Union in 2004, automakers and suppliers have changed their location strategies and now view the whole of Europe as a single fully integrated space. Using data on employment, production, trade and foreign control of affiliated firms, the paper measures the East-West relocation process. The first section studies the motor vehicle sector, highlighting a sharp rise in the activity levels of Central and Eastern European countries (CEEC), as well as the specific role that Germany plays. It is crucial to remember that motor vehicle manufacturing remains a key traditional economic activity for some of the larger Western European countries. The second section looks at the automotive parts sector. The CEECs’ growth is particularly impressive when consideration is given to employment, a variable largely driven by foreign firms’ decision to export much of their local production. At the same time, the offshoring process remains more or less selective even if it often revolves around labour-intensive activities – explaining in turn the creation today of embedded East-West networks.
    Keywords: automobile; Europe; deindustrialisation; relocation; offshoring; industry geography; auto parts industry
    JEL: F23 L23 L62 R12
    Date: 2014–01–07
  14. By: Giulia Faggio
    Abstract: This paper assesses the local labour market impact of a UK public sector relocation initiative labeled the Lyons Review. The review resulted in the dispersal of more than 25,000 civil servants out of London and the South East towards other UK destinations. The objective of the paper is to detect whether inflows of public sector jobs have crowded out private sector activity or stimulated the local provision of additional jobs in the private sector. By applying a difference-in-difference approach, I evaluate the policy impact comparing areas in close proximity to a relocation site with areas further away. I find that the dispersal of public sector workers that followed the implementation of the Lyons Review had a positive impact on local services with a negative, but weaker, impact on manufacturing.
    Keywords: Economic development, regional labour markets, regional government policy, job displacement
    JEL: O1 R23 R58 J61
    Date: 2014–02
  15. By: Bertschek, Irene; Niebel, Thomas
    Abstract: Mobile internet access allows for flexibility with respect to working time and working place. We analyse whether employees' use of mobile internet access improves firms' labour productivity. Our data set comprises 2460 German firms and refers to the year 2010, when mobile internet started its diffusion process to firms on a large scale. The econometric analysis shows that firms' labour productivity significantly increases with the share of employees with mobile internet access. However, an instrumental variable approach reveals that mobile internet use does not cause higher labour productivity. --
    Keywords: Mobile Internet,Labour Productivity,Firm-Level Data
    JEL: D22 L20 O33
    Date: 2013
  16. By: Hendrik Jürges (University of Wuppertal); Lars Thiel (University of Wuppertal); Tabea Bucher-Koenen (Munich Center for the Economics of Aging); Johannes Rausch (Munich Center for the Economics of Aging); Morten Schuth (Munich Center for the Economics of Aging); Axel Börsch-Supan (Munich Center for the Economics of Aging)
    Abstract: About 20% of German workers retire on disability pensions. Disability pensions provide fairly generous benefits for those who are not already age-eligible for an old-age pension and who are deemed unable to work for health reasons. In this paper, we use two sets of individual survey data to study the role of health and financial incentives in early retirement decisions in Germany, in particular disability benefit uptake. We show that financial incentives to retire do affect sick individuals at least as much as healthy individuals. Based on 25 years of individual survey data and empirical models of retirement behavior, we then simulate changes in the generosity of disability pensions to understand how these changes would affect retirement behavior. Our results show that making the disability benefit award process more stringent without closing other early retirement routes would not greatly increase labor force participation in old age.
    JEL: H55 J14 J26
    Date: 2014–02
  17. By: Adena, Maja
    Abstract: I estimate permanent and transitory tax-price and income elasticity of charitable giving in Germany using a rich panel data of tax return for the years 2001-2006. Income tax reforms were implemented in 2004 and 2005. The results suggest that the permanent tax-price elasticity varies significantly by income class, ranging from -0.2 for low incomes to -1.6 for higher incomes. Permanent income elasticity does not vary much among income classes, is rather low, and ranges between 0.2-0.3. The donors adjust their donations gradually after changes in the tax schedule and respond to future predictable changes in price. They respond to changes in current and, to a smaller extent, in future income. -- In dieser Studie wurde die permanente und transitorische Steuerpreis- und Einkommenselastizität der Spenden in Deutschland geschätzt. Basis für die Schätzung ist das umfangreiche Taxpayer-Panel, welches alle Steuermerkmale der Steuerzahler in Deutschland für die Jahre 2001-2006 erfasst. Die Ergebnisse suggerieren, dass die permanente Steuerpreiselastizität, je nach Einkommensklasse, sich stark unterscheidet; sie reicht von -0.2 für niedrige Einkommen bis -1.6 für höhere Einkommen. Dahingegen ist die permanente Einkommenselastizität für unterschiedliche Einkommensklassen ähnlich; insgesamt ist sie sehr niedrig und liegt zwischen 0.2 und 0.3. Spender passen ihre Spendenentscheidung nach Steueränderungen verzögert an, sie reagieren auch auf zukünftige vorausschaubare Preisänderungen. Sie reagieren auf aktuelle und weniger auf zukünftige Änderungen des Einkommens.
    Keywords: charitable giving,price elasticity,tax incentives
    JEL: H24 H31 D12
    Date: 2014
  18. By: Lucinda Platt (Department of Social Policy, London School of Economics and Political Science); Gundi Knies (Institute for Social and Economic Research, University of Essex); Alita Nandi (Institute for Social and Economic Research, University of Essex)
    Abstract: Using a rich, nationally representative data set with a large sample of minorities and matched small area characteristics, we explore differences in life satisfaction for ethnic groups living in UK. We test the hypothesis that minorities will be less satisfied, which will in part be explained by less favourable individual and area contexts, but that living in areas with a larger proportion of own ethnic group promotes well-being. We find that satisfaction is lower among minorities, ceteris paribus, but area concentration is associated with higher life satisfaction for certain groups. We discuss the implications of our findings.
    Keywords: Life Satisfaction, Happiness, Ethnic group, Neighbourhood, Subjective well-being, UKHLS
    JEL: I31 J15 R23 O15
    Date: 2014–02
  19. By: Andrew Clare; James Seaton; Peter N. Smith; Stephen Thomas
    Abstract: A growing body of literature suggests that over widely varying historical eras and across a wide range of asset classes momentum investing, often accompanied by a trend following overlay, provides superior risk-adjusted returns. We examine the effectiveness of applying these methodologies to pan-European equity asset allocation through periods of potentially substantial market dislocation, in particular, with the advent of the single currency and the equity market crashes of the early 2000‟s and 2008.With the introduction of the Euro there has been much discussion of the benefits of diversification via country based portfolios versus industry sector portfolios. Early studies simply looked at changing return correlations over time. The simple conclusion that increasing country correlations over time drives superior risk-adjusted portfolios towards diversification across sectors has been increasingly challenged. Our approach is different in that we apply momentum and trend following investing strategies and assess whether it is sectoral or country indices which dominate our portfolios through periods of structural changes and extreme volatility. Diversification via sectors is clearly the best strategy in times of equity market stress. In addition, the application of trend following offers a substantial improvement in risk-adjusted performance compared to traditional buy-and-hold portfolios. The terms momentum and trend following have often been used interchangeably although the former is a relative concept and the latter absolute. By combining the two we find that one can achieve the higher return levels associated with momentum portfolios but with much reduced volatility, tail risk and drawdowns due to trend following. We observe that a flexible asset allocation strategy that allocates capital to the best performing instruments irrespective of asset class enhances this further. Such methodologies offer superior risk adjusted returns, especially through periods of raised market volatility
    Keywords: Trend following, Momentum investing, tail risk, European equity sectors, Financial Crisis
    Date: 2014–01

This nep-eur issue is ©2014 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.